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LONMIN PLC - AGM Statement

Release Date: 25/03/2019 13:00
Code(s): LON     PDF:  
Wrap Text
AGM Statement

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: 213800FGJZ2WAC6Y2L94


25 March 2019

                                          AGM Statement

In his address to shareholders at the Annual Meeting of Lonmin Plc today, Chairman Brian Beamish
reported that:

“The 2018 financial year saw Lonmin return to profit with an improved net cash position.
Underpinning these positive numbers, was a solid operational performance, improved collaboration
with all stakeholders and improved metal prices.

“Our key Generation 2 shafts contributed around 76% of total mining production in 2018 and
increased production by 1.6%. In line with our strategy to reduce high cost production in an
oversupplied market, production from our Generation 1 shafts was 13.2% lower than 2017.
Processing plants continued to perform well, with the concentrators achieving levels of PGM
recoveries amongst the highest in their history. The performance of the smelter and refineries was
also pleasing.

“Capital expenditure for the year was contained to less than one billion Rands. We improved our
immediately available ore reserves to an equivalent of 21 months.

“Total revenue for the year was $1,345 million, up $179 million on 2017. The Dollar PGM basket price
achieved in 2018 was 20% higher than 2017 although the platinum price was on average 7% lower
than 2017. The prices for other PGMs increased significantly. The Rand was on average 2% stronger
against the US Dollar in 2018 compared to 2017, averaging R13.07 per Dollar. This resulted in an
operating profit of $101 million.

“As a result of our return to profitability, we were able to make our first payment to the Lonmin
Employee Profit Sharing Scheme, an important and motivating milestone for our workforce.

“We committed R500 million towards employee housing and living conditions for the period 2014 to
2018. Over and above this commitment, Lonmin pays R475 million per annum in living-out
allowances to Category 4 to 9 employees and incurs an operating cost for its current accommodation
rental stock of R57 million per annum. We continue to deliver accommodation units and are
particularly excited about the launch of the Lonmin Facilitated Employee Home Ownership
Programme commencing in 2019.

“We took new and prudent measures to refinance the business with a $200 million facility which we
announced in October 2018. This refinancing resulted in full settlement of the $150 million term loan
that was fully drawn at the year-end, provided additional liquidity and importantly, removed the
problematic tangible net worth covenant associated with the previous financing. While the new

facility has improved the Company’s liquidity in the short-term, it is amortized over a three-year
period and cannot be regarded as the solution to the liquidity challenges faced by your company. Our
liquidity is still insufficient to drive the new projects necessary to avoid shaft closures and job losses.

“Year on year performance for the first quarter of the current financial year was down for several
reasons. Poor production and correspondingly high unit costs have continued in our second quarter,
largely offsetting the benefits of improved PGM prices.

“We have improved the LTIFR by 26% in the period 2015 to 2018; we have taken decisive actions;
right-sized the business by reducing over 8,000 positions; improved productivity, applied rigorous
cost containment measures and kept unit cost increases below mining inflation. We have imposed
strict capital discipline and cash preservation while maintaining operational flexibility and returned
the business to profitability. We have also achieved our key objective of remaining net cash positive
at the end of every quarter.

“Despite these achievements we continue to be financially constrained and unable to fund the
significant investment required to sustain our business and associated employment in the future. The
challenges facing Lonmin and the industry persist. The Company is a single asset producer in a single
geography and remains exposed to inflationary cost pressures as well as volatility in PGM pricing and
exchange rates.

“This, together with our current year performance, continues to underscore the vulnerability of our
business and the importance of a sustainable long-term solution for the Company. This is why your
Board, recommends the all-share offer from Sibanye-Stillwater, as announced in December 2017.

“We continue to believe that this transaction represents a comprehensive solution to the challenges
facing Lonmin, offering the Company and its stakeholders a more certain future. We believe that a
combination of Sibanye-Stillwater and Lonmin will create a larger, more diversified and resilient
company better able to withstand market volatility and business disruptions.

“Since our Annual Report was published, AMCU filed an appeal with the Competition Appeal Court of
South Africa against the South African Competition Tribunal’s decision of 21 November 2018. On 25
January 2019, we announced that 2 April 2019 had been set down as the date for the hearing of this

“The refinancing is expected to help support the business until the successful completion of the
Offer. Because of the appeal by AMCU against the transaction, we announced on 15 January 2019 an
extension to the Longstop Date for the Scheme to become unconditional and effective from 28
February 2019 to 30 June 2019. This delay is detrimental to all stakeholders.

“Shareholders will have an opportunity to vote on the transaction once the AMCU appeal process
has been concluded.”

                                                 - ENDS –


Tanya Chikanza                                              +44 20 3908 1073/ +27 83 391 2859
(Executive Vice President: Corporate Strategy,
Investor Relations and Corporate
Andrew Mari (Investor Relations)                            +27 60 564 6419

TBTB Cardew
  Anthony Cardew / Emma Crawshaw                             +44 207 930 0777

  Wendy Tlou (Head of Communications)                        +27 83 358 0049

  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

  For further information please visit our website:

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


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