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LON - Lonmin Plc - Q1 2010 Production Report & Interim Management Statement
Lonmin Plc
(Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number
1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN: GB0031192486
("Lonmin")
28 January 2010
Q1 2010 Production Report
& Interim Management Statement
Lonmin Plc ("Lonmin" or the "Company") today announces its production report and
Interim Management Statement for the quarter to 31 December 2009 (unaudited).
Overview
Our performance in the first quarter of 2010 exemplified management`s focus on
operational stability and delivering on its commitments, with metals in
concentrate production from our underground operations at Marikana being
equivalent to the prior year period. Tonnes mined from Marikana underground
operations fell slightly, partly as a result of the planned closure of
uneconomic production units in 2009. However, this volume reduction was
compensated for by improvements in grade and concentrator recoveries during the
period and was achieved with a significantly reduced workforce. Following its
successful re-build during October, the Number One furnace performed well.
Mining
Our underground mining operations at Marikana produced 2.6 million tonnes during
the first quarter of 2010, a like for like decline of 3.9%, equivalent to around
100,000 mined tonnes, from the same period in 2009.
There were two reasons for this shortfall. Firstly, as expected, production was
impacted by the previously announced closure of an uneconomic decline shaft and
a number of half levels at Marikana during the third quarter of 2009. These
unprofitable operations contributed around 35,000 mined tonnes during the first
quarter of 2009.
Secondly, whilst the frequency of Section 54 safety stoppages at Marikana during
the first quarter of 2010 declined from the prior year period, the volume impact
was worse with tonnes lost during the quarter being around 60,000 tonnes higher
than the prior year period. This was predominantly due to production at our
largest shaft, K3, being impacted by a 7 day Section 54 safety shutdown
following a fatal incident at the shaft on 10 December 2009.
Production at Saffy and Hossy shafts continued to perform well, delivering a
combined tonnage increase of 46% from the prior year period.
Pandora underground production increased slightly during the first quarter of
2010 from the prior year period.
Total tonnes mined declined by 15.3% from the same period in 2009 to 2.6
million, following the planned closure of non-value adding production at our
Limpopo operations and the opencast operations at Marikana and the Pandora joint
venture during the 2009 financial year.
Concentrators
As a result of the above factors, total tonnes milled for the quarter declined
by 15.6% from the first quarter of 2009 to 2.6 million tonnes. However, total
metals in concentrate production declined by just 6.6% to 161,845 saleable
ounces of Platinum, with metals in concentrate production from our Marikana
operations remaining flat at 156,025 saleable ounces of Platinum. This was due
to improvements in grade and concentrator recoveries during the first quarter of
2010. Underground milled head grade during the period increased by 6.3% to 4.74
grammes per tonnes, as a result of a number of factors including cleaner mining
across the property, a better ratio of stoping ore to development ore at Hossy
and Saffy as well as an improved ore mix. This also helped underground
concentrator recoveries, which improved significantly during the quarter to
84.5%, from 80.2% during the prior year period. The improvement in concentrator
recoveries was also the result of continued benefits from our concentrator
optimisation programme, excellent plant availability and a rigorous focus on
batch milling the right ore through the right concentrators. It should also be
noted that the performance in quarter one last year was impacted by an intensive
maintenance programme which reduced recoveries.
These improvements in grade and recoveries are pleasing. However, we need to see
these sustained before being confident that we have made a step change in our
performance.
Smelter and Refineries
The planned 30 day re-build of the Number One furnace was completed successfully
and the furnace has been operating consistently since matte was tapped on 9
November 2009. A furnace re-build was also conducted during the prior year
period and total refined PGM production was flat at 243,114 ounces. However,
refined Platinum production for the first quarter of 2010 declined 16.7% to
110,786 ounces mainly as a result of metal-in-process inventory timing
differences.
Sales & Pricing
Consequently, Platinum sales for the first quarter of 2010 declined 13.6% from
the prior year period to 109,044 ounces, whilst sales of total PGM`s increased
4.8% to 239,685 ounces.
The US dollar PGM pricing environment improved considerably during the first
quarter of the 2010 financial year from the prior year period, with the basket
price improving 35%, but our South African Rand PGM basket price was flat due to
a much stronger South African Rand against the US dollar during the quarter.
