Wrap Text
2013 Final Results Announcement
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")
11 November 2013
2013 Final Results Announcement
Lonmin Plc, ("Lonmin" or "the Company"), the world's third largest primary Platinum producer, today publishes its Final
Results for the year ended 30 September 2013.
HIGHLIGHTS
- Strong performance across the Company
- Lost Time Injury Frequency Rate (LTIFR) of 3.50, a 15.9% improvement on previous year, but sadly 3 fatalities
- Production ramp up achieved well ahead of Renewal Plan
- Highest Marikana underground tonnes hoisted in 6 years (11 million)
- 751,000 Platinum ounces in concentrate achieved, highest in 6 years and an 10.5% increase on last year
- Platinum sales of 696,000 ounces, exceeding guidance of 660,000 ounces; pipeline rebuilt
- Immediately available ore reserves at 3.8 million centares, up 14.7%
- Concentrator recoveries at record level at 87.0%
- Financial results
- Rights Issue of December 2012, raised net proceeds of $767 million
- Underlying profit before tax of $158 million ($57 million in 2012)
- Net cash of $201 million (net debt of $421 million in 2012)
- Cost of production per PGM ounce increase contained to 3.8% - exceeding guidance and lower than South
African inflation
- Capital expenditure of $159 million (below guidance of $175 million - in line with guidance in Rand terms)
- Underlying Earnings per Share of 20.5 cents versus 3.9 cents in prior year (restated for impact of Rights Issue)
- Guidance and focus areas FY2014 onwards
- FY2014 guidance of Platinum sales in excess of 750,000 ounces
- Unit costs to increase by less than wage inflation
- Capital expenditure of $210 million for 2014 financial year
- Driving achievements through a focus on operational excellence and value optimisation
Lonmin Chief Executive Officer Ben Magara said: "These are strong results. Despite the constraints faced at the start of the
financial year our ramp up was impressive and we met production expectations with costs well under control and with
many areas of the business recording their best performance in years. Our top management team has been strengthened
and we have the right people in place to take Lonmin forward. Our focus for the coming year will be on driving higher
performance and delivery further and harder whilst continuing with cost control and working to bring that same focus to
the business critical issues of employee relationships and social responsibility."
FINANCIAL HIGHLIGHTS
30 September 30 September
2013 2012
Revenue $1,520m $1,614m
Underlying(i) operating profit $164m $67m
Operating profit / (loss)(ii) $147m $(702)m
Underlying i profit before taxation $158m $57m
Profit / (loss) before taxation $140m $(698)m
Underlying i earnings per share (iii) 20.5c 3.9c
Earnings / (loss) per share (iii) 31.2c (107.7)c
Trading cash inflow per share(iii),(iv) 3.0c 69.1c
Free cash outflow per share(iii),(v) (28.9)c (41.8)c
Net cash / (debt) as defined by the Group(vi) $201m $(421)m
Gearing(vii) - 14%
Footnotes:
i Underlying results and earnings / (loss) per share are based on reported results and earnings / (loss) per share excluding the effect of special
items as disclosed in note 3 to the financial statements.
ii Operating profit / (loss) is defined as revenue less operating expenses before impairment of available for sale financial assets, finance income
and expenses and before share of profit / (loss) of equity accounted investments.
iii During December 2012 the Group undertook a Rights Issue of shares. As a result, the September 2012 underlying earnings per share, loss per
share, trading cash flow per share and the free cash flow per share have been adjusted to reflect the bonus element of the Rights Issue as
disclosed in note 6 to the financial statements.
iv Trading cash flow is defined as cash flow from operating activities.
v Free cash flow is defined as trading cash flow less capital expenditure on property, plant and equipment and intangibles, proceeds from
disposal of assets held for sale and dividends paid to non-controlling interests.
vi Net cash / (debt) as defined by the Group comprises cash and cash equivalents, bank overdrafts repayable on demand and interest bearing
loans and borrowings less unamortised bank fees, unless the unamortised bank fees relate to undrawn facilities in which case they are
treated as other receivables.
vii Gearing is calculated as the net debt attributable to the Group divided by the total of the net debt attributable to the Group and equity
shareholders' funds.
ENQUIRIES
Investors / Analysts:
Lonmin
Tanya Chikanza (Head of Investor Relations) +27 11 218 8300 / +44 20 7201 6007
Media:
Cardew Group
James Clark / Emma Crawshaw +44 20 7930 0777
Sue Vey +27 72 644 9777
Sponsor:
J.P. Morgan Equities South Africa (Pty) Ltd
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 Igneous 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. Underpinning the operations is the Shared Services function which provides
high quality levels of support and infrastructure across the operations.
For further information please visit our website: http://www.lonmin.com
CONTENTS
This document contains the following sections:
- Chief Executive Officer's Review;
- Operational Review;
- Market Review;
- Reserves & Resources;
- Financial Review;
- Responsibility Statement of the Directors';
- Operating Statistics 5 Year Review; and
- Financial Statements
CHIEF EXECUTIVE'S REVIEW
I was appointed Chief Executive of Lonmin Plc on 1 July this year. Under the interim leadership of our Chief Financial
Officer, Simon Scott, Lonmin had been strengthening its position. Set against a continuingly tough market, and given the
disruptions which defined the beginning of the period, our ramp up quickly exceeded the schedule which was maintained
throughout the year. We continued to outperform and achieved 751,000 Platinum metal in concentrate ounces, and sales
of 696,000 Platinum ounces by the end of the year.
Whilst proud of our operational achievements we regard our solid performance in 2013 as the foundation to build on. Our
sustained hard work to improve relationships with our employees is yielding results, not least around labour relations, but I
want to see a step change.
Our safety performance improved and I believe that our "zero harm" aspiration is achievable, that all injuries and fatalities
are preventable and that this remains our goal.
We remember with great sadness the loss of our colleagues Elson Ngomane, Gil Macamo and Ayanda Dziliyana during
2013. Their deaths remind us of both the intrinsic dangers of mining and that we must redouble our efforts in this area.
My priority on joining the business was to meet as many employees and stakeholders as possible to begin the task of
winning back hearts and minds in the wake of last year's events at Marikana.
To this end I visited our shafts, plants and the communities around them and went to the areas of South Africa from which
most of our employees come. I also visited the families of those who lost their lives during the terrible Events at Marikana
last year. All these groups of people expressed to me the shared wish of wanting Lonmin to succeed. This is important and
encouraging, given that we regard the support of all our stakeholders as crucial in stripping uncertainty from our business
and driving higher performance.
Whilst our hard work has begun to rebuild trust, demonstrated by the fact that we were able to sign a union recognition
agreement and attend the Marikana commemoration, we still have much more to do in this regard.
Our stakeholder relationships are business critical. I reject any contention that these are "soft" issues, set against the
"hard" issues of operations and finances.
My second step was to make a number of changes and additions to Lonmin's top executive team. We now have the team
in place to focus our resources more strategically and achieve a steady improvement in value for our shareholders.
The Executive team is comprised of the following:
- Simon Scott Chief Financial Officer
- Albert Jamieson Chief Commercial Officer (to 31 December 2013)
- Abey Kgotle Executive Vice President Human Resources
- Barnard Mokwena Executive Vice President Transformation
- Lerato Molebatsi Executive Vice President Communications and Public Affairs
- Mark Munroe Executive Vice President Mining and Group Safety
- Thandeka Ncube Shanduka Resources Business Transformation Manager
- Natascha Viljoen- Executive Vice President Processing and Sustainability
Looking ahead, I have set out four management pillars for the future which will drive delivery of value to all of our
shareholders and stakeholders. Overall they represent evolutionary improvements in those things we do well, and demand
more rapid changes in areas where we have been slower to perform. These can be summarised as: continuing to reclaim
our role as managers in our relationships with employees and stakeholders; operational credibility and excellence;
management of value optimisation; and finally sustainability and social agenda. I will deal with each of these in turn.
Lonmin's relationships with its employees and stakeholders
As a labour-intensive industry our people are key to our success. In narrow tabular mining, where mechanisation will
always be limited, people make the difference and should be a source of competitive advantage. This is absolutely not a
"soft" issue. This year has seen significant and very welcome interventions from the South African Government in the
context of employment and industrial relations. Lonmin's greater collaboration with Government and with our colleagues
in the South African mining sector will enable steady progress to be made in establishing a renewed stability. Our challenge
is to build on this positive start to create a long-term environment where performance increases through a more content
and dedicated workforce, removing uncertainty from the business, and in which our success benefits our shareholders and
all our stakeholders. This is fundamentally about rebuilding trust.
Operational credibility and excellence
We continue to be cautious about the near and medium-term markets for PGMs. It is vital, then, that we exploit our assets
as safely and efficiently as possible. It is absolutely necessary that we only mine profitably and that we maintain a rigorous
control over costs. I believe that such discipline is the only way in which to ensure that our shareholders benefit from the
eventual improvement in the market when it comes; about which we remain confident. The Lonmin Renewal Plan, which
was in operation when I arrived, has proved a success. It enabled us to hit targets and achieve ramp up ahead of
expectations. In order to plan more effectively for Lonmin's future, we must now look strategically and holistically at all our
assets and properties and prioritise investment to protect and enhance value accordingly. We will focus on fewer projects
at a time. My initial review of our operations led us to decide that continuing to invest in our Saffy shaft is the best use of
capital at this stage, optimising efficiencies and enabling growth at the right time. The majority of the investment in Saffy
has already been made.
Value optimisation management (VOMA)
It is essential that our drive to work efficiently, profitably and strategically is underpinned by a coherent strategy. In the
near-term we must: guarantee a return on the recent and historical investment at Marikana; maximise cash flow in order
to self fund capital expenditure; improve profitability by margin focused mining and increased productivity; and continue to improve
cost management. In the medium-term we must also ensure our mining plans and processing capacity are flexible enough
to respond to an improving market and continue to work to identify value enhancing opportunities.
We will continue to assess the choices available to us, but already we see an opportunity to improve our commercial sales
strategy in line with value optimisation. We are also advancing our exciting PGM Tailings Re-treatment project, where we
expect to mine one of our old tailings dams hydraulically for the extraction of both PGMs and chrome. Re-treatment of old
tailings is not new in mining and is a great source of medium-term value. This will allow us to tap into a low risk, low cost
on surface asset to enhance our overall profitability.
Above all else, we will continue to maximise the conservation and generation of cash and maintain our relentless focus on
overheads and fixed costs. Against these priorities, we have already made good progress but there is much more to do.
Sustainability and social agenda
Our relationships with our employees and the communities who live on and around our operations are key to our
performance. Pre-eminent amongst the requirements is the need to improve housing, facilitate good health and education
and continue to deliver on our environmental responsibilities.
The conversion or upgrade of hostels into family units and single private units is one of the measures we are judged against
and to date, we have converted 107 hostel blocks. We expect to achieve completion in 2014.
All the conversion work thus far has been executed by Historically Disadvantaged South African (HDSA) Greater Lonmin
Community (GLC) companies which are now able to manage and deliver multimillion Rand projects as a result.
We have also concluded research and scoping projects around Integrated Human Settlements as part of our long-term
planning for housing development and supporting infrastructure at Marikana.
Post the year-end, we signed an agreement with the Provincial Department of Human Settlement, whereby, we
contributed 50ha of serviced land for immediate development. This land contribution is an integral part of the integrated
human settlement plan for the Marikana area and forms part of our commitment to support the Presidential initiatives to
improve living conditions. In addition Lonmin will contribute at least R0.5 billion over the next five years towards employee
accommodation and bulk services as part of its Social Labour Plan programme.
Social infrastructure cannot be delivered by business alone but this is an area in which Lonmin's involvement must be
accelerated to produce a step change. By the same token, and again in partnership with Government, we will remain
committed to our long-held objective of reaching "zero-harm" in everything that we do. We must also ensure that we
minimise our use of power and water both of which are limited.
Finally, this approach supports the goals and initiatives for the business set out by the Board in early 2013 which
encompassed employee relations, empowerment, migrant and local labour, use of invested capital and infrastructure and
housing and accommodation.
Black Economic Empowerment (BEE)
Our BEE and Mining Charter commitments require Lonmin to increase HDSA ownership in its prospecting and mining
ventures by 31 December 2014 to at least 26%. By 30 September 2013, HDSA investors directly and indirectly owned 18%
of the share capital of the Company's subsidiaries that own and operate Marikana and Limpopo and that participate in the
Pandora joint venture, as well as 26% of the share capital of its subsidiary that owns Akanani.
We are now deeply engaged in examining ways in which the remaining 8% we need to achieve might be apportioned.
There is clearly a balance to be struck between delivering this for our employees and communities and doing so in a way
which is sustainable, fair and equitable to our present shareholders. Share ownership schemes are one area of our
thinking, although not the only one, and our ability to explore those actively is facilitated by the signing of our recent union
recognition agreement.
We have not yet finalised all our proposals, and any future transaction would need to be considered on its merits.
Dividend
A dividend is not proposed for the current financial year. However, Lonmin has confidence in the future demand for PGMs
and our expectation is for prices to firm in the future. Our Renewal Plan anticipates positive free cash flow from the 2014
financial year onwards. The return to stronger earnings and cash flows will permit the resumption of dividends. When we
do resume the payment of dividends, we would intend to follow the existing policy of declaring an ordinary final dividend
at a rate which the Board expects can at least be maintained in subsequent years.
Conclusion
Overall, the longer-term fundamentals of the PGM markets remain robust, although we continue to be cautious about the
market in the near and medium-term.
We will enhance value for our shareholders by leveraging our established operations and quality assets in the world's
premier PGM deposit through:
- Embedding our operational credibility and excellence;
- Rebuilding our employee and stakeholder relationships;
- Improving utilisation of our infrastructure, especially Saffy and processing;
- Continued focus on cost control;
- Cash conservation and funding capital from our operations; and
- Driving our social and citizenship agenda through partnership.
Outlook
Given the prevailing labour landscape combined with an uncertain market outlook, we are maintaining sales guidance in
excess of 750,000 Platinum ounces with capital spend estimate set at $210 million, in line with our Renewal Plan. Unit cost
of production is guided to be less than wage inflation.
Colleagues
Finally, I would like to offer my thanks and congratulations to all our employees, contractors, communities and partners for
their hard work throughout the year. Without their dedication we would not be reporting such positive achievements.
Ben Magara
Chief Executive Officer
10 November 2013
OPERATIONAL REVIEW
Safety
Our safety aim is simple - zero harm. However there still remains a lot to do.
Lonmin believes this objective is achievable, and that every injury or fatality is preventable.
