To view the PDF file, sign up for a MySharenet subscription.

LONMIN PLC - Second Quarter 2017 Production Report

Release Date: 15/05/2017 08:01
Code(s): LON     PDF:  
Wrap Text
Second Quarter 2017 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 : GB00BYSRJ698
("Lonmin")


REGULATORY RELEASE


15 May 2017

Second Quarter 2017 Production Report

Lonmin Plc (“Lonmin” or “the Company”), today announces its unaudited production results for the three months to
31 March 2017. Lonmin also publishes today, in a separate announcement, its Interim Results for the half year ended
31 March 2017.

Overview

-   The 12 month rolling LTIFR to 31 March improved by 2.2% to 4.88 from 4.99 at 31 December 2016. Regrettably
    two colleagues were fatally injured in the period.
-   Tonnes mined from our Generation 2 shafts were 1.9 million tonnes, a decrease of 2.8% or 55,000 tonnes on the
    comparative period, as K3’s underperformance predominantly weighed down the overall performance. Our
    Generation 1 shafts produced 0.5 million tonnes, a decrease of 21.8% or 133,000 tonnes on the comparative
    period, in line with our plan to close high cost areas, in response to the oversupplied market, as seen from lower
    prices. Newman shaft was closed during the period.
-   The poor mining performance from Q1 2017 continued into January 2017, with mining production of 584,000
    tonnes for the month. The March production of 978,000 tonnes illustrates the mining improvement from the
    poor performance in the first four months to 31 January 2017.
-   K3 produced 276,000 tonnes in March 2017, the highest monthly mining production for the last 29 months, on
    the back of addressing the management/union impasse and change in management, compared to 126,000
    tonnes in January 2016.
-   Saffy shaft produced 213,000 tonnes in March 2017, an all-time record for the life of the shaft.

                                                                 Actual     Actual   Actual    3 months      3 month
    Tonnes mined                                               January    February   March     to 31 Mar    to 31 Mar
                                                                  2017        2017    2017          2017         2016
                      K3 Shaft                        kt           126         181      276          583          634
                      Rowland Shaft                   kt           113         155      185          452          420
                      Saffy Shaft                     kt           112         173      213          498          493
                      4B Shaft                        kt             97        112      137          346          388
    Generation 2                                      kt           447         621      810        1 879        1 934
    Generation 1                                      kt           137         173      168          477          610
                     Opencast                         kt              0          0        0            0             3
    Lonmin (100%) Total Tonnes Mined (100%)           kt           584         794      978        2 356        2 547
    Cost of production per PGM ounce                            15 979      11 800    9 695       11 836       10 390

-   Production improvement has been maintained through April notwithstanding the Easter break, although this will
    need to be sustained.


                                                           1
-   Tonnes lost due to Section 54 safety stoppages at 137,000 tonnes were higher than the prior year period of
    37,000 tonnes, on the back of the fatality at K3 in February, where 117,000 tonnes were lost to Section 54
    stoppages.
-   Unit cost for the quarter was R11,836 per PGM ounce, 13.9% higher than the comparative prior year period,
    reflecting the weak mining performance in January 2017. The importance and impact of good mining production
    on unit cost is significant, as illustrated by the unit cost of R9,695 per PGM ounce for the month of March 2017,
    on the back of the strong mining production in March 2017.
-   Refined Platinum production of 164,138 ounces was down 7.5% on prior year period, reflecting the weak mining
    performance. Refined Platinum production benefited from the smelter clean-up project, which released a
    further 10,295 Platinum ounces during this quarter.
-   Platinum sales of 172,042 ounces were down 18.6% on the comparative prior year period.
-   Average Rand full basket price (including base metals) up 1.9% on Q2 2016, at R11,250 per PGM ounce.

Mining Operations

The Marikana mining operations including Pandora (100%) produced 2.4 million tonnes during the quarter, down 7.5% or
191,000 tonnes, on the comparative period. This decline is primarily the result of the removal of high cost Generation
1 production (133,000 tonnes), in line with our Business Plan strategy to remove high cost ounces, and due to the
weak mining performance experienced at K3 (51,000 tonnes), arising from the management/union impasse, in the
first four months to 31 January 2017.

