Lonmin Plc, today announces its production results for the three months to 30 June 2014 (unaudited) and Interim Management Statement for the period from 1 April 2014 to todays date. Photo supplied

Dineo Faku

LONMIN slashed its capital expenditure (capex) by half and revised its sales guidance downwards following the five-month strike in the platinum belt, which had so far cost the company $322 million (R3.4 billion), the third-largest platinum producer reported on Friday.

The JSE-listed firm said capex would decline to $100m from $210m last year and its sales guidance was now 420 000 ounces of saleable platinum. It forecast 340 000 ounces of saleable platinum metal in concentrate in the year to September compared with 751 000 ounces last year.

The strike cost Lonmin $322m in lost production, security costs and forfeited service with contractors. “The figure is set to be higher when taking into account all the ramp-up costs that will be factored in the fourth quarter,” the company’s chief executive, Ben Magara, said.

Lonmin would consider its options on whether to solely operate the Pandora joint venture with Anglo American Platinum (Amplats), he added.

Anglo American subsidiary Amplats announced last week that it would exit from the Pandora venture, and sell its Union and Rustenburg operations.

“We are joint venture partners with Amplats in Pandora. We are most suitable to operate the mine. At the right time we will consider our options,” Magara said.

About 90 percent of Lonmin employees had returned to work following the strike, and all 11 shafts were operating at 30 percent of monthly capacity. They were expected to reach 80 percent of monthly production by the end of the fourth quarter.

“As we have resumed production and metal is processed through the pipeline we are resuming deliveries to customers,” Magara said. “As we have not yet reached normal production levels we have accordingly not lifted force majeure.”

The strike was expected to result in a 60 percent spike in unit costs for every ounce of platinum produced.

Michael Kavanagh, an analyst at Noah Capital Markets, said the results were pretty much as expected.

“It will take six months or so to get a true picture of where they are post the strike with regards to production, capital and unit costs,” he explained.

Lonmin’s cash position stood at zero at the end of June from $71m at the end of March and it would draw on debt facilities as it ramped up production.

“The company has significant headroom available in its banking facilities to fund the debt levels, which will rise as we fund the production ramp-up and rebuild the stock pipeline over the coming months,” Magara said.

Lonmin was the hardest hit producer when 70 000 workers downed tools because all its underground production was halted. The company is working on an employee share ownership plan and community transactions as it seeks to meet black economic empowerment ownership targets.

Its shares leapt 5.03 percent to close at R42.80 on Friday.