Our Lost Time Injury Frequency Rate (LTIFR) in 2013 continued to improve, this time by 15.9% to reach 3.50. However,
improvements become more and more difficult as safety achievements are made. Initially systems, protective equipment
and working practices must be evaluated, where after a culture of safe working must be designed and implemented. But
after this, safety increasingly rests on the behaviours and mind-sets of individuals which is a much harder challenge to
overcome.
Some of our shafts remain industry leaders in safety. 4B/1B, for example, is deemed the safest shaft in the country,
achieving seven million fall of ground fatality free shifts during the year. It won the prestigious JT Ryan trophy this year to
mark it as South Africa's safest shaft of its type.
We were deeply saddened by the deaths of three colleagues in falls of ground during the financial period.
Our safety strategy rests on three pillars: fatality prevention; injury prevention; and safe production. Within each of these
pillars the strategy focus is on leadership, simplifying systems, creating an enabling environment and creating a safety
conscious culture.
We believe that keeping people safe is a team effort and that good working relationships lead to good working practices.
Another feature of our safety initiatives has been the continual empowerment of employees to exercise their right to
withdraw from unsafe work areas. We report and analyse these incidents weekly and use the data to address shortcomings
and drive improvement.
Finally, safety for Lonmin does not end at the gate to a mine. We work hard with employees, Non-Governmental
Organisations and authorities to address concerns about crime, stress and substance abuse away from work.
Mining Division
Overview
In the financial year 2013, Marikana underground operations delivered their best performance in the last six years. Given
the issues at the end of last year, this is a welcome achievement. We maintained the momentum established at the
beginning of the financial year and achieved an impressive result, to mine a total of 11.7 million attributable tonnes during
the year, an increase of 1.3 million tonnes from 2012.
Of this, 11.0 million tonnes were from Marikana underground operations, being a 12% increase from 2012.
It is important to read these results, however, within the context of the six week stoppage and early ramp up of late 2012,
which affects year on year comparisons favourably for 2013.
K4 shaft was placed on care and maintenance at the beginning of the year and contributed 0.1 million tonnes in the prior
year.
Productivity, measured as square metres per mining employee (Marikana mining) excluding opencast, W1 and ore
purchased from our joint venture operations, improved by 6% year on year.
The impact of Section 54 stoppages, management induced safety stoppages and labour disruptions reduced to around 0.6
million tonnes compared to 2.4 million tonnes for the financial year 2012, which included the lengthy strike action and
wider disruption at Marikana.
The reduced number of Section 54 stoppage figures also provides encouragement in terms of our relationship with the
Department of Mineral Resources (DMR) at all levels.
Marikana Ore Reserves and Grades
FY13 FY12 Variance %
('000m2) ('000m2)
Karee 1,879 1,808 71 3.9%
Middelkraal 800 466 334 71.7%
Westerns 747 581 166 28.6%
Easterns 389 472 (83) (17.6)%
Total 3,815 3,327 488 14.7%
Performance with respect to ore development was positive, resulting in the ore reserve position increasing by 14.7% from
the level reported at the end of 2012 to 3.8 million centares. The most significant increase was at the Middelkraal
operations and is almost entirely due to the increase at Saffy shaft where the ore reserve position increased by 108.7%
from 2012. Westerns operations also delivered a significant year on year increase in ore reserves with a 36.6% increase at
Rowland shaft. The overall improvements are in line with Lonmin's strategy of creating greater flexibility at these shafts.
The ore reserve position remained largely unchanged but healthy at the Karee operations and decreased as planned at the
Easterns operations.
Mining grades as delivered to the concentrators remained largely unchanged compared to 2012. The salient factors
affecting the mining grades are:
- Underground Merensky grade increased by 3.0% due to higher in situ grades;
- UG2 reef grade was unchanged;
- Stoping dilution was controlled as planned; and
- The ratio of development ore to stoping ore decreased slightly, based on a less aggressive ore reserve growth.
Business Improvement Initiatives
De-Bottlenecking of Operations
A pilot project based on the Theory of Constraints management philosophy was carried out at Rowland Shaft during the
year. The project has delivered promising results with the production output at Rowland increasing towards the end of the
year to achieve an 11.4% increase from the last financial year. Our intention is that this philosophy will be integrated into
the mining operating model and rolled out to all operations, starting with Saffy. The best practice teams have also
undergone extensive training in this and will assist in the roll out.
Alternative Shift Cycle Configuration
A project was initiated as one of the Board's five initiatives to investigate alternatives to the current eleven day per
fortnight shift cycle that is being worked. The brief was to explore alternative shift cycles that would be value accretive for
all stakeholders in the business. A number of options have been investigated and explored and have been narrowed down
to those that have the greatest probability of success at our operations. The remaining options will be further refined and
consultations with the unions will follow during 2014. Implementation will be evaluated thereafter.
Technical and Leadership Skills Improvement
An increased emphasis is being placed on training and development of people across all levels of the Mining Division. A
leadership development programme was introduced during the year with the aim of equipping all leaders with the
necessary skills to face the challenges of the ever changing working environment. All mining crews attended a one day
team training session during the year as a follow up to the three day training sessions that were held during 2012. Phase
two of the team training programme has been developed and will be rolled out during 2014. Learnerships and skills
development training in the form of mining, engineering and technical services learnership programmes as well as the
learner official and graduate programmes have begun to deliver success as graduates of these programmes were
appointed into vacancies in the organisation during the past year. Based on the successes to date, these programmes are
set to continue and be further refined.
Best Practice / Optimisation Teams
The optimisation and best practice teams were strengthened during the year and have been deployed across the
operations with the aim of assisting in identifying the causes of underperformance and to assist in implementing the
appropriate corrective action. The process also involves coaching of supervisors in supervisory best practice and coaching
the mining teams in best practice mining cycles and work practices.
Absenteeism Project
Unplanned absenteeism remains a challenge in the operations and a number of projects are underway to mitigate the
reasons for key team members not being at work.
The inflationary cost pressures experienced by the platinum industry continue to be of great concern and productivity
improvement programmes, as outlined above, play an important role in reducing the impact. Unit cost of production
increases for mining operations, at 5.8% year on year, were successfully contained at levels below wage inflation.
Overview of Marikana mines
Karee
Karee operations, comprised of K3, 4B/1B and K4, mined 4.95 million tonnes during 2013, an increase of 12.9%. K3, our
largest shaft, increased by 17.2% whilst the grade increased by 9.2% year on year mainly as a result of an increase in the
Merensky grade as mining increased in the higher grade decline area.
Middelkraal
Hossy shaft increased tonnes hoisted by 21.6% to 1.05 million tonnes during 2013, despite continuing challenges relating to
machine reliability, the availability of replacement parts and retention of trained artisans that have negatively affected the
historical mechanisation of this shaft. The decision to introduce hybrid mining continues to deliver positive results. The roll
out of the hybrid crews will be further pursued in 2014.
Importantly our investment and focus on Saffy has begun to yield positive rewards, as production for the year reached 1.15
million tonnes a 28.1% increase from last year as its ore reserve position increased by 108.7% year on year in line with
plans to ramp up production at this shaft. Notwithstanding this encouraging increase in production, the ramp up at Saffy
has been slower than planned as it continued to face poor ground conditions and follows a process of stringent roof
support systems. The significant increase in available ore reserves however now provides the flexibility required to address
these challenges. Additional stoping crews have been deployed from other shafts and more will be added to Saffy which
gives us confidence that the further ramp up planned for 2014 can be realised. We expect Saffy to mine 200,000 tonnes
per month when it reaches full capacity making this Lonmin's second largest shaft.
Westerns
Production from our Westerns operations, Rowland, Newman and W1, at 2.90 million tonnes increased in 2013 by 9.7%, or
256,000 tonnes from 2012. Rowland achieved 14 million fall of ground fatality free shifts the best in the South African
mining industry in 2013. The depletion of Newman continued as expected. Grades at both Rowland and Newman shafts
remained unchanged during 2013 when compared to 2012.
Easterns
At our Easterns operations, performance for the year decreased from 1.0 million tonnes produced in 2012 to 0.9 million
tonnes produced in 2013. This is in line with the planned depletion of E1. Grade at E1 shaft increased by 2.0% year on year
as reef development reduced in line with the declining production profile. Grades increased at E2 shaft and E3 shaft by
3.6% and 6.2% year on year respectively as stoping moved to the higher grade lower levels of the shafts.
Opencast
Production at the Merensky opencast operation at Marikana increased from 0.4 million tonnes in 2012 to 0.5 million
tonnes in 2013. We evaluate our options around opencast operations on a continuous basis especially in this relatively
subdued price environment. It is currently planned to scale back on these operations in 2014 as production from other
shafts increases.
Pandora Joint Venture
2013 2012 Variance
Attributable production1 243 185 31.4%
('000 tonnes)
Saleable metal in concentrate2 78,721 58,188 35.3%
(oz PGMs)
Profit after tax $4m $2m 100%
Footnotes:
1 Represents Lonmin's 42.5% share of the total tonnes mined.
2 Lonmin purchases 100.0% of the ore produced by the joint venture for onward processing.
The project to extend the mining footprint at E3 shaft by another two levels was completed at the end of 2013 with the
newly developed 9 and 10 levels being commissioned.
Capital Spend
Capital expenditure in the Mining Division was limited to $99 million during 2013. The majority of the capital was spent on
sustaining capital across the various shafts and central engineering. Only K3 Shaft UG2 Decline project, Saffy Shaft and
Rowland Shaft were allocated capital funds to continue with ore reserve development projects that are currently in
execution. K4 shaft will continue to be on care and maintenance for the duration of 2014. Key work on ore passes and
critical infrastructure will take place during 2014. The restart of K4 is currently contemplated to take place in 2015 and its
ramp up will be subject to market conditions.
Process Division
The Processing Division also had another good year.
During the financial year our total tonnes milled increased by 9.3% to 11.8 million tonnes. This was a commendable
achievement which reflects the increase in tonnes mined in a challenging year. The total milled head grade improved to
4.54 grammes per tonne or 1.1% higher than the prior year period.
We saw a continued improvement in the concentrators' efficiency during the year, with an exceptional improved year on
year recovery performance up from 86.1% to 87.0%. This was achieved against the backdrop of one plant being out of
operation for an upgrade for the full year. We rationalised plant use and took the opportunity to upgrade the plant at the
same time. The continued multi-year investment made in the concentrator operating assets, to secure higher sustainable
run times over previous reporting periods, enabled this outstanding performance. We are particularly proud that all of our
plants are achieving recoveries in excess of 80% for the first time.
The Eastern tailing treatment plant continued to show improved recoveries, whilst the Eastern concentrators also
delivered an encouraging improvement in the reporting period. The continued impact of the concentrator improvements
can be seen in sustainable, improved throughputs and efficiencies across the plants that were in operation in 2013.
For the financial year, we achieved 750,942 saleable ounces of Platinum in concentrate, up 10.5% and the highest amount
since 2007 due to higher mined production and improved recoveries. Refined production of 709,029 Platinum ounces were
lower as a result of refilling the pipeline and a stock lock up following the smelter incident at the Number Two furnace.
Platinum sales of 695,803 ounces were achieved during 2013.
The strategy to increase the back up capacity at the smelter has proven to be successful, as production from the smelter
for the full year did not suffer after the failure in April 2013 of the Number Two furnace roof. Whilst the smelter was able
to process the backlog, some excess stock remained in the pipeline at the refineries at the year end. A full refurbishment of
all the pyromet furnaces ancillary equipment was completed to improve the reliability of the back up capacity.
PGM ounces produced of 1,336,109 were down 13,693 or 1.0% compared to the prior year period. The difference in
production of Platinum and PGMs is a reflection of the longer processing times for non-Platinum PGMs.
People development
Our mission directed works teams have gone from strength to strength this year. They are focused on vertical alignment
but more importantly they are used to engage each employee in every aspect of the workplace. The level of innovation
from the shop floor is impressive and contributing to the continuous improvement in results.
We have launched the first Processing learning programmes with ten employees passing the first phase on a MQF level 2.
This is the first of its kind in the platinum industry.
Capital Spend
In 2013, the Process Division spent $52 million on capital compared to $121 million in 2012. The 2013 expenditure included
the completion of the Number One shaft concentrator and the Number One furnace integrity optimisation. The prior year
included the completion of the Tailings Treatment Project and the new Number Two furnace.
Labour Relations
Unions
The labour relations landscape changed significantly following the events at Marikana in August 2012. The Association of
Mineworkers and Construction Union (AMCU) became the new majority union representing 66% of our total workforce.
This significant increase in membership resulted in the National Union Mineworkers' overall membership declining to 14%
of the total workforce.
We were legally obliged to terminate our existing union agreements and negotiate new ones as a result of these changes,
most significantly in the year our new agreement with AMCU, as largest union. It is unfortunate that this process is formally
called "derecognition" in South Africa - a term which is unhelpful and does not reflect events.
We are now actively engaging with minority unions as our view is that every employee's voice must be heard, regardless of
which union, if any, they belong to.
Going forward, our primary focus will remain on rebuilding relations with our employees and strengthening bonds with the
representative unions of their choice.
Employee Value Proposition
We have made a good start with the Employee Value Proposition initiative. The main focus of this initiative is to address
the needs of our employees and as we work to rebuild relationships. It seeks to go beyond taking an interest in an
employee only when he or she is at work and takes a holistic approach. An example of the kind of initiatives we want to see
more of in this area is financial literacy training, aimed at addressing the high levels of debt among our employees. More
than 11,000 employees participated in this training in the last twelve months and it has now been incorporated into the
induction programme.
Judicial Commission of Inquiry
The Farlam Commission into the events of August 2012 at Marikana continues with our full participation. We continue to
wholly support the inquiry and expect some of our employees to be asked to give evidence in early 2014.
MARKET REVIEW
Overview
In 2013 Lonmin sold 695,803 ounces of Platinum into the market. Platinum sales contributed 69% of our turnover.
Palladium was the second highest contributor to the revenue basket with the 313,030 ounces sold constituting 15% of
Lonmin's income. Combined sales of Rhodium, Ruthenium and Iridium contributed a further 8% and Gold and Base Metals
made up the balance.
