Lonmin completed a rights issue early in its 2016 financial year, which put the company in a stronger position to steer itself through the current low platinum-group metals (PGMs) price environment, in combination with the renewal of debt facilities, shaft closures, workforce reduction and the implementation of a focused business plan.

The stated objectives of the company are now to lower fixed costs, keep capital expenditure to the minimum necessary and improve efficiencies, while simultaneously safeguarding the company’s long-term value.

The reorganisation of the business emphasises the productive Generation 2 shafts and plays down the higher-cost Generation 1 shafts.

Lonmin, which in 2014 was the scene of South Africa’s longest strike in history, has now seemingly passed the test of employer- employee normalisation by clinching a three-year wage agreement, as well as a 6 000- person workforce reduction, without any work stoppages or labour disputes.

Sustainability remains central but without transformation being held back.

For example, Lonmin’s historically disadvantaged South African representation at management level is now 52.3%, considerably higher than the Mining Charter’s target of 40%.

In its last financial year, cost reductions of R1.3-billion were 86% higher than the targeted figure of R700-million.

The sale of 735 747 oz of platinum in the 2016 finan- cial year also beat the production guidance of 700 000 oz on the back of an entrepreneurial-like smelter clean-up project and metal release from the new precious metals plant, which put an extra 73 186 oz of platinum into the mix.

The winding down of the older Generation 1 shafts to reduce high-cost production resulted in a planned 8.8% tonnage decrease to 10.3-million tonnes, as well as the closure of the 1B shaft and the cessation of own production from the Newman shaft.

The reorganisation resulted in the business delivering an underlying operating profit of $7-million in the 2016 financial year, compared with the underlying $134-million loss of 2015.

Costs decreased by 3.2% to R14.1-billion, on a R1.3-billion fall. (Also see diagram.)

Regarding black economic empowerment (BEE), Lonmin concluded a series of shareholding agreements with the Bapo Ba Mogale Traditional Community in December 2014, and is also implementing an employee share ownership plan and a community share ownership trust for the benefit of the local communities on the western portion of its Marikana operations.

All three transactions collectively provided the additional equity empowerment that Lonmin needed to hit the 26% effective BEE equity ownership target demanded by the Mining Charter.

The Bapo Ba Mogale community was also awarded four procurement contracts in terms of the 2014 transaction.