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LONMIN PLC - Third Quarter 2012 Production Report & Interim Management Statement

Release Date: 26/07/2012 08:00
Code(s): LON
Wrap Text
Third Quarter 2012 Production Report & Interim Management Statement

26 July 2012

                                                     Lonmin Plc

                                    Third Quarter 2012 Production Report
                                      & Interim Management Statement

Lonmin Plc (“Lonmin or the Company”), the world’s third largest Platinum producer, today announces its production
results for the three and nine months to 30 June 2012 and interim management statement (unaudited).

Overview

Our operational performance in the quarter under review improved against the prior year period. Our record safety
performance was negatively impacted by a fatal incident at the Rowland shaft in which our colleague Thobisani Didi lost
his life on 22 June. We extend our deepest sympathies to his family and friends.

Safety remains our number one priority and our Lost Time Injury Frequency Rate (LTIFR) for the quarter was 4.47
incidents per million man hours versus 4.69 for quarter two 2012.

Mining Division

Our Marikana underground operations produced 2.9 million tonnes during the third quarter of 2012, an increase of
447,000 tonnes, or 18.5% from the prior year period. This increase partly reflects the unprotected industrial action
experienced at the Karee operations in the prior year period, which resulted in 258,000 tonnes of lost production, and
improved operational performance at each of our mining divisions with the exception of Westerns. Production at Karee
increased by 370,000 tonnes up 41.1% on the prior year period, and excluding the prior year industrial action mentioned
above, improved by 9.7%, as it benefitted from improved ore reserves. Production at Westerns was down 39,000 tonnes
or 4.9% against the prior year period as the planned decline at Newman continued. Middelkraal increased production by
52,000 tonnes or 12.0% on the prior year as we continued to operate in the challenging ground conditions at Saffy.
Production at Easterns increased by 45,000 tonnes or 18.4% buoyed by the flexibility afforded by a better ore reserve
position. Underground production increased against the backdrop of moderating Section 54 stoppages.

Production from our Merensky opencast operations increased by 3.5% from the prior year period and we continued to
focus on grade improvement. Pandora production increased by 46.2% on the prior year period to 55,000 tonnes as a
consequence of our ramp up plan.

Overall, the 3.0 million tonnes mined was 452,000 tonnes (+17.8%) higher than in the prior year period.

The total impact of production lost as a result of Section 54 stoppages was 40,000 tonnes, compared to 132,000 tonnes
lost in the prior year period, of which 30,000 tonnes were lost at Rowland where we experienced a fatality, with the
balance lost at Hossy. Quarter on quarter, lost production from Section 54 safety stoppages fell by 76.6%, a welcome
trend.

Process Division

Total tonnes milled increased by 12.7% year on year in the third quarter to 3.1 million, with the contribution from
underground and opencast being 3.0 million tonnes and 109,000 tonnes respectively.

Underground milled head grade improved by 0.16 grammes per tonne to 4.63 grammes per tonne (5PGE+Au) when
compared to 4.48 grammes per tonne in the prior year period as we are progressively accessing areas of higher grade
Merensky ore. The overall milled head grade was 4.58 grammes per tonnes, an increase of 0.21 grammes per tonne or
4.8% on the prior year period due to the contribution of a lower proportion of higher grade opencast ore which improved
to 3.24 from 2.07 grammes per tonne in the prior year period.




                                                                                                                     
Underground and overall concentrator recoveries improved by 2.0 percentage points to 87.0% when compared to the
prior year and 1.30 and 1.40 percentage points respectively quarter on quarter, buoyed by better than anticipated
recoveries at the Eastern Tailings Treatment Plant which dispatched its first concentrate in April 2012.

Platinum in concentrate from the Marikana operations was 191,877 saleable ounces, a 21.1% increase on the prior year
period, whilst total Platinum in concentrate at 202,851 ounces was 23.5% higher than the prior year period. These
improvements were a function of an increase in tonnes milled, improved grades and recoveries.