Incwala Resources
Discussions regarding the future of Incwala Resources (Pty) Ltd, our Black
Economic Empowerment partner, are ongoing. We will update the market on these
discussions, once they have been concluded.
As anticipated, on 18 December 2009, R147 million ($20 million) was paid to
Impala Platinum Holdings Limited (Impala), as part of the vendor financing
indemnity given by Lonmin to Impala at the time of the creation of Incwala.
Following an earlier payment in October 2009, a total of R441 million ($59
million) has been paid to Impala in relation to this vendor financing indemnity.
Further details of these and other indemnity agreements can be found in Note 25
on page 121 of the 2009 Annual Report.
Wage Settlements
As announced on 4 December 2009, we completed a two year wage agreement with the
National Union of Mine Workers in respect of our Marikana operations. Employees
will receive a 10% wage increase during the first year of the agreement, which
has been backdated to 1 October 2009. In the second year of the wage agreement,
employees will be eligible to receive a CPI (Consumer Price Index) plus 2% wage
increase. In addition, certain minimum rates of pay will be increased over the
life of the wage agreement. In November 2009, we also concluded a one year wage
agreement with Solidarity, under the terms of which employees will receive a
9.5% wage increase for the 2010 financial year.
Outlook
Our production performance during the first quarter of 2010 represents a solid
start to the year and supports our 2010 sales guidance of 700,000 ounces of
Platinum, as published on 16 November 2009. Our cost guidance for the increase
in South African Rand gross operating costs to be below local inflation, still
stands despite the above inflation wage increases agreed. We therefore reiterate
our sales and cost guidance for the year.
ENQUIRIES:
Investors / Analysts:
Rob Gurner +44 (0) 207 201 6050
Head of Investor Relations
Media:
Cardew Group +44 (0) 207 930 0777
Anthony Cardew / Rupert Pittman
Financial Dynamics +27 (0) 21 487 9000
Dani Cohen / Ravin Maharaj
3 months 3 months
to 31st to 31st
December December
2009 2008
Tonnes Marikana Underground - total 000 2,571 2,674
mined
Underground - 000 2,148 2,385
conventional
Underground - Hossy 000 422 289
& Saffy1
Opencast 000 - 216
Total 000 2,571 2,890
Limpopo Underground 000 - 87
Opencast 000 - -
Total 000 - 87
Pandora Underground 000 38 34
attributable2
Opencast 000 - 68
Total 000 38 103
Lonmin Platinum Underground 000 2,609 2,796
Opencast 000 - 285
Total 000 2,609 3,080
Tonnes Marikana Underground 000 2,447 2,662
milled3
Opencast 000 61 116
Total 000 2,508 2,778
Limpopo Underground 000 - 92
Pandora4 Underground 000 89 80
Opencast 000 - 124
Total 000 89 205
Lonmin Platinum Underground 000 2,535 2,835
Head grade5 g/t 4.74 4.46
Recovery rate6 % 84.5% 80.2%
Opencast 000 61 240
Head grade5 g/t 1.96 4.74
Recovery rate6 % 42.3% 69.9%
Total 000 2,596 3,075
Head grade5 g/t 4.68 4.48
Recovery rate6 % 84.0% 79.4%
3 months 3 months
to 31st to 31st
December December
2009 2008
Metals in Marikana Platinum oz 156,025 157,450
concentrate
7
Palladium oz 72,596 72,825
Gold oz 3,361 3,613
Rhodium oz 21,678 21,809
Ruthenium oz 33,350 33,836
Iridium oz 7,281 7,410
Total PGMs oz 294,291 296,944
Nickel8 MT 661 679
Copper8 MT 417 421
Limpopo Platinum oz - 3,770
Palladium oz - 3,331
Gold oz - 243
Rhodium oz - 487
Ruthenium oz - 688
Iridium oz - 159
Total PGMs oz - 8,679
Nickel8 MT - 76
Copper8 MT - 54
Pandora3 Platinum oz 5,820 12,013
Palladium oz 2,745 5,406
Gold oz 40 93
Rhodium oz 911 1,657
Ruthenium oz 1,403 2,427
Iridium oz 231 456