As a result of the poor Q1 2017 performance, which continued into January 2017, a number of initiatives were
implemented to address mining production and the union relationship at K3 shaft. Significant progress was made in
this area, which consequently resulted in production increasing to 794,000 tonnes in February 2017, up from the
584,000 tonnes in January. March production stood at 978,000 tonnes, the highest monthly mining production for
the last 18 months and the highest March production since 2012. This was achieved despite the planned reduction in
high cost Generation 1 production.

Generation 2
Tonnes mined from our Generation 2 shafts were 1.9 million tonnes, a decrease of 2.8% on the comparative period
in the prior year, as K3’s underperformance up to January predominantly weighed down the overall performance.
- K3, our biggest shaft, produced 583,000 tonnes, a decrease of 8.0% or 51,000 tonnes on the comparative prior
     year period. The union relationship issues experienced in the four months to 31 January 2017 have been
     resolved and the shaft produced 276,000 tonnes in March 2017, the highest monthly mining production for the
     last 29 months, compared to 126,000 tonnes in January 2017.
- Rowland shaft produced 452,000 tonnes, an increase of 7.6% on the comparative prior year period.
- Saffy shaft produced 498,000 tonnes, an increase of 1.1% on the comparative prior year period, demonstrating
     that the shaft is maintaining its steady state performance. Saffy experienced a grouting problem through to
     January 2017, which resulted in production of only 112,000 tonnes in January. Pleasingly, Saffy shaft produced
     213,000 tonnes for the month of March 2017, an all-time record for the life of the shaft.
- 4B produced 346,000 tonnes, a decrease of 10.7% on the comparative prior year period as a result of worse than
     planned geological conditions.

Generation 1
The performance at the Generation 1 shafts is in line with our plan and we are executing successfully the strategy to
reduce high cost production in a low price environment. Tonnes mined from our Generation 1 shafts (1 B, Hossy,
Newman, W1, E1, E2, E3 and Pandora (100%)) were 0.5 million tonnes, a decrease of 21.8%, on the comparative
prior year period, reflecting the planned decline in production. Most of these shafts are run by contractors, which
provide better flexibility to retain or close them.

A thorough technical assessment was conducted at the Newman shaft following the recent fatality. As a result the
shaft is currently under review whilst on care and maintenance. Hossy shaft remains on track for planned care and
maintenance closure by the end of the year.
                                                           2
Production Losses
The K3 and Newman fatalities resulted in an increase in tonnes lost to Section 54 stoppages in the second quarter.
Tonnes lost due to Section 54 safety stoppages at 137,000 tonnes were higher than the comparative prior year
period of 37,000 tonnes, with most of stoppages at K3 shaft where 117,000 tonnes were lost to Section 54
stoppages.

The increase in management induced safety stoppages (MISS) illustrate our non-negotiable stance on safety. Tonnes
lost due to MISS for the quarter increased to 40,000 tonnes compared to none in the comparative prior year period.
Most of these stoppages were at K3, with 36,000 tonnes lost to MISS.

                                                                   Q2 2017      Q2 2016
                                                                    Tonnes       Tonnes
        Section 54 safety stoppages                                137,000       37,000
        Management induced safety stoppages and other               40,000            -
        Total tonnes lost                                          177,000       37,000

Ore Reserves
We closely monitor our Immediately Available Ore Reserve position, in order to protect our operational flexibility. As
at 31 March 2017, the ore reserve position of the Marikana mining operations represents an average of 20.6 months
production, well above the industry benchmark of around 15 months.

As part of the drive to increase mining production, following the Q1 2017 Production Report, some non-critical
development crews were moved to provide additional stoping and vamping crews in our core Generation 2 shafts.
However, following the closure of Newman, contractor crews from this shaft are being moved to stoping and
vamping to Generation 2 shafts, which is allowing the development crews to move back to development and retain
Lonmin’s operational flexibility.

Processing Operations

Milling production in the quarter of 2.2 million tonnes was affected by lower than planned ore availability from the
mining operations and was 7.1% lower than in the comparative prior year period.

Underground milled head grade at 4.56 grammes per tonnes (5PGE+Au) decreased by 2.5% when compared to the
4.68 grammes per tonne achieved in the comparative prior year period and the overall milled head grade at 4.55
grammes per tonne, was down 2.3% on the comparative prior year period, due to milling more Merensky than
planned and shortage of underground ore to mill, which affected plant stability.

Concentrator recoveries in the quarter remained excellent at 86.2%, marginally down from 86.7% on the
comparative prior year period.