Autocatalyst production remains the largest end user of our products. The internal combustion engine is set to remain the
dominant drivetrain for passenger and commercial vehicles for the foreseeable future, offering the best combination of
fuel efficiency, purchase cost and running cost. Diesel engines for light duty vehicles, which are more highly platinum
loaded than gasoline engines, retain their fuel efficiency advantage over gasoline at a time when reducing CO2 emissions is
paramount for automakers. Of the two leading light duty diesel markets, Europe is mature while India still has significant
growth potential. Increasing categories of non-road engines are now subject to emissions legislation in the US and Europe,
resulting in growing platinum demand despite slowing vehicle production in Europe. Rising concerns over air quality in
China and other growing markets is expected to see emissions legislation tightening for both on-road and non-road
vehicles, despite ongoing efforts to substitute metals with less volatile price profiles. PGMs remain the most effective
product for autocatalyst production.
Jewellery, driven by Chinese demand, which has taken advantage of periods of lower prices and strengthening local
currency continues to grow at a steady pace and is forecast to contribute 37% to platinum demand in 2013.
The influence of primary production from South Africa on platinum prices is diminishing somewhat, in part due to the
growth of recycling in the northern hemisphere which is having an increasing impact on primary supply.
PGM prices
The 2013 calendar year started with a platinum price rally on the back of supply fears and planned producer restructuring,
with prices peaking at $1,725 per ounce in early February. Thereafter, investor concerns about excess capacity removed
much of the upside momentum and the price retreated back towards $1,400 per ounce by the end of September, despite
the purchase of 660,000 ounces of platinum by the Absa Exchange Traded Fund (ETF).
The gold price collapse in April pulled platinum down with it. At the beginning of April gold was trading at over $1,600 per
ounce, but by the end of June had fallen to below $1,200 per ounce and has since recovered to over $1,300 per ounce.
Firming palladium demand supported a steady rise in the palladium price through the first half of the year, followed by a
more volatile second half.
Rhodium is a small market and susceptible to price volatility from trading movements.
Supply
Primary South African supply is unlikely to grow over the next year as a result, primarily, of restructuring activities and
there is mounting pressure on primary producers to reduce operating costs and raise operating efficiencies.
Platinum supply in the Rest of the World is forecast to remain flat in 2013, with growth in Zimbabwe offsetting lower
production in Russia. Production in North America has been flat year on year. As outlined earlier the rate of recycling will
compensate for the lower primary supply.
Demand
Autocatalyst PGM demand has inevitably been affected by the slow down in vehicle production, but was mitigated by the
rise in Chinese jewellery demand.
Car production in Europe, diesel's largest car market and hence platinum's largest automotive market, is regarded by many
in the industry to be close to a return to growth after several years. Despite the emergence of some very competitive
gasoline cars, highly fuel efficient diesel took just short of 50% of light duty vehicle sales and we anticipate that this will
continue.
Palladium automotive demand growth has excelled over the last five years, increasing by 1.91 million ounces mainly on the
back of strong gasoline vehicle sales in emerging markets and the increasing substitution of platinum in diesel vehicles in
Europe. Over the same period, however, the price has more than doubled leading to a drop in demand in other
applications and encouraging further recycling. Net new metal demand growth was 480,000 ounces.
Jewellery
Jewellery remains the second major market for platinum. China continues to dominate the platinum jewellery market and
indeed accounts for 24% of total platinum demand alone. Platinum is making headway in India, the largest market for gold
jewellery. India is now the fourth largest market for platinum jewellery and is expected to move into second place over the
next few years on the back of changing demographics.
Investment
Overall holdings in the principal platinum ETFs grew by just 22,000 ounces or 1.5% over the first four months of the year to
1,474,000 ounces. Absa's NewPlat ETF, launched in April, has added 660,000 ounces (to the end of September) and total
holdings have increased by 516,000 ounces (35%) to 1,990,000 ounces.
Palladium ETFs started the year more strongly than platinum, adding 160,000 ounces in Quarter One, taking total holdings
in the principal ETFs to 2.0 million. Over the last three months, the major ETF holdings have seen modest outflows of some
110,000 ounces, down to 1.75 million (to the end of September). Year to date palladium ETFs have lost 46,000 ounces
(-2.6%). Absa is expected to launch a new palladium ETF by the 2013 calendar year end.
Rhodium ETF holdings have almost doubled this year, adding 41,000 ounces to total 95,000 ounces.
Outlook
PGM demand growth from autocatalysts is based on the expected growth in vehicle numbers and on more classes of
vehicle becoming subject to tighter emissions legislation. Europe with Euro 6, and the US with LEV III, are leading the way.
These regulations are likely to form the basis for legislation in all regions in future although the availability of sufficiently
clean fuel, both diesel and gasoline, is a prerequisite for this. Increasingly driving emissions are found to be significantly
higher than legislated standards, raising the prospect of even tighter standards, and hence PGM demand.
Consumers and retailers, particularly in China and increasingly in India, continue to grow the market for platinum jewellery.
Platinum is increasingly seen as the bridal metal of choice. Retailers continue to expand their store networks to meet
demand as disposable income rises outside the main metros in Asia.
The minor end uses of platinum - including chemical and petroleum catalysis, medical, glass fabrication and electronics -
together make up around 20% of total demand. Most are highly dependent on the particular properties of platinum and
face little risk from substitution, but significant recycling takes place too, reducing the need for new metal. Palladium and
Rhodium are highly dependent on the autocatalyst market.
RESERVES & RESOURCES
- Revisions to the South African Mineral Resource estimates were confined to the Marikana and Pandora properties.
The Akanani, Limpopo and Loskop Mineral Resources were unchanged during 2013.
- The Mineral Resources at Marikana (excluding tailings) increased by 3.9 Moz of 3PGE+Au in 2013. This
increase is attributed to the extension of the Inferred Mineral Resources of 2.5 Moz and Indicated Mineral
Resources of 2.0 Moz which was offset by a decrease of Measured Mineral Resources.
- Measured Mineral Resources decreased by 0.6 Moz 3PGE+Au. Mining depletion accounted for a decrease of
1.5 Moz which was offset by an increase of 0.9 Moz converted from Indicated Mineral Resources.
- There were no material changes in geological losses at Marikana.
- The decrease of 0.05 Moz 3PGE+Au to the Pandora Mineral Resource was due to mining depletion.
- No revisions were made to the Mineral Resources in Sudbury and Kenya during 2013.
- The following revisions to the Marikana Mineral Reserves were made in 2013, there being no changes to the
Limpopo Reserves:
- The focus at Marikana in 2013 was on ore reserve management which resulted in an increase of 0.4 Moz
3PGE+Au Proved Mineral Reserves compared with 2012.
- The total UG2 Reef and Merensky Reef Mineral Reserves increased by 1.6 Moz to 42.9 Moz of 3PGE+Au due
to an increase in the Probable Mineral Reserves at K4 Shaft Merensky Reef as well as the inclusion of 0.7 Moz
3PGE from the Eastern Platinum Number One tailings dam.
A summary of the changes to Lonmin's Mineral Resources and Mineral Reserves are shown in the following tables and
should be read in conjunction with the Key Assumptions section of this report. Detailed breakdowns of these Mineral
Resources and Mineral Reserves into their respective confidence categories can be found in the sections specific to the
individual areas.
PGE Mineral Resources (Total Measured, Indicated & Inferred)(1)
30-Sep-2013 30-Sep-2012
Area 3PGE+Au Pt 3PGE+Au Pt
Mt 4 Mt 4
g/t Moz Moz g/t Moz Moz
Marikana 755.4 4.85 117.8 71.0 732.7 4.83 113.9 68.5
Limpopo(2) 128.8 4.07 16.8 8.4 128.8 4.07 16.8 8.4
Limpopo Baobab shaft 46.1 3.91 5.8 3.0 46.1 3.91 5.8 3.0
Akanani 216.0 3.84 26.7 10.9 216.0 3.84 26.7 10.9
Pandora JV 65.9 4.65 9.8 6.0 66.2 4.65 9.9 6.0
Loskop JV(3) 10.1 4.04 1.3 0.8 10.1 4.04 1.3 0.8
Sudbury PGM JV(3) 0.4 6.30 0.07 0.04 0.4 6.30 0.07 0.04
Tailings Dam(3) 22.5 1.10 0.8 0.5 22.5 1.10 0.8 0.5
Total Mineral Resource 1 245.1 4.48 179.1 100.5 1 222.7 4.46 175.2 98.1
Notes
1) All figures are reported on a Lonmin Plc attributable basis, the relative proportions of ownership per project being shown in
the Key Assumptions section of this report. Mineral Resources are reported Inclusive of Mineral Reserves.
2) Limpopo(2) excludes Baobab shaft.
3) Loskop and Sudbury PGM JV exclude Rh, due to insufficient assays, and therefore 2PGE+Au are reported. Tailings Dam exclude
Au, due to assay values below laboratory detection limit, and therefore are reported as 3PGE.
4) Quantities and grades have been rounded to one or two decimal places, therefore minor computational errors may occur.
PGE Mineral Reserves (Total Proved & Probable)(1)
30-Sep-2013 30-Sep-2012
Area 3PGE+Au Pt 3PGE+Au Pt
Mt 4 Mt3
g/t Moz Moz g/t Moz Moz
Marikana 281.2 3.98 36.0 21.9 269.8 4.06 35.2 21.3
Limpopo(2) 42.4 3.20 4.4 2.2 42.4 3.20 4.4 2.2
Limpopo Baobab shaft 9.4 3.16 1.0 0.5 9.4 3.16 1.0 0.5
Pandora JV 6.1 4.11 0.8 0.5 6.3 4.02 0.8 0.5
Tailings Dam(3) 21.1 1.10 0.7 0.5 - - - -
Total Mineral Reserve 360.2 3.70 42.9 25.6 327.9 3.92 41.3 24.4
Notes
1) All figures are reported on a Lonmin Plc attributable basis, the relative proportions of ownership per project being shown in
the Key Assumptions section of this report.
2) Limpopo excludes Baobab shaft.
3) Tailings Dam exclude Au, due to assay values below laboratory detection limit, and therefore are reported as 3PGE.
4) Quantities have been rounded to one decimal place and grades have been rounded to two decimal places, therefore minor
computational errors may occur.
Key assumptions pertaining to the 2013 Lonmin Mineral Resource and Mineral Reserve Statement
- Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are converted to Mineral
Reserves are also included in the Mineral Resource statement.
- All Mineral Resources and Mineral Reserves quoted reflect Lonmin's attributable portion only. There have been no
changes in the percentage attributable to Lonmin during the year. The following percentages were applied to the
total Mineral Resource and Mineral Reserve for each property:
Limpopo- Pandora Loskop Sudbury
Marikana Limpopo- Baobab & Akanani JV JV PGM JV
Dwaalkop JV Doornvlei
Lonmin
Attributable 82% 41% 82% 74% 34.85% 41% 50%
- Incwala Resources, Lonmin's BEE partner, owns 18% of both Western Platinum Limited and Eastern Platinum
Limited, and 26% of Akanani. Lonmin's 23.56% holding in the share capital of Incwala does not factor in the
calculations of its attributable interest.
- Limpopo includes Dwaalkop joint venture, which is a joint venture between Mvelaphanda Resources (50%)
and Western Platinum (50%) that is managed by Lonmin.
- Eastern Platinum Limited has an attributable interest of 42.5% in the Pandora joint venture together with
Anglo Platinum (42.5%), Mvelaphanda Resources (7.5%) and the Bapo Ba Mogale Mining Company (7.5%).
- Western Platinum Limited has an attributable interest of 50% in the Loskop joint venture together with
Boynton Investments (50%).
- Lonmin's share of the Sudbury PGM joint venture is currently a nominal 50%, of the product from any PGE
deposit developed on the participating properties. The agreement is that Lonmin will be allocated its pro-
rata share in PGE's and Vale will be allocated its pro-rata share in Nickel, Copper, Cobalt, Gold and Silver. The
exchange of metals will be governed by prevailing metal prices at the time of the refined metal production.
- Lonmin has a 49% attributable portion of the Bumbo Mineral Resource in terms of The West Kenya Earn-in
and joint venture agreement between African Barrick Gold Limited and AfriOre International (Barbados)
Limited, a wholly owned subsidiary of Lonmin Plc.
- Where grades are reported as 3PGE+Au these are a summation of the Platinum, Palladium, Rhodium and Gold
grades. Modelling of available assay information, obtained from drillhole core, indicates that the proportion of
3PGE+Au contained in 5PGE+Au, which includes Ruthenium and Iridium, is approximately as follows:
UG2 Merensky Platreef
Marikana 0.81 0.92 -
Marikana Tailings 0.78 - -
Limpopo 0.86 0.93 -
Akanani - - 0.95
Pandora 0.81 - -
- Where Nickel (Ni) and Copper (Cu) grade estimates are derived from sufficient reliable information for the various
Mineral Resources, they are reported as average grades in percent. These grades represent acid soluble
proportions. Acid soluble percentages of Ni and Cu are closely correlated to the metals present as sulphide
minerals.
- Mineral Resources are reported as "in-situ" tonnes and grade and allow for geological losses such as faults, dykes,
potholes and Iron Rich Ultramafic Pegmatite (IRUP).
- Mineral Resources are estimated using a minimum true width of at least 90 cm and therefore may include some
diluting material.
- Proved and Probable Mineral Reserves are reported as tonnes and grade expected to be delivered to the mill, are
inclusive of diluting materials and allow for losses that may occur when the material is mined.
- A Mineral Resource and Mineral Reserve estimate of the Eastern Platinum No 1 tailings dam has been included.
The remaining tailing dams will be considered as and when the appropriate assessments take place.
- For economic studies and the determination of pay limits, consideration was made of both short and long term
revenue drivers. The following long term global assumptions were used:
- Precious Metals (per Troy Ounce): Pt USD1,865, Pd USD888, Rh USD1,348, Ru USD95, Ir USD630, Au
USD1,385.
- Base Metals (per metric tonne): Ni USD14,890, Cu USD7,233.
- Average exchange rate of USD1 to Rand 9.0.
- Dilutions are quoted as waste tonnes / (waste + ore tonnes) in percent.
- Bumbo Mineral Resources are reported using a cut-off grade of 0.7% copper equivalent.
- The copper equivalent formula for Bumbo was based upon commodity prices at the close of the market on 25th
July 2011, namely:
- Copper: USD9633/tonne ($Cu)
- Zinc: USD2441/tonne ($Zn)
- Gold: USD1614/ounce ($Au)
- Silver: USD40/ounce ($Ag)
- The copper equivalent (CuEq) is as follows:
CuEq (%) = Cu% + (Zn%*($Zn/100)/($Cu/100)) + (Au g/t*($Au/31.1034768)/($Cu/100)) +
(Ag g/t*($Ag/31.1034768)/($Cu/100))
- Unless otherwise stated, the Lonmin Mineral Resources and Mineral Reserves estimates were prepared or
supervised by various persons employed by Lonmin.
