Wrap Text
First Quarter 2018 Production Report and Business 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
22 January 2018
First Quarter 2018 Production Report and Business Update
“Another solid operational performance quarter”
Lonmin Plc (“Lonmin” or “the Company”), one of the world’s largest primary platinum producers, today
announces its unaudited Quarter 1 2018 production results for the three months to 31 December 2017
and provides an operational update.
Lonmin also publishes today, in a separate announcement, its results for the financial year ended 30
September 2017.
Overview
- Fatality free first quarter with the twelve-month rolling LTIFR to 31 December 2017 improving by
5.3% to 4.28 per million man hours.
- Mining performance improvement has been sustained from March 2017. Tonnes mined by our
Generation 2 shafts increased by 11.4% to 1.8 million tonnes compared with the first quarter of
2017. Total tonnes mined increased by 2.4% to 2.4 million tonnes compared with the first quarter of
2017.
- E3/Pandora classified as Generation 2 whilst 4B has been reclassified as Generation 1.
- Refined production of 161,363 Platinum ounces increased by 17.7% against the first quarter of 2017.
- Sales of 147,216 Platinum ounces increased by 9.1% compared with the first quarter of 2017.
- Average Rand full basket price for the first quarter of R13,153 increased 26.8% on the first quarter of
2017.
- Our unit costs for the first quarter were R12,703 per PGM ounce (6E basis), an increase of 3.3% on
the first quarter of 2017, but below the consumer price inflation (CPI) of around 5%. We are
maintaining our unit cost guidance of between R12,000 and R12,500 per PGM ounce.
- Net Cash at 31 December 2017 of $63 million, reflecting reduction in the historical first quarter cash
burn rate, as a result of improved production, prices and working capital management.
Ben Magara, Chief Executive Officer, said: “Another fatality free all-round operational performance, from
mining, to processing through to sales, demonstrating the strength of our mine-to-market business. I am
pleased that we have maintained the mining performance improvement since March 2017. The higher
sales volume from good production, focus on working capital management, combined with better
Palladium and Rhodium prices which boosted Dollar basket revenues, resulted in a historically reduced
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quarter one cash burn and a positive net cash position, however we still have much work to reduce
costs.”
Safety
Our safety strategy is centred on the belief that Zero Harm is achievable and important contributions are
required from all stakeholders to achieve it. Lonmin remains fatality free since July to December 2017.
- We achieved significant milestones in the journey towards Zero Harm at the following operations:
o Precious Metal Refinery achieved 2 years LTI free in December 2017.
o EPL Concentrator achieved 1 year LTI free in October 2017.
o Marikana Mining Operations achieved 5 Million Fall of Ground Fatality Free Shifts in
November 2017 and were on 3 Million Fatality Free Shifts at the end of Q1.
- The twelve month rolling LTIFR to 31 December 2017 was 4.28 per million man hours, an
improvement of 5.3% on September 2017 at 4.52.
Mining Operations
It is pleasing to note that our focused effort in our core shafts is bearing fruit. The Marikana mining
operations, including Pandora produced 2.4 million tonnes during the quarter, up 2.4% on the
comparative period, driven by an 11.4% increase in production from our Generation 2 shafts.
Generation 2
Tonnes mined from our Generation 2 shafts were 1.8 million tonnes, an increase of 11.4%, or 0.2 million
tonnes against the comparative period.
- K3, our biggest shaft, produced 695,000 tonnes, an increase of 17.9% on the prior period,
demonstrating the shaft’s recovery in performance from the challenges it faced in the prior year
period.
- Rowland shaft produced 448,000 tonnes, an increase of 5.7% on the prior year period.
- Saffy shaft produced 521,000 tonnes, an increase of 5.6% on the prior year period.
- On completion of the Pandora acquisition, combined with the progress made pursuant to our
recovery plans, the E3 shaft and Pandora production has been combined and reclassified as a
Generation 2 shaft, with comparatives adjusted accordingly. The combined area produced 147,000
tonnes, an increase of 23.8% on the prior year period.
- Immediately available ore reserves for the Generation 2 shafts has been maintained at around 20
months.
