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LON - Lonmin - Full Year Production Report 2009
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")
22 October 2009
Lonmin Plc
Full Year Production Report 2009
Lonmin Plc, ("Lonmin" or "the company") today announces its production report
for the three months and twelve months to 30 September 2009 (unaudited) and
provides an outlook statement for the 2010 financial year.
Introduction
Lonmin delivered a satisfactory production performance in 2009. The year was
not without its challenges, including the disruptive effect of the
restructuring programme largely completed in March, the increasing prevalence
and severity of Section 54 safety stoppages throughout the year, particularly
at our two largest shafts, and an unplanned outage at the Number One furnace
in June. Despite these challenges, underground production at Marikana was in
line with 2008 levels and we achieved our revised 2009 sales guidance by
selling 682,955 ounces of Platinum.
Fourth Quarter Production - 2009
Total tonnes mined for the fourth quarter of the 2009 financial year were 2.6
million, a 20% decline from the prior year period. The main reasons for the
reduction were the planned closure of opencast operations at Marikana and
Pandora, and the placing of our Baobab shaft at Limpopo on to care and
maintenance.
Production from our Marikana underground operations was 2.6 million tonnes, a
6% reduction from the fourth quarter of 2008. Our conventional underground
Marikana mining operations produced 2.1 million tonnes during the fourth
quarter of the 2009 financial year, a 15% decline from the same period last
year. A major factor behind this decline was a significant increase in the
prevalence and severity of Section 54 safety shutdowns in the fourth quarter
of 2009. We lost a total of around 196,000 tonnes in the quarter due to
Section 54 shutdowns, compared to around 57,000 tonnes lost due to these
shutdowns in the prior year period. All the safety shutdowns during the period
took place at our conventional operations, with 93% of the resultant tonnes
lost occurring at our two largest shafts, K3 and Rowland.
Tonnage from our mechanised and hybrid sections increased by 74% during the
fourth quarter of 2009 from the prior year period and by 19% from the previous
quarter as both Hossy and Saffy continued to produce strong performances.
Total tonnes milled in the quarter declined by 12% year-on-year to 3.0 million
tonnes and the concentrators produced 172,082 saleable ounces of Platinum in
concentrate for the quarter, a 14% decrease from the fourth quarter in the
2008 financial year.
Underground and overall concentrator recoveries increased significantly to
81.9% and 80.3% respectively from the third quarter of the 2009 financial
year, when underground and overall recoveries were 80.5% and 79.0%
respectively. This was a result of a better ore mix and due to the benefits of
our concentrator optimisation programme starting to come through with the
performance of some concentrators starting to record results we have not
achieved for several years.
Underground milled head grade decreased by 1.5% to 4.59 grammes per tonne
(5PGE+Au) year-on-year, due to reef control issues at certain areas of the
Merensky reef, compounded by mining through localised low grade areas on that
reef horizon.
The Number One furnace was run at reduced power for most of the fourth quarter
of 2009, following a matte run out in June, and was supported by the running
of our Pyromet furnaces during the quarter. Following a re-design of the matte
tappe hole area at the Number One furnace a re-build commenced on 10 October
2009 and we expect to tappe matte in late November 2009.
As expected, this incident impacted refined production in the fourth quarter
of the 2009 financial year which was 166,851 ounces of Platinum and 317,843
ounces of total PGMs, decreases of 27% and 25% respectively year-on-year. As
planned, excess inventory, built-up in the Process Division following the
Number One furnace incident, was reduced by selling 25,062 Platinum ounces of
metal-in-process inventory. Metal sales during the fourth quarter of the 2009
financial year decreased from the prior year period to 192,608 ounces of
Platinum and 358,806 ounces of PGMs.
Twelve Month Production - 2009
Total tonnes mined during the 2009 financial year were 10.8 million, a 1.6
million decline from 2008. All of this reduction related to our decision to
close production units which were unprofitable. Of the production shortfall,
1.2 million tonnes related to the closure of opencast operations at Marikana
and Pandora whilst 0.4 million tonnes were due to placing of the Baobab shaft
at Limpopo on care and maintenance during the first half of the 2009 financial
year.
Total Marikana underground production during the 2009 financial year was the
same as 2008 at 10.2 million tonnes. The ramp-up in production from our
mechanised and hybrid shafts was offset by, amongst other things, an increase
in prevalence and severity of Section 54 safety shutdowns at our Marikana
operations. In 2009, we lost around 513,000 tonnes as a result of these
shutdowns, compared to around 210,000 tonnes in 2008. Lonmin`s focus on safety
has been maintained during 2009 when we recorded a slight improvement in our
Lost Time Injury Frequency Rate over 2008, despite the disruptive impact of
the restructuring programme completed earlier in the year. Regrettably we
suffered three fatalities in the year.