FINANCIAL REVIEW
Overview
The foundation for this year's financial performance was laid in the first half of the financial year when we strengthened
our financial position with a successful refinancing and we achieved a better than anticipated production ramp up
following the production disruption in 2012. The excellent operational performance continued into the second half of the
year. This coupled with a consistent focus on cost containment and assisted by the weakening Rand resulted in a solid
financial outcome for the year ended 30 September 2013.
The Group undertook a successful Rights Issue which was completed in December 2012. The Rights Issue was fully
subscribed with just below 97% of the take up coming from existing shareholders and the remainder from the rump
placement. Total net proceeds of $767 million after costs and foreign exchange movements were raised. In addition, the
terms of our debt facilities were revised in conjunction with the successful Rights Issue. Details of the amendments to debt
facilities are included below. This refinancing has resulted in a robust balance sheet with significantly improved funding
flexibility.
The exceptional production performance during the year allowed us to replenish the metal in process pipeline which was
depleted in order to protect liquidity in September 2012. Saleable metal in concentrate Platinum production reached its
highest level in 6 years. However PGM sales volumes were lower compared to 2012 given lower opening stocks and the
lock up in inventory as a result of the smelter incident in April 2013. The overall PGM pricing environment improved
marginally which partially mitigated the effect of lower sales volumes but the net result was lower revenue for the year
ended 30 September 2013 compared to 2012.
The Rand was significantly weaker during the year under review resulting in favourable exchange impacts. These, coupled
with positive stock movements as a result of the metal in process replenishment, offset cost escalations yielding
significantly improved profitability for the year ended 30 September 2013. Profit for the year attributable to equity
shareholders amounted to $166 million (2012 loss of $410 million) and the earnings per share were 31.2 cents compared
to a loss per share of 107.7 cents in 2012 (note that the prior period loss per share has been recalculated, in accordance
with accounting standards, to take into account the effects of the Rights Issue referred to above). It should also be noted
that 2012 profitability was severely impacted by the disruptive events of last year and the impairment of Akanani, an
exploration and evaluation asset.
The successful refinancing of the business, the return to profitability during the year under review and the revised strategy
and streamlined capital investment programme have allowed us to repay all debt and end the year in a net cash position of
$201 million.
Income Statement
The $97 million movement between the underlying operating profit of $67 million for the year ended 30 September 2012
and that of $164 million for the year ended 30 September 2013 is analysed below.
$m
Year to 30 September 2012 reported operating loss (702)
Year to 30 September 2012 special items 769
Year to 30 September 2012 underlying operating profit 67
PGM price 4
PGM volume (90)
PGM mix 3
Base metals (11)
Revenue changes (94)
Cost changes (including foreign exchange impact of $194 million) 191
Year to 30 September 2013 underlying operating profit 164
Year to 30 September 2013 special items (17)
Year to 30 September 2013 reported operating profit 147
Revenue
Total revenue declined by $94 million from 2012 to $1,520 million for the year ended 30 September 2013.
As mentioned in the overview the PGM pricing environment improved only marginally over the last year and the impact on
the average prices achieved during the year on the key metals sold is shown below:
Year ended Year ended
30.09.13 30.09.12
$/oz $/oz
Platinum 1,517 1,517
Palladium 715 630
Rhodium 1,097 1,274
PGM basket (excluding by-product revenue) 1,100 1,095
The US Dollar basket price (excluding by-products) increased by 0.5% contributing $4 million to the movement in revenue.
It should be noted that whilst the US Dollar basket price only increased by 0.5% from the 2012 financial year, in Rand terms
the basket price increased by 17% impacted by the relatively weaker Rand.
PGM sales volume for the year to 30 September 2013 was 6% down on the year to 30 September 2012. The reduction in
PGM volumes, mainly as a result of process inventory replenishment following last year's production disruption as well as
some inventory lock up as a result of the smelter incident, contributed $90 million to the overall decrease in revenue.
However, the mix of metals sold resulted in a positive impact of $3 million mainly due to a higher proportion of Platinum
due to metal in process inventory timing differences. Base metal revenue was down $11 million as the 15% increase in
Chrome volumes was more than offset by lower base metal prices and lower sales volumes of Nickel and Copper.
Operating Costs
Total underlying costs in US Dollar terms decreased by $191 million mainly due to positive metal stock and foreign
exchange movements partially offset by the impact of increased production and cost escalations. A track of these changes
is shown in the table below.
$m
Year ended 30 September 2012 underlying costs 1,547
Increase / (decrease):
Marikana underground mining 150
Marikana opencast mining 27
Limpopo mining (2)
Concentrating and processing 28
Overheads 13
2012 special idle fixed production costs excluded from underlying costs 120
Underlying operating costs 336
Pandora and W1 ore purchases 29
Metal stock movement (393)
Foreign exchange (194)
Depreciation and amortisation 31
Cost changes (including foreign exchange impact) (191)
Year ended 30 September 2013 underlying costs 1,356
Marikana underground mining costs increased in the year by $150 million or 18%, mainly as a result of a 12% increase in
production on the back of a successful ramp up following last year's seven week production disruption. This was
compounded by the 14% wage increase incurred in October 2012. Marikana opencast mining costs increased by $27
million driven by a 19% increase in production as well as wage inflation which impacted on contractual mining rates.
Concentrating and processing costs increased from 2012 by $28 million or 8% as escalation effects, in particular from
electricity costs were partially offset by reduced refined production due to smelter downtime.
Overheads increased by $13 million or 10% largely due to cost escalation effects.
In 2012, $120 million relating to fixed production overheads incurred during the strike for which there was no associated
production was re-allocated to special costs.
Ore purchases increased by $29 million on the back of a 32% increase in tonnes purchased.
The year under review saw a replenishment of stock in process following last year's pipeline depletion. This has resulted in
a $393 million positive impact on operating profit, excluding exchange impacts, arising from metal stock movements. The
$393 million comprises of a $253 million increase in stock in 2013 and a $140 million stock decrease in 2012.
The Rand weakened substantially against the US Dollar during the year under review averaging Rand 24 to USD1 compared
to an average of Rand 8.05 to USD1 in 2012 resulting in a $194 million positive impact on operating costs.
Depreciation, which is calculated on a units of production basis, increased during the year by $31 million as a direct result
of increased production in both opencast and underground mining.
Cost of production per PGM Ounce
The C1 cost per PGM ounce produced for the year to 30 September 2013 was R8,832. This was an increase of 3.8%
compared to 2012. The containment of unit costs in the face of cost escalation pressures (14% wage escalation and 12%
power escalation) was achieved on the back of increased volumes, improved recoveries and our continued focus on cost
control.
In the current year, we have introduced a more inclusive and transparent measure for unit costs, "Cost of production per
PGM ounce". This measure differs from the C1 cost per PGM ounce produced in that it includes sales and marketing costs,
as well as other management and shared services costs. This makes for a more easily understood cost comparison and
benchmarking tool. The cost of production per PGM ounce in 2013 at R9,182 increased by 3.8% over 2012 which is in line
with the C1 unit cost increase stated above. A trend analysis going back five years reveals a similar correlation between the
two cost measures.
Further details of unit costs can be found in the Operating Statistics.
Special Operating Costs
Residual strike related costs arising from the Events at Marikana continue to be incurred. For the year ended 30 September
2013, these costs totalled $7 million and largely consisted of communication costs relating to reputational rebuild as well
as costs related to the ongoing Farlam Commission. In addition $10 million was spent on the management restructuring
exercise which formed part of the Lonmin Renewal Plan. The restructuring exercise was cost neutral in 2013 but is
expected to yield savings of approximately R200 million per annum going forward.
In 2012 special operating costs of $769 million were charged. These related to the impairment of the Akanani exploration
and evaluation asset ($602 million), strike related costs ($159 million) and other costs amounting to $8 million.
Impairment of Available for Sale Financial Assets
The $2 million impairment of available for sale financial assets represents the loss in value below the original cost price of
one of our investments.
In 2012 the $6 million impairment represented the loss in value of one of our investments following the company's de-
listing in December 2011.
Financing Costs
Year ended 30 September
2013 2012
$m $m
Net bank interest and fees (20) (27)
Capitalised interest payable and fees 11 26
Exchange gain / (loss) 8 (1)
Other (9) (12)
Underlying net finance costs (10) (14)
Special finance income / (costs)
Unwinding fees relating to interest rate swap (14) -
Fair value movements in cash flow hedges 7 -
HDSA receivable 18 30
Exchange loss in respect of Rights Issue (10) -
Net finance (costs) / income (9) 16
The total net finance costs of $9 million for the year ended 30 September 2013 represent a $25 million adverse movement
compared to the total net finance income of $16 million for the year ended 30 September 2012.
Net bank interest and fees decreased from $27 million to $20 million for the year ended 30 September 2013 as the benefit
of settling debt following the successful Rights Issue was partially offset by the unwinding of previously unamortised bank
fees on settlement of the original loan facilities. Interest totalling $11 million was capitalised to assets (2012 - $26 million).
Following the retiring of debt after the Rights Issue, further periodic borrowings to fund the working capital cycle were
largely incurred in Rand and benefited from the weakening of the Rand in relation to the US Dollar as the year progressed.
Exchange gains for the year ended 30 September 2013 amounted to $8 million compared to a loss of $1 million in 2012.
Other finance costs largely relate to the unwinding of the discounting of site rehabilitation liabilities.
The interest rate swap entered into in 2011 to hedge against interest rate fluctuations was unwound after the underlying
bank debt was settled. Fees amounting to $14 million were incurred as a result. The unwinding fees were partially offset by
positive fair value movements amounting to $7 million upon the release of the cash flow hedge resulting from the interest
rate swap.
The Historically Disadvantaged South Africans (HDSA) receivable, being the Sterling loan to a subsidiary of Shanduka Resources
(Proprietary) Limited (Shanduka), increased by $18 million during the year to 30 September 2013 being $1 million of
foreign exchange gains and $17 million of accrued interest. The $30 million increase in 2012 represented $14 million worth
of exchange gains and $16 million of accrued interest. At 30 September 2013 the balance of the receivable stood at $399
million (2012 - $381 million) and is secured on shares in the Shanduka subsidiary whose only asset of value is its ultimate
shareholding in Incwala Resources (Proprietary) Limited (Incwala). The value of the security, based on the value of Incwala,
calculated based on discounted cash flows of Incwala's underlying investments in Western Platinum Limited (WPL), Eastern
Platinum Limited and Akanani currently marginally exceeds this amount. Should the value of security fall below the carrying
amount of the receivable, an impairment charge would be effected.
In order to minimise the risk of the exposure to currency fluctuations on the Rand and Sterling proceeds expected, the
Group entered into forward exchange contracts in synchronisation with the Rights Issue process. The US Dollar weakened
over the offer period resulting in the Rand and Sterling proceeds received and translated at prevailing spot rates being
more than that due under the forward exchange contracts. This resulted in the recognition of exchange losses under
hedging arrangements of $11 million which was partially offset by a $1 million exchange gain on retranslation of advance
proceeds of the Rights Issue.
Taxation
Reported tax for the current year was a credit of $58 million after the tax effects of special items of $85 million. The
underlying tax charge is $27 million reflecting an effective rate of 17%. The underlying charge largely comprises deferred
tax charges being recognised on accelerated capital allowances. The low underlying effective tax rate of 17% compared to a
standard tax rate of 28% is largely driven by exchange effects on profits arising from a predominantly Rand tax base
translated to the US Dollar functional currency.
Cash Generation and Net Debt
The following table summarises the main components of the cash flow during the year.
Year ended 30 September
2013 2012
$m $m
Operating profit / (loss) 147 (702)
Depreciation, amortisation and impairment 157 726
Changes in working capital (246) 265
Other (5) 11
Cash flow generated from operations 53 300
Interest and finance costs (33) (27)
Tax (4) (10)
Trading cash inflow 16 263
Capital expenditure (159) (408)
Dividends paid to minority interests (11) (14)
Free cash outflow (154) (159)
Dividend from joint venture 1 7
Additions to other financial assets - (2)
Net proceeds from equity issuance 767 -
Issue of other ordinary share capital 1 -
Dividends paid to equity shareholders - (31)
Cash inflow / (outflow) 615 (185)
Opening net debt (421) (234)
Foreign exchange 13 -
Unamortised fees (6) (2)
Closing net cash / (debt) 201 (421)
Trading cash inflow (cents per share) 3.0c 69.1c
Free cash outflow (cents per share) (28.9c) (41.8c)
Cash flow generated from operations in the year ended 30 September 2013 at $53 million was lower than the $300 million
recorded in 2012. The cash benefits of improved profitability were more than offset by adverse working capital
movements, $189 million was attributable to the replenishment of the metal in process pipeline following last year's
production stoppage as well as some lock up of the pipeline experienced as a result of the smelter incident. It should be
noted that in 2012, working capital cash flows benefited from the reduction in stock levels at year end as well as from the
revenue received in advance on the forward sale of gold.
Trading cash inflow for the year to 30 September 2013 amounted to $16 million (2012 - $263 million). The cash outflow on
interest and finance costs increased by $6 million as the benefit of reduced debt levels was offset by amendment fees paid
for revised debt facilities and the cost of unwinding the interest rate swap. Tax payments decreased by $6 million and
represent provisional corporate tax payments which benefitted from unredeemed capital expenditure deductions. The
trading cash inflow per share was 3.0 cents for the year ended 30 September 2013 against 69.1 cents for 2012. Note that
the prior year trading cash inflow per share has been recalculated, in accordance with accounting standards, to take into
account the effects of the Rights Issue referred to below.
Capital expenditure cash flow at $159 million was $249 million below prior year reflecting our revised strategy and capital
investment programme. In Mining, the expenditure incurred was focused on sustaining capital across the various shafts as
well as ore reserve development projects at K3 shaft UG2 decline, Saffy shaft and Rowland shaft. In the Process Division
spend comprised the completion of work at the Number One shaft concentrator and the Number One furnace integrity
optimisation project.
The Group undertook a successful Rights Issue which was completed in December 2012 and raised total net proceeds of
$767 million after costs and foreign exchange charges. The proceeds of the Rights Issue were utilised to settle debt
resulting in a net cash position at 30 September 2013 of $201 million compared to a net debt position of $421 million at 30
September 2012.
Key Financial Risks
The Group faces many risks in the operation of its business. The Group's strategy takes into account known risks, but risks
will exist of which we are currently unaware. This financial review focuses on financial risk management.
