LONMIN PLC - Second Quarter 2018 Production Report

Release Date: 14/05/2018 08:01
Code(s): LON
 
Wrap Text
Second Quarter 2018 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")

LEI No: 213800FGJZ2WAC6Y2L94


REGULATORY RELEASE


14 May 2018

                                     Second Quarter 2018 Production Report

Lonmin Plc (“Lonmin” or “the Company”), today announces its unaudited production results for the three months to
31 March 2018. Lonmin also publishes today, in a separate announcement, its Interim Results for the half year ended
31 March 2018.

Overview

-   A third consecutive fatality free quarter, Lonmin now 10 months fatality free.
-   The 12 month rolling LTIFR to 31 March improved by 3.5% to 4.13 from 4.28 at 31 December 2017.
-   Tonnes lost due to Section 54 safety stoppages relatively insignificant at 7,000 tonnes versus 137,000 tonnes in
    prior year.
-   Tonnes mined from Generation 2 shafts were 1.7 million tonnes, an increase of 1.5%.
-   Production from Generation 1 shafts continued to decrease in line with our Business Plan to remove high-cost
    production. Overall total tonnes mined decreased by 4.6% to 2.2 million tonnes.
-   Platinum production (Metals-in-Concentrate) was 143,374 ounces, an increase of 3.9% on the prior year period
    and PGM production (Metals-in-Concentrate) was 274,941 ounces, an increase of 3.5% on the prior year period.
-   The Bulk Tailings Retreatment (“BTT”) project was successfully commissioned on 14 February, with 347,000 tonnes
    milled, producing 759 Platinum ounces and 1,440 PGM ounces. The project is in the process of ramping up to full
    throughput within H2 2018. Once at steady-state, the project is expected to deliver amongst the lowest cost
    ounces in the Lonmin portfolio, producing about 55,000 PGM ounces per year.
-   Furnace Number One was recommissioned in February after an unplanned outage. The resultant lock-up of ounces
    is expected to be released within the second half of the year. Consequently:
               o Saleable refined Platinum production in the quarter of 122,649 ounces was down 25.3% on prior
                   year period;
               o Platinum sales of 140,533 ounces were down 18.3% on the prior year period, including 7,525
                   Platinum ounces of BMR concentrate.
-   The average full Rand basket price (including base metals) up 12.5% on Q2 2017, at R12,661 per PGM ounce.
-   The average Rand to US Dollar exchange rate was 9.6% stronger at 11.95 compared to 13.22 in Q2 2017.
-   Unit cost for the quarter was R13,308 per PGM ounce, 12.4% higher than the prior year period, primarily driven
    by the 8% wage increase, lock-up of metals, and higher variable costs. Unit costs are anticipated to improve during
    H2 2018 to within the upper end of guidance range.
-   Section 189 process commenced, resulting in 1,993 employees and contractors being impacted during this year,
    of the 3,700 jobs we expect to be impacted in the current year, including through natural attrition, with a net
    reduction in headcount of 1,504.


                                                          1
Mining Operations

The Marikana mining operations including Pandora (100%) produced 2.2 million tonnes during the quarter, down 4.6% or
108,000 tonnes, on the prior year period. This decline is primarily the result of the planned removal of high-cost
Generation 1 production (167,000 tonnes), in line with our rationalisation of high cost ounces.

Generation 2
Tonnes mined from our Generation 2 shafts were 1.7 million tonnes, an increase of 1.5% on the prior year period.
- K3, our biggest shaft, produced 644,000 tonnes, a pleasing increase of 10.5% or 61,000 tonnes on the prior year
   period.
- Saffy shaft produced 499,000 tonnes, marginally higher than the prior year period, demonstrating that the shaft
   is maintaining its steady state performance and is now focused on efficiency improvements.
- Rowland shaft produced 418,000 tonnes, a decrease of 7.6% on the prior year period, impacted by low
   immediately available ore reserves and the resultant limited mining flexibility, signifying the importance of the
   MK2 project.
- On completion of the Pandora acquisition, combined with the progress of 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 146,000 tonnes, a marginal decrease of 1.7% on the prior year period,
   as we rationalised the business.

Generation 1
The performance of 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 (4B, Hossy, W1
and E1) were 0.5 million tonnes, a decrease of 24.8%, in line with the planned decline in production. The decrease is
also due to both Newman and E2, which produced in Q2 2017, now being placed on care and maintenance.

