Lonmin CEO Ben Magara
JOHANNESBURG (miningweekly.com) – The share price of platinum mining company Lonmin rose sharply on Monday on net cash generation, higher platinum sales and the expectation of platinum demand from the automotive and chemical sectors remaining firm.
Lonmin’s share price rose 17.57% to R42.56 a share in early JSE trade after Lonmin CEO Ben Magara reported that net debt of $185-million at end September had given way to $114-million cash after capital expenditure (capex) as at March 31.
He added that 1 428 reskilled employees had helped to lift productivity 3.9% higher to 5.9 square metres a mining employee in the six months to March 31 at the company’s modern second-generation shafts.
He said that half-year cost savings of R469-million had taken the company 67% along the way towards the full-year cost-saving target of R700-million, with the company’s core second-generation shafts producing 76.6% of the 5.1-million half-year tonnes produced.
Older, higher-cost first-generation shafts produced 27.7% less tonnage in line with the strategy of shedding high-cost production in an oversupplied market.
Operational flexibility was preserved with the immediately available ore reserve position of four-million square metres, which translates into 22 months of production.
Refined platinum production was up 33% to 348 885 oz on the smelter complex returning to normal.
The company sold 36% more platinum at 361 882 oz.
Half-year capex was held at $27-million in line with a $5-million benefit from the weaker rand.
MARKET OUTLOOK
Lonmin expects automotive demand for platinum to lift as emerging markets continue to catch up with tightening emission standards.
It sees the jewellery market as offering upside opportunity over the medium to long term.
Sales guidance remains at 700 000 oz of platinum at R10 400/oz and capex guidance is down at $105-million from a previous $132-million.
"The results reflect the positive momentum in Lonmin,” Magara commented in a media conference call in which Creamer Media’s Mining Weekly Online took part.
Going forward, the company said that its investment in worker relationships and the concept of shared value would be extensively tested in the upcoming wage negotiations, especially against the backdrop of local government elections.
“I’m cautiously optimistic about wage negotiations as we have engaged continuously on the economic realities,” Magara added.
Half-year safety was dealt a heavy blow by the deaths of Lonmin employees Zilindile Ndumela, Goodman Mangisa and Fanelekile Giyama, who were fatally injured in separate incidents in October, April and May.