Financial Risk Management
The main financial risks faced by the Group relate to the availability of funds to meet business needs (liquidity risk), the risk
of default by counterparties to financial transactions (credit risk) and fluctuations in interest, foreign exchange rates and
commodity prices (market risk). Factors which are outside the control of management which can have a significant impact
on the business remain, specifically, volatility in the Rand / US Dollar exchange rate and PGM commodity prices.
These are the critical factors to consider when addressing the issue of whether the Group is a Going Concern.
Liquidity Risk
The policy on liquidity is to ensure that the Group has sufficient funds to facilitate all ongoing operations. The Group funds
its operations through a mixture of equity funding and borrowings. The Group's philosophy is to maintain an appropriately
low level of financial gearing given the exposure of the business to fluctuations in PGM commodity prices and the Rand /
US Dollar exchange rate. We ordinarily seek to fund capital requirements from equity.
As part of the annual budgeting and long-term planning process, the Group's cash flow forecast is reviewed and approved
by the Board. The cash flow forecast is amended for any material changes identified during the year, for example material
acquisitions and disposals or changes in production forecasts. Where funding requirements are identified from the cash
flow forecast, appropriate measures are taken to ensure these requirements can be satisfied. Factors taken into
consideration are:
- the size and nature of the requirement;
- preferred sources of finance applying key criteria of cost, commitment, availability, security / covenant conditions;
- recommended counterparties, fees and market conditions; and
- covenants, guarantees and other financial commitments.
During the year under review, the Group revised its debt facilities on the back of the successful Rights Issue. The amended
US Dollar Facilities and amended Rand Facilities came into effect in December 2012. The proceeds of the Rights Issue were
used to repay the Group's indebtedness under the original facilities, including (i) the repayment in full of amounts
outstanding (amounting to $300 million plus accrued interest and applicable break fees) under the US Dollar Term Loan,
which facility was cancelled; and (ii) the repayment of amounts outstanding under the US Dollar Revolving Credit Facility;
and (iii) the repayment of amounts outstanding under the Rand Facilities Agreements.
The remaining facilities are summarised as follows:
- Revolving Credit Facility of $400 million at a Lonmin Plc level; and
- Three bilateral facilities of R660 million each at a WPL level.
The principal amendments to each of the original agreements were to remove the net debt/EBITDA and EBITDA/net
interest covenants and to substitute these with the following financial covenants:
- consolidated tangible net worth will not be less than $2,250 million;
- consolidated net debt will not exceed 25 per cent of consolidated tangible net worth; and
- if:
- in respect of the amended US Dollar Facilities Agreement, the aggregate amount of outstanding loans
exceeds $75 million at any time during the last six months of any test period; or
- in respect of both the amended US Dollar Facilities Agreement and the amended Rand Facilities
Agreements, consolidated net debt exceeds $300 million as of the last day of any test period,
the capital expenditure of the Group must not exceed the limits set out in the table below, provided that, if 110 per
cent of budgeted capital expenditure for any test period ending on or after 30 September 2013 is lower than the
capital expenditure limit set out in the table below for that test period, then the capital expenditure limit for that
test period shall be equal to 110 per cent of such budgeted capital expenditure.
Test Period Capital expenditure limit (Rand)
1 October 2012 to 31 March 2013 (inclusive) 800,000,000
1 October 2012 to 30 September 2013 (inclusive) 1,600,000,000
1 April 2013 to 31 March 2014 (inclusive) 1,800,000,000
1 October 2013 to 30 September 2014 (inclusive) 2,000,000,000
1 April 2014 to 31 March 2015 (inclusive) 3,000,000,000
1 October 2014 to 30 September 2015 (inclusive) 4,000,000,000
1 April 2015 to 31 March 2016 (inclusive 4,000,000,000
1 October 2015 to 30 September 2016 (inclusive) 4,000,000,000
Credit Risk
Banking Counterparties
Banking counterparty credit risk is managed by spreading financial transactions across an approved list of counterparties of
high credit quality. Banking counterparties are approved by the Board and consist of the ten banks that participate in
Lonmin's bank debt facilities. These counter-parties comprise: BNP Paribas S.A., Citigroup Global Markets Limited,
FirstRand Bank Limited, HSBC Bank Plc, Investec Bank Limited, J.P. Morgan Limited, Lloyds TSB Bank Plc, The Royal Bank of
Scotland N.V., The Standard Bank of South Africa Limited and Standard Chartered Bank.
Trade Receivables
The Group is exposed to significant trade receivable credit risk through the sale of PGMs to a limited group of customers.
This risk is managed as follows:
- aged analysis is performed on trade receivable balances and reviewed on a monthly basis;
- credit ratings are obtained on any new customers and the credit ratings of existing customers are monitored on an
ongoing basis;
- credit limits are set for customers; and
- trigger points and escalation procedures are clearly defined.
It should be noted that a significant portion of Lonmin's revenue is from two key customers. However, both of these
customers have strong investment grade ratings and their payment terms are very short, thereby reducing trade receivable
credit risk significantly.
HDSA Receivables
HDSA receivables are secured on the HDSA's shares, whose only asset of value is its shareholding in Incwala.
Interest Rate Risk
Given that all debt has been repaid, this risk is not considered to be high at this point in time. The interest position is kept
under constant review in conjunction with the liquidity policy outlined above and the future funding requirements of the
business.
Foreign Currency Risk
The Group's operations are predominantly based in South Africa and the majority of the revenue stream is in US Dollars.
However, the majority of the Group's operating costs and taxes are paid in Rand. Most of the cash received in South Africa
is in US Dollars. A majority of the Group's funding sources are in US Dollars.
The Group's reporting currency is the US Dollar and the share capital of the Company is based in US Dollars.
During the year under review, Lonmin did not undertake any foreign currency hedging except in relation to Rights Issue
proceeds as described above.
Commodity Price Risk
Our policy is not to hedge commodity price exposure on PGMs, excluding gold, and therefore any change in prices will have
a direct effect on the Group's trading results.
For base metals and gold, hedging is undertaken where the Board determines that it is in the Group's interest to hedge a
proportion of future cash flows. The policy allows Lonmin to hedge up to a maximum of 75% of the future cash flows from
the sale of these products looking forward over the next 12 to 24 months. The Group did not undertake any hedging of
base metals under this authority in the year under review and no forward contracts were in place in respect of base metals
at the end of the period.
In respect of gold, Lonmin entered into a pre-paid sale of 75% of its current gold production for the next 54 months in
March 2012. In terms of this contract Lonmin will deliver 70,700 ounces of gold over the period with delivery on a quarterly
basis and in return received an upfront payment of $107 million. The upfront receipt was accounted for as deferred
revenue on our balance sheet and is being released to profit and loss as deliveries take place at an average price of $1,510
per ounce delivered.
Contingent Liabilities
The Group provided third party guarantees to Eskom as security to cover estimated electricity consumption for three
months. At 30 September 2013 these guarantees amounted to $10 million (2012 - $12 million).
Simon Scott
Chief Financial Officer
10 November 2013
Responsibility Statement of the Directors in respect of the Annual Report and Accounts
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
- the Directors' report and Strategic report include a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
Roger Phillimore Simon Scott
Chairman Chief Financial Officer
10 November 2013
Operating statistics 5 year review
Units 2013 2012 2011 2010 2009
Tonnes mined
Marikana Karee(1) kt 4,950 4,384 4,438 4,115 3,950
Westerns(1) kt 2,899 2,643 3,434 3,694 3,912
Middelkraal(1) kt 2,201 1,762 1,904 1,918 1,385
Easterns(1) kt 910 997 1,174 1,082 935
Underground kt 10,960 9,786 10,949 10,809 10,182
Opencast kt 528 443 601 329 234
Underground
Total Marikana & Opencast kt 11,487 10,229 11,550 11,137 10,415
Pandora (100%)(2) Underground kt 571 435 394 391 335
Opencast kt - - - - 366
Total kt 571 435 394 391 702
Limpopo Underground kt - - - - 87
Total Tonnes
Lonmin (100%) mined kt 12,058 10,663 11,944 11,529 11,204
% Tonnes
mined from
UG2 reef
(100%) % 73.9 71.7 73.2 76.1 78.5
Underground
Lonmin (attributable)(2) & Opencast kt 11,730 10,413 11,718 11,304 10,801
Ounces mined3
Lonmin excluding Pandora Platinum oz 717,882 635,346 695,474 686,108 609,108
Pandora (100%) Platinum oz 40,917 30,714 25,342 25,670 42,885
Lonmin Platinum oz 758,799 666,060 720,816 711,778 651,993
Lonmin excluding Pandora Total PGMs oz 1,340,678 1,174,776 1,306,082 1,297,452 1,151,770
Pandora (100%) Total PGMs oz 78,353 58,300 48,420 49,227 79,474
Lonmin Total PGMs oz 1,419,032 1,233,076 1,354,501 1,346,679 1,231,245
Tonnes milled(4)
Marikana Underground kt 10,854 9,936 10,896 10,655 10,148
Opencast kt 393 450 748 129 622
Limpopo Underground kt - - - - 92
Pandora (100%)(5) Underground kt 574 432 394 391 335
Opencast kt - - - - 430
Lonmin Platinum Underground kt 11,428 10,367 11,290 11,046 10,576
Opencast kt 393 450 748 129 1,053
Total kt 11,822 10,817 12,037 11,176 11,628
Milled head grade(6)
Lonmin Platinum Underground g/t 4.60 4.56 4.54 4.67 4.57
Opencast g/t 2.92 3.01 2.23 2.25 3.70
Total g/t 4.54 4.49 4.40 4.65 4.50
Concentrator recovery rate(7)
Lonmin Platinum Underground % 87.0 86.1 85.4 84.8 81.0
Opencast % 85.3 85.9 81.6 63.8 65.1
Total % 87.0 86.1 85.3 84.7 79.8
Operating statistics 5 year review
Units 2013 2012 2011 2010 2009
Metals in concentrate(8)
Marikana Platinum oz 706,012 646,393 694,149 668,620 612,910
Palladium oz 323,622 295,409 324,655 313,590 284,561
Gold oz 17,664 16,925 17,471 14,969 14,419
Rhodium oz 95,241 83,144 91,659 93,043 85,008
Ruthenium oz 144,304 127,269 144,369 144,913 130,080
Iridium oz 33,059 27,610 31,294 31,432 28,389
Total PGMs oz 1,319,902 1,196,750 1,303,597 1,266,566 1,155,367
Limpopo Platinum oz - - - - 3,770
Palladium oz - - - - 3,331
Gold oz - - - - 243
Rhodium oz - - - - 487
Ruthenium oz - - - - 688
Iridium oz - - - - 159
Total PGMs oz - - - - 8,679
Pandora Platinum oz 41,117 30,625 25,241 25,756 46,421
Palladium oz 19,190 14,261 11,847 12,108 20,866
Gold oz 315 228 179 176 350
Rhodium oz 6,563 4,743 3,865 4,036 6,425
Ruthenium oz 9,764 7,135 6,070 6,228 9,338
Iridium oz 1,773 1,195 996 1,041 1,767
Total PGMs oz 78,721 58,188 48,199 49,345 85,168
Lonmin Platinum before
Concentrate Purchases Platinum oz 747,129 677,019 719,390 694,376 663,101
Palladium oz 342,812 309,670 336,502 325,698 308,758
Gold oz 17,979 17,153 17,650 15,145 15,013
Rhodium oz 101,803 87,886 95,524 97,079 91,920
Ruthenium oz 154,067 134,404 150,439 151,141 140,106
Iridium oz 34,832 28,805 32,290 32,473 30,315
Total PGMs oz 1,398,623 1,254,938 1,351,796 1,315,911 1,249,214
Concentrate purchases Platinum oz 3,813 2,802 - - -
Palladium oz 1,132 973 - - -
Gold oz 14 10 - - -
Rhodium oz 421 329 - - -
Ruthenium oz 428 404 - - -
Iridium oz 172 129 - - -
Total PGMs oz 5,980 4,647 - - -
Lonmin Platinum Platinum oz 750,942 679,821 719,390 694,376 663,101
Palladium oz 343,944 310,643 336,502 325,697 308,758
Gold oz 17,993 17,163 17,650 15,144 15,013
Rhodium oz 102,225 88,216 95,524 97,079 91,920
Ruthenium oz 154,495 134,808 150,439 151,141 140,106
Iridium oz 35,004 28,934 32,290 32,473 30,315
Total PGMs oz 1,404,603 1,259,585 1,351,796 1,315,911 1,249,214
Nickel(9) MT 3,743 3,489 3,537 2,972 2,794
Copper(9) MT 2,340 2,226 2,223 1,824 1,763
Operating statistics 5 year review
Units 2013 2012 2011 2010 2009
Refined production
Lonmin refined metal production
Platinum oz 707,665 648,414 686,877 607,794 655,291
Palladium oz 319,841 310,558 323,907 303,748 297,415
Gold oz 18,676 18,398 18,013 15,284 18,277
Rhodium oz 79,124 110,896 86,702 94,690 95,596
Ruthenium oz 171,052 153,394 164,374 147,854 146,506
Iridium oz 28,068 32,844 26,337 36,073 23,908
Total PGMs oz 1,324,426 1,274,503 1,306,210 1,205,443 1,236,992
Toll refined metal production
Platinum oz 1,364 38,958 44,396 77,571 2,025
Palladium oz 662 21,043 49,119 15,274 941
Gold oz 289 729 2,879 1,100 58
Rhodium oz 1,837 4,717 14,402 5,411 1,532
Ruthenium oz 6,519 7,907 24,408 8,278 2,647
Iridium oz 1,012 1,944 5,249 1,695 513
Total PGMs oz 11,683 75,299 140,453 109,328 7,717
Total refined PGMs
Platinum oz 709,029 687,372 731,273 685,365 657,317
Palladium oz 320,503 331,601 373,026 319,022 298,356
Gold oz 18,965 19,128 20,892 16,383 18,335
Rhodium oz 80,961 115,613 101,103 100,100 97,128
Ruthenium oz 177,571 161,300 188,782 156,133 149,153
Iridium oz 29,081 34,788 31,586 37,768 24,420
Total PGMs oz 1,336,109 1,349,802 1,446,662 1,314,772 1,244,709
Base metals
Nickel(10) MT 3,532 3,786 4,188 3,475 3,244
Copper(10) MT 2,168 2,153 2,454 2,091 1,988
Operating statistics 5 year review
Units 2013 2012 2011 2010 2009
Sales
Refined metal sales
Platinum oz 695,803 701,831 720,783 681,424 659,703
Palladium oz 313,030 335,849 372,284 315,515 305,332
Gold oz 18,423 19,273 19,417 16,289 18,910
Rhodium oz 77,625 119,054 102,653 98,657 94,160
Ruthenium oz 168,266 170,751 187,189 153,865 146,009
Iridium oz 28,828 37,187 33,603 34,790 23,522
Total PGMs oz 1,301,973 1,383,945 1,435,929 1,300,540 1,247,636
Concentrate and other(11)
Platinum oz - - - 24,850 23,253
Palladium oz - - - - (2,848)
Gold oz - - - - 13
Rhodium oz - - - - 175
Ruthenium oz - - - - 303
Iridium oz - - - - 387
Total PGMs oz - - - 24,850 21,282
Lonmin Platinum
Platinum oz 695,803 701,831 720,783 706,274 682,955
Palladium oz 313,030 335,849 372,284 315,515 302,485
Gold oz 18,423 19,273 19,417 16,289 18,922
Rhodium oz 77,625 119,054 102,653 98,657 94,335
Ruthenium oz 168,266 170,751 187,189 153,865 146,312
Iridium oz 28,828 37,187 33,603 34,790 23,909
Total PGMs oz 1,301,973 1,383,945 1,435,929 1,325,390 1,268,918
Nickel(10) MT 3,586 3,843 4,180 3,033 3,318
Copper(10) MT 2,130 2,197 2,448 2,169 2,045
Chrome(10) MT 1,388,761 1,209,643 730,278 684,654 708,753
Average prices
Platinum $/oz 1,517 1,517 1,769 1,525 1,086
Palladium $/oz 715 630 752 448 224
Gold $/oz 1,508 1,597 1,405 1,153 912
Rhodium $/oz 1,097 1,274 2,145 2,308 1,571
Ruthenium $/oz 74 103 168 173 97
Iridium $/oz 946 1,042 938 520 388
Basket price of PGMs(12) $/oz 1,100 1,095 1,299 1,139 786
Full Basket price of PGMs(13) $/oz 1,167 1,163 1,389 1,195 836
Basket price of PGMs(12) R/oz 10,291 8,807 9,109 8,375 6,873
Full Basket price of PGMs(13) R/oz 10,921 9,304 9,716 8,790 7,316
Nickel(10) $/MT 12,772 14,330 21,009 18,569 15,006
Copper(10) $/MT 7,113 7,201 8,612 6,623 6,291
Chrome(10) $/MT 19 20 27 5 2
Footnotes:
1 Karee includes the shafts K3, K4 (currently on care and maintenance), 1B and 4B. Westerns comprises Rowland, Newman and W1. Middelkraal represents Hossy and Saffy. Easters includes E1, E2 and E3.
