Johannesburg - Troubled platinum producer, Lonmin, said on Monday that it was relocating its head office to Marikana to cut costs, as it warned of a possible breach of its covenant to credit facilities, amid widening operating losses in the half-year to March.
“We are relocating our South African operational headquarters from Johannesburg to Marikana in 2018, to enhance executive management support to operations,” the company said. “This is expected to have the consequential impact of generating further savings."
Lonmin the world’s third-largest platinum producer, which was the scene of the Marikana massacre in mid-August 2012, has been rocked by a week-long community protest for jobs and housing.
It said debt facilities available to the group were subject to financial covenants, which included that the consolidated tangible net worth of the group would not be at any time less than $1.1billion (R14.4bn).
Read also: Lonmin falls 11% on lower production
Lonmin said that at March 31 the group’s tangible net worth was $1.43bn and the headroom in the tangible net worth covenant was $334million.
“Should a further impairment in the future result in the (tangible net worth) falling below $1.1bn this debt covenant would be breached, which could reduce the liquidity of the group.
“This risk has been flagged to the group’s lenders and is being managed through regular engagements with them. The other debt covenants are well within thresholds and are not considered to be at risk,” the company said.
Lonmin revised its unit costs guidance for the full year to between R11300 to R11800 per platinum group metals (PGMs) ounce from between R10800 and R11300 “to reflect the weak production in the first four months of the year”, it pointed out.
“Our change in outlook on unit costs combined with the strengthening of the rand against the dollar on the balance sheet date has resulted in an impairment charge of $146m.
“This reduced the headroom against the (tangible net worth) covenant in banking facilities to $334m,” the company said.
Lonmin posted a $181m operating loss, including $146m impairment in the half-year to March compared with a $15m operating loss in the same period last year.
The miner also revised its capital expenditure guidance to between R1.4bn and R1.5bn from its original guidance of R1.8bn. It maintained its sales guidance of 650000 to 680000 platinum ounces for the full financial year.
Lonmin also announced the acquisition of a 7.5percent in the Pandora Mine.