24th Jul 2015 06:55
LONDON (Alliance News) - Lonmin PLC Friday said it is planning to close or temporarily shut down numerous mine shafts in South Africa, threatening around 6,000 jobs, which will lead to production being around 100,000 platinum ounces less per year over the next two years.
The FTSE 250-listed platinum group metals miner said it was taking the "necessary protective measures" to reduce its cost base in the current pricing environment so that it will be able to sustain a viable operation even if the current metal pricing environment continues for some time, it said.
Lonmin is highly geared to platinum group metal prices, and at current metal prices the company is Ebitda negative. Lonmin said the platinum price had fallen more than 14% to USD964 per ounce in July from USD1,126 per ounce in March.
As a result, Lonmin has decided to close the Hossy and Newman shafts and put the W1, E1 and 1B Generation 1 shafts into care and maintenance.
"This will include reducing the associated active concentrator capacity. We are also taking further measures to reduce our overhead and support service structures in-line with the closing of shafts and the resultant reduction in the size of our operations," said Lonmin.
Lonmin said it would have a "smaller more sustainable and agile business" by reducing the high-cost production, but the consequence will be that annual production will be around 100,000 platinum ounces less over the next two fiscal years.
"These actions will protect the majority of the workforce, but a total of 6,000 employees including contractors are likely to be affected by these closures. This figure includes those who have already applied for the voluntary separation packages we announced in May," said the company.
The miner also said it its reviewing its capital structure and said it needs to consider refinancing its debt facilities.
"The board is considering the full range of options available to secure long term capital and expects to update the market by the time of our full-year results in November 2015," said Lonmin.
On a more positive note, the company did report a substantial rise in production and sales in the third quarter following on from the strike action in 2014 that severely hampered its results.
Saleable platinum in concentrate production was 172,672 ounces in the third quarter, up from only 23,618 ounces a year earlier whilst refined platinum production totalled 241,170 ounces from 36,255 ounces. Sales came in at 231,778 platinum ounces which was in line with production but hit by weaker platinum prices.
"Our mining and milling performance in the nine months of the 2015 financial year increased significantly on the prior year period which was impacted by the five month strike," said the company.
"The fourth quarter production has started well and absent any material Section 54 safety stoppages we expect to achieve our platinum saleable metal-in-concentrate of 750,000 platinum ounces and sales guidance of 730,000 platinum ounces for the year," it added.
By Joshua Warner; [email protected]; @JoshAlliance
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