JOHANNESBURG - The third largest primary platinum producer in the world said it was taking further decisive action to ensure a sustainable business in a continuing adverse macroeconomic environment.
Subject to receiving the necessary consents and approvals, Lonmin plans, among other things, to pursue all options to maximise cash from its high-quality downstream processing operation through the sale of excess processing capacity of up to 500,00 platinum ounces per annum.
Lonmin said this would have the benefit not only of releasing capital, but would also allow other South African platinum group metals producers who currently operate on a sale of concentrate basis to access the profit margin benefits of an integrated beneficiation model.
Last month, Lonmin announced its third quarter production results and business update, which reported improved mining performance, reduced unit costs and increased net cash.
Despite that pleasing performance, Lonmin said it continued to be concerned by the persistent adverse macroeconomic conditions and the inflationary cost pressures confronting the platinum mining industry in South Africa.
Therefore, despite having already taken significant measures to reduce costs, Lonmin announced further measures to ensure that its operations generate sufficient cash to support a sustainable business.
Lonmin also plans the reduction in annual overhead costs by a minimum of R500 million by the end of the year ending 30 September 2018.
The miner said the substantial majority of overhead reductions would come from non-production central functions as the company sought to right-size its overheads to its operations. In addition, Lonmin would continue to identify further overhead and cost savings.
But Lonmin said it was too early to define the ultimate effect of the Operational Review on the Company, but the overall aim remained for the business to be cash positive after capital investment.
Meanwhile, Lonmin also announced the approval by the Department of Mineral Resources of its section 11 application to acquire the Pandora joint-venture from Anglo Platinum which will defer R2.6 billion of capital expenditure and contribute to the sustainability of the business by potentially preserving jobs at E3 shaft.
Lonmin has already received approval from the competition tribunal and is in the process of obtaining lender consent.