2 Pandora underground and opencast tonnes mined represents 100% of the total tonnes mined on the Pandora joint venture of which 42.5% is attributable to Lonmin.
3 Ounces mined have been calculated at achieved concentrator recoveries and industry standard downstream processing losses to present produced saleable ounces.
4 Tonnes milled excludes slag milling.
5 Lonmin purchases 100% of the ore produced by the Pandora joint venture for onward processing which is included in downstream operating statistics.
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 include metal derived from slag processing and have been calculated at industry standard downstream processing losses to present produced saleable ounces.
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 the LME grade C. Chrome is produced in the form of chromite
concentrate and volumes shown are in the form of chromite.
11 Concentrate and other sales have been adjusted to a saleable ounce basis using industry standard recovery rates.
12 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.
13 As per note 10 but including revenue from base metals.
Operating statistics 5 year review
Units 2013 2012 2011 2010 2009
Capital expenditure 1 Rm 1,500 3,296 2,907 1,989 2,106
$m 159 408 410 267 234
Cost per PGM ounce sold(2),(5)
Group:
Mining Marikana R/oz 6,247 5,963 5,292 4,575 4,468
Mining Limpopo R/oz - - - - 7,404
Mining (weighted average) R/oz 6,247 5,963 5,292 4,575 4,490
Concentrating Marikana R/oz 1,051 1,073 960 862 808
Concentrating Limpopo R/oz - - - - 1,820
Concentrating (weighted average) R/oz 1,051 1,073 960 862 815
Smelting and refining(3) R/oz 917 872 830 809 693
Shared business services R/oz 618 600 452 527 632
C1 cost per PGM ounce produced R/oz 8,832 8,507 7,534 6,773 6,630
Stock movement R/oz (970) (192) (272) (358) 112
C1 cost per PGM ounce sold
before base metal credits R/oz 7,862 8,315 7,262 6,415 6,742
Base metal credits R/oz (627) (497) (606) (415) (440)
C1 cost per PGM ounce sold
after base metal credits R/oz 7,235 7,817 6,656 6,000 6,302
Amortisation R/oz 992 708 617 571 516
C2 cost per PGM ounce sold R/oz 8,227 8,525 7,273 6,571 6,818
Pandora mining cost:
C1 Pandora mining cost
(in joint venture) R/oz 5,242 5,229 5,020 4,727 3,371
Pandora JV cost/ounce to Lonmin
(adjusting Lonmin share of profit) R/oz 8,229 7,644 7,228 7,253 5,956
Exchange rates
Average rate for period(4) R/$ 9.24 8.05 6.95 7.45 9.00
BRP/$ 0.64 0.63 0.62 0.64 0.64
Closing rate R/$ 9.99 8.30 8.05 6.92 7.47
BRP/$ 0.62 0.62 0.64 0.64 0.62
Operating statistics 5 year review
Units 2013 2012 2011 2010 2009
Underlying cost of sales
PGM operations
Mining $m (919) (877) (995) (811) (594)
Concentrating $m (159) (168) (187) (153) (115)
Smelting and refining(3) $m (133) (147) (172) (156) (112)
Shared services $m (101) (100) (97) (79) (88)
Management and marketing services $m (26) (35) (32) (31) (34)
Ore and concentrate purchases $m (64) (48) (46) (42) (41)
Limpopo mining $m (7) (9) (7) (5) (9)
Special item adjustment $m - 121 - - -
Royalties $m (6) (8) (12) (6) -
Share based payments $m (13) (12) (13) (12) (1)
Inventory movement $m 203 (140) (12) 111 (48)
FX and Group charges $m 44 14 5 (43) (10)
$m (1,181) (1,412) (1,567) (1,226) (1,051)
PGM operations
Mining Rm (8,545) (7,079) (7,002) (6,026) (5,302)
Concentrating Rm (1,469) (1,346) (1,297) (1,142) (1,019)
Smelting and refining(3) Rm (1,235) (1,183) (1,203) (1,161) (982)
Shared services Rm (928) (805) (679) (586) (776)
Management and marketing services Rm (243) (287) (217) (227) (298)
Ore and concentrate purchases Rm (597) (385) (318) (315) (363)
Limpopo mining Rm (61) (76) (50) (37) (106)
Special item adjustment Rm - 966 - - -
Royalties Rm (55) (68) (82) (40) -
Share based payments Rm (121) (99) (87) (87) -
Inventory movement Rm 2,145 (842) (119) 649 (289)
FX and Group charges Rm (1,247) (218) (517) (53) 404
Rm (12,356) (11,424) (11,572) (9,025) (8,733)
Cost of production (PGM operations)
Cost
Mining Rm (8,545) (7,079) (7,002) (6,026) (5,302)
Concentrating Rm (1,469) (1,346) (1,297) (1,142) (1,019)
Smelting and refining(3) Rm (1,235) (1,183) (1,203) (1,161) (982)
Shared services Rm (928) (805) (679) (586) (776)
Management and marketing services Rm (243) (287) (217) (227) (298)
Rm (12,420) (10,701) (10,399) (9,142) (8,379)
PGM Saleable Ounces
Mined ounces excluding ore purchases oz 1,340,678 1,174,776 1,306,082 1,297,452 1,151,770
Metals in concentrate before
concentrate purchase oz 1,398,623 1,254,938 1,351,796 1,315,911 1,249,214
Refined ounces oz 1,336,109 1,349,802 1,446,662 1,314,772 1,244,709
Metals in concentrate including
concentrate purchases oz 1,404,603 1,259,585 1,351,796 1,315,911 1,249,214
Operating statistics 5 year review
Units 2013 2012 2011 2010 2009
Cost of production (PGM operations)
(continued)
Cost of production
Mining R/oz (6,373) (6,026) (5,361) (4,644) (4,604)
Concentrating R/oz (1,051) (1,073) (960) (868) (816)
Smelting and refining(3) R/oz (925) (877) (832) (883) (789)
Shared services R/oz (661) (639) (503) (446) (622)
Management and marketing services R/oz (173) (228) (161) (173) (239)
R/oz (9,182) (8,843) (7,815) (7,013) (7,069)
% increase in cost of production
Mining % 5.8 12.4 15.4 0.9 n/a
Concentrating % (2.1) 11.8 10.6 6.4 n/a
Smelting and refining(3) % 5.4 5.4 (5.8) 11.8 n/a
Shared services % 3.3 27.2 12.8 (28.3) n/a
Management and marketing services % (24.1) 41.9 (7.0) (27.7) n/a
% 3.8 13.1 11.4 (0.8) n/a
Footnotes:
1 Capital expenditure is the aggregate of the purchase of property, plant and equipment and intangible assets (includes capital accruals and excludes capitalised interest).
2 It should be noted that with the restructuring of the business in 2011, 2010 and 2009 the cost allocation between business units has been changed and, therefore, whilst the
total is on a like-for-like basis, individual line items are not totally comparable.
3 Comprises of Smelting and Refining costs as well as direct Process Operations shared costs.
4 Exchange rates are calculated using the market average daily closing rate over the course of the period.
5 The cost per PGM ounce sold has been replaced by the cost of production from 2013.
Consolidated income statement
for the year ended 30 September
Special Special
2013 items 2013 2012 items 2012
Underlying(i) (note 3) Total Underlying(i) (note 3) Total
Continuing operations Note $m $m $m $m $m $m
Revenue 2 1,520 - 1,520 1,614 - 1,614
EBITDA(ii) 321 (17) 304 193 (169) 24
Depreciation, amortisation and
impairment (157) - (157) (126) (600) (726)
Operating profit / (loss)(iii) 164 (17) 147 67 (769) (702)
Impairment of available for sale
financial assets - (2) (2) - (6) (6)
Finance income 4 9 26 35 5 30 35
Finance expenses 4 (19) (25) (44) (19) - (19)
Share of profit / (loss) of equity
accounted investments 4 - 4 4 (10) (6)
Profit / (loss) before taxation 158 (18) 140 57 (755) (698)
Income tax credit(iv) 5 (27) 85 58 (39) 187 148
Profit / (loss) for the year 131 67 198 18 (568) (550)
Attributable to:
- Equity shareholders of Lonmin Plc 109 57 166 15 (425) (410)
- Non-controlling interests 22 10 32 3 (143) (140)
Earnings / (loss) per share(v) 6 31.2c (107.7)c
Diluted earnings / (loss) per share(v),(vi) 6 31.1c (107.7)c
Consolidated statement of comprehensive income
for the year ended 30 September
2013 2012
Total Total
$m $m
Profit / (loss) for the year 198 (550)
Items that may be reclassified subsequently to the income statement
- Changes in fair value of available for sale financial assets - (8)
- Changes in settled cash flow hedges released to the income statement(vii) 8 -
- Foreign exchange loss on retranslation of equity accounted investments (9) (5)
- Deferred tax on items taken directly to the statement of comprehensive income - (2)
Total other comprehensive expense for the period (1) (15)
Total comprehensive income / (loss) for the period 197 (565)
Attributable to:
- Equity shareholders of Lonmin Plc 166 (425)
- Non-controlling interests 31 (140)
197 (565)
Footnotes:
i Underlying results and earnings / (loss) per share are based on reported results and earnings / (loss) per share excluding the effect of special items as defined in note 3.
ii EBITDA is operating profit / (loss) before depreciation, amortisation and impairment of goodwill, intangibles and property, plant and equipment.
iii Operating profit / (loss) is defined as revenue less operating expenses before impairment of available for sale financial assets, finance income and expenses and share of
profit / (loss) of equity accounted investments.
iv The income tax credit substantially relates to overseas taxation and includes net exchange gains of $80 million (2012 - $17 million) as disclosed in note 5.
v During December 2012 the Group undertook a Rights Issue of shares. As a result the September 2012 loss per share and diluted loss per share have been adjusted to
reflect the bonus element of the Rights Issue as disclosed in note 6.
vi Diluted earnings / (loss) per share is based on the weighted average number of ordinary shares in issue adjusted by dilutive outstanding share options.
vii Refer to note 4 for detail regarding the unwinding of the interest rate swap derivative.
