Johannesburg - Ben Magara, chief executive of Lonmin, releasing the company’s annual report on Friday, said the mining group expected to remain under pressure in the year ahead and forecast lower platinum sales.
Lonmin’s unit costs were expected to be R10 800 to
R11 300 per platinum group metal (PGM) ounce for the 2017 financial year, with platinum sales expected to be between 650 000 and 680 000 ounces for the year - down from the 735 747 platinum ounces the previous year. The group’s platinum sales contributed 65 percent to the company’s 2016 turnover.
Lonmin said the expected reduction in platinum sales for 2017 was due to the company’s focus on the larger generation 2 shafts and closure of inefficient shafts that had high production costs.
Magara said the group’s return to profitability positioned it well to realise maximum value for its shareholders, but that the focus would be on costs and being cash positive after capital expenditure.
“I am particularly pleased with our return to profitability and the increase in our cash position and liquidity. We remain vigilant in our cost control and expect our overheads and support-services structures to align with our sales profile,” Magara said.
Reducing costs
The company said it had increased its net cash position from $69 million (R938 million) at the end of the first quarter to $173 million at the end of the year, and cut costs by R1.3 billion.
The group last year reported an operating profit of $7 million from a loss of $134 million in 2015.
Read also: Lonmin 'can withstand current platinum prices'
Lonmin expected its total capital expenditure for the year to be R1.8 billion, which includes R400 million related to the Bulk Tailings Treatment (BTT) project.
The BTT project is the re-mining of Lonmin’s Eastern Tailings dam and the reprocessing of 26 million tons of tailings material.
The company said it expected the project to produce 29 000 ounces of platinum a year and 50 000 ounces of PGM. The project is expected to be commissioned for full production during the 2018 financial year.
Lonmin's chief executive Ben Magara briefs the media in Melrose Arch on Friday. He said he was particularly pleased with the group's return to profitability.Photo: Nicholas Rama
Barrie van der Merwe, the chief financial officer, said it was important to keep production levels up to offset negative market sentiments. “This industry has been in contraction for the past eight years - we have seen flat price lines. Lonmin has become more efficient and productive, and we will ensure we manage productivity and have good spend control,” Van der Merwe said.
He highlighted it was important for the group to keep making profits in order to meet its commitments to provide decent housing for its 33 000-strong workforce. The company said it had yet to build housing for 11 500 of its employees. The group has committed R500 million over five years to develop 1 240 modern houses for its employees.
Lonmin shares were unchanged on Friday at R28.17.