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LONMIN PLC - Second Quarter 2016 Production Report

Release Date: 16/05/2016 08:00
Code(s): LON     PDF:  
Wrap Text
Second Quarter 2016 Production Report

Lonmin Plc (Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number 1969/000015/10)
JSE code: LON
Issuer Code: LOLMI
ISIN : GB0031192486
("Lonmin")

REGULATORY RELEASE


 16 May 2016


 Second Quarter 2016 Production Report


 Lonmin Plc (“Lonmin” or “the Company”), one of the world’s largest primary platinum producers, today
 announces its production results for the three months to 31 March 2016 (unaudited). Lonmin also
 publishes today, in a separate announcement, its Interim Results and achievements for the half year ended
 31 March 2016.

 Overview

 -   The 12 month rolling LTIFR to 31 March improved by 5.2% to 5.10 incidents per million man hours from
     5.38 at 31 December.
 -   We were pleased to have been fatality free in the quarter but regrettably, post the period end there
     were two fatalities, one at Pandora in April and one at Rowland shaft in May. Focus on safety
     improvements remains a priority.
 -   We are continuing to deliver on our Business Plan with the unit cost of production at R10,390 per PGM
     ounce. This was 2.6% lower than Q2 2015 and 5.1% lower than R10,949 at Q1 2016 which was
     impacted by the December holidays. Our stated aim is to achieve unit costs in FY16 which are flat on
     FY15 and we are pleased to be delivering on this objective.
 -   A total of 2.5 million tonnes were mined in the quarter. Our core, large, long life Generation 2 shafts
     produced 1.9 million tonnes, an increase of 1.1% on Q2 2015. Our Generation 1 shafts produced 0.6
     million tonnes, a decrease of 22.1% on Q2 2015 in line with the plan to close areas of high cost
     production.
 -   Refined Platinum production of 177,444 ounces was 54,964 ounces or 44.9% higher than Q2 2015 as
     the smelter complex operated well unlike Q2 2015 which had smelter shutdowns.
 -   Sales of 211,462 Platinum ounces were 92,411 ounces or 77.6% higher than in Q2 2015.
 -   The average Rand basket price at R11,035 per PGM ounce was essentially flat Q2 2015 as the decrease
     in Dollar PGM prices was offset by a weakening Rand.
Mining Operations

The Marikana underground mining operations produced 2.5 million tonnes during the second quarter. This
was a decrease of 6.2% or 0.2 million tonnes on the prior year period due to the planned decrease in
production from the Generation 1 shafts in-line with our strategy to remove high cost production in a low
price environment.

Generation 2 shafts
Production from our core Generation 2 shafts of the future (K3, Rowland, Saffy and 4B/1B) was 1.9 million
tonnes, an increase of 1.1% on Q2 2015 emphasizing the continued focus on these shafts.

-   K3, our biggest shaft, produced 634,000 tonnes, which was broadly flat on Q2 2015. A decrease in
    section 54 safety stoppages was largely offset by a delay in filling critical production vacancies. This
    was in line with the Company’s strategy to freeze recruitment in order to complete the section 189
    process by reskilling and redeploying employees into vacant, more productive roles as part of the
    reorganisation.
-   Saffy shaft produced 493,000 tonnes, an increase of 17.2% on the prior year period as this shaft has
    been ramped up and is now running at full production.
-   Rowland shaft produced 420,000 tonnes, which was a decrease of 7.1% on Q2 2015. As at K3, there
    was a delay in filling critical production vacancies due to the time taken to reskill employees impacted
    by the reorganisation and redeploy them to Rowland shaft to complete the section 189 process.
-   4B/1B produced 388,000 tonnes as planned, a decrease of 3.9% as the 1B shaft was closed and placed
    on care and maintenance in October 2015.

Generation 1 shafts
In line with the Group’s plans for the closure of high cost areas, production from our Generation 1 shafts
(Hossy, Newman, W1, E1, E2, E3 and Pandora (100%)) at 0.6 million tonnes was 0.2 million tonnes, or 22.1%
lower than Q2 2015

K4 shaft remains on care and maintenance and a small amount of opencast ore was recovered as this
operation wound down.

