Wrap Text
Q1 2013 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")
REGULATORY RELEASE
31 January 2013
Q1 2013 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 quarter to 31 December 2012 (unaudited) and Interim Management Statement for the period from 1
October 2012 to today’s date.
Overview
Our production performance in the quarter has substantially exceeded our planned ramp up to produce Platinum in
concentrate of 174,253 saleable ounces and Platinum sales of 185,497 saleable ounces. This demonstrates the
successful execution of the operational plans we put in place for the safe re-start and ramping up of production
following the labour unrest that preceded the period. The protocols developed for our safe sustainable start up have
not only been commended by regulatory authorities as being best practice but have been adopted and rolled out by
our peers. Total tonnes mined were 2.9 million tonnes, similar to the prior year period.
In addition our exemplary safety performance throughout the production ramp up delivered an improved Lost Time
Injury Frequency Rate (LTIFR) for the quarter of 3.74 incidents per million man hours worked compared to 4.16 for Q4
2012 and 4.67 for Q1 2012. The Process Division had a LTI free first quarter for the first time in five years.
Mining Division
Total tonnes mined in the first quarter of the 2013 financial year from our Marikana underground operations were 2.7
million tonnes, down 26,000 tonnes or 1.0% from the prior year period. This is a relatively flat performance when
compared to Q1 2012, as this performance masks two trends. Firstly the prior year period results were unusually
impacted by the high incidence of Section 54 safety reviews and stoppages which dominated the South African Mining
sector as a whole and resulted in lower than normal production in that period. The total impact of Section 54
shutdowns in Q1 2012 was 177,000 tonnes, compared to 19,000 tonnes in Q1 2013. Secondly the Q1 2013 production
reflects the re-commencement and gradual ramping up of production during the quarter. The quarter’s performance
is commendable with tonnes mined well ahead of the ramp up plan and overall mining divisions’ output up 78.2%
from Q4 2012. This solid performance is due to the emphasis we have placed on safely accelerating our ramp up
following the resumption of operational activities coupled with the extensive training we conducted before blasting
commenced on 1 October 2012. In addition, management interventions have assisted in ensuring high levels of
employee work attendance during the quarter up to the December break.
Looking specifically at how our four mining divisions contributed to the quarter’s total production, tonnes mined at
Karee were largely flat increasing by only 2,000 tonnes or 0.1% from the prior year period, with tonnes mined at K3,
our biggest shaft, relatively flat when compared to the prior year period. The prior year period also included 18,000
tonnes from K4, which was placed on care and maintenance in September 2012. Westerns production decreased by
42,000 tonnes or 5.5% driven by the planned depletion of ore reserves at Newman shaft and ore reserve and
infrastructure challenges at Rowland. Production at Middelkraal was up 66,000 tonnes representing a 14% increase
from the prior year period as both Hossy and Saffy continued to increase production. Production at Easterns fell by
53,000 tonnes or 19.4% as E1 and E3 approached their end of life. Pandora underground production increased by
7,000 tonnes or 13.5% to 61,000 tonnes and is ramping up to replace the tonnes lost by the winding down of E1 and
E3.
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Our opencast Merensky operations delivered a total of 155,000 tonnes, an increase of 37,000 tonnes or 31.3% from
the prior year period as planned.
Process Division
Total tonnes milled for the quarter declined by 4.6% to 2.8 million tonnes when compared to Q1 2012. This was due to
the concentrators re-starting as planned, ten days after the mining ramp up commenced on 1 October 2012. This was
to rebuild stocks as required for efficient plant running and the planned closure of the Number One shaft UG2
concentrator for upgrade. The UG2 concentrator is due to come back online in the fourth quarter of FY 2013.
Underground milled head grade during the period increased by 3.1% to 4.64 grammes per tonne (5PGE + Au)
compared to the prior year period, as a result of an increase in hoisting grade and ore mix. The opencast milled head
grade was marginally lower than Q4 2012 grade and lower than prior year period at 2.98 grammes per tonne. Overall,
total milled head grade increased by 2.6% to 4.59 grammes per tonne in the period.
Underground and overall concentrator recoveries improved by 1.5 percentage points to 86.8% when compared with
the prior year period, assisted by the successful commissioning of the Eastern Tails Treatment Plant in April 2012.
Platinum in concentrate from our Marikana operations was 174,253 saleable ounces, a 2.2% decrease from the prior
year period and an increase of 71,431 ounces when compared to Q4 2012. In total the concentrators produced
185,497 saleable ounces of Platinum in the quarter, a 0.7% decrease from the prior year period. Total refined
production for the quarter was 135,455 ounces of saleable Platinum an increase of 18.9% on the prior year period.