In 2009 we mined 8.5 million tonnes from our conventional underground Marikana
operations, a decline of 0.6 million tonnes from 2008. Around half of this
decline was due to the increase in Section 54 shutdowns, as outlined above
with 80% of the total tonnes lost due to Section 54 safety shutdowns in 2009
occurring at K3 and Rowland, our two largest shafts. In addition, around
114,000 tonnes were lost at our Marikana conventional underground operations
following the planned closure of a small uneconomic decline shaft and a
further five half levels at Marikana during the third quarter of 2009. Finally
tonnes were lost during 2009 directly as a result of disruption relating to
the restructuring programme completed in March, when a total of 7,000 full
time employees and contractors left the business.
Production from our mechanised and hybrid shafts increased 49% to 1.7 million
tonnes during the 2009 financial year from the prior year. Saffy performed
extremely well, despite the multiple challenges faced by shaft management in
converting from fully mechanised to hybrid mining during the year, with the
shaft achieving its year end monthly hoisting target of 80,000 tonnes in
September 2009. Hossy also had a good year, achieving productivity in line
with our initial targets set in November 2008. We will provide the market with
further details on the encouraging performance of these two shafts at our
Final Results on 16 November 2009.
We made progress towards improving underground ore reserve development at
Marikana in 2009. At the end of September 2009, underground ore reserve
development at Marikana reached 2.0 million square metres of immediately
available ore reserves up from 1.9 million square metres at the end of March
2009.* Most of our shafts at Marikana now have appropriate levels of
development, but there remains scope for improvement at certain shafts,
particularly K3.
The concentrators produced a total of 663,101 saleable ounces of Platinum in
concentrate during the 2009 financial year, a 9% year-on-year decline, mainly
as a result of closing production at the Marikana and Pandora opencast
operations, as well as Limpopo. Overall concentrator recoveries improved
during the 2009 financial year to 79.8%, from 79.2% in 2008, due to the
milling of less oxidised opencast ore from deeper pits in the 2009 financial
year compared to the prior year. Underground recoveries fell to 81.0%, from
81.7% in 2008, mainly as a result of undertaking extensive maintenance on some
of our Marikana concentrators in the first quarter of the 2009 financial year
and due to ore mix. However performance against our internal models, which
take account of ore mix issues, showed a significant improvement during the
year as a result of a stable management team, investment in maintenance, which
improves plant availability, and our concentrator optimisation project.
Underground milled head grade was 1.7% lower year-on-year at 4.57 grammes per
tonne (5PGE+Au) mainly as a result of an increased proportion of development
ore coming from Hossy and Saffy and a general increase in development ore
throughout the operations. On the UG2 horizon, we mined a larger proportion of
ore from some of the slightly lower grade areas of the Marikana ore body and
there was some unplanned dilution, partially as a result of localised
geological conditions. There is still a lack of flexibility in face
availability on the Merensky reef horizon, and some localised lower grade
areas were encountered, particularly during the first quarter of the year.
Overall milled head grade decreased marginally year-on-year from 4.52 to 4.50
grammes per tonne (5PGE+Au).
Our refineries performed consistently throughout the year. Total refined
production for 2009 was 657,317 ounces of Platinum and 1,244,709 of total
PGMs, down 6% and 7% respectively from the same period in 2008. However,
taking into account the closure of opencast operations at Marikana and Pandora
and the placing of Limpopo operations on care and maintenance, 2009 total
refined production would have been flat compared to 2008. Final metal sales
for 2009 were in line with our revised sales guidance at 682,955 ounces of
Platinum and 1,268,918 of total PGMs.
Outlook for 2010
South African PGM producers are likely to face continued industry-related
challenges in 2010 and the decision announced today to move the operational
headquarters from London to Johannesburg reflects our determination to drive
operational performance more effectively than can be done from London. Section
54 safety stoppages will not stop but we need to reduce their impact on our
operational and financial performance. South African mining inflation remains
relatively high, putting pressure on industry margins and capital investment,
and the labour environment remains challenging. Recent improvements in US
dollar-based PGM pricing have been offset by South African rand strength and
cash flow management remains a high priority in the industry. Against this
background however we expect that Marikana mining production will grow in
2010, more than offsetting the reduction in opencast tonnes and ounces from
Pandora, as these pits are now closed. This should allow metals in concentrate
production to increase by around 5% and, as a result, we expect to achieve
2010 sales of around 700,000 platinum ounces, slightly ahead of 2009.
Change in Quarterly Production Reporting
In the 2010 financial year, we will be incorporating our Second and Fourth
Quarter production reports into our Half Year and Full Year results
announcements, respectively, as this is felt to be a more efficient way of
communicating with the market. We will continue to publish separate First and
Third Quarter production reports.
