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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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