Total refined production for the third quarter was up 12.0% to 186,864 ounces of saleable Platinum when compared
against the prior year period. The increase was supported by the planned unwinding of inventory from the preceding
quarter. Total Platinum Group Metals (“PGMs”) produced in the third quarter were 351,935 ounces, an increase of 16.7%
on the prior year period.

Our new Number Two Furnace was successfully commissioned, with the first matte tap in mid-July. Its performance will
continue to be monitored. The backup capacity and optionality is a welcome addition to our smelting process.

Sales & Pricing

Platinum sales were down 6.3% or 10,123 ounces to 150,376 ounces. The lower sales were a consequence of the
delivery schedule agreed with a major customer which will unwind in the fourth quarter. Total PGM sales were up 1.8% or
5,154 ounces to 299,292 ounces when compared to the prior year period.

The US dollar basket price (excluding base metal credit) at $1,037 per ounce during the quarter was 20.4% less than the
prior year period while the corresponding Rand basket price (excluding base metal credit) was 4.4% lower than the prior
year period and 6.0% lower than the preceding quarter.

Nine Month Production

Total tonnes mined during the first nine months of the 2012 financial year were 8.8 million tonnes, up 4.1% or 349,000
tonnes from the corresponding prior year period. The increase was tapered by the 387,000 tonnes of production lost to
Section 54 stoppages in the first nine months of the 2012 financial year. These stoppages moderated in the third quarter
which also benefitted from the absence of the illegal industrial action experienced at Karee in the corresponding prior year
period. Production at Karee was up 19.8% against the prior year to 3.7 million tonnes. In a similar trend Middelkraal
increased production by 7.3% to 1.5 million tonnes, whilst Westerns and Easterns were down 10.1% and 1.5%
respectively for the nine month period. Production at Westerns reflected the planned decline at Newman. Easterns was
affected by the Section 54 stoppages issued at E2 and E3, following the fatality that occurred in the first quarter as well as
the occurrence of community unrest which eroded productivity in the period.

Total tonnes milled during the nine months of the 2012 financial year increased by 4.0% to 9.1 million tonnes against the
corresponding prior year period. The increase in mined production contributed positively to the improvement. The total
milled head grade improved to 4.47 grammes per tonne or a 2.8% increase on the prior year period with some benefit
coming from the targeted improvement in opencast grade. Underground and overall recoveries improved in the nine
month period to 86.0% compared to 85.4% and 85.2% respectively in the prior year period, aided by yields from the
Eastern Tailings Treatment Plant. Platinum in concentrate increased by 10.0% when compared against the prior year
period, ending the nine months under review at 571,026 saleable ounces of Platinum.

Total refined production in the nine months of the 2012 financial year was 491,193 Platinum ounces and 953,475 PGM
ounces, an increase of 1.6% and a decrease of 2.9% respectively, when compared to the prior year period. Refined
production was tapered by a stock build up in the second quarter which is unwinding in the second half as planned.

Sales for the nine months were 2.1% lower than the prior year period at 468,777 ounces of Platinum and 907,871 PGM
ounces were down 6.8% on the comparable period.

The US dollar basket price at $1,155 during the nine months of the 2012 financial year was 10.7% lower than the prior
year period. The corresponding Rand basket price including base metal revenue was in line with the prior year period at
R9, 638 per ounce.



                                                                                                                           
Outlook and Guidance

The momentum in underground mining combined with good concentrator recoveries gives us confidence to maintain our
full year sales guidance of 750,000 Platinum ounces for the current year, absent any material safety or industrial relations
stoppages. We anticipate the increase in unit costs to be contained at 8.5%, in line with the wage increases as previously
guided.

In our interim results announcement on 14 May, we stated that given our intention to manage our balance sheet prudently
and produce profitable ounces, we would, if market conditions dictate, defer capital investment to the extent deemed
necessary.