W1 and E1 are shafts at the end of their reserve lives and are mining remnant pillars. Contractors have continued to
run these shafts and are responsible for all the costs associated with these shafts, enabling us to retain the flexibility
to cease production if and when profitable. Lonmin pays a predetermined rate per tonne, which has been reduced in
line with Lonmin’s cost cutting measures.

Hossy shaft was scheduled to be placed on care and maintenance, but continues to demonstrate potential to
contribute to the business. Based on this and the available IAOR, we intend to continue to operate Hossy for the
duration of FY 2018.

We continually review each shaft on its merits and as reported, in light of 4B shaft’s remaining life and lacklustre
performance, its short life of mine relative to the other Generation 2 shafts, and our capital constraints, 4B has been
reclassified as a Generation 1 shaft and comparatives adjusted accordingly. 4B produced 291,000 tonnes, a decrease
of 16.0% on the prior year period, as the bad geological conditions persist, signifying the end of economically minable
reserves.

Production Losses
Tonnes lost due to Section 54 safety stoppages at 7,000 tonnes were greatly reduced to 7,000 tonnes compared to
the prior year period of 137,000 tonnes. This emphasised our improving safety statistics and continued proactive
engagement with all stakeholders including various unions, employees and the DMR Inspectorate.

We are encouraged by the fact that the number and duration of Section 54 stoppages has continued to improve, for
the last four years quarter on quarter.

                                                                Q2 2018    Q2 2017        Q2 2016      Q2 2015
                                                                 Tonnes     Tonnes         Tonnes       Tonnes
         Section 54 safety stoppages                              7,000    137,000        234,000      229,000
                                                            2
         Management induced safety stoppages                  13,000       40,000         7,000       56,000
         Total tonnes lost                                    20,000      177,000       241,000      285,000
Processing Operations

Platinum production (Metals-in-Concentrate) was 143,374 ounces, which was 3.9% higher than the prior year period
and PGM production (Metals-in-Concentrate) was 274,941 ounces, which was 3.5% higher than the prior year period.

Concentrator production - Mining
Total tonnes milled from mining operations in the period under review were 2.2 million tonnes, in line with the prior
year period.

Underground milled head grade was 4.51 grammes per tonne, lower than the 4.56 grammes per tonne from prior year
period but within our acceptable range. Underground concentrator recoveries for the half year remained excellent at
86.8%, exceeding the 86.5% achieved in the prior year period.

Concentrator production - Bulk Tailings Retreatment (BTT)
The BTT project is progressing within cost, scope and time and was successfully hot commissioned on 14 February.
The project is expected to ramp up and reach full throughput during 2018. Once at steady-state, the project is expected
to deliver amongst the lowest cost ounces in the Lonmin portfolio, producing about 29,000 ounces of Platinum per
year or some 55,000 ounces of PGMs. The project is expected to be mined over a seven-year period, and further
tailings dams are being explored for life extension. The feed from the BTT project will have relatively low milled head
grade and recovery rates when compared to underground ore. We expect the current levels to improve as the project
continues to ramp up and for milled head grade and recovery rates to average 1.4 grammes per tonne and 31%
respectively, over the life of the project.

Since commissioning in February, 347,000 tonnes were remined and milled by the BTT project, producing to 759
Platinum ounces and 1,440 PGM ounces in concentrate.

Smelting and Refining
Total saleable refined Platinum production of 122,649 ounces in the current quarter, was 25.3% lower than the prior
year period and total saleable refined PGMs produced were 234,552 ounces, a decrease of 23.2% on the prior year
period, due to the lock-up of 47,000 PGM ounces, arising from the run out of Furnace Number One on 2 December
2017 as reported in Q1. Furnace Number One was recommissioned in February, and we expect the lock-up of ounces
to unwind within the second half of the financial year.

There was no release of Platinum ounces from the smelter clean-up project during this quarter due to the smelter
unplanned outage, compared to the 10,295 Platinum ounces released in Q2 2017. The smelter clean-up project is
expected to deliver around 13,000 PGM ounces, equivalent to around $13 million of cash inflows in H2 2018.

Furnace Number Two has been on scheduled maintenance since April 2018, and as such overall output is not expected
to be affected owing to capacity at other furnaces, as we are also running the three pyromets.

Sales and Pricing

Platinum sales for the quarter were 140,533 ounces, 18.3% lower than the prior year period sales of 172,042 ounces
as a result of the lock-up of ounces, including 7,525 Platinum ounces of BMR concentrate. PGM sales were 262,302
ounces, down 18.0% on the prior year period sales of 319,896, in line with the outages.