Total PGMs oz 11,151 22,051
Nickel8 MT 9 12
Copper8 MT 5 7
Lonmin Platinum Platinum oz 161,845 173,232
Palladium oz 75,341 81,563
Gold oz 3,401 3,949
Rhodium oz 22,589 23,953
Ruthenium oz 34,754 36,952
Iridium oz 7,512 8,025
Total PGMs oz 305,442 327,674
Nickel8 MT 669 767
Copper8 MT 422 481
3 months 3 months
to 31st to 31st
December December
2009 2008
Metallurgy1 Lonmin Platinum oz 110,786 132,935
2 refined
metal
Production
Palladium oz 70,967 60,756
Gold oz 3,408 3,496
Rhodium oz 21,564 18,749
Ruthenium oz 25,632 25,338
Iridium oz 9,921 2,544
Total PGMs oz 242,278 243,818
Toll Platinum oz - -
refined
metal
production
Palladium oz - -
Gold oz - -
Rhodium oz 324 -
Ruthenium oz 512 -
Iridium oz - -
Total PGMs oz 835 -
Total Platinum oz 110,786 132,935
refined
PGMs
Palladium oz 70,967 60,756
Gold oz 3,408 3,496
Rhodium oz 21,888 18,749
Ruthenium oz 26,144 25,338
Iridium oz 9,921 2,544
Total PGMs oz 243,114 243,818
Base metals Nickel9 MT 668 764
Copper9 MT 378 499
Sales Refined Platinum oz 109,044 126,202
Metal Sales
Palladium oz 68,572 53,345
Gold oz 2,020 3,379
Rhodium oz 25,262 17,102
Ruthenium oz 25,511 25,668
Iridium oz 9,277 3,108
Total PGMs oz 239,685 228,805
Concentrate Platinum oz - -
and other10
Palladium oz - -
Gold oz - -
Rhodium oz - -
Ruthenium oz - -
Iridium oz - -
Total PGMs oz - -
Lonmin Platinum oz 109,044 126,202
Platinum
Palladium oz 68,572 53,345
Gold oz 2,020 3,379
Rhodium oz 25,262 17,102
Ruthenium oz 25,511 25,668
Iridium oz 9,277 3,108
Total PGMs oz 239,685 228,805
Nickel9 MT 572 676
Copper9 MT 483 403
3 months 3 months
to 31st to 31st
December December
2009 2008
Prices Average Platinum $/oz 1,411 882
Palladium $/oz 363 187
Gold $/oz 1,163 819
Rhodium $/oz 2,214 2,347
Ruthenium $/oz 118 248
Iridium $/oz 386 421
Basket price of $/oz 1,017 751
PGMs11
Nickel9 $/MT 16,606 15,143
Copper9 $/MT 6,431 4,950
Exchange Average rate R/$ 7.46 9.92
Rates for period
Closing rate R/$ 7.37 9.45
Notes:
1 Hossy and Saffy are replacement/growth shafts in ramp up. Hossy is fully
mechanised whilst Saffy has conventional stoping but mechanised
development. In previous production reports this section showed all
M&A/Hybrid mining. All comparatives have been restated.
2 Pandora attributable tonnes mined includes Lonmin`s share (42.5%) of the
total tonnes mined on the Pandora joint venture.
3 Tonnes milled excludes slag milling.
4 Lonmin purchases 100% of the ore produced by the Pandora joint venture
for onward processing which is included in downstream operating
statistics.
5 Head Grade is the grammes per tonne (5PGE + Au) value contained in the
tonnes milled and fed into the concentrator from the mines (excludes slag
milled).
6 Recovery rate in the concentrators is the total content produced divided
by the total content milled (excluding slag).
7 Metals in concentrate include slag and have been calculated at industry
standard downstream processing losses.
8 Corresponds to contained base metals in concentrate.
9 Nickel is produced and sold as nickel sulphate crystals or solution and
the volumes shown correspond to contained metal. Copper is produced as
refined product but typically at LME grade C.
10 Concentrate and others sales essentially relates to BMR concentrate and
BMR/PMR residues.
11 Basket price of PGMs is based on the revenue generated from the actual
PGMs (5PGE + Au) sold in the period.
12 Lonmin refined metal production and sales include an estimated 3koz
saleable ounces of Platinum produced from toll refining third party
concentrate (Q1 2009 - nil).
Date: 28/01/2010 09:00:01 Supplied by www.sharenet.co.za
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