Platinum production (Metals-in-Concentrate) was 138,041 ounces, which was 10.6% lower than the comparative
prior year period and PGM production (Metals-in-Concentrate) was 265,546 ounces, which was 10.4% lower than
the comparative prior year period.

Total refined Platinum production of 164,138 ounces in the first quarter, was 7.5% lower than the comparative prior
year period. Refined Platinum production did however benefit from the smelter clean-up project, which released a
further 10,295 Platinum ounces during the quarter. Total PGMs produced were 305,331 ounces, a decrease of 9.2%
on the comparative prior year period.

Sales and Pricing


                                                          3
Platinum sales for the quarter were 172,042 ounces, 18.6% lower than the comparative prior year period sales of
211,462 ounces as a result of poor mining performance. PGM sales were 319,896 ounces, down 21.7% on the
comparative prior year period sales of 408,793.

The US Dollar basket price (including base metal revenue) at $850 per ounce during the quarter was up 19.2% on Q2
2016 while the corresponding Rand basket price of R11,250 per ounce was 1.9% higher than Q2 2016.

The average Rand to US Dollar exchange rate was 16.4% stronger at 13.22 compared to 15.81 in Q2 2016.

- ENDS -

ENQUIRIES

Investors / Analysts:
Tanya Chikanza (Head of Investor Relations)           +27 11 218 8358 / +44 203 908 1073
Andrew Mari (Investor Relations Manager)              +27 11 218 8420

Media:
Wendy Tlou (Head of Communications)          +27 83 358 0049
Anthony Cardew / Emma Crawshaw, Cardew Group +44 207 930 0777

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 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




                                                          4
                                                                                             3 months    3 months
                                                                                             to 31 Mar   to 31 Mar
                                                                                                  2017        2016
                1
Tonnes mined        Generation 2               K3 Shaft                                kt          583         634
                                               Rowland Shaft                           kt          452         420
                                               Saffy Shaft                             kt          498         493
                                               4B Shaft                                kt          346         388
                                               Generation 2                            kt        1 879       1 934
                    Generation 1               Hossy Shaft                             kt          159         175
                                               Newman Shaft                            kt           27         113
                                               W1 Shaft                                kt           33          41
                                               East 1 Shaft                            kt           44          40
                                               East 2 Shaft                            kt           65          77
                                               East 3 Shaft                            kt           22          17
                                                              2
                                               Pandora (100%)                          kt          127         147
                                               Generation 1                            kt          477         610
                                               Total Underground                       kt        2 356       2 544
                                               Opencast                                kt                        3
                    Lonmin (100%)              Total Tonnes Mined (100%)               kt       2 356        2 547
                                               % tonnes mined from UG2 reef
                                               (100%)                                  %        73.4%       76.5%
                    Lonmin (attributable)      Underground & Opencast                  kt       2 293       2 473
                3
Ounces mined        Lonmin excluding Pandora   Pt Ounces                               oz     139 269     153 708
                    Pandora (100%)             Pt Ounces                               oz       8 581      10 139
                    Lonmin                     Pt Ounces                               oz     147 850     163 848
                    Lonmin excluding Pandora   PGM Ounces                              oz     267 498     294 341
                    Pandora (100%)             PGM Ounces                              oz      16 980      19 867
                    Lonmin                     PGM Ounces                              oz     284 478     314 208
                4
Tonnes milled       Marikana                   Underground                             kt       2 034       2 201
                                               Opencast                                kt          38          19
                                               Total                                   kt       2 071       2 220
                           5
                    Pandora                    Underground                             kt         127         147
                    Lonmin Platinum            Underground                             kt       2 161       2 347
                                                               Milled head grade6      g/t        4.56        4.68
                                                                   Recovery rate7      %         86.5%       86.7%
                                               Opencast                                kt          38          19
                                                                                   6
                                                               Milled head grade       g/t        4.41        2.86
                                                                   Recovery rate7      %         70.1%       83.4%
                                               Total                                   kt       2 198        2 366
                                                               Milled head grade6      g/t        4.55        4.66
                                                                                   7
                                                                   Recovery rate       %         86.2%       86.7%