The US Dollar basket price (including base metal revenue) at $1,058 per ounce during the quarter was up 24.5% on Q2
2017 while the corresponding Rand basket price of R12,661 per ounce was 12.5% higher than Q2 2017.

The average Rand to US Dollar exchange rate was 9.6% stronger at 11.95 compared to 13.22 in Q2 2017.

                                                       - ENDS -
                                                          3
Investors / Analysts:
Tanya Chikanza                                                 +27 83 391 2859/+44 20 3908 1073
(Executive Vice President: Corporate Strategy, Investor
Relations and Corporate Communications)
Andrew Mari (Investor Relations)                               +27 14 571 2070 /+27 60 564 6419

Media:
 Wendy Tlou (Head of Communications)                             +27 83 358 0049
 Anthony Cardew, TB Cardew                                       +44 207 930 0777
 Tom Allison, TB Cardew                                          +44 7789 998 020

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

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 seeks to create 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
                                                                                                        2018 - Act   2017 - Act
               1   Marikana                       K3 Shaft                                        kt           644          583
Tonnes mined
                                                  Rowland Shaft                                   kt          418          452
                                                  Saffy Shaft                                     kt          499          498
                                                                          2
                                                  East 3 Shaft Combined                           kt          146          149
                                                    East 3 Shaft                                  kt          146           22
                                                    Pandora (100%)                                kt                      127
                                                  Generation 2                                    kt        1 707        1 682
                                                  4B Shaft                                        kt          291          346
                                                  Hossy Shaft                                     kt          128          159
                                                  Newman Shaft                                    kt                        27
                                                  W1 Shaft                                        kt           46           33
                                                  East 1 Shaft                                    kt           43           44
                                                  East 2 Shaft                                    kt                        65
                                                  Generation 1                                    kt          508          675
                                                  Underground                                     kt        2 214        2 356
                                                  Opencast                                        kt           34
                   Total Marikana                 Marikana Operations                             kt        2 248        2 356
                   Lonmin (100%)                  Total Tonnes Mined (100%)                       kt        2 248        2 356
                                                  % Tonnes mined from UG2 reef (100%)             %        71.8%        73.4%
             Lonmin (attributable)                Underground & Opencast                          kt        2 248        2 293
Ounces Mined Lonmin excluding Pandora             Pt Ounces                                       oz     140 434      139 269
3
                   BTT                            Pt Ounces                                       oz         759
                   Lonmin excl Pandora incl BTT   Pt Ounces                                       oz     141 194      139 269
                   Pandora (100%)                 Pt Ounces                                       oz                    8 581
                   Lonmin incl Pandora & BTT      Pt Ounces                                       oz     282 387      287 119

              Lonmin excluding Pandora            PGM Ounces                                      oz     270 885      267 498
              BTT                                 PGM Ounces                                      oz       1 440            0
              Lonmin excl Pandora incl BTT        PGM Ounces                                      oz     272 326      267 498
              Pandora (100%)                      PGM Ounces                                      oz                   16 980
              Lonmin incl Pandora & BTT           PGM Ounces                                      oz     544 652      551 976
Tonnes milled Marikana                            Underground                                     kt       2 193        2 034
4                                                 Opencast                                        kt           5           38
                                                  Total                                           kt       2 198        2 071
                                  5               Underground
                   Pandora 100%                                                                   kt                      127
                   Before BTT Plant               Total                                           kt       2 198        2 198
                   BTT Plant 6                    Total                                           kt         347
                   Lonmin Platinum                Underground                                     kt       2 193        2 161
                                                                                              7
                                                                          Milled head grade       g/t        4.51         4.56
                                                                                              8
                                                                              Recovery rate       %         86.8%        86.5%
                                                  Opencast                                        kt            5          38
                                                                                              7
                                                                          Milled head grade       g/t        3.62         4.41
                                                                                              8
                                                                              Recovery rate       %         63.4%        70.1%
                                                              6
                                                  BTT Plant                                       kt         347               0
                                                                                              7
                                                                          Milled head grade       g/t        1.13          -
                                                                                              8
                                                                              Recovery rate       %         12.0%         0.0%
                                                  Total                                           kt       2 545        2 198
                                                                                              7
                                                                          Milled head grade       g/t        4.05         4.55
                                                                                              8
                                                                              Recovery rate       %         83.9%        86.2%




