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LONMIN PLC - Operational Update

Release Date: 07/08/2017 08:00
Code(s): LON     PDF:  
Wrap Text
Operational Update

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")


LEI No: 213800FGJZ2WAC6Y2L94


REGULATORY RELEASE


Not for release, publication or distribution (directly or indirectly) in whole or in part, in, into or from
any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

07 August 2017

Lonmin is taking further decisive action to ensure a sustainable business in a continuing adverse
macroeconomic environment

On 17 July 2017, Lonmin Plc (“Lonmin” or the “Company”) announced its third quarter production
results and business update, which reported improved mining performance, reduced unit costs and
increased net cash.

Despite this pleasing performance, Lonmin continues to be concerned by the persistent adverse
macroeconomic conditions and the inflationary cost pressures confronting the platinum mining industry
in South Africa. Therefore, despite having already taken significant measures to reduce costs, Lonmin is
announcing further measures to ensure that its operations generate sufficient cash to support a
sustainable business.

In addition to continuing to remove high cost production, Lonmin is today announcing the initial
conclusions resulting from an on-going review of its operations (the “Operational Review”), which has
the primary objective of preserving value for shareholders and safeguarding the long-term interests of
employees and all key stakeholders. The Operational Review is focused on optimizing the cash produced
by the business, both from its operations and through releasing capital from those activities where the
Company is currently bearing the cost of excess capacity and unrealized development potential. The
review is also designed to position the Company to benefit from any future improvement in the PGM
pricing environment.

The immediate results of the Operational Review include initiatives to generate cash through the
monetization of select Lonmin assets and to preserve cash by reducing fixed costs. Subject to receiving
the necessary consents and approvals, Lonmin plans to implement the following:

   - Pursue all options to maximize cash from Lonmin's high quality downstream processing
     operations. It is currently intended to implement this through the sale of excess processing
     capacity of up to 500,000 platinum ounces per annum. This would have the benefit not only of
     releasing capital for Lonmin, but would also allow other South African PGM producers who
     currently operate on a sale of concentrate basis to access the profit margin benefits of an
     integrated beneficiation model.

   - A review of the Company’s major development capital requirements over the next few years. In
     this regard, Lonmin will consider selling for cash or introducing joint venture partners into
     Limpopo and Akanani together with exploring options to introduce funding partners into K4.

   - Despite consistent strong performance from Rowland, Lonmin’s current capital position makes it
     challenging to fund the MK2 project which is necessary to extend Rowland’s economic life.
     Lonmin believes that the MK2 project will be value accretive and the Company will explore
     options to introduce funding partners and preserve approximately five thousand jobs.

   - The reduction in annual overhead costs by a minimum of ZAR500 million by the end of the year
     ending 30 September 2018. The substantial majority of overhead reductions will come from non-
     production central functions as the Company seeks to right-size its overheads to its operations. In
     addition, Lonmin will continue to identify further overhead and cost savings.

It is too early to define the ultimate effect of the Operational Review on the Company, but the overall
aim remains for the business to be cash positive after capital investment. Further announcements will
be made as and when appropriate and Lonmin will engage with all appropriate stakeholders in relation
to these initiatives.

Lonmin is also pleased to announce today the approval by the DMR of its S11 application to acquire the
Pandora JV from Anglo Platinum which will defer R2.6 billion of capital expenditure and contribute to
the sustainability of the business by potentially preserving jobs at E3 shaft. Lonmin has already received
approval from the competition tribunal and is in the process of obtaining lender consent.

                                                - ENDS –

ENQUIRIES

Lonmin Investor Relations:                                 +44 203 908 1073 / +27 11 218 8358

Tanya Chikanza (Head of Investor Relations)
Andrew Mari (Investor Relations Manager)

Media:

Wendy Tlou                                                                   +27 83 358 0049
Anthony Cardew / Emma Crawshaw, Cardew Group             +44 207 930 0777 / +44 7770 720 389

Financial Advisers:

Gleacher Shacklock LLP                                                       +44 207 484 1150
Dominic Lee / Jan Sanders / Paul Finlayson

Moshe Capital Proprietary Limited                                             +27 11 783 9986
Mametja Moshe / Konosoang Asare-Bediako

Financial Adviser and Corporate Broker:

J.P. Morgan Cazenove                                                         +44 207 742 4000
Michael Wentworth-Stanley / Dimitri Reading-Picopoulos

                                                    
Additional Information

The release, publication or distribution of this announcement in certain jurisdictions may be restricted
by law. Persons who are not resident in the United Kingdom or who are subject to the laws of other
jurisdictions should inform themselves of, and observe, any applicable requirements. Any failure to
comply with applicable requirements may constitute a violation of the securities law of any such
jurisdiction.
This announcement is not intended to, and does not, constitute or form part of any offer, invitation or
the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of,
any securities whether pursuant to this announcement or otherwise.


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 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



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




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