Platinum miner Lonmin warned on Thursday it was likely to miss its full year production and cost targets after losing thousands of ounces following violent clashes between unions that forced it to freeze mining at its South African operations.
The miner said eight Lonmin workers and two policemen had been killed in the violence that began last Friday - the deadliest so far in a membership turf war between the dominant National Union of Mineworkers (NUM) and the newer Association of Mineworkers and Construction Union (AMCU) in South Africa.
Adding to its woes, the company said its chief executive, Ian Farmer, had been diagnosed with a serious illness and taken to hospital. Chairman Roger Phillimore has temporarily taken on Farmer's day-to-day responsibilities.
The miner, which said the situation on the ground had eased since Wednesday morning, said its shafts remained operational and ready for employees to return, but its striking rock drill operators remained armed and away from work. They will face dismissal unless they return to work by Friday.
“As a result of the disruption, Lonmin has so far lost six days of mined production, representing approximately 300,000 tonnes of ore, or 15,000 Platinum equivalent ounces,” the London- and Johannesburg-listed miner said in a statement.
“Consequently, it is unlikely that Lonmin will meet its full year guidance of 750,000 saleable ounces of platinum, although the extent of the variation from guidance will depend on the timing and speed with which normal operations can safely resume.”
Guidance that unit costs will rise 8.5 percent this year is also likely to be exceeded.
“If Ian remains out for some period of time, it's a big negative. He's the one who is leading the reshaping of the company on the spending cuts and he's also the one who has been dealing with the recent labour unrest,” one London-based equity analyst said. “Two big hits today. On both fronts, it depends on how things develop from here.”
Lonmin, which has one of the weakest balance sheets in the sector, said its debt was well within the terms of its facilities but would examine pressure from the current disruption on its debt covenants at the end of September.
Lonmin's London shares extended losses on the news and were down 6.3 percent at 651.5 pence at 15:45 SA time. - Reuters