* In 2009 we have changed our reporting methodology for ore reserve
development, in line with industry best practice, to exclude partially
developed ore reserves. We have reported on this basis for 2009 and will
continue to do so going forward.
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 3 12 12
months months months months
to 30 to 30 to 30 to 30
Sep Sep Sep Sep
2009 2008 2009 2008
Tonnes Marikana Underground 000 2,069 2,436 8,472 9,076
mined -
conventional
Underground 000 510 294 1,710 1,150
- M&A1
Underground 000 2,579 2,729 10,182 10,226
- total
Opencast 000 0 306 234 1,300
Total 000 2,579 3,035 10,415 11,526
Limpopo Underground 000 0 122 87 523
Opencast 000 0 0 0 0
Total 000 0 122 87 523
Pandora Underground 000 38 29 142 124
attributable
2
Opencast 000 8 97 156 275
Total 000 47 126 298 400
Lonmin Underground 000 2,618 2,880 10,411 10,875
Platinum
Opencast 000 8 403 389 1,575
Total 000 2,626 3,283 10,801 12,449
Tonnes Marikana Underground 000 2,676 2,739 10,148 10,206
milled3
Opencast 000 185 246 622 1,163
Total 000 2,861 2,985 10,771 11,369
Limpopo Underground 000 0 129 92 534
Opencast 000 0 0 0 0
Total 000 0 129 92 534
Pandora4 Underground 000 90 68 335 293
Opencast 000 59 256 430 595
Total 000 149 324 766 888
Ore Underground 000 0 0 0 0
purchases5
Opencast 000 0 0 0 30
Total 000 0 0 0 30
Lonmin Underground 000 2,767 2,936 10,576 11,033
Platinum
Head grade6 g/t 4.59 4.66 4.57 4.66
Recovery % 81.9% 81.4% 81.0% 81.7%
rate7
Opencast 000 243 502 1,053 1,788
Head grade6 g/t 2.88 4.19 3.70 3.70
Recovery % 51.0% 63.7% 65.1% 59.4%
rate7
Total 000 3,010 3,438 11,628 12,821
Head grade6 g/t 4.45 4.50 4.52
4.59
Recovery % 80.3% 79.1% 79.8% 79.2%
rate7
3 3 12 months 12 months
months months
to 30 to 30 to 30 Sep to 30 Sep
Sep Sep
2009 2008 2009 2008
Metals Marikana Platinum oz 163,870 175,130 612,910 660,429
in
concentr
ate8
Palladium oz 76,401 80,757 284,561 303,530
Gold oz 3,804 4,468 14,419 17,221
Rhodium oz 22,535 24,082 85,008 90,096
Ruthenium oz 33,634 37,242 130,080 139,158
Iridium oz 7,344 8,005 28,389 29,654
Total PGMs oz 307,588 329,684 1,155,367 1,240,088
Nickel9 MT 723 799 2,669 3,065
Copper9 MT 453 502 1,680 1,882
Limpopo Platinum oz - 5,834 3,770 22,017
Palladium oz - 3,627 3,331 16,477
Gold oz - 186 243 1,265
Rhodium oz - 775 487 2,660
Ruthenium oz - 1,400 688 4,128
Iridium oz - (468) 159 121
Total PGMs oz - 11,353 8,679 46,667
Nickel9 MT - 93 76 414
Copper9 MT - 68 54 296
Pandora4 Platinum oz 8,212 19,350 46,421 48,743
Palladium oz 3,717 7,897 20,866 21,282
Gold oz 56 142 350 371
Rhodium oz 1,105 2,274 6,425 6,334
Ruthenium oz 1,537 3,388 9,338 9,379
Iridium oz 298 726 1,767 1,762
Total PGMs oz 14,924 33,777 85,168 87,872
Nickel9 MT 12 15 49 53
Copper9 MT 7 9 30 27
Ore Platinum oz - - - 937
purchases5
Palladium oz - - - 793
Gold oz - - - 74
Rhodium oz - - - 83
Ruthenium oz - - - 107
Iridium oz - - - 25
Total PGMs oz - - - 2,019
Nickel9 MT - - - 16
Copper9 MT - - - 11
Lonmin Platinum oz 172,082 200,314 663,101 732,125
Platinum
Palladium oz 80,117 92,281 308,758 342,081
Gold oz 3,860 4,796 15,013 18,932
Rhodium oz 23,640 27,131 91,920 99,173
Ruthenium oz 35,170 42,030 140,106 152,772
Iridium oz 7,642 8,263 30,315 31,562
Total PGMs oz 322,512 374,815 1,249,214 1,376,645
Nickel9 MT 735 908 2,794 3,549
Copper9 MT 460 578 1,763 2,216
3 3 12 months 12 months
months months
to 30 to 30 to 30 Sep to 30 Sep
Sep Sep
2009 2008 2009 2008
Metallur Lonmin Platinum oz 165,251 228,942 655,291 699,942
gy13 refined
Metal
Production
14
Palladium oz 70,858 110,198 297,415 330,209
Gold oz 4,428 5,481 18,277 20,257
Rhodium oz 30,846 22,694 95,596 91,063
Ruthenium oz 35,733 49,122 146,506 158,424
