Pandora made an operating loss of R109 million in the 2016 financial year, 50 percent of which was reflected in Lonmin’s 2016 accounts. Photo: Supplied
JOHANNESBURG - Lonmin, the world’s third-largest platinum producer, whose share price has been rallying on the JSE this week, now owns 100percent of the Pandora joint venture.

The stock strengthened 12percent to R12.50 on the JSE after the company said yesterday it had finalised the acquisition of Anglo American Platinum’s 42.5percent interest in the Pandora joint venture.

The miner said it had also acquired Mvelaphanda Resources’ 7.5percent stake in Pandora.

Lonmin said both transactions were effective from the beginning of the month.

Lonmin chief executive Ben Magara indicated in a statement that the transaction would reduce capital expenditure.

“This is an excellent strategic fit for us, which equips us with a valuable contiguous asset with long-term development potential and allows us to maintain production levels at Saffy, while significantly reducing our capital expenditure requirements at this operation over the short and medium term,” he said.

The company, which announced the acquisition last November, said the acquisition would help to extend mining at its Saffy Shaft without having to spend R2.6billion of capital expenditure, of which R1.6bn would have been required over the next four years.

The company also said that it provided significant future opportunities to develop Pandora’s potential.

Sibonginkosi Nyanga, an analyst at Momentum Securities, said Pandora was a good investment case for Lonmin, because there were a lot of synergies.

“The Pandora area is contiguous with Lonmin’s existing operations and relies on Lonmin’s mining and processing infrastructure. It is an excellent strategic fit for Lonmin, equipping the miner with a valuable contiguous asset with long-term development potential.”

Operating loss

Pandora made an operating loss of R109million in the 2016 financial year, 50percent of which was reflected in Lonmin’s 2016 accounts.

Its gross assets were R1.1bn at September 30, 2016.

Lonmin received a contribution of R117m in its 2016 financial year from the ore purchase agreement, which offset the loss reported by the joint venture.

Pandora mined platinum group metals (PGMs) from the UG2 and Merensky reefs underlying the Pandora mining area.

Lonmin said it bought 100percent of the ore produced by the Pandora joint venture for processing and refining.

Lonmin previously said that the acquisition allowed it to consolidate its position in this relatively shallow and high-grade mineral resource, providing an attractive option for development by Eastern Platinum in both the short term and the long term.

Pandora contributed 32509 platinum ounces (63857 PGM ounces) to Lonmin in the 2016 financial year.

- BUSINESS REPORT