14th Nov 2007 07:01
Lonmin PLC14 November 2007 Lonmin Final Results - Part 1 of 2 Addressing Operational Challenges • A challenging year for Lonmin: • Sales of 793,584 ounces of Platinum and 1,490,184 ounces of total PGMs • EBIT of US$794 million down 5.7% on 2006 • Underlying earnings per share of 295.9 cents down 5.2% on 2006 • Safety performance continues to improve • Mineral resources increased by 27.1% and mineral reserves by 9.2% year on year enhanced by the completion of the pre-feasibility study at Limpopo and the addition of Akanani • Continued growth of mechanised shafts • Senior operational team strengthened with appointment of new President, Lonmin South Africa and new Executive Vice President, Mining • Drilling at Akanani continues to confirm our view of the potential of the project • Final dividend of 60.0 cents per share an increase of 9.0% reflecting the Board's confidence in the fundamentals of Lonmin's business +----------------------------+------+-----------+------------+----------+|Financial highlights - | | | | ||Continuing Operations | | | | || | | 2007 | 2006 | variance ||Year to 30 September | | | | |+----------------------------+------+-----------+------------+----------+|Revenue | US$m | 1,941 | 1,855 | 4.6% |+----------------------------+------+-----------+------------+----------+|Underlying EBIT (i) | US$m | 796 | 830 | (4.1)% |+----------------------------+------+-----------+------------+----------+|EBIT (ii) | US$m | 794 | 842 | (5.7)% |+----------------------------+------+-----------+------------+----------+|Underlying profit before | US$m | 811 | 827 | (1.9)% ||taxation | | | | |+----------------------------+------+-----------+------------+----------+|Profit before taxation | US$m | 705 | 633 | 11.4% |+----------------------------+------+-----------+------------+----------+|Underlying earnings per |cents | 295.9 | 312.1 | (5.2)% ||share (iii) | | | | |+----------------------------+------+-----------+------------+----------+|Earnings per share |cents | 205.1 | 219.5 | (6.6)% |+----------------------------+------+-----------+------------+----------+|Dividend per share (in |cents | 115.0 | 100.0 | 15.0% ||respect of the year) (iv) | | | | |+----------------------------+------+-----------+------------+----------+|Free cash flow per share |cents | 248.2 | 203.4 | 22.0% |+----------------------------+------+-----------+------------+----------+|Equity shareholders' funds | US$m | 1,968 | 1,089 | - |+----------------------------+------+-----------+------------+----------+|Net debt | US$m | 375 | 458 | - |+----------------------------+------+-----------+------------+----------+|Interest cover (v) | x | 27.4 | 23.1 | - |+----------------------------+------+-----------+------------+----------+|Gearing (vi) | % | 15 | 27 | - |+----------------------------+------+-----------+------------+----------+ NOTES ON HIGHLIGHTS (i) Underlying EBIT is total operating profit adjusted for special items.(ii) EBIT is total operating profit.(iii) Underlying earnings per share are calculated on profit for the year excluding movements in the fair value of the embedded derivative associated with the convertible bond, exchange on tax balances, profit on the sale of Marikana houses, pension settlement surplus, amounts written off in respect of non core activities and, for 2006, an adjustment to the interest capitalised in prior years.(iv) The Board recommends a final dividend of 60.0 cents per share payable on 8 February 2008 to shareholders on the register on 11 January 2008.(v) Interest cover is calculated as Group operating profit excluding exceptional items divided by net interest excluding exchange.(vi) Gearing is calculated on the net borrowings attributable to the group divided by the net borrowings attributable to the Group plus equity shareholders' funds. Commenting on the results, Brad Mills, Lonmin's Chief Executive said: "Over the last few years we have been modernising and transforming the Lonminbusiness, while we build in long term growth. In 2007 although we have had manysuccesses, including achieving a market-leading safety performance, eliminatingour over reliance on the Number One furnace and increasing our mineral resourcesby 27.1%, we have also encountered operational challenges and have made a numberof changes which will address these issues. For the 2008 financial year we arecurrently forecasting sales of around 900,000 Platinum ounces. The fundamentalquality of our asset base is robust and we are confident that we can resolve theissues we have faced to provide a solid foundation for long term growth. " Enquiries: Alex Shorland-Ball, Lonmin Plc +44 (0) 20 7201 6060 This press release is available on www.lonmin.com. A live webcast of the finalresults' presentation starting at 09.30hrs (London) on 14 November 2007 can beaccessed through the Lonmin website. There will also be a web question facilityavailable during the presentation. An archived version of the presentation,together with the presentation slides, will be available on the Lonmin website. Chief Executive's Comments Introduction Operationally, the 2007 financial year was a challenging one for Lonmin with asignificant shortfall against our original expectations for production. This hasbeen as a result of a number of factors in both the mining and processing sidesof our business. We have identified the problems and are well advanced inaddressing many of them. Our Marikana Mining unit was impacted by the longer than usual Christmas breakand industrial action during the year. We have continued to ramp up productionfrom our new, fully mechanised, Hossy and Saffy shafts on the eastern side ofthe Marikana property and these shafts are performing in line with ourexpectations. Our concentrators produced a total of 869,832 saleable ounces of Platinum and1,637,481 saleable ounces of total PGMs in concentrate during the year.Recoveries were impacted by the blend of the feed mix including higher thananticipated opencast tonnage and lower head grade. They were also affected by acontinued shortage of skilled personnel. This led to a 3.5% decline in overallconcentrator recovery year-on-year from 80.8% to 77.3%. The inclusion of moreunderground UG2 ore from the marginally lower grade eastern side of the Marikanaoperations, as we continued to grow our mechanised operations in that area,contributed to a decline in milled head grade from 4.85 grammes per tonne to4.80 grammes per tonne (5PGE+Au). We have moved the management of theconcentrators into the Process Division and with the help of the Six Sigma team,introduced a new model to