Iridium oz 5,840 9,353 23,908 31,599
Total PGMs oz 312,955 425,791 1,236,992 1,331,493
Toll Platinum oz 1,600 - 2,025 -
refined
metal
production
Palladium oz 736 - 941 -
Gold oz 48 - 58 -
Rhodium oz 538 - 1,532 -
Ruthenium oz 1,639 - 2,647 -
Iridium oz 328 - 513 -
Total PGMs oz 4,888 - 7,717 -
Total Platinum oz 166,851 228,942 657,317 699,942
refined
PGMs
Palladium oz 71,594 110,198 298,356 330,209
Gold oz 4,475 5,481 18,335 20,257
Rhodium oz 31,383 22,694 97,128 91,063
Ruthenium oz 37,372 49,122 149,153 158,424
Iridium oz 6,168 9,353 24,420 31,599
Total PGMs oz 317,843 425,791 1,244,709 1,331,493
Base Nickel10 MT 849 1,224 3,244 3,483
metals
Copper10 MT 471 648 1,988 2,009
Sales Refined Platinum oz 167,546 241,959 659,703 706,492
Metal
Sales 14
Palladium oz 78,998 112,694 305,332 329,460
Gold oz 5,542 5,715 18,910 20,151
Rhodium oz 34,612 27,255 94,160 93,337
Ruthenium oz 40,538 47,832 146,009 158,477
Iridium oz 5,262 10,475 23,522 32,140
Total PGMs oz 332,498 445,931 1,247,636 1,340,057
Concentrat Platinum oz 25,062 15,725 23,253 20,425
e and
other11
and 13
Palladium oz 370 9,867 (2,848) 11,888
Gold oz 13 11 13 117
Rhodium oz 174 60 175 889
Ruthenium oz 301 25,095 303 26,205
Iridium oz 387 1,519 387 1,789
Total PGMs oz 26,307 52,277 21,282 61,313
Lonmin Platinum oz 192,608 257,685 682,955 726,918
Platinum
Palladium oz 79,369 122,561 302,485 341,348
Gold oz 5,555 5,725 18,922 20,268
Rhodium oz 34,786 27,315 94,335 94,227
Ruthenium oz 40,839 72,928 146,312 184,682
Iridium oz 5,649 11,994 23,909 33,929
Total PGMs oz 358,806 498,208 1,268,918 1,401,371
Nickel10 MT 964 1,157 3,318 3,338
Copper10 MT 777 627 2,045 1,978
3 3 12 months 12 months
months months
to 30 to 30 to 30 Sep to 30 Sep
Sep Sep
2009 2008 2009 2008
Prices Average Platinum $/oz 1,252 1,505 1,086 1,655
Palladium $/oz 270 303 224 372
Gold $/oz 971 877 912 867
Rhodium $/oz 1,612 6,976 1,571 7,614
Ruthenium $/oz 79 263 97 340
Iridium $/oz 378 412 388 414
Basket $/oz 918 1,294 786 1,529
price of
PGMs12
Nickel10 $/MT 16,208 16,710 15,006 22,556
Copper10 $/MT 6,193 6,885 6,291 7,212
Exchange Average rate for R/$ 7.77 7.81 8.99 7.45
Rates period
Closing R/$ 7.47 8.27 7.47 8.27
rate
Notes:
1 M&A comprises ore produced by our fully mechanised shafts and from
Saffy shaft, which is being transitioned to hybrid mining.
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 Relates to the tonnes milled and derived metal in concentrate from
third-party ore purchases.
6 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).
7 Recovery rate in the concentrators is the total content produced
divided by the total content milled (excluding slag).
8 Metals in concentrate includes slag and has been calculated at
industry standard downstream processing losses.
9 Corresponds to contained base metals in concentrate.
10 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.
11 Concentrate and others sales essentially relates to BMR concentrate
and BMR/PMR residues.
12 Basket price of PGMs is based on the revenue generated from the actual
PGMs (5PGE + Au) sold in the period.
13 During the fourth quarter of 2008 financial year, 25,000 oz of refined
Ruthenium and 1,500 oz of refined Iridium were bought and sold to meet
contractual commitments. The metallurgy section of the above table
excludes these transactions as they relate to third party mined and
processed metals but they are included in the sales section.
14 Lonmin refined metal production and sales include an estimated 5koz
saleable ounces of Platinum produced from toll refining third party
concentrate.
Date: 22/10/2009 08:01:06 Supplied by www.sharenet.co.za
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