- Platinum producer sees costs of 10,400-10,700 rand an ounce
- Current quarter may also experience output interruptions
Lonmin Plc, the world’s third-largest platinum producer, said costs may rise above the level targeted this year following its life-saving rights issue at the end of 2015.
Costs per platinum group-metal ounce produced will be 10,400 rand ($750) to 10,700 rand in the year ended Sept. 30, the Johannesburg-based company said in a statement Monday. Lonmin had previously targeted costs of 10,400 rand a ounce.
Two people died at the company’s operations, and safety stoppages reduced output by about 311,000 tons in the three months ending June 30, Lonmin said. Labor costs increased 8.2 percent from a year earlier. Unit costs were 10,596 rand an ounce, compared with the average PGM basket price of 11,864 rand an ounce.
Lonmin has cut its workforce by almost 20 percent as it attempts to reduce unprofitable production following the December $407 million rights issue, sold at a 94 percent discount. Along with the world’s two biggest platinum miners, Lonmin was hit hard by a five-month strike in South Africa in 2014. It previously raised $457 million from shareholders in 2009 and a further $817 million in 2012 after police opened fire on striking miners near one of its shafts in Marikana.
The company had net cash of $91 million at the end of June after working capital and capital expenditure investment of $51 million, it said. Lonmin shares have almost tripled this year and on Monday climbed 3.6 percent to 246.75 pence at 8:07 a.m. in London.
The quarter “has been marked by complex and competing themes as the operating environment has remained challenging,” Lonmin said. “Whilst we are pleased with the implementation of our business plan, we have yet to fully harness the associated benefits and productivity gains.”
The current quarter, the fourth in the company’s financial year, is normally its best due to an uninterrupted production run.
“We are, however, conscious of a number of events occurring during this year’s fourth quarter, including local government elections, wage negotiations, and various holidays, which have the potential to interfere with production,” Lonmin said.
Royal Bafokeng Platinum Ltd., a fellow South African miner of the metal, swung to a 150 million-rand profit in the first half of the year from a loss of 115.6 million rand the previous year. Platinum production rose 16 percent to 91,600 ounces.