Generation 1
The performance of the Generation 1 shafts is in line with our plan and we continue to reduce high cost
production in a low price environment. Tonnes mined from our Generation 1 shafts (4B, Hossy, W1, E1
and E2) were 0.6 million tonnes, a decrease of 14.0%, or 0.1 million tonnes on the prior year period,
reflecting the planned decline in production. The decrease is also due to both Newman and E2, which
produced in Q1 2017, now being on care and maintenance.
We continually review each shaft on its merits and as reported, in light of 4B shaft’s lacklustre
performance, its short life of mine relative to the other Generation 2 shafts, and our capital constrains,
4B has been reclassified as a Generation 1 shaft and comparatives adjusted accordingly. 4B produced
306,000 tonnes, a decrease of 9.0% on the prior year period, as the bad geological conditions persist.
W1, E1 and E2 are shafts at the end of their resource lives. E2 shaft was put on care and maintenance in
November 2017. Contractors have continued to run W1 and E1, and are responsible for all the costs
associated with such shafts, and we thus retain the flexibility to cease production if required.
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Hossy shaft was scheduled to be put on care and maintenance, but it continues to contribute to the
business. Based on its relative contribution and the available IAOR, which stood at 11 months at FY 2017,
we will continue to operate Hossy for the duration of FY 2018.
Production Losses
Overall total tonnes lost in the quarter reduced to 57,000 tonnes, compared to 147,000 tonnes lost in
the first quarter of 2017. We have been encouraged that the number and duration of Section 54
stoppages has continued to improve, as experienced during the FY2017.
Q1 2018 Q1 2017
Tonnes Tonnes
Section 54 safety stoppages 8,000 58,000
Management induced safety stoppages and other 48,000 89,000
Total tonnes lost 57,000 147,000
Processing Operations
Underground milling production in the quarter of 2.5 million tonnes was 3.0% higher than in the prior
year period.
Underground milled head grade at 4.63 grammes per tonne (5PGE+Au) increased by 1.5% when
compared to the 4.56 grammes per tonne achieved in the prior year period and the overall milled head
grade was also 4.63 grammes per tonne, up 1.5% on the prior year period, due to improved quality of
mining.
Concentrator recoveries in the quarter remained excellent at 88.0%, up 1.2% from 87.0% in the prior
year period.
Platinum production (Metals-in-Concentrate) was 164,488 ounces, which was 7.6% higher than the prior
year period and total PGMs production (Metals-in-Concentrate) was 315,316 ounces, which was 7.7%
higher than the prior year period.
Refined Platinum production of 161,363 ounces in the first quarter, was 17.7% higher than the prior year
period, with the smelter clean-up project not contributing any Platinum ounces as expected, (no
contribution in Q1 2017). We expect minimal ounces from the smelter clean-up project in the 2018
financial year as the ounces are depleting. Total PGMs produced were 308,774 ounces, an increase of
17.3% on the prior year period.
Number One furnace had a run out on 2 December 2017, necessitating it’s planned shutdown scheduled
for the end of 2018 to be brought forward. We expect some lock up of ounces in the second quarter,
which will unwind within the financial year. As such overall output is not expected to be affected owing
to capacity at other furnaces, as we will be running the number two furnace and the three pyromets.
Sales and Pricing
Platinum sales for the quarter were 147,216 ounces, 9.1% higher than the prior year period sales of
134,954 ounces. PGM sales were 292,335 ounces, marginally higher (0.8%) on the prior year period sales
of 289,962 ounces; Ruthenium sales decreased by 33.7%, as the Ruthenium to other metal sales ratio
was brought in line with the normal production ratio in this quarter, converse to Q1 2017 when there
was a release of built up stocks of Ruthenium, which reduced the impact of the increase of the other
PGM metals sales.
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The US Dollar basket price (including base metal revenue) at $968 per ounce during the quarter was up
30.9% on Q1 2017, while the corresponding Rand basket price of R13,153 per ounce was 26.8% higher
than the Q1 2017, with the stronger Rand diluting the increase.
