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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