Whilst we believe that the long term industry fundamentals for PGMs demand remain sound, the current lacklustre
demand for PGMs and the weak pricing environment, may persist for longer than we had previously anticipated. As a
result, we embarked on a thorough review of our growth strategy, future production profile and consequent capital
investment programme. This review is ongoing and we are examining all cash conservation and cost saving measures
available to us. Given the stage we are at in the financial year, savings for FY12 will be modest, however we have thrifted
some capital expenditure to reduce our capex guidance for the year by $20 million to around $430 million. We have also
taken the decision to reduce the capital spend in the 2013 and 2014 Financial Years to around $250 million per annum.
This will be achieved mainly by deferring capital spend on our Hossy, K4 and Saffy shafts as well as optimising some of
the processing projects. We continue to identify and implement other cost saving measures that can be taken while
retaining sufficient flexibility to enable us to respond to improved market conditions when these occur.

The consequence of the decision to reduce capital expenditure is that the increase in production capacity previously
announced will now take place more slowly and, in light of the current surplus market, the Company will cut production
growth and contain Platinum sales in 2013 to the current 750,000 Platinum ounces level. Cost improvement remains a
key management priority, and the Company remains committed to improving its unit costs relative to the industry.

As anticipated, the Company’s level of net debt remains well within the limits and terms of the existing bank debt facilities.
As part of its ongoing capital planning, the Company is also reviewing certain financing options, including accessing the
international debt capital markets. The Company will update its shareholders if it decides to access the international debt
capital markets or undertake alternative financing options.


ENQUIRIES:
Investors / Analysts:
Tanya Chikanza                                                                               +44 (0) 207 201 6007
Head of Investor Relations

Ruli Diseko                                                                                  +27 (0) 11 218 8300
Investor Relations Manager

Media:
Cardew Group                                                                                 +44 (0) 207 930 0777
James Clark/Emma Crawshaw
Inzalo Communications                                                                        +27 (0) 11 646 9992
Gillian Findlay/Bridget von Holdt


This report and statement is not an offer of securities for sale in the United States, securities may not be offered or sold in
the United States absent registration or an exemption from registration, and any public offering of securities to be made in
the United States will be made by means of a prospectus or offering memorandum that may be obtained from the issuer
and that will contain detailed information about the Company and management, as well as financial statements.




                                                                                                                             
                                                            3 months     3 months     9 months     9 months
                                                           to 30 June   to 30 June   to 30 June   to 30 June
                                                                 2012         2011         2012         2011
Tonnes                               1
           Marikana          Karee                   kt        1 271          901        3 731        3 115
mined                                    1
                             Westerns                kt          755          794        2 264        2 519
                                                 1
                             Middelkraal             kt          489          436        1 453        1 355
                                         1
                             Easterns                kt          291          246          847          860
                             Underground             kt        2 806        2 376        8 295        7 849
                             Opencast                kt          133          129          330          465
                             Total                   kt        2 939        2 505        8 624        8 314
           Pandora
                        2
           attributable      Underground             kt           55           38          160          121
           Lonmin Platinum   Underground             kt        2 861        2 414        8 454        7 970
                             Opencast                kt          133          129          330          465
                             Total                   kt        2 995        2 543        8 784        8 434
                             % UG2                   %          70.9%        74.1%        71.0%        72.9%
                                                                   ^            ^            ^            ^
Tonnes     Marikana          Underground             kt        2 879        2 560        8 412        7 835
       3
milled
                             Opencast                kt          109          118          348          668
                             Total                   kt        2 988        2 678        8 760        8 503
                     4
           Pandora           Underground             kt          133           92          359          268
           Lonmin Platinum   Underground             kt        3 012        2 652        8 771        8 103
                                             5
                             Head grade              g/t         4.63         4.48         4.53         4.53
                             Recovery rate6          %          87.0%        85.0%        86.0%        85.4%
                             Opencast                kt          109          118          348          668
                             Head grade5             g/t         3.24         2.07         3.00         2.17
                                                 6
                             Recovery rate           %          86.9%        80.9%        85.6%        81.6%
                             Total                   kt        3 121        2 770        9 120        8 771
                             Head grade5             g/t         4.58         4.37         4.47         4.35
                             Recovery rate6          %          87.0%        84.9%        86.0%        85.2%