optimise recoveries. In the Process Division, the outage of our Number One furnace in December had amajor impact on our overall production and sales profile for the year. We haveaddressed our historic reliance on the Number One furnace with there-commissioning of the Merensky furnace giving us an increase of 25% in ourinstalled smelting capacity year on year. The addition of new and experiencedmanagement to the Process Division and our focus on operating discipline at theNumber One furnace have reduced the risk of further incidents with that vessel. Despite the challenges, we have made significant progress in certain areasduring the year. Our safety performance has continued to improve. We havestrengthened our senior management team with the appointment of Alan Ferguson,formerly with BOC, as Chief Financial Officer; Mahomed Seedat, formerly with BHPBilliton as President, Lonmin South Africa; and Chris Sheppard, formerly withAnglo Platinum, as Executive Vice President in charge of our mining operations. The acquisition of the Akanani project on the Bushveld's northern limb has addedsignificantly to our long term growth profile, whilst at Limpopo we havesignificantly improved both our understanding of the resources and ourconfidence in its longer term value. Safety We have continued to make good progress with our safety performance recording alost time injury frequency rate per million man hours worked for the year of10.80, an improvement of 13.3% on the 2006 financial year. Our severity rate hasalso fallen to 10.48 days versus 13.81 days in 2006, an improvement of 24.1%. We regrettably suffered a total of three industrial fatalities at our operationsduring the year. Our focus at Marikana has been on promoting LTI free days and we achieved arecord 93 LTI free days this year in comparison to 37 in 2006. We have rolledout the Incident Cause Analysis Methodology (ICAM) to cover all LTIs with therelevant Mine Overseer presenting the investigation into each incident to thesenior operational team. We have introduced Safety Behaviour Observations acrossthe business and this has been successful in visibly showing the commitment ofall management to the safety of each Lonmin employee. In October 2007 we began anew mine wide safety campaign based on learning map technology which is designedto help achieve our goal of an injury free workplace by 2010. Marikana Mining The Marikana Mining Division mined 12.8 million tonnes for the full year, adecrease of 2.0% on the previous period after stripping out the effect of theadditional seven days of production which were included in last year's figuresin order to align our production months with the calendar month. Of these tonnes11.2 million came from underground, down 2.4% from the 11.5 million tonnes ofunderground mined in 2006, and 1.6 million from our opencast operations, down0.9% on the total for 2006. Tonnage was below expectations as a result of the longer than usual Christmasperiod and industrial action. In February we lost one day to a wildcat strikeand in August the operation was impacted by a 10 day illegal strike by theNational Union of Mineworkers ("NUM"). We continued with the ramp up of our fully mechanised Hossy and Saffy shaftsduring the financial year. We have been pleased with the progress of theseshafts and they are confirming our views of the safety, productivity and costbenefits of mechanisation. These shafts have increased production from 64,000tonnes in 2006 to 461,000 tonnes this year or around 4% of our undergroundMarikana ore. Our current expectation is that our mechanised operations willproduce around 17% of underground Marikana ore in the 2008 financial year. Since the year end we have strengthened the mining team with the addition ofthree new senior appointments. Chris Sheppard joined us on 1 October 2007 asExecutive Vice President, Mining with responsibility for all our miningoperations. In addition we have enhanced the Marikana mining team with theappointment of Frank Russo-Bello formerly with AngloGold Ashanti, as VicePresident in charge of Conventional Mining and Dave Wright, formerly minemanager at Rio Tinto's Palabora mine as Vice President in charge of mechanisedmining. Both Frank and Dave report to Chris and joined us earlier this month. Limpopo Mining Our Limpopo operations produced 0.8 million tonnes mined during the 2007financial year. Metal in concentrate production was 35,567 saleable ounces ofPlatinum and 73,600 saleable ounces of total PGMs. This is lower than ouroriginal expectations for the mine as we have continued to encounter difficultground conditions at Limpopo including an Iron Rich Ultramafic Pegmatite (IRUP)in a section of the Merensky reef which was discovered during the later part ofthe year. These issues have confirmed the need to concentrate on development toensure that we have sufficient flexibility to achieve sustainable production.This focus will continue into 2008. We continue to evaluate our options for theexpansion of the Limpopo property following completion of extensive drilling onthe site which has further increased our confidence in the reserves and theproperty's longer term growth prospects. Pandora Joint Venture We continued to mine ore from the Pandora Joint Venture ground during the periodthrough our E3 shaft and UG2 opencast operations. Our share of Pandora'sproduction was 0.1 million tonnes mined from underground (an increase of 28.0%on 2006) and 0.3 million tonnes mined from opencast (an increase of 63.4% on2006). Lonmin purchases 100% of the ore from the Pandora Joint Venture and thisore contributed 52,479 saleable ounces of Platinum in concentrate and 98,133saleable ounces of total PGMs in concentrate to our production, an increase of53.5% on the prior year. In the short term we will continue to exploit E3 shaftand the opencast operations. The feasibility study for a stand alone Pandora project on a conventional basis,which underpins the full value of the asset, is still work in progress and wewill be considering our options in consultation with our joint venture partnersin due course. The Pandora Joint Venture contributed US$12 million of profit after tax for ouraccount in the financial year. Concentrators We produced a total of 869,832 saleable ounces of Platinum in concentrate forthe year, which was a fall of 9.9% on 2006, after stripping out the effect ofthe additional seven days in 2006. Milled head grade declined marginally during the year from 4.85 grammes pertonne to 4.80 grammes per tonne (5PGE+Au) as we continued to grow the Marikanamechanised shafts, processed more opencast ore and sourