Lonmin may revise forecasts due to strikeComment on this story
London - South African mining company Lonmin said a strike was cutting platinum production and could force it to reassess guidance for the year after it posted a rise in output for the past quarter.
The world's third-biggest platinum producer is currently losing about 3,100 ounces of refined output per day because of the strike over wages, which started a week ago.
In an attempt to end the industrial action, the company on Thursday revised its wage offer to South Africa's Association of Mineworkers and Construction (AMCU).
The offer still fell short of the union's demand for a 12,500 rand per month “living wage”.
“Before the start of the strike we would have maintained our guidance for the full year ,” the company said.
“However, due to the ongoing strike, we will reassess our guidance and update the market in due course.”
Lonmin has been targeting sales of over 750,000 ounces, $210 million in capital spending and a rise in production costs below wage inflation for the year to end-September 2014.
In its first fiscal quarter to December 31, refined production increased by 45 percent to 196,249 saleable platinum ounces compared with the same period a year before.
“The production outcome is very pleasing as the Christmas period usually restricts production, and we were concerned that our 189,000 estimate was too optimistic,” Citi analysts said in a note.
“Healthy stockpiles and a trouble-free smelting complex have resulted in good refined platinum output.”
FATALITIES AND SAFETY STOPPAGES
Sales for the quarter were 134,804 ounces, an increase of 24 percent, helped by an improvement in recovery rates.
But output from its mines fell by 10 percent to 2.6 million tonnes as the momentum it built up in 2013 was disrupted by a fatality and safety stoppages, Lonmin said.
Also it reduced mined output from the opencast operations in its first quarter because prices were weaker, the company said.
“They entered the quarter with very high inventories because they had a smelter disruption previously, and that turned out to be a blessing for them because they could make sure they had plenty of inventories to see them through disruptions,” Investec analyst Marc Elliott said.
Lonmin had been recovering from 2012, when it was at the centre of a wave of mining strikes that left dozens dead.
The labour unrest and violence left it so battered that the company had to tap shareholders for cash.
South Africa has been shaken by a turf battle for membership between the National Union of Mineworkers and the AMCU, with both unions accusing each other of attacking and killing their members.
In 2013, at least three men were shot dead near Lonmin's Marikana mine between June and October, sparking fears of a renewed cycle of violence in the troubled platinum belt.
Concerns about the company's prospects have resurfaced during the latest strike.
“If the strike is resolved within a couple of weeks, they could be able to catch up and meet their guidance, but if we start to get towards a month, then it's slightly more worrying,” Elliott said. - Reuters