                                                          5
                                                              3 months    3 months
                                                              to 31 Mar   to 31 Mar
                                                                   2017        2016
Metals-in-      Marikana                Platinum         oz     129 460     143 246
            8
concentrate                             Palladium        oz      60 206      66 190
                                        Gold             oz       3 220       3 505
                                        Rhodium          oz      18 456      20 737
                                        Ruthenium        oz      30 786      33 971
                                        Iridium          oz       6 437       6 827
                                        Total PGMs       oz     248 566     274 476
                                              9
                                        Nickel           MT         666         683
                                                9
                                        Copper           MT         419         425
                Pandora                 Platinum         oz       8 581      10 139
                                        Palladium        oz       4 037       4 716
                                        Gold             oz          61          31
                                        Rhodium          oz       1 436       1 662
                                        Ruthenium        oz       2 373       2 757
                                        Iridium          oz         492         561
                                        Total PGMs       oz      16 980      19 867
                                              9
                                        Nickel           MT          19          36
                                                9
                                        Copper           MT           8          10
                Concentrate purchases   Platinum         oz                   1 105
                                        Palladium        oz                     435
                                        Gold             oz                       5
                                        Rhodium          oz                     153
                                        Ruthenium        oz                     259
                                        Iridium          oz                      61
                                        Total PGMs       oz          0        2 018
                                              9
                                        Nickel           MT                       1
                                                9
                                        Copper           MT                       0
                Lonmin Platinum         Platinum         oz    138 041      154 491
                                        Palladium        oz     64 243       71 342
                                        Gold             oz      3 281        3 541
                                        Rhodium          oz     19 892       22 552
                                        Ruthenium        oz     33 158       36 986
                                        Iridium          oz      6 930        7 449
                                        Total PGMs       oz    265 546      296 361
                                              9
                                        Nickel           MT        684          720
                                                9
                                        Copper           MT        427          435




                                                     6
                                                                             3 months    3 months
                                                                             to 31 Mar   to 31 Mar
                                                                                  2017        2016
Refined production Lonmin refined metal          Platinum              oz      164 136     175 833
                   production                    Palladium             oz       71 409      77 316
                                                 Gold                  oz        4 488       4 669
                                                 Rhodium               oz       20 947      23 467
                                                 Ruthenium             oz       36 833      42 973
                                                 Iridium               oz        7 484       9 505
                                                 Total PGMs            oz      305 297     333 762
                   Toll refined metal production Platinum              oz            2       1 611
                                                 Palladium             oz            6         303
                                                 Gold                  oz            1          11
                                                 Rhodium               oz            9          75
                                                 Ruthenium             oz            2         343
                                                 Iridium               oz           13
                                                 Total PGMs            oz           33      2 343
                   Total refined PGMs            Platinum              oz      164 138    177 444
                                                 Palladium             oz       71 416     77 618
                                                 Gold                  oz        4 489      4 680
                                                 Rhodium               oz       20 956     23 542
                                                 Ruthenium             oz       36 835     43 316
                                                 Iridium               oz        7 498      9 505
                                                 Total PGMs            oz      305 331    336 105
                                                          10
                   Base metals                   Nickel                MT          761        753
                                                           10
                                                 Copper                MT          492        463
Sales              Refined metal sales           Platinum              oz      172 042    211 462
                                                 Palladium             oz       72 455    100 412
                                                 Gold                  oz        4 456      5 930
                                                 Rhodium               oz       24 867     25 966
                                                 Ruthenium             oz       38 659     52 937
                                                 Iridium               oz        7 417     12 086
                                                 Total PGMs            oz      319 896    408 793
                                                          10
                                                 Nickel                MT          801        709
                                                           10
                                                 Copper                MT                     672
                                                             10
                                                 Chrome                MT     266 159     314 261
Average prices     Platinum                                           $/oz        972         918
                   Palladium                                          $/oz        759         529
                   Gold                                               $/oz      1 242       1 394
                   Rhodium                                            $/oz        875         654
                                                       11
                   $ basket excl. by-product revenue                  $/oz        801         686
                                                      12
                   $ basket incl. by-product revenue                  $/oz        850         713
                                                       11
                   R basket excl. by-product revenue                  R/oz     10 587      10 635
                                                      12
                   R basket incl. by-product revenue                  R/oz     11 250      11 035
                          10
                   Nickel                                             $/MT      8 241       6 425
                           10
                   Copper                                             $/MT                  4 321




                                                                  7
Notes:
1.   Reporting of shafts are 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
     42.5% for October and November 2014 and 50% thereafter 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




                                                                 8

Date: 15/05/2017 08:01:00 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.

Share This Story