The average Rand to US Dollar exchange rate was 2.1% stronger at 13.61 compared to 13.90 in Q1 2017.
Business and Operating Environment Update
The operating environment has remained challenging as the Company strives to balance the economic,
social and environmental imperatives. Management continues to participate in strategic multi-
stakeholder engagements to address these challenges.
As part of our Operational Review, we identified cost reduction initiatives, to reduce annual overhead
costs by a minimum of ZAR500 million by the end of 30 September 2018. These initiatives are ongoing.
We expect the substantial majority of overhead reductions to come from non-production central
functions and high cost production areas as their production comes to an end. As highlighted in the 2017
Financial Results announcement released separately today, a section 189 process commenced in
October 2017 and is ongoing, with over 600 employees already having left the business.
Unit Costs
Unit costs of R12,703 per PGM ounce were 3.3% higher on the prior year period. Whilst this increase is
below the CPI of around 5%, the increase highlights the need for us to remain vigilant in working to
reduce our operating costs and we maintain our unit cost guidance in the range of R12,000 to R12,500
per PGM ounce for the full 2018 financial year.
Balance Sheet and Liquidity
Net cash at 31 December 2017 was $63 million, after working capital and capital expenditure investment
during the quarter. The higher production and metal prices in the quarter and management of working
capital initiatives resulted in the historical quarter 1 cash burn of around $120 million being contained to
only $40 million.
Outlook and Guidance
Sales guidance for the full year is maintained at between 650,000 and 680,000 Platinum ounces. We are
maintaining unit cost guidance of between R12,000 and R12,500 per PGM ounce produced. Our capital
expenditure guidance for the year of between R1.4 billion and R1.5 billion is maintained.
- ENDS -
ENQUIRIES
Investors / Analysts:
Tanya Chikanza (Executive Vice President: Corporate +27 11 218 8358 / +44 20 3908 1073/
Strategy, Investor Relations and Corporate +27 14 571 2070
Communications)
Andrew Mari (Investor Relations Manager) +27 11 218 8420
Media:
Wendy Tlou +27 83 358 0049
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Anthony Cardew / David Roach, 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
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3 months 3 months
to 31 Dec to 31 Dec
2017 2016
Tonnes Marikana K3 Shaft kt 695 590
Mined(1) Rowland Shaft kt 448 424
Saffy Shaft kt 521 493
East 3 Shaft Combined kt 147 119
East 3 Shaft kt 46 17
Pandora (100%)(2) kt 101 102
Generation 2 kt 1 812 1 626
4B Shaft kt 306 336
Hossy Shaft kt 144 171
Newman Shaft kt 23
W1 Shaft kt 44 39
East 1 Shaft kt 47 31
East 2 Shaft kt 32 67
Generation 1 kt 573 666
Underground kt 2 385 2 292
Opencast kt 38
Lonmin (100%) Total Tonnes Mined (100%) kt 2 385 2 330
% tonnes mined from UG2 reef (100%) % 72.4% 74.9%
Lonmin (attributable) Underground & Opencast kt 2 334 2 279
Ounces Lonmin excluding Pandora Pt Ounces oz 147 208 141 476
Mined(3) Pandora (100%) Pt Ounces oz 7 557 7 112
Lonmin Pt Ounces oz 154 765 148 588
Lonmin excluding Pandora PGM Ounces oz 282 818 270 638
Pandora (100%) PGM Ounces oz 14 962 14 067
Lonmin PGM Ounces oz 297 780 284 705
Tonnes Marikana Underground kt 2 348 2 277
Milled(4) Opencast kt 7 11
Total kt 2 355 2 288
Pandora(5) Underground kt 101 102
