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 -
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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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