25th Jul 2014 08:51
LONDON (Alliance News) - Lonmin PLC Friday said it expects to return to normal production rates by the end of the year following major strike action by platinum miners in South Africa, which ended in June.
The FTSE 250 listed company said that, due to the strike, it lost production of 192,700 platinum saleable ounces in its third quarter ended June 30 but it did manage to return to some production following the re-start of its processing division in May, achieving platinum metal in concentrate production of 23,618 ounces and refined platinum production of 36,255 ounces in June.
The company said that, following employees return to work, a ramp up to full production at all of its shafts has started, and it is currently achieving roughly 30% of normal monthly production. Lonmin said it expects to be achieving 80% of normal production by the end of its financial year at the end of September and be at its normal steady rate of production by end of the year.
"We are experiencing stable attendance levels by our employees across all operations since the end of the strike," Chief Executive Ben Magara said in a statement. "Our immediate focus is on ensuring a safe and productive ramp up. I am pleased with the enthusiasm in our management and all employees to the re-building of our relationships and operational credibility."
The major platinum mining companies in South Africa announced on June 24 that they had settled their dispute with the Association of Mineworkers and Construction Union in South Africa, ending five months of crippling strike action.
Under the new deal, Lonmin said at the time that its lowest underground basic salary will increase by ZAR1,000 per month for each year of the three-year deal, while employees in its C-band group will receive wage increases of 8% in year 1 and 7.5% in years 2 and 3.
The company also said that all employees will receive, within seven working days, back payments due to them from their 2013 increase date of October 1 until January 22 this year, the day before the strikes began.
Lonmin said on Friday that compared to its full year 2013, the wage settlement has resulted in an overall increase of 12.9% in the company's labour costs for 2014, 8.8% for 2015 and 8.2% for 2016.
It added that special costs of USD322 million have been incurred due to idle production during the strike, and security costs, with further costs expected.
The company said it had no cash balance at the end of June and so is conducting decisive cash conservation measures, but it has significant headroom in its banking facilities to fund its planned production ramp up.
As a result of the strike, Lonmin said its platinum metal in concentrate production for the full current financial year should be around 340,000 ounces with sales volumes revised down to 420,000 saleable platinum ounces from a planned guidance of 750,000 ounces before the strike action.
The company also said its capital expenditure guidance for the period has also been revised down to roughly USD100 million for the year from USD210 million previously.
Lonmin shares were up 4.8% to 240.80 pence, putting it amongst the top five FTSE 250 risers on Friday.
By Tom McIvor; [email protected]; @TomMcIvor1
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