Lonmin’s half-year profit plunge
Mark Mentiplay, 15th May 2012
JOHANNESBURG, May 15 -- The world's third largest platinum producer, Lonmin, has blamed production-sapping industrial disruptions, community unrest, weak prices and high rand costs for slashing its March 2012 half net operating profit by $US130M to $14M.
Revenue was also savaged by lower PGM prices and volumes sold, down 20% to $751M on the March 2011 half.
However, optimistic Lonmin CEO Ian Farmer expects production to ramp up in the second half as normal, barring further abnormal disruptions, for full 2012 year production of 750,000oz platinum, with a unit cost increase per PGM oz of around 8.5% and production rising to target capacity of 950,000oz.
Lonmin’s mining operations, all of which are in South Africa’s Bushveld complex, produced 5.8Mt in the latest half, a decrease of 1.7 % on H1 2011.
Farmer says productivity was impacted by the uncharacteristically high number of Section 54 safety stoppages right across the South African PGM mining industry during the period, along with labour and community unrest, and management-induced safety stoppages. These cost the company some 464,000t, compared to 166,000t in the 2011 half.
Despite this, metals-in-concentrate were up 3.8 % to 368,175oz, whilst platinum sales, at 318,402oz, were in line with 2011 half year.
While total underlying costs in $US terms decreased by $53M to $790M with the impact of cost escalations offset by a combination of reduced production, positive foreign exchange movements and a build-up of stock in process, the cost per PGM oz for the half was R8,172, up 10.9% on H1 2011.
The full year 2012 capex is $450M, either committed or already spent, the major objective being to reduce costs at Marikana. Net debt projections are for $356M, with net gearing contained at 11%.
And the future for Lonmin and the South African PGM mining industry, according to Farmer: Gradual industrial and auto demand recovery. Supply constraints by South African producers will lead to deficits, with the near term pricing outlook unpredictable, but medium-to-long term market fundamentals positive as demand outstrips supply.
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