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.