Lonmin Plc, the third-largest platinum producer, said it shut down its Number Two furnace at Marikana in northwestern South Africa following an unspecified incident, meaning that two furnaces at the site are offline.
“The incident has happened at a time when Lonmin had just shut down the Number One furnace for its planned upgrade of the hearth and shell,” Lonmin said in a statement today.
Repairs to the Number Two furnace will take 30 to 40 days, Lonmin said. Three Pyromet furnaces, accounting for 50 percent of the company’s capacity, continue to operate, it said. The stock dropped 5.7 percent to close at 269 pence in London.
It’s too soon to assess what the overall impact will be, Ben Davis, an analyst at Liberum Capital Ltd., said in an e-mail response to questions. “If the furnace is down for an extended period, it could lead to issues given the inefficiencies of the smaller Pyromet smelters.”
Lonmin on April 26 reported a fatality at the Merensky section of its K3 shaft at Marikana and halted production for an investigation. A six-week walkout last year at the Marikana operation, about 170 kilometers (106 miles) northwest of Johannesburg, resulted in the loss of an estimated 110,000 ounces of platinum production, the company said Nov. 9.
“The timing of this incident is unfortunate given that the Number Two furnace essentially acts as a form of backup to the Number One furnace, which has itself just been shut down as part of a planned 90 day maintenance program,” said Justin Froneman, a Johannesburg-based analyst with Standard Bank Group Ltd.’s securities unit who maintains a buy recommendation on the stock.
Marikana is in the Rustenburg region, which holds the world’s largest platinum reserves. Police shot dead 34 protesting miners at the mine on Aug. 16 during a strike over wages. The company appointed Ben Magara, executive head of engineering and capital projects at Anglo American Platinum Ltd., the biggest platinum producer, as chief executive officer starting July 1.