                                                                  5
                                                            3 months     3 months
                                                            to 31 Mar    to 31 Mar
                                                            2018 - Act   2017 - Act
Metals-in-        Marikana          Platinum           oz     137 368      129 460
              9                     Palladium          oz      64 106       60 206
concentrate
                                    Gold               oz       3 471        3 220
                                    Rhodium            oz      19 483       18 456
                                    Ruthenium          oz      33 119       30 786
                                    Iridium            oz       6 931        6 437
                                    Total PGMs         oz     264 477      248 566
                                    Nickel 10          MT        693          666
                                    Copper    10       MT        450          419
                  Pandora           Platinum           oz                   8 581
                                    Palladium          oz                   4 037
                                    Gold               oz                      61
                                    Rhodium            oz                   1 436
                                    Ruthenium          oz                   2 373
                                    Iridium            oz                     492
                                    Total PGMs         oz           0      16 980
                                    Nickel   10        MT                      19
                                    Copper 10          MT                        8
                  BTT Plant 6       Platinum           oz        759
                                    Palladium          oz        306
                                    Gold               oz          8
                                    Rhodium            oz         95
                                    Ruthenium          oz        219
                                    Iridium            oz         53
                                    Total PGMs         oz      1 440             0
                                    Nickel 10          MT           1
                                    Copper 10          MT          1
                  Concentrate       Platinum           oz      5 248
                  purchases         Palladium          oz      1 703
                                    Gold               oz         19
                                    Rhodium            oz        708
                                    Ruthenium          oz      1 090
                                    Iridium            oz        256
                                    Total PGMs         oz      9 023             0
                                    Nickel 10          MT           6
                                    Copper 10          MT          3
                  Lonmin Platinum   Platinum           oz    143 374      138 041
                                    Palladium          oz     66 116       64 243
                                    Gold               oz      3 497        3 281
                                    Rhodium            oz     20 286       19 892
                                    Ruthenium          oz     34 427       33 158
                                    Iridium            oz      7 240        6 930
                                    Total PGMs         oz    274 941      265 546
                                    Nickel 10          MT        700          684
                                              10
                                    Copper             MT        454          427




                                                   6
                                                                       3 months     3 months
                                                                       to 31 Mar    to 31 Mar
                                                                       2018 - Act   2017 - Act
Refined      Lonmin refined                     Platinum          oz     114 731      164 136
Production   Metal                              Palladium         oz      54 618       71 409
             Production                         Gold              oz       3 211        4 488
                                                Rhodium           oz      16 290       20 947
                                                Ruthenium         oz      25 894       36 833
                                                Iridium           oz       5 066        7 484
                                                Total PGMs        oz     219 810      305 297
             Toll refined                       Platinum          oz         393            2
             metal                              Palladium         oz         134            6
             production                         Gold              oz           7            1
                                                Rhodium           oz           4            9
                                                Ruthenium         oz           9            2
                                                Iridium           oz           3           13
                                                Total PGMs        oz         550           33
             Total refined PGMs                 Platinum          oz     115 124      164 138
                                                Palladium         oz      54 752       71 416
                                                Gold              oz       3 218        4 489
                                                Rhodium           oz      16 293       20 956
                                                Ruthenium         oz      25 904       36 835
                                                Iridium           oz       5 069        7 498
                                                Total PGMs        oz     220 360      305 331
             BMR Concentrate Sales (Saleable    Platinum          oz       7 525
             Refined production)                Palladium         oz       3 211
                                                Gold              oz         178
                                                Rhodium           oz       1 093
                                                Ruthenium         oz       1 815
                                                Iridium           oz         369
                                                Total PGMs        oz      14 192
                                           11                     oz
             Total saleable refined PGMs        Platinum                122 649      164 138
                                                Palladium         oz     57 963       71 416
                                                Gold              oz      3 396        4 489
                                                Rhodium           oz     17 386       20 956
                                                Ruthenium         oz     27 719       36 835
                                                Iridium           oz      5 438        7 498
                                                Total PGMs        oz    234 552      305 331
             Base metals                        Nickel   12       MT        668          761
                                                Copper   12       MT        414          492




