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LONMIN PLC - CANCELLATION OF S327907 Q1 2013 Production Report & Interim Management Statement

Release Date: 31/01/2013 14:11
Code(s): LON     PDF:  
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CANCELLATION OF S327907 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.



                                                                                                                   1
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.
                                                                                                                     2
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.
                                                                                                                   3
For further information please visit our website: http://www.lonmin.com




                                                                          4
                                                                             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
            7
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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