Production Losses
There has been a significant reduction in Section 54 safety stoppages. Production lost due to Section 54
safety stoppages in the quarter totalled 37,000 tonnes. This was 185,000 tonnes better than the prior year
period and 160,000 tonnes less than Q1 2016.

                                                       Q2 2016                     Q2 2015
                                                       tonnes                      tonnes
       Section 54 safety stoppages                          37,000                 222,000
       Management induced safety stoppages                  -                      43,000
       Labour stoppages                                     -                      14,000
       Total tonnes lost                                    37,000                 279,000

Process Operations

Milling production in the quarter at 2.4 million tonnes were 17.8% or 0.5 million tonnes lower than in the
prior year period driven by the decrease in tonnes mined and stock piles ahead of the mills drawn down in
Q2 2015.

Underground milled head grade at 4.68 grammes per tonnes (5PGE+Au) increased by 1.9% when compared
to the 4.59 grammes per tonne achieved in Q2 2015 largely due to higher grades at our K3 and 4B shafts
and less dilution at Hossy as a result of the curtailed development as this shaft is managed for closure. The
overall milled head grade was 4.66 grammes per tonne, up 2.8% on the prior year period due to the
increase in underground grade and decrease in lower grade opencast ore in the mix.

Concentrator recoveries for the quarter were excellent at 86.7%. Overall, total Platinum-in-concentrate for
the quarter at 154,491 saleable ounces was 15.0% lower than Q2 2015. Total PGMs in concentrate were
296,361 saleable ounces, 15.6% lower than the prior year period.

Total refined Platinum production at 177,444 ounces was 44.9% higher than in the comparable period last
year when processing throughput was impacted by smelter stoppages in December 2014. Total PGMs
produced were 336,105 ounces, an increase of 42.2% on Q2 2015.


Sales & Pricing

Platinum sales for the quarter at 211,462 ounces were 34,018 ounces higher than refined production due
to the seasonal release of finished metal built up due to the December holiday period. This was an increase
of 77.6% or 92,411 ounces compared with the prior year period when the timing of production was
impacted by processing throughput constraints. PGM sales were up 70.1% to 408,793 ounces.

The US Dollar basket price (including base metal revenue) at $713 per ounce during the quarter was down
23.7% on Q2 2015 while the corresponding Rand basket price (R11,035 per ounce) was 0.3% higher than
the prior year period and 1.6% higher than Q1 2016 impacted by the Rand weakness. The average Rand to
US Dollar exchange rate was 34.7% weaker at 15.81 compared to 11.74 in Q2 2015.

Since the second half of January the Platinum price has been steadily increasing and following the quarter
end, in April, the platinum price has ranged between a high of $1,068 per ounce and a low of $952 per
ounce compared to the price achieved in Q2 of $918 per ounce. The impact of the increase in platinum
price was only partly offset by the Rand strengthening against the US Dollar, averaging ZAR:USD 14.59 in
April 2016 compared to 15.81 in Q2 resulting in a Rand basket price for April 2016 of around R11,900
compared to 11,035 in Q2.


Unit costs

We are continuing to deliver on our Business Plan with the unit cost of production for the quarter at
R10,390 per PGM ounce. This was 2.6% lower than Q2 2015 and 5.1% lower than R10,949 at Q1 2016 which
was impacted by the December holidays. Significantly, this was in-line with the R10,339 achieved in FY15
despite the 8.2% year on year increase in labour costs. Our stated aim is to achieve unit costs in FY16 which
are flat on FY15 and we are pleased to be delivering on this objective.



- ENDS -
ENQUIRIES

Investors / Analysts:
Lonmin
Tanya Chikanza (Head of Investor Relations)      +44 207 201 6007 / +27 11 218 8358

Media:
Cardew Group
Anthony Cardew                                +44 207 930 0777
Sue Vey                                       +27 60 523 7953

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 more than 70%
of known global PGM resources are located.

