JOHANNESBURG - Platinum miner Lonmin’s share price surged 8.21percent yesterday as the group cut its operating loss for the first six months ended March to $32million (R391.6m) from $181m a year earlier.
The dual-listed miner, which is being bought by Sibanye-Stillwater, also announced that it would cut more than 3000 jobs in the current financial year as part of its plans to release 12600 workers in the next three years.
Lonmin chief executive Ben Magara said the group would retrench 3700 workers in the current financial year.
“The section 189 process commenced, resulting in 1993 employees and contractors being impacted during this year, of the 3700 jobs we expect to be impacted in the current year, including through natural attrition, with a net reduction in headcount of 1504,” Magara said.
The miner has been battling weak global platinum prices and soaring operating costs in South Africa, which have shrunk the company's market value by nearly 98percent in the past five years. The group reported that platinum sales for the six-month period under review were 287749ounces, 6.3percent lower than the previous year period.
Lonmin’s ability to remain a going concern over the next 12 to 18 months had “material uncertainties”, said Barrie van der Merwe, its chief financial officer, during a results presentation yesterday.
He said Lonmin continued to hold talks with alternative providers of finance.
Credit waivers granted to Lonmin by its lenders in January were dependent on the company's planned merger with precious metals producer Sibanye-Stillwater, he said.
Lonmin said Marikana mining operations (including Pandora) produced 2.2million tons during the first quarter of the year, down 108000tons on the prior year's period.
The group said this decline was primarily the result of the planned removal of high-cost Generation 1 production, in line with its rationalisation of high-cost ounces.
The group said its revenue for the period under review increased to $561m from $486m in the comparative period.
Magara said the platinum mining industry had delivered negative returns in the last decade as a result of low platinum prices and inflationary cost pressures.
“The challenging 'lower for much longer' platinum pricing environment is creating long-term damage to an already ailing industry, which has sacrificed at least 26000 jobs in the last five years and continues to under-invest in its future.”
Sibanye-Stillwater last year agreed to buy the embattled Lonmin for about £285million (R4.72billion). The deal, which will make Sibanye the second biggest platinum producer, is still subject to regulatory approvals.
Sibanye made its foray into platinum by acquiring Anglo American Platinum’s Rustenburg operations in 2015.
Aeon Investment Management chief investment officer Asief Mohamed said the job cuts at Lonmin might draw the ire of the Competition Commission in their Sibanye deal.
“The worrying trend is that Lonmin is still making losses. The problem is that platinum group metals are over-supplied across the globe and the only way to increase the price of Platinum is to cut global supply,” Mohamed said.
The mining sector, especially the platinum sector, has experienced a job’s bloodbath in recent years.
Narrowing losses
Impala Platinum last month said it would cut 1400 jobs and shuttering shafts at its main Rustenburg mine to narrow financial losses.
The Chamber of Mines said the mining industry employed 464667 people in 2017, with the platinum sector accounting for 175770 employees in the sector. The country is host to around 80percent of the world's known platinum reserves.
National Union of Mineworkers spokesperson Livhuwani Mammburu said that the union was concerned about the impending retrenchments at Lonmin.
“They can't just retrench workers when they feel like it. It looks like it has become fashionable for mining companies to retrench, one mine worker supports 10 family members and their retrenchments destroy communities,” Mammburu said.
“They must start retrenching their executives, who earn millions. We call on the Department of Mineral Resources to intervene and salvage jobs at Lonmin.”
Amcu, which is the largest union at Lonmin, had not responded to questions by the time we went to print.
Lonmin’s share price closed 6.84percent higher on the JSE yesterday at R8.59.