                                                                                                           
                                                     3 months     3 months     9 months     9 months
                                                    to 30 June   to 30 June   to 30 June   to 30 June
                                                          2012         2011         2012         2011
Metals in       Marikana      Platinum         oz     191 877      158 490      543 572      502 279
            7
concentrate
                              Palladium        oz      87 920       73 553      247 724      234 971
                              Gold             oz       4 613        3 875       14 195       13 008
                              Rhodium          oz      25 541       20 940       69 879       65 923
                              Ruthenium        oz      36 714       33 164      105 738      104 255
                              Iridium          oz       7 912        7 088       22 921       22 652
                              Total PGMs       oz     354 577      297 110     1 004 029     943 088
                                     8
                              Nickel           MT         948          762        2 886        2 567
                                         8
                              Copper           MT         602          479        1 847        1 626
                          4
                Pandora       Platinum         oz       9 949        5 722       25 557       16 796
                              Palladium        oz       4 661        2 683       11 893        7 862
                              Gold             oz          72           39          190          115
                              Rhodium          oz       1 575          868        3 965        2 557
                              Ruthenium        oz       2 252        1 386        5 907        4 040
                              Iridium          oz         373          226          988          664
                              Total PGMs       oz      18 883       10 924       48 501       32 035
                                     8
                              Nickel           MT          15            9           38           27
                                         8
                              Copper           MT           8            5           20           15
                Concentrate   Platinum         oz       1 025             -       1 897             -
                purchases     Palladium        oz         334             -         644             -
                              Gold             oz           3             -           6             -
                              Rhodium          oz         122             -         226             -
                              Ruthenium        oz         144             -         271             -
                              Iridium          oz          47             -          90             -
                              Total PGMs       oz       1 676             -       3 134             -
                              Nickel           MT           0             -           1             -
                              Copper           MT           0             -           1             -
                Lonmin        Platinum         oz     202 851      164 212      571 026      519 075
                Platinum      Palladium        oz      92 915       76 236      260 262      242 833
                              Gold             oz       4 688        3 913       14 391       13 123
                              Rhodium          oz      27 239       21 808       74 070       68 480
                              Ruthenium        oz      39 111       34 551      111 916      108 295
                              Iridium          oz       8 333        7 314       24 000       23 316
                              Total PGMs       oz     375 136      308 034     1 055 664     975 123
                                       8
                              Nickel           MT         963          771        2 926        2 594
                                           8
                              Copper           MT         610          485        1 868        1 641