                                                              7
                                                                                                                                                                                                3 months     3 months
                                                                                                                                                                                                to 31 Mar    to 31 Mar
                                                                                                                                                                                                2018 - Act   2017 - Act
Sales                          Refined                                                            Platinum                                                              oz                        133 007      172 042
                               Metal                                                              Palladium                                                             oz                         64 157       72 455
                               Sales                                                              Gold                                                                  oz                          3 496        4 456
                                                                                                  Rhodium                                                               oz                         18 280       24 867
                                                                                                  Ruthenium                                                             oz                         23 748       38 659
                                                                                                  Iridium                                                               oz                          5 422        7 417
                                                                                                  Total PGMs                                                            oz                        248 110      319 896
                                                                                                  Nickel      12                                                        MT                           685          801
                                                                                                               12
                                                                                                  Copper                                                                MT                           696
                                                                                                  Chrome 12                                                             MT                       292 663      266 159
                                                                            13                                                                                           oz
                               BMR Concentrate Sales                                              Platinum                                                                                         7 525
                                                                                                  Palladium                                                             oz                         3 211
                                                                                                  Gold                                                                  oz                           178
                                                                                                  Rhodium                                                               oz                         1 093
                                                                                                  Ruthenium                                                             oz                         1 815
                                                                                                  Iridium                                                               oz                           369
                                                                                                  Total PGMs                                                            oz                        14 192
                               Lonmin Platinum                                                    Platinum                                                              oz                       140 533      172 042
                                                                                                  Palladium                                                             oz                        67 368       72 455
                                                                                                  Gold                                                                  oz                         3 675        4 456
                                                                                                  Rhodium                                                               oz                        19 373       24 867
                                                                                                  Ruthenium                                                             oz                        25 563       38 659
                                                                                                  Iridium                                                               oz                         5 791        7 417
                                                                                                  Total PGMs                                                            oz                       262 302      319 896
                                                                                                  Nickel      12                                                        MT                           685          801
                                                                                                               12
                                                                                                  Copper                                                                MT                           696             0
                                                                                                  Chrome 12                                                             MT                        292 663      266 159
                                                                                                                                                                                                3 months     3 months
                                                                                                                                                                                                to 31 Mar    to 31 Mar
                                                                                                                                                                                                2018 - Act   2017 - Act
Average prices Platinum                                                                                                                                                $/oz                           973          972
               Palladium                                                                                                                                               $/oz                         1 017          759
               Gold                                                                                                                                                    $/oz                         1 332        1 242
               Rhodium                                                                                                                                                 $/oz                         1 797          875
                               $ basket excl. by-product revenue                          14                                                                           $/oz                          974          801
                               $ basket incl. by-product revenue                         15                                                                            $/oz                        1 058          850
                               R basket excl. by-product revenue                           14                                                                          R/oz                       11 652       10 587
                               R basket incl. by-product revenue                          15                                                                           R/oz                       12 661       11 250
                               Nickel     12                                                                                                                           $/MT                       10 115        8 241
                               Copper12                                                                                                                                $/MT                        6 422

Unit Costs                     Cost of Production per PGM ounce                                                                                                     ZAR/oz                         13 308      11 836

Exchange                       Average rate for period                 16
                                                                                                                                                                        R/$                        11.95        13.22
Rates                          Closing rate                                                                                                                             R/$                        11.83        13.42

Notes
 1 Reporting of shafts are in line w ith our operating strategy for Generation 1 and Generation 2 shafts.
 2 E3 Shaft and Pandora underground tonnes mined w ill be reported as E3 Shaft Combined from 1 December 2017 w hen Lonmin required 100% of Pandora.
 3 Ounces mined have been calculated at achieved concentrator recoveries and w ith Lonmin standard dow nstream processing recoveries to present produced saleable ounces.
 4 Tonnes milled excludes slag milling.
 5 As from 1 December 2017 Lonmin ow ns 100% of Pandora joint venture and there w ill be no ore purchases therafter.
 6 The BTT (Bulk Tailings Treatment) project w as commissioned in February 2018.
 7 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).
 8 Recovery rate in the concentrators is the total content produced divided by the total content milled (excluding slag).
 9 Metals-in-concentrate have been calculated at Lonmin standard dow nstream processing recoveries to present produced saleable ounces.
10 Corresponds to contained base metals in concentrate.
11 Saleable refined production includes production associated w ith BMR concentrate sales.
12 Nickel is produced and sold as nickel sulphate crystals or solution and the volumes show n 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 show n are in the form of chromite.
13 Includes saleable refined production associated w ith BMR concentrate sales
14 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.
15 As per note 14 but including revenue from base metals.
16 Exchange rates are calculated using the market average daily closing rate over the course of the period.


                                                                                                                            8

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