Consolidated statement of financial position
as at 30 September
2013 2012
Note $m $m
Non-current assets
Goodwill 40 40
Intangible assets 462 462
Property, plant and equipment 2,908 2,889
Equity accounted investments 36 157
Other financial assets 430 418
3,876 3,966
Current assets
Inventories 449 260
Trade and other receivables 86 79
Tax recoverable 4 3
Cash and cash equivalents 8 201 315
740 657
Current liabilities
Trade and other payables (295) (328)
Interest bearing loans and borrowings 8 - (123)
Derivative financial instruments - (5)
Deferred revenue (23) (24)
(318) (480)
Net current assets 422 177
Non-current liabilities
Interest bearing loans and borrowings 8 - (613)
Derivative financial instruments - (10)
Deferred tax liabilities (501) (562)
Deferred revenue (47) (70)
Provisions (140) (143)
(688) (1,398)
Net assets 3,610 2,745
Capital and reserves
Share capital 569 203
Share premium 1,411 997
Other reserves 88 80
Retained earnings 1,341 1,208
Attributable to equity shareholders of Lonmin Plc 3,409 2,488
Attributable to non-controlling interests 201 257
Total equity 3,610 2,745
The financial statements of Lonmin Plc, registered number 103002, were approved by the Board of Directors on 10
November 2013 and were signed on its behalf by:
Roger Phillimore Chairman
Simon Scott Chief Financial Officer
Consolidated statement of changes in equity
for the year ended 30 September
Equity interest
Called up Share Non-
share premium Other Retained controlling Total
capital account reserves(i) earnings(ii) Total interests(iii) equity
$m $m $m $m $m $m $m
At 1 October 2011 203 997 80 1,650 2,930 411 3,341
Loss for the year - - - (410) (410) (140) (550)
Total other comprehensive expense: - - - (15) (15) - (15)
- Change in fair value of available for sale financial
assets - - - (8) (8) - (8)
- Foreign exchange on retranslation of equity
accounted investments - - - (5) (5) - (5)
- Deferred tax on items taken directly to the
statement of comprehensive income - - - (2) (2) - (2)
Transactions with owners, recognised directly in
equity: - - - (17) (17) (14) (31)
- Share-based payments - - - 14 14 - 14
- Dividends - - - (31) (31) (14) (45)
At 30 September 2012 203 997 80 1,208 2,488 257 2,745
Consolidated statement of changes in equity (continued)
for the year ended 30 September
Equity interest
Called up Share Non-
share premium Other Retained controlling Total
capital account reserves(i) earnings(ii) Total interests(iii) equity
$m $m $m $m $m $m $m
At 1 October 2012 203 997 80 1,208 2,488 257 2,745
Profit for the year - - - 166 166 32 198
Total other comprehensive expense: - - 8 (8) - (1) (1)
- Change in settled cash flow hedges released to
the income statement(iv) - - 8 - 8 - 8
- Foreign exchange on retranslation of equity
accounted investments - - - (8) (8) (1) (9)
Transactions with owners, recognised directly in
equity: 366 414 - (25) 755 (87) 668
- Share-based payments - - - 14 14 - 14
- Incwala equity accounting adjustment(v) - - - (39) (39) (76) (115)
- Share capital and share premium recognised on
Rights Issue(vi) 365 459 - - 824 - 824
- Rights Issue costs charged to share premium(vi) - (45) - - (45) - (45)
- Shares issued on exercise of share options(vii) 1 - - - 1 - 1
- Dividends - - - - - (11) (11)
At 30 September 2013 569 1,411 88 1,341 3,409 201 3,610
Footnotes:
i Other reserves at 30 September 2013 represent the capital redemption reserve of $88 million (2012 - $88 million) and a $nil hedging loss net of deferred tax (2012 - $8
million).
ii Retained earnings include $5 million of accumulated credits in respect of fair value movements on available for sale financial assets (2012 - $5 million accumulated
credits) and a $6 million debit of accumulated exchange on retranslation of equity accounted investments (2012 - $3 million credit).
iii Non-controlling interests represent a 13.76% shareholding in each of Eastern Platinum Limited, Western Platinum Limited and Messina Limited and a 19.87%
shareholding in Akanani Mining (Proprietary) Limited.
iv Refer to note 4 for detail regarding the unwinding of the interest rate swap derivative.
v Where an associate owns an equity interest in a group entity an adjustment is made to the equity accounting and the non-controlling interest to avoid double counting.
Any difference between the adjustment to the investment in the associate and non-controlling interest is taken direct to equity.
vi During December 2012 the Group undertook a Rights Issue in which 365,496,943 shares were issued as disclosed in note 9.
vii During the year 900,000 share options were exercised (2012 400,000) on which $0.9 million of cash was received (2012 - $0.4 million).
Consolidated statement of cash flows
for the year ended 30 September
2013 2012
Note $m $m
Profit / (loss) for the year 198 (550)
Taxation 5 (58) (148)
Share of (profit) / loss of equity accounted investments (4) 6
Finance income 4 (35) (35)
Finance expenses 4 44 19
Impairment of available for sale financial assets 3 2 6
Non cash movement on deferred revenue (24) (13)
Depreciation, amortisation and impairment 157 726
Change in inventories (189) 124
Change in trade and other receivables (2) 75
Change in trade and other payables (32) (28)
Change in provisions (23) (3)
Deferred revenue received - 107
Share-based payments 14 14
Loss on disposal of property, plant and equipment 5 -
Cash flow from operations 53 300
Interest received 1 4
Interest and bank fees paid (34) (31)
Tax paid (4) (10)
Cash inflow from operating activities 16 263
Cash flow from investing activities
Distribution from joint venture 1 7
Additions to other financial assets - (2)
Purchase of property, plant and equipment (156) (404)
Purchase of intangible assets (3) (4)
Cash used in investing activities (158) (403)
Cash flow from financing activities
Equity dividends paid to Lonmin shareholders - (31)
Dividends paid to non-controlling interests (11) (14)
Proceeds from current borrowings 8 257 120
Repayment of current borrowings 8 (380) (10)
Proceeds from non-current borrowings 8 369 589
Repayment of non-current borrowings 8 (988) (275)
Proceeds from equity issuance 9 823 -
Costs of issuing shares 9 (45) -
Loss on settlement of forward exchange contracts on equity issuance 9 (11) -
Issue of other ordinary share capital 1 -
Cash inflow from financing activities 15 379
(Decrease) / increase in cash and cash equivalents 8 (127) 239
Opening cash and cash equivalents 8 315 76
Effect of foreign exchange rate changes 8 13 -
Closing cash and cash equivalents 8 201 315
Notes to the accounts
1. Statement on accounting policies
Basis of preparation
The financial information presented has been prepared on the basis of International Financial Reporting Standards (IFRSs)
as adopted by the EU.
Going concern
In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider
whether the Group can continue in operational existence for the foreseeable future.
The financial performance of the Group is dependent upon the wider economic environment in which the Group operates.
Factors exist which are outside the control of management which can have a significant impact on the business, specifically,
volatility in the Rand / US Dollar exchange rate and PGM commodity prices. The events at Marikana in August and
September 2012 necessitated a review of the strategy and capital structure of the Group. To this end, the Lonmin Plc Board
concluded that reducing capital expenditure in the near term and raising additional equity, in conjunction with a revision to
bank facilities would result in the appropriate capital structure and retain the Group's flexibility as regards financial risks.
In December 2012, Lonmin Plc successfully concluded a Rights Issue which raised net proceeds of $767 million (see note
9). In conjunction with the Rights Issue, Lonmin Plc negotiated certain amendments to the terms of the Group's existing debt
facilities. The proceeds of the Rights Issue were utilised to reduce the Group's debt exposure.
The Directors have prepared cash flow and covenant forecasts for a period in excess of twelve months and have concluded
that the capital structure, after the successful Rights Issue and debt facilities amendments, provides sufficient head room to
cushion against downside operational risks and minimises the risk of breaching new covenants.
As a result, the Directors believe that the Group will continue to meet its obligations as they fall due and comply with its
financial covenants and accordingly have formed a judgement that it is appropriate to prepare the financial statements on a
going concern basis. Therefore, these financial statements do not include any adjustments that would result if the going
concern basis on preparation is inappropriate.
New standards and amendments in the year
The following revised IFRS has been adopted in these financial statements. The application of this IFRS has not had any
material impact on the amounts reported for the current and prior years:
- IAS 1 Amendments to Presentation of Financial Statements (effective 1 July 2012) requires that an entity present
separately the items of Other Comprehensive Income that may be reclassified to the income statement in future from
those that would never be reclassified to the income statement.
There were no other new standards, interpretations or amendments to standards issued and effective for the year which
materially impacted the Group's financial statements.
2. Segmental analysis
The Group distinguishes between three reportable operating segments being the Platinum Group Metals (PGM) Operations
segment, the Evaluation segment and the Exploration segment.
The PGM Operations segment comprises the activities involved in the mining and processing of PGMs, together with
associated base metals, which are carried out entirely in South Africa. These operations are integrated and designed to
support the process for extracting and refining PGMs from underground. PGMs move through each stage of the process and
undergo successive levels of refinement which result in fully refined metals. The Chief Executive Officer, who performs the
role of Chief Operating Decision Maker (CODM), views the PGM Operations segment as a single whole for the purposes of
financial performance monitoring and assessment and does not make resource allocations based on margin, costs or cash
flows incurred at each separate stage of the process. In addition, the CODM makes his decisions for running the business
on a day to day basis using the physical operating statistics generated by the business as these summarise the operating
performance of the entire segment.
The Evaluation segment covers the evaluation through pre-feasibility of the economic viability of newly discovered PGM
deposits. Currently all of the evaluation projects are based in South Africa.
The Exploration segment covers the activities involved in the discovery or identification of new PGM deposits. This activity
occurs on a worldwide basis.
No operating segments have been aggregated. Operating segments have consistently adopted the consolidated basis of
accounting and there are no differences in measurement applied. Other covers mainly the results and investment activities
of the corporate Head Office. The only intersegment transactions involve the provision of funding between segments and
any associated interest.
Year ended 30 September 2013
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
Revenue (external sales by product):
Platinum 1,055 - - - - 1,055
Palladium 224 - - - - 224
Gold 28 - - - - 28
Rhodium 85 - - - - 85
Ruthenium 13 - - - - 13
Iridium 27 - - - - 27
PGMs 1,432 - - - - 1,432
Nickel 46 - - - - 46
Copper 15 - - - - 15
Chrome 27 - - - - 27
1,520 - - - - 1,520
Year ended 30 September 2013
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
Underlying(i):
EBITDA / (LBITDA)(ii) 339 8 (4) (22) - 321
Depreciation, amortisation and
impairment (157) - - - - (157)
Operating profit / (loss)(ii) 182 8 (4) (22) - 164
Finance income 13 - - 14 (18) 9
Finance expenses (25) - - (12) 18 (19)
Share of profit of equity accounted
investments 4 - - - - 4
Profit / (loss) before taxation 174 8 (4) (20) - 158
Income tax expense (27) - - - - (27)
Underlying profit / (loss) after
taxation 147 8 (4) (20) - 131
Special items (note 3)(iii) 68 - - (1) - 67
Profit / (loss) after taxation 215 8 (4) (21) - 198
Total assets(iv) 3,899 276 - 1,603 (1,162) 4,616
Total liabilities(v) (1,909) (187) (42) (30) 1,162 (1,006)
Net assets 1,990 89 (42) 1,573 - 3,610
Share of net assets of equity
accounted investments(vi) 36 - - - - 36
Additions to property, plant,
equipment and intangibles 174 7 - - - 181
Material non cash items share-
based payments 13 - - 1 - 14
Year ended 30 September 2012
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
Revenue (external sales by product):
Platinum 1,064 - - - - 1,064
Palladium 212 - - - - 212
Gold 31 - - - - 31
Rhodium 152 - - - - 152
Ruthenium 17 - - - - 17
Iridium 39 - - - - 39
PGMs 1,515 - - - - 1,515
Nickel 55 - - - - 55
Copper 16 - - - - 16
Chrome 28 - - - - 28
1,614 - - - - 1,614
Year ended 30 September 2012
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
Underlying(i):
EBITDA / (LBITDA)(ii) 202 3 (4) (8) - 193
Depreciation, amortisation and
impairment (126) - - - - (126)
Operating profit / (loss)(ii) 76 3 (4) (8) - 67
Finance income 5 - - 14 (14) 5
Finance expenses (15) - - (18) 14 (19)
Share of profit of equity accounted
investments 2 - - 2 - 4
Profit / (loss) before taxation 68 3 (4) (10) - 57
Income tax expense (39) - - - - (39)
Underlying profit / (loss) after
taxation 29 3 (4) (10) - 18
Special items (note 3)(iii) (103) (481) - 16 - (568)
(Loss) / profit after taxation (74) (478) (4) 6 - (550)
Total assets(iv) 3,862 269 - 1,493 (1,001) 4,623
Total liabilities(v) (2,094) (188) (46) (551) 1,001 (1,878)
Net assets 1,768 81 (46) 942 - 2,745
Year ended 30 September 2012
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
Share of net assets of equity
accounted investments 42 - - 115 - 157
Additions to property, plant,
equipment and intangibles 439 5 - - - 444
Material non cash items share-
based payments 13 - - 1 - 14
Revenue by destination is analysed by geographical area below:
Year ended Year ended
30 September 30 September
2013 2012
$m $m
The Americas 411 319
Asia 461 485
Europe 451 508
South Africa 197 302
1,520 1,614
The Group's revenues are all derived from the PGM Operations segment. This segment has two major customers who
contributed 62% ($937 million) and 30% ($459 million) of revenue in the year (2012 - 49% ($794 million) and 29% ($473
million)).
Metal sales prices are based on market prices which are denominated in US Dollars. The majority of sales are also invoiced
in US Dollars with the exception of certain sales in South Africa which are invoiced in South African Rand based on
exchange rates determined in accordance with the contractual arrangements.
Non-current assets, excluding financial instruments, by geographical area are shown below:
Year ended Year ended
30 September 30 September
2013 2012
$m $m
South Africa 3,446 3,547
Europe - 1
3,446 3,548
Footnotes:
i Underlying results are based on reported results excluding the effect of special items as defined in note 3.
ii EBITDA / (LBITDA) and operating profit / (loss) are the key profit measures used by management.
iii The impairment of Akanani to the value of $nil (2012 - $602 million) is included under special items in the segmental analysis. Akanani forms part of the Evaluation
segment.
iv The assets under "Other" include the HDSA receivable of $399 million (2012 - $381 million) and intercompany receivables of $1,162 million (2012 - $707 million).
v The liabilities under "Other" include non-current borrowings of $nil (2012 - $500 million).
vi Refer to footnote v in the statement of changes in equity.
3. Special Items
'Special items' are those items of financial performance that the Group believes should be separately disclosed on the face
of the income statement to assist in the understanding of the financial performance achieved by the Group and for
consistency with prior years.
2013 2012
$m $m
Operating loss: (17) (769)
- Costs relating to illegal work stoppage(i)
Idle fixed production costs - (120)
Contract costs - (29)
Payroll costs - (7)
Other costs (7) (3)
- Capital raising costs - (5)
- Impairment of property, plant and equipment - 2
- Restructuring and reorganisation costs(ii) (10) -
- Costs incurred relating to disputed prospecting rights - (5)
- Impairment of exploration and evaluation assets(iii) - (602)
Impairment of available for sale financial assets(iv) (2) (6)
Share of impairment recognised in investment in associate - (10)
Net finance income: 1 30
- Interest accrued from HDSA receivable(v) 17 16
- Foreign exchange gain on HDSA receivable(v) 1 14
- Net change in fair value of settled cash flow hedges(vi) 7 -
- Unwinding fees relating to early settlement of interest rate swap(vi) (14) -
- Foreign exchange gain on holding Rights Issue proceeds received in advance (note 9) 1 -
- Loss on forward exchange contracts in respect of Rights Issue (note 9) (11) -
Loss on special items before taxation (18) (755)
Taxation related to special items (note 5) 85 187
Special gain / (loss) before non-controlling interest 67 (568)
Non-controlling interests (10) 143
Special gain / (loss) for the year attributable to equity shareholders of Lonmin Plc 57 (425)
Footnotes:
i Residual strike related costs arising from the Events at Marikana continue to be incurred. For the year ended 30 September 2013, these costs totalled $7 million and
largely consisted of communication costs relating to reputational rebuild as well as costs related to the on-going Farlam Commission.