The discrepancy between metal in concentrate and refined production is a consequence of the planned restocking of
the pipeline following the six week strike and the re-establishment of stable metal flows through the value chain. We
have successfully filled the pipeline and our stocks are in a healthy position.
Sales & Pricing
Platinum sales at 108,342 ounces were 16.7% higher than the prior year period, total PGM sales decreased by 3.7% to
182,576 ounces.
The US dollar basket price at $1,176 per ounce improved by 3.5% on the prior year period whilst the increase in the
Rand basket price was more pronounced up 10.3% to R10,152 per ounce.
Renewal Plan
Cost management programmes
The implementation of our renewal plan has progressed well; the over performance on many of the metrics is
encouraging, and in the absence of any unexpected material labour unrest, it is expected to continue as suggested by
the healthy stock levels reflected in our production report. The assessment of our operating model and management
structure is progressing as planned whilst our initiative to deliver a R100 million in procurement savings for FY 13 by
implementing structures, processes and systems to fully benefit from a Total Cost of Ownership approach is also
progressing well.
Employee relationship
Our union membership profile has evolved over the last few months whilst the recognition agreements with our union
stakeholders have also expired. In light of this, we have commenced the process of reviewing the recognition
arrangements with a view to establishing all inclusive recognition that provides appropriate representation to all the
unions and associations representing our employees.
In parallel, Lonmin is actively participating in industry discussions on the establishment of a forum for centralised
engagement and looks forward to this becoming a reality.
Social licence – housing, community and employee care
The Board separately today, will announce initiatives around housing, the communities we operate in and our
employees.
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Financial stability
The Rights Issue announced on 9 November 2012 to raise approximately $817 million was successfully completed on
11 December 2012. Since then, Lonmin has repaid in full its $700 million USD bank debt facilities, cancelling the $300
million term loan facility leaving the $400 million revolving credit facility available to be drawn when required. The
amendments to this facility as well as Lonmin’s ZAR bank debt facilities of R1.98 billion outlined at the time of the
Rights Issue both became effective in December 2012. The successful conclusion of this balance sheet refinancing has
significantly strengthened Lonmin’s financial position and gives it greater financial flexibility, with sufficient available
liquidity and more appropriate financial covenants.
Board and Management Update
On 28 December 2012, we announced the resignation of Ian Farmer as Chief Executive of the Company. The Board has
appointed an executive search agency to pursue the selection and engagement of his successor and this search is
currently underway. We announced on 23 January 2013 that Cyril Ramaphosa would not be standing for re-election as
a Non-Executive Director of Lonmin at the AGM today.
Outlook
Our operations delivered a strong performance in the quarter ahead to exceed our planned ramp up targets.
Encouragingly, the second quarter is proceeding well with the momentum of the first quarter having already been re-
established. We remain focused on embedding the safety protocols that have underpinned the successful start up
reflected in our solid production results. At this early stage of the year, guidance for the full year is maintained at
680,000 Platinum ounces of saleable metals in concentrate and sales of 660,000 ounces of Platinum. We maintain our
capital expenditure guidance for the year of around $175 million and unit cost guidance of around R9,350 per PGM
ounce produced absent any material safety or industrial relations stoppages.
- ENDS -
ENQUIRIES
Investors / Analysts:
Lonmin
Tanya Chikanza (Head of Investor Relations) +27 11 218 8358 /
+44 20 7201 6007
Ruli Diseko (Investor Relations Manager) +27 11 218 8300
Media:
Cardew Group
James Clark / Alexandra Stoneham +44 20 7930 0777
Sue Vey +27 72 644 9777
Brunswick - Johannesburg
Cecilia de Almeida +27 11 502 7400 /
+27 83 325 9169
Sponsor: J.P. Morgan Equities South Africa Proprietary Limited
Notes to editors
Lonmin, which is listed on both the London Stock Exchange and the Johannesburg Stock Exchange, is one of the
world's largest primary producers of PGMs. These metals are essential for many industrial applications, especially
catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery.
Lonmin's operations are situated in the Bushveld Complex in South Africa, where nearly 80% of known global PGM
resources are found.
The Company creates value for shareholders through mining, refining and marketing PGMs and has a vertically
integrated operational structure - from mine to market. Lonmin's mining operations extract ore from which the
Process Division produces refined PGMs for delivery to customers. Underpinning the operations is the Shared Services
function which provides high quality levels of support and infrastructure across the operations.