                                                                                                   
                                                       3 months     3 months     9 months     9 months
                                                      to 30 June   to 30 June   to 30 June   to 30 June
                                                            2012         2011         2012         2011
Refined      Lonmin refined       Platinum       oz     185 946      166 021      470 255      446 999
production   metal production     Palladium      oz      84 199       76 086      220 701      214 473
                                  Gold           oz       4 856        4 291       13 392       10 955
                                  Rhodium        oz      15 040       14 560       66 799       53 084
                                  Ruthenium      oz      41 749       37 183      114 718      109 589
                                  Iridium        oz       7 663        1 641       24 369       15 052
                                  Total PGMs     oz     339 453      299 782      910 235      850 153
             Toll refined metal   Platinum       oz         918          812       20 937       36 665
             production           Palladium      oz       8 290          449       12 479       49 084
                                  Gold           oz         481           13          681        2 879
                                  Rhodium        oz       2 793          130        4 455       14 022
                                  Ruthenium      oz            -         408        3 682       24 408
                                  Iridium        oz            -          86        1 006        5 177
                                  Total PGMs     oz      12 482        1 898       43 241      132 235
             Total refined        Platinum       oz     186 864      166 832      491 193      483 665
             PGMs                 Palladium      oz      92 489       76 535      233 180      263 557
                                  Gold           oz       5 337        4 303       14 074       13 833
                                  Rhodium        oz      17 833       14 690       71 254       67 106
                                  Ruthenium      oz      41 749       37 591      118 401      133 997
                                  Iridium        oz       7 663        1 727       25 374       20 229
                                  Total PGMs     oz     351 935      301 679      953 475      982 387
                                         9
             Base metals          Nickel         MT       1 220          914        2 865        3 027
                                             9
                                  Copper         MT         723          560        1 623        1 775
                                                              ^            ^            ^            ^
Sales        Refined metal        Platinum       oz     150 376      160 499      468 777      478 804
             sales                Palladium      oz      79 200       64 573      214 753      254 104
                                  Gold           oz       4 707        3 812       14 040       12 449
                                  Rhodium        oz      16 500       14 547       65 520       69 353
                                  Ruthenium      oz      40 953       43 008      118 864      134 781
                                  Iridium        oz       7 557        7 700       25 916       24 203
                                  Total PGMs     oz     299 292      294 138      907 871      973 695
                                         9
                                  Nickel         MT         976          890        2 769        3 001
                                             9
                                  Copper         MT         603          486        1 473        1 563
                                             9
                                  Chrome         MT     326 446      173 608      922 478      415 354




                                                                                                     
                                                                                     3 months          3 months             9 months        9 months
                                                                                    to 30 June        to 30 June           to 30 June      to 30 June
                                                                                          2012              2011                 2012            2011
Average            Platinum                                          $/oz                  1 468             1 764                  1 568        1 772
prices
                   Palladium                                         $/oz                    622               754                    660          755
                   Gold                                              $/oz                  1 518             1 524                  1 673        1 247
                   Rhodium                                           $/oz                  1 265             2 082                  1 462        2 290
                   Ruthenium                                         $/oz                    108               172                    103          170
                   Iridium                                           $/oz                  1 058             1 023                  1 041         898
                                                              11
                   $ basket excl. by-product revenue                 $/oz                  1 037             1 303                  1 155        1 294
                                                              12
                   $ basket incl. by-product revenue                 $/oz                  1 108             1 400                  1 228        1 386
                                                               11
                   R basket excl. by-product revenue                 R/oz                  8 481             8 872                  9 070        8 954
                                                              12
                   R basket incl. by-product revenue                 R/oz                  9 057             9 533                  9 638        9 593
                           9
                   Nickel                                            $/MT                 13 815            21 677                 16 087      22 074
                               9
                   Copper                                            $/MT                  7 345             8 927                  7 321        8 784
                               9
                   Chrome                                            $/MT                      22                36                  18           30

Exchange                                         13
                   Average rate for period                            R/$                    8.12              6.77                 7.98         6.85
rates
                   Closing rate                                       R/$                    8.16              6.76                 8.16         6.76

Notes:
1        Karee includes the shafts K3, 1B and 4B and K4. Westerns comprises Rowland, Newman and ore purchases from W1. Middelkraal represents
         Hossy and Saffy. Easterns includes E1, E2 and E3.
2        Pandora attributable tonnes mined represents 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 metal derived from slag processing and have been calculated at industry standard downstream processing
         losses to present produced saleable ounces.
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. Chrome is produced in the form of chromite concentrate and volumes shown are in the form of
         chromite.
10       Concentrate and other sales have been adjusted to a saleable ounce basis using industry standard recovery rates.
11       Basket price of PGMs is based on the revenue generated in Rand and Dollar from the actual PGMs (5PGE + Au) sold in the period based on
         the appropriate Rand / Dollar exchange rate applicable for each sales transaction.
12       As per note 11 but including revenue from base metals.
13       Exchange rates are calculated using the market average daily closing rate over the course of the period.




                                                                                                                                                   

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