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Lonmin Stockpiles Platinum as Union Threatens to Strike

Nov. 11 (Bloomberg) -- Lonmin Plc, the world’s third-largest platinum producer, said it stockpiled more than twice as much metal as planned in the last fiscal year as a South African union threatened to strike over pay.

Lonmin’s inventory of unrefined metal reached 42,000 ounces in the year through September, more than double the 15,000 ounces to 20,000 ounces it targeted, Chief Executive Officer Ben Magara said on a conference call. The stockpile, in addition to about 13,000 ounces of unsold refined platinum, will put Lonmin in a “good position” in the event of a stoppage, he said.

The Association of Mineworkers and Construction Union, the largest labor group at Lonmin, Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd., has called for wages for some workers to be more than doubled and threatened to strike if its demands aren’t met. In recent years platinum producers have faced rising costs for labor and energy, while prices stagnated.

“It may take time as we seek to find fair value for all, given the economic realities,” Magara said today.

Lonmin produced 751,000 platinum ounces in concentrated form in the fiscal year, of which it refined 709,000 ounces, the Johannesburg-based company said in a statement. The unrefined-metal stockpile of 42,000 ounces, in addition to the unsold refined ounces, represents about one month of this year’s projected sales.

Largest Union

The AMCU has in the past 12 months usurped the National Union of Mineworkers as the largest union at Lonmin, Amplats -- as the world’s biggest platinum producer is known -- and Impala.

Lonmin returned to profit in fiscal 2013 after production exceeded its forecast and cost increases were below inflation in South Africa, where the company mines its metal.

Earnings were 31 cents a share, compared with a 202-cent loss a year earlier, the statement shows. That beat the 13-cent median estimate of 21 analysts surveyed by Bloomberg. Sales, which totaled 696,000 ounces, exceeded the company’s forecast of 660,000 ounces. A 3.8 percent jump in costs was less than South Africa’s annual inflation rate of 6 percent in September.

“Lonmin has delivered well in a particularly challenging year, in what remains a difficult environment for miners,” Investec Plc said in an e-mailed note to clients.

Lonmin’s loss in the previous year followed a six-week strike during which at least 44 miners, including 34 in one day, died near the company’s Marikana mine. This year wage talks may be resolved without a stoppage, Magara said.

Black Ownership

The company will look to distribute shares to workers and communities as it seeks to increase its black shareholding to 26 percent at the end of 2014, meeting South African laws, Magara said. Black investors held about 18 percent of Lonmin’s major mining operations as of Sept. 30, according to the statement.

“There is clearly a balance to be struck between delivering this for our employees and communities and doing so in a way which is sustainable, fair and equitable to our present shareholders,” the company said in the statement.

Lonmin said unit costs will increase by less than wage inflation this year. It plans capital spending of $210 million.

To contact the reporter on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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