JOHANNESBURG – Lonmin, the world's third-largest platinum producer, reversed its fortunes in the year to 2018, recording a $101 million (R1.4 billion) operating profit from more than $1bn it impaired last year as cost-cutting measures paid off and the higher rand basket price firmed.
Chief executive Ben Magara said the company had posted a strong performance across the business following an aggressive cost-cutting exercise helped by the 19.7 percent higher dollar basket price for Platinum Group Metals (PGMs).
“This performance has been achieved by our continuous focus and strict management of controllable factors, cutting costs and driving efficiencies wherever possible, and despite business fundamentals remaining challenging throughout the year,” Magara said.
The dual-listed company yesterday released its last full-year set of results as a standalone entity. This was ahead of its R5bn merger with Sibanye-Stillwater that is expected to close early next year.
Magara, however, warned that the company was not yet out of the woods, charging that it still faced liquidity constraints and needed to make significant investments in its mines to prolong their lifespan.
Magara said Lonmin would be better placed as part of Sibanye Stillwater.
“This will provide a stronger and more resilient platform for Lonmin’s shareholders and our stakeholders and allow them to benefit from the long-term upside potential of an enlarged and geographically diversified precious metals group,” Magara said.
The Competition Tribunal gave the merger the go ahead this month, on condition that Sibanye place a moratorium on job cuts six months after the merger closes, amid concerns that 13 000 jobs would be lost.
The merger is subject to approval by Sibanye shareholders and sanctions by courts in Wales and England.
Lonmin embarked on a belt-tightening exercise with the rollout of a business plan in 2015 to preserve cash and liquidity.
The plan resulted in 8 000 job losses to date. It also relocated its head office from Melrose Arch to Marikana.
Its acquisition of the Pandora joint venture helped it defer at least R1.6bn of development capital at Saffy shaft.
Yesterday, Lonmin said that its net cash position improved to $114m during the period from $103m in the prior year, paving the way for the first payment of the employee profit sharing scheme.
The group reported production improvements with platinum sales at 681 580 ounces ahead of market guidance and unit costs were within the company’s expectations at R12 307 per PGM ounce.
Seleho Tsatsi, an investment analyst at Anchor Capital, said Lonmin had posted a decent cost performance.
“On a long-term basis, the merger with Sibanye continues to be Lonmin’s best option,” said Tsatsi.
Lonmin shares rose 1.12 percent on the JSE on Thursday to close at R8.10.