12th May 2014 07:43
LONDON (Alliance News) - Lonmin PLC Monday said it swung to a significant pretax loss in its first half as the ongoing miners strike in South Africa continued to hit production at the company.
However, a leaked memo over the weekend showed that the company is expecting a mass return to work on Wednesday.
The platinum mining company said it swung to a pretax loss of USD278 million for the six months ended March 31 from a pretax profit of USD54 million the previous year, as revenues fell 21% to USD578 million from USD735 million.
The company said its revenues fell as the amount of ore mined at the company dropped 43% to 3.2 million attributable tonnes, with production in its first quarter hit by safety stoppages and production in its second quarter at a virtual standstill due to the ongoing strike action.
Lonmin said that in its second quarter, production from its Marikana underground mine fell 81% to 500,000 tonnes, production from its Merensky opencast operations fell 42% to 77,000 tonnes and production from its Pandora site fell 75% to 90,000 tonnes, all due to the strike action in South Africa.
Overall, the company said it lost 155,720 ounces of equivalent saleable platinum on the strike action during its first half year.
The platinum sector in the country has been crippled by strikes at mines owned by Lonmin, Impala Platinum Holdings Ltd and Anglo American Platinum Ltd, a subsidiary of Anglo American PLC, as the Association of Mineworkers and Construction Union attempts to achieve significantly better wages.
In March, Lonmin said that negotiations over the action had been suspended after parties could not reach any kind of consensus following an offer by the major platinum producers to pay increases of between 7.5% and 10%, the union in turn has been demanding increases of 30% or more.
Lonmin said on Monday that in April it put on the table a revised settlement, stating that entry-level underground employees would be paid ZAR12,500 per month from July 2017, through a pay rise of 7.5% to 9.5% per year. However, the revised offer was rejected by the AMCU.
The companies then decided to offer employees the new deal directly, and they are hoping that this process will mean they can see a return to work in May and production has been provisionally rescheduled to start in June.
On Saturday, a leaked internal company memo said that it expects a 'mass return to work' on Wednesday, according to a Reuters report.
"Lonmin is gearing up for a serious back to work offensive on Monday 12 May in anticipation of a mass return to work on 14 May," the memo said, according to Reuters on Saturday.
Lonmin said on Monday that it had anticipated the strike and so was able to manage its stock to limit its losses, achieving platinum sales of 263,675 ounces during the period, a 19% fall on the previous year.
Lonmin said it has made good progress on its unit-cost containment during the period and set up a number of initiatives during the period to limit its losses.
The company said its spend on capital during the period was USD46 million and its net cash balance was USD71 million at March 31, with available committed debt facilities of USD589 million.
"Whilst we continue to work to resolve this dispute we have also taken decisive and early action to reduce cash burn, to safeguard our great assets and protect our balance sheet integrity ahead of a safe and successful ramp up when the strike ends; something we have demonstrated we excel in," Chief Executive Ben Magara said in a statement.
Lonmin shares were up 2.3% to 289.20 pence, putting them in the top FTSE 250 risers Monday.
By Tom McIvor; [email protected]; @TomMcIvor1
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