Lonmin Platinum Underground kt 2 449 2 378
Milled head grade(6) g/t 4.63 4.56
Recovery rate(7) % 88.1% 87.1%
Opencast kt 7 11
Milled head grade(6) g/t 4.97 4.47
Recovery rate(7) % 67.3% 62.5%
Milled head grade(6) g/t - -
Recovery rate(7) % 0.0% 0.0%
Total kt 2 456 2 390
Milled head grade(6) g/t 4.63 4.56
Recovery rate(7) % 88.0% 87.0%
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3 months 3 months
to 31 Dec to 31 Dec
2017 2016
Metals-in- Marikana Platinum oz 152 648 145 211
concentrate(8)
Palladium oz 70 857 66 662
Gold oz 3 722 3 695
Rhodium oz 21 745 20 477
Ruthenium oz 36 600 34 567
Iridium oz 7 465 7 098
Total PGMs oz 293 036 277 709
Nickel(9) MT 745 739
Copper(9) MT 481 461
Pandora Platinum oz 7 557 7 112
Palladium oz 3 573 3 358
Gold oz 52 50
Rhodium oz 1 261 1 196
Ruthenium oz 2 105 1 947
Iridium oz 414 404
Total PGMs oz 14 962 14 067
Nickel(9) MT 11 14
Copper(9) MT 6 6
Concentrate Platinum oz 4 283 603
purchases Palladium oz 1 354 164
Gold oz 15 2
Rhodium oz 571 58
Ruthenium oz 858 99
Iridium oz 237 24
Total PGMs oz 7 317 950
Nickel(9) MT 6 0
Copper(9) MT 3 0
Lonmin Platinum Platinum oz 164 488 152 925
Palladium oz 75 784 70 184
Gold oz 3 789 3 746
Rhodium oz 23 576 21 731
Ruthenium oz 39 563 36 613
Iridium oz 8 117 7 526
Total PGMs oz 315 316 292 726
Nickel(9) MT 761 753
Copper(9) MT 491 467
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3 months 3 months
to 31 Dec to 31 Dec
2017 2016
Refined Production Lonmin refined Metal Production Platinum oz 161 026 136 102
Palladium oz 75 271 61 721
Gold oz 4 191 3 190
Rhodium oz 24 217 21 646
Ruthenium oz 35 365 31 892
Iridium oz 8 041 7 199
Total PGMs oz 308 111 261 751
Toll refined metal production Platinum oz 337 1 021
Palladium oz 123 189
Gold oz 5 7
Rhodium oz 43 68
Ruthenium oz 132 234
Iridium oz 22 14
Total PGMs oz 663 1 532
Total refined PGMs Platinum oz 161 363 137 123
Palladium oz 75 395 61 910
Gold oz 4 196 3 197
Rhodium oz 24 260 21 714
Ruthenium oz 35 498 32 126
Iridium oz 8 063 7 212
Total PGMs oz 308 774 263 283
Base metals Nickel(10) MT 868 715
Copper(10) MT 436 354
.
Sales Refined Metal Sales Platinum oz 147 216 134 954
Palladium oz 67 699 60 060
Gold oz 4 523 2 889
Rhodium oz 25 268 26 130
Ruthenium oz 39 099 59 016
Iridium oz 8 529 6 913
Total PGMs oz 292 335 289 962
Nickel(10) MT 852 928
Copper(10) MT 400 215
Chrome(10) MT 352 360 385 496
Average prices Platinum $/oz 922 945
Palladium $/oz 1 001 687
Gold $/oz 1 257 1 154
Rhodium $/oz 1 465 730
$ basket excl. by-product revenue(11) $/oz 888 683
$ basket incl. by-product revenue(12) $/oz 968 739
R basket excl. by-product revenue(11) R/oz 12 013 9 624
R basket incl. by-product revenue(12) R/oz 13 153 10 372
Nickel(10) $/MT 9 424 8 989
Copper(10) $/MT 6 823 5 411
Unit Costs Cost of Production per PGM ounce ZAR/oz 12 703 12 296
Exchange Average rate for period(13) R/$ 13.61 13.90
Rates
Closing rate R/$ 12.36 13.73
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Notes
1 Reporting of shafts are in line with our operating strategy for Generation 1 and Generation 2 shafts.
2 E3 Shaft and Pandora underground tonnes mined will be reported as E3 Shaft Combined from
1 December 2017 when Lonmin acquired 100% of Pandora.
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 As from 1 December 2017, Lonmin owns 100% of Pandora joint venture and there will be no ore
purchases thereafter.
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.
JSE Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
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