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
                                                                                 3 months    3 months
                                                                                 to 31 Mar   to 31 Mar
                                                                                      2016        2015
Tonnes mined(1)    Generation 2               K3 shaft                     kt          634         638
                                              Rowland shaft                kt          420         452
                                              Saffy shaft                  kt          493         420
                                              4B/1B shaft                  kt          388         403
                                              Generation 2                 kt        1,934       1,913
                   Generation 1               Hossy shaft                  kt          175         266
                                              Newman shaft                 kt          113         179
                                              W1 shaft                     kt           41          42
                                              East 1 shaft                 kt           40          39
                                              East 2 shaft                 kt           77          99
                                              East 3 shaft                 kt           17          14
                                              Pandora (100%)(2)            kt          147         145
                                              Generation 1                 kt          610         784
                   Generation 3               K4 shaft                     kt            -          15
                                              Total underground            kt        2,544       2,712
                                              Opencast                     kt            3          52
                   Lonmin (100%)              Total tonnes mined (100%)    kt        2,547       2,764
                                              % tonnes mined from UG2 reef
                                                                           %          76.5        75.8
                                              (100%)
                Lonmin (attributable)         Underground & Opencast       kt       2,473       2,692
Ounces mined(3) Lonmin excluding Pandora      Pt ounces                    oz     153,708     163,188
                Pandora (100%)                Pt ounces                    oz      10,139       9,786
                Lonmin                        Pt ounces                    oz     163,848     172,974

                   Lonmin excluding Pandora   PGM ounces                   oz     294,341     314,401
                   Pandora (100%)             PGM ounces                   oz      19,867      19,439
                   Lonmin                     PGM ounces                   oz     314,208     333,841
Tonnes milled(4)   Marikana                   Underground                  kt       2,201       2,621
                                              Opencast                     kt          19         114
                                              Total                        kt       2,220       2,735
                   Pandora(5)                 Underground                  kt         147         145
                   Lonmin Platinum            Underground                  kt       2,347       2,766
                                              Head grade(6)                g/t       4.68        4.59
                                              Recovery rate(7)             %         86.7        86.8
                                              Opencast                     kt          19         114
                                              Head grade(6)                g/t       2.86        3.13
                                              Recovery rate(7)             %         83.4        85.3
                                              Total                        kt       2,366       2,880
                                              Head grade(6)                g/t       4.66        4.53
                                              Recovery rate(7)             %         86.7        86.8

                                                           3 months    3 months
                                                           to 31 Mar   to 31 Mar
                                                                2016        2015
Metals-in-       Marikana                Platinum     oz     143,246     170,434
concentrate(8)                           Palladium    oz      66,190      79,370
                                         Gold         oz       3,505       4,008
                                         Rhodium      oz      20,737      25,519
                                         Ruthenium    oz      33,971      41,736
                                         Iridium      oz       6,827       8,078
                                         Total PGMs   oz     274,476     329,144
                                         Nickel(9)    MT         683         829
                                         Copper(9)    MT         425         514
                 Pandora                 Platinum     oz      10,139       9,785
                                         Palladium    oz       4,716       4,598
                                         Gold         oz          31          38
                                         Rhodium      oz       1,662       1,703
                                         Ruthenium    oz       2,757       2,784
                                         Iridium      oz         561         530
                                         Total PGMs   oz      19,867      19,438
                                         Nickel(9)    MT          36          19
                                         Copper(9)    MT          10           9
                 Concentrate purchases   Platinum     oz       1,105       1,595
                                         Palladium    oz         435         506
                                         Gold         oz           5           3
                                         Rhodium      oz         153         204
                                         Ruthenium    oz         259         283
                                         Iridium      oz          61          85
                                         Total PGMs   oz       2,018       2,676
                                         Nickel(9)    MT           1           1
                                         Copper(9)    MT           -           1
                 Lonmin Platinum         Platinum     oz     154,491     181,814
                                         Palladium    oz      71,342      84,474
                                         Gold         oz       3,541       4,049
                                         Rhodium      oz      22,552      27,425
                                         Ruthenium    oz      36,986      44,803
                                         Iridium      oz       7,449       8,693
                                         Total PGMs   oz     296,361     351,258
                                         Nickel(9)    MT         720         849
                                         Copper(9)    MT         435         523

                                                              3 months    3 months
                                                              to 31 Mar   to 31 Mar
                                                                   2016        2015
Refined production   Lonmin refined metal   Platinum     oz     175,833     122,094
                     production             Palladium    oz      77,316      56,638
                                            Gold         oz       4,669       3,015
                                            Rhodium      oz      23,467      17,954
                                            Ruthenium    oz      42,973      28,400
                                            Iridium      oz       9,505       7,554
                                            Total PGMs   oz     333,762     235,655
                     Toll refined metal     Platinum     oz       1,611         385
                     production             Palladium    oz         303         185
                                            Gold         oz          11           9
                                            Rhodium      oz          75          26
                                            Ruthenium    oz         343          57
                                            Iridium      oz           -          11
                                            Total PGMs   oz       2,343         673
                     Total refined PGMs     Platinum     oz     177,444     122,480
                                            Palladium    oz      77,618      56,822
                                            Gold         oz       4,680       3,024
                                            Rhodium      oz      23,542      17,980
                                            Ruthenium    oz      43,316      28,456
                                            Iridium      oz       9,505       7,565
                                            Total PGMs   oz     336,105     236,328
                     Base metals            Nickel(10)   MT         753         697
                                            Copper(10)   MT         463         394
Sales                Refined metal sales    Platinum     oz     211,462     119,051
                                            Palladium    oz     100,412      56,411
                                            Gold         oz       5,930       1,850
                                            Rhodium      oz      25,966      14,075
                                            Ruthenium    oz      52,937      40,265
                                            Iridium      oz      12,086       8,670
                                            Total PGMs   oz     408,793     240,322
                                            Nickel(10)   MT         709         669
                                            Copper(10)   MT         672         382
                                            Chrome(10)   MT     314,261     399,906
                                                                                                   3 months           3 months
                                                                                                   to 31 Mar          to 31 Mar
                                                                                                        2016               2015
Average prices            Platinum                                               $/oz                    918              1,156
                          Palladium                                              $/oz                    529                781
                          Gold                                                   $/oz                  1,394              1,505
                          Rhodium                                                $/oz                    654              1,163
                          Ruthenium                                              $/oz                     35                 52
                          Iridium                                                $/oz                    507                560
                          $ basket excl. by-product revenue(11)                  $/oz                    686                864
                          $ basket incl. by-product revenue(12)                  $/oz                    713                936
                          R basket excl. by-product revenue(11)                  R/oz                 10,635             10,176
                          R basket incl. by-product revenue(12)                  R/oz                 11,035             11,007
                          Nickel(10)                                             $/MT                  6,425             11,739
                          Copper(10)                                             $/MT                  4,321              5,628
                          Chrome(10)                                             $/MT                     11                 18
Unit costs                Cost of production per PGM ounce                       R/oz                 10,390             10,667
Exchange rates            Average rate for period(13)                            R/$                   15.81              11.74
                          Closing rate                                           R/$                   14.71              12.13

Notes:
1 Reporting of shafts is in line with our operating strategy for Generation 1 and Generation 2 shafts.
2 Pandora underground tonnes mined represents 100% of the total tonnes mined on the Pandora joint venture of which 50%
  is attributable to Lonmin.
3 Ounces mined have been calculated at achieved concentrator recoveries and with Lonmin standard downstream processing
  recoveries 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 have been calculated at Lonmin standard downstream processing recoveries 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 LME grade C. Chrome is produced in the form of chromite concentrate
   and volumes shown are in the form of chromite.
11 Basket price of PGMs is based on the revenue generated in Rand and Dollar from the actual PGMs (5PGE + Au) sold in the
   period based on the appropriate Rand / Dollar exchange rate applicable for each sales transaction.
12 As per note 11 but including revenue from base metals.
13 Exchange rates are calculated using the market average daily closing rate over the course of the period.




Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd

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