The costs for 2012 related to fixed production overheads incurred during the illegal strike period for which there was no associated production output and costs arising
directly as a result of the strike action. The total of these strike related costs amounted to $159 million. Idle fixed production costs incurred during the strike period
amounted to $120 million. Costs relating to contractors not being able to fulfil their obligations as a result of the disruption amounted to $29 million. The negotiated
wage settlement included an amount to be paid to employees on their return to work which totalled $7 million. Other costs related to the strike include additional security,
media coordination and consumables.
ii These costs relate to the management restructuring exercise completed during 2013.
iii Impairment charges relate to the write down of goodwill and the exploration and evaluation asset of Akanani.
iv The $2 million (2012 - $6 million) impairment of available for sale financial assets represents the loss in value below the original cost price of one of our investments.
v During the year ended 30 September 2010 the Group provided financing to assist a subsidiary of Shanduka to acquire a majority shareholding in Incwala, Lonmin's Black Economic
Empowerment partner. This financing gave rise to foreign exchange movements and the accrual of interest.
vi Refer to note 4 for detail regarding the unwinding of the interest rate swap derivative.
4. Net finance (expenses) / income
2013 2012
$m $m
Finance income: 9 5
- Interest receivable on cash and cash equivalents 1 4
- Other interest receivable - 1
- Foreign exchange gains on net cash / (debt)(i) 8 -
Finance expenses: (19) (19)
- Interest payable on bank loans and overdrafts (11) (20)
- Effective portion of cash flow hedges released to the income statement - (5)
- Bank fees (7) (6)
- Unamortised bank fees realised on settlement of old loan facility (3) -
- Capitalised interest(ii) 11 26
- Unwind of discounting on provisions (9) (11)
- Ineffective portion of cash flow hedges released to the income statement - (2)
- Foreign exchange losses on net cash / (debt)(i) - (1)
Special items (note 3): 1 30
- Interest on HDSA receivable 17 16
- Foreign exchange gain on HDSA receivable 1 14
- Net change in fair value of settled cash flow hedges(iii) 7 -
- Unwinding fees relating to early settlement of interest rate swap(iii) (14) -
- Foreign exchange gain on holding Rights Issue proceeds received in advance (note 9) 1 -
- Loss on forward exchange contracts in respect of Rights Issue (note 9) (11) -
Net finance (expenses) / income (9) 16
Footnotes:
i Net cash / (debt) as defined by the Group comprises cash and cash equivalents, bank overdrafts repayable on demand and interest bearing loans and borrowings less
unamortised bank fees, unless the unamortised bank fees relate to undrawn facilities in which case they are treated as other receivables.
ii Interest expenses incurred have been capitalised on a Group basis to the extent that there is an appropriate qualifying asset. The weighted average interest rate used by
the Group for capitalisation is 5.9% (2012 4.3%).
iii The interest rate swap entered into in 2011 was unwound after the funds raised from the Rights Issue were used to settle the underlying bank debt. The equity related
hedging loss of $8m and the derivative liability of $15m were transferred to the income statement resulting in net finance income of $7m. In addition unwinding fees of
$14m were incurred for early settlement of the interest rate swap.
5. Taxation
2013 2012
$m $m
Current tax charge (excluding special items):
United Kingdom tax expense - -
Current tax expense at 23.5% (2012 25%)(i) - -
Less amount of the benefit arising from double tax relief available - -
Overseas current tax expense at 28% (2012 28%) 2 10
Corporate tax expense current year 3 9
Adjustment in respect of prior years (1) 1
Deferred tax charge (excluding special items):
Deferred tax expense - UK and overseas 25 29
Origination and reversal of temporary differences 26 31
Adjustment in respect of prior years (1) (2)
Tax credit on special items UK and overseas (note 3): (85) (187)
Reversal of utilisation of losses from prior years to offset deferred tax liability - (2)
Foreign exchange on current taxation(ii) 1 -
Foreign exchange on deferred taxation(ii) (81) (17)
Tax on special items impacting profit before tax (5) (168)
Actual tax credit (58) (148)
Tax charge excluding special items (note 3) 27 39
Effective tax rate (41%) 21%
Effective tax rate excluding special items (note 3) 17% 68%
A reconciliation of the standard tax charge / (credit) to the actual tax credit was as follows:
2013 2013 2012 2012
% $m % $m
Tax charge / (credit) on profit / (loss) at standard tax rate 28 39 28 (195)
Tax effect of:
- Unutilised losses(iii) 4 5 - -
- Foreign exchange impacts on taxable profits (17) (23) (2) 14
- Adjustment in respect of prior years (1) (2) - -
- Disallowed expenditure 1 1 - -
- (Income) / expenses not subject to tax 5 7 - (1)
Special items as defined above (61) (85) (5) 34
Actual tax credit (41) (58) 21 (148)
The Group's primary operations are based in South Africa. The South African statutory tax rate is 28% (2012 - 28%).
Lonmin Plc operates a branch in South Africa which is also subject to a tax rate of 28% on branch profits (2012 - 28%). The
aggregated standard tax rate for the Group is 28% (2012 - 28%). The dividends withholding tax rate is 15% (2012 - 15%).
Dividends payable by the South African companies to Lonmin Plc are subject to a 5% withholding tax benefitting from double
taxation agreements.
Footnotes:
i Effective from 1 April 2013 the United Kingdom tax rate changed from 24% to 23%. Effective from 1 April 2014 the United Kingdom tax rate will change from 23% to 21%
and from 21% to 20% from 1 April 2015. This does not materially impact the Group's recognised deferred tax liabilities.
ii Overseas tax charges are predominantly calculated based in Rand as required by the local authorities. As these subsidiaries' functional currency is US Dollar this leads to
a variety of foreign exchange impacts being the retranslation of current and deferred tax balances and monetary assets, as well as other translation differences. The Rand
denominated deferred tax balance in US Dollars at 30 September 2013 is $388 million (30 September 2012 - $461 million).
iii Unutilised losses reflect losses generated in entities for which no deferred tax is provided as it is not thought probable that future profits can be generated against which a
deferred tax asset could be offset or previously unrecognised losses utilised.
6. Earnings / (loss) per share
Earnings / (loss) per share (EPS / (LPS)) has been calculated on the profit attributable to equity shareholders amounting to
$166 million (2012 loss of $410 million) using a weighted average number of 532,130,347 ordinary shares in issue (2012
380,691,485 ordinary shares).
During December 2012 the Group undertook a capital raising by way of a Rights Issue. As a result the EPS / (LPS) figures
have been adjusted retrospectively as required by IAS 33 Earnings Per Share. On 11 December 2012, 365,496,943
ordinary shares were issued with nine new ordinary shares issued for every existing five ordinary shares held. For the
calculation of the EPS / (LPS), the number of shares held prior to 11 December 2012 has been increased by a factor of
1.878 to reflect the bonus element of the Rights Issue.
Diluted earnings / (loss) per share is based on the weighted average number of ordinary shares in issue adjusted by dilutive
outstanding share options in accordance with IAS 33 - Earnings Per Share. In the year to 30 September 2012 outstanding
share options were anti-dilutive and so were excluded from diluted loss per share in accordance with IAS 33 - Earnings Per
Share.
2013 2012 (restated)
Profit for Per share Loss for Per share
the year Number of amount the year Number of amount
$m shares cents $m shares cents
Basic EPS/(LPS) 166 532,130,347 31.2 (410) 380,691,485 (107.7)
Share option schemes - 2,105,203 (0.1) - - -
Diluted EPS/(LPS) 166 534,235,550 31.1 (410) 380,691,485 (107.7)
2013 2012 (restated)
Profit for Per share Profit for Per share
the year Number of amount the year Number of amount
$m shares cents $m shares cents
Underlying EPS 109 532,130,347 20.5 15 380,691,485 3.9
Share option schemes - 2,105,203 (0.1) - 3,174,636 -
Diluted Underlying EPS 109 534,235,550 20.4 15 383,866,121 3.9
Underlying earnings per share has been presented as the Directors consider it important to present the underlying results of
the business. Underlying earnings per share is based on the earnings attributable to equity shareholders adjusted to exclude
special items (as defined in note 3) as follows:
2013 2012 (restated)
(Loss)/
Profit for Per share profit for Per share
the year Number of amount the year Number of amount
$m shares cents $m shares cents
Basic EPS/(LPS) 166 532,130,347 31.2 (410) 380,691,485 (107.7)
Special items (note 3) (57) - (10.7) 425 - 111.6
Underlying EPS 109 532,130,347 20.5 15 380,691,485 3.9
Headline earnings and the resultant headline earnings per share are specific disclosures defined and required by the
Johannesburg Stock Exchange. These are calculated as follows:
Year ended Year ended
30 September 30 September
2013 2012
$m $m
Earnings / (loss) attributable to ordinary shareholders (IAS 33 earnings) 166 (410)
Add back loss on disposal of property, plant and equipment 5 -
Add back impairment of assets (note 3) 2 616
Tax related to the above items (1) (120)
Non-controlling interests (1) (86)
Headline earnings 171 -
2013 2012 (restated)
Profit for Per share Loss for Per share
the year Number of amount the year Number of amount
$m shares cents $m shares cents
Headline EPS 171 532,130,347 32.1 - 380,691,485 -
Share option schemes - 2,105,203 (0.1) - 3,174,636 -
Diluted Headline EPS 171 534,235,550 32.0 - 383,866,121 -
7. Dividends
2013 2012
$m Cents per share $m Cents per share
Prior year final dividend paid in the year - - 31 15.0
Interim dividend paid in the year - - - -
Total dividend paid in the year - - 31 15.0
Interim dividend paid in the year - - - -
Proposed final dividend for the year - - - -
Total dividend in respect of the year - - - -
8. Net cash / (debt) as defined by the Group
Transfer of
Foreign unmortised
As at exchange and bank fees to As at
1 October Cash non cash other 30 September
2012 flow movements receivables 2013
$m $m $m $m $m
Cash and cash equivalents 315 (127) 13 - 201
Current borrowings (123) 123 - - -
Non-current borrowings (619) 619 - - -
Unamortised bank fees(ii) 6 (3) 2 (5) -
Net cash / (debt) as defined by the
Group(i) (421) 612 15 (5) 201
Foreign Transfer of As at
As at exchange and unmortised bank 30 September
1 October Cash non cash fees to other 2012
2011 flow movements receivables $m
$m $m $m $m
Cash and cash equivalents 76 239 - - 315
Current borrowings (10) (110) (3) - (123)
Non-current borrowings (308) (314) 3 - (619)
Unamortised bank fees(ii) 8 - (2) - 6
Net debt as defined by the Group(i) (234) (185) (2) - (421)
Footnotes:
i Net cash / (debt) as defined by the Group comprises cash and cash equivalents, bank overdrafts repayable on demand and interest bearing loans and borrowings less
unamortised bank fees, unless the unamortised bank fees relate to undrawn facilities in which case they are treated as other receivables.
ii As at 30 September 2013 unamortised bank fees of $5 million relating to undrawn facilities were treated as other receivables (30 September 2012 - $6 million of
unamortised bank fees relating to drawn facilities were offset against loans). During the year ended 30 September 2013 the term loan was repaid and cancelled resulting
in the related unamortised bank fees of $3 million being expensed. Additional bank fees incurred in amending the USD and the Rand revolving credit facilities were
capitalised and are being amortised over the remaining term of the facilities.
9. Rights Issue
Overview of the Rights Issue offer
On 9 November 2012, Lonmin announced a fully underwritten 9 for 5 Rights Issue of 365,503,264 new shares at 140 pence
per new share for shareholders on the London Stock Exchange and at ZAR19.4872 per new share for shareholders on the
Johannesburg Stock Exchange. The offer period commenced on 20 November 2012 and closed for acceptance on 10
December 2012. The final number of shares issued was 365,496,943.
In the prospectus, Lonmin anticipated raising $817 million of total proceeds which, net of expenses of $40 million would
raise funds of $777 million. The issue was successful with a take up of just below 97% and the remaining 3% raised
through a rump placement. The Company raised total net cash proceeds of $767 million which was slightly below
expectations given in the prospectus as a result of exchange differences between the prospectus exchange rate and that
achieved ($4 million) as well as expenses being $5 million more than anticipated.
Accounting for the Rights Issue
The Rights Issue proceeds were received over the offer period and initially credited to a "shares to be issued" account at
the prevailing spot exchange rates at the dates of receipt resulting in the recognition of cash inflow of $823 million before
the impact of hedging arrangements. The retranslation of these receipts at the spot rate on closing resulted in a $1 million
exchange gain recognised through finance income as a special item.
Share capital and share premium of $365 million and $459 million respectively were recognised on the statement of
financial position using the spot exchange rate on the date of issuance being 11 December 2012. $45 million of issue costs
were also recognised and charged against share premium. Therefore the total net increase in share capital and share
premium was $779 million.
In order to minimise the risk of the exposure to currency fluctuations on the Rand and Sterling proceeds expected, the
Group entered into forward exchange contracts in synchronisation with the Rights Issue process. The Dollar weakened over
the offer period resulting in the Rand and Sterling proceeds received and translated at prevailing spot rates being more than
due under the forward exchange contracts. This resulted in the recognition of exchange losses of $11 million. This $11
million fair value loss cannot be offset against equity (which it was effectively hedging for economic purposes) as, under
IFRS, hedge accounting can only be applied to cash flows which ultimately affect profit and loss. The loss on forward
exchange contracts has therefore been shown as a special charge in finance costs in the income statement. The offset is
effectively in the recognition of a higher credit to the share premium account.
A summary of the above transaction is shown below:
$m
Cash proceeds received at spot rates 823
Foreign exchange gain on retranslation of advance cash proceeds 1
Gross increase in share capital and share premium 824
Costs of issue charged to share premium (45)
Net increase in share capital and share premium 779
Loss on settlement of forward exchange contracts (11)
Total 768
Footnote:
i Net cash proceeds amounted to $767 million (excluding the foreign exchange gain on retranslation of advance cash proceeds of $1 million).
10. Statutory Disclosure
The financial information set out above does not constitute the company's statutory accounts for the years ended
30 September 2013 or 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to
the registrar of companies, and those for 2013 will be delivered in due course. The auditor has reported on those accounts.
Their report on the accounts for 2013 was (i) unqualified, (ii) did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006. Their report on the accounts for 2012 was (i) unqualified, (ii) drew attention by way of emphasis
without qualifying their report to a material uncertainty in respect of going concern and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
Date: 11/11/2013 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