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For further information please visit our website: http://www.lonmin.com
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3 months 3 months
to 31 Dec to 31 Dec
2012 2011
1
Tonnes mined Marikana Karee kt 1 213 1 211
1
Westerns kt 720 761
1
Middelkraal kt 542 476
1
Easterns kt 219 272
Underground kt 2 694 2 720
Opencast kt 155 118
Total kt 2 849 2 838
2
Pandora attributable Underground kt 61 54
Lonmin Platinum Underground kt 2 755 2 774
Opencast kt 155 118
Total kt 2 910 2 892
% UG2 % 72.6% 70.7%
3
Tonnes milled Marikana Underground kt 2 646 2 820
Opencast kt 91 77
Total kt 2 737 2 897
4
Pandora Underground kt 146 126
Lonmin Platinum Underground kt 2 792 2 946
Head grade5 g/t 4.64 4.50
6
Recovery rate % 86.8% 85.3%
Opencast kt 91 77
5
Head grade g/t 2.98 3.33
Recovery rate6 % 84.8% 85.7%
Total kt 2 883 3 023
Head grade5 g/t 4.59 4.47
6
Recovery rate % 86.8% 85.3%
5
Metals in Marikana Platinum oz 174 253 178 131
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concentrate Palladium oz 79 273 81 041
Gold oz 4 238 4 664
Rhodium oz 23 097 22 463
Ruthenium oz 35 441 35 349
Iridium oz 7 824 7 739
Total PGMs oz 324 126 329 387
8
Nickel MT 856 966
8
Copper MT 547 624
4
Pandora Platinum oz 10 336 8 595
Palladium oz 4 770 3 993
Gold oz 77 65
Rhodium oz 1 615 1 310
Ruthenium oz 2 456 2 012
Iridium oz 433 345
Total PGMs oz 19 687 16 321
8
Nickel MT 17 13
8
Copper MT 10 7
Concentrate Platinum oz 907 0
purchases Palladium oz 246 0
Gold oz 3 0
Rhodium oz 91 0
Ruthenium oz 96 0
Iridium oz 37 0
Total PGMs oz 1 379 0
Nickel MT 1 0
Copper MT 0 0
Lonmin Platinum Platinum oz 185 497 186 725
Palladium oz 84 290 85 035
Gold oz 4 317 4 730
Rhodium oz 24 803 23 773
Ruthenium oz 37 992 37 361
Iridium oz 8 295 8 084
Total PGMs oz 345 193 345 708
8
Nickel MT 874 978
8
Copper MT 557 631
6
3 months 3 months
to 31 Dec to 31 Dec
2012 2011
Refined production Lonmin refined metal Platinum oz 135 364 112 220
production Palladium oz 60 625 58 818
Gold oz 3 560 3 663
Rhodium oz 6 251 20 037
Ruthenium oz 31 327 31 965
Iridium oz 8 601 9 320
Total PGMs oz 245 727 236 022
Toll refined metal Platinum oz 91 1 730
production Palladium oz 128 4 124
Gold oz 252 202
Rhodium oz 1 688 1 580
Ruthenium oz 1 457 1 704
Iridium oz 267 588
Total PGMs oz 3 883 9 928
Total refined PGMs Platinum oz 135 455 113 950
Palladium oz 60 753 62 942
Gold oz 3 812 3 865
Rhodium oz 7 939 21 616
Ruthenium oz 32 784 33 668
Iridium oz 8 868 9 908
Total PGMs oz 249 610 245 950
9
Base metals Nickel MT 768 730
9
Copper MT 467 366
Sales Refined metal sales Platinum oz 108 342 92 863
Palladium oz 44 071 39 492
Gold oz 2 400 3 618
Rhodium oz 4 362 18 235
Ruthenium oz 19 061 24 684
Iridium oz 4 341 10 698
Total PGMs oz 182 576 189 590
9
Nickel MT 692 791
9
Copper MT 201 321
9
Chrome MT 277 552 261 205
7
Average prices Platinum $/oz 1 575 1 532
Palladium $/oz 666 627
Gold $/oz 1 509 1 668
Rhodium $/oz 1 184 1 549
Ruthenium $/oz 82 121
Iridium $/oz 1 016 1 041
10
$ basket price excl. by-product revenue $/oz 1 176 1 136
11
$ basket price incl. by-product revenue $/oz 1 268 1 238
10
R basket price excl. by-product revenue R/oz 10 152 9 204
11
R basket price incl. by-product revenue R/oz 10 886 9 935
9
Nickel $/MT 14 296 15 287
9
Copper $/MT 7 239 6 874
9
Chrome $/MT 19 19
12
Exchange rates Average rate for period R/$ 8.67 8.09
Closing rate R/$ 8.45 8.07
Notes:
1 Karee includes the shafts K3, 1B, 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 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.
11 As per note 10 but including revenue from base metals.
12 Exchange rates are calculated using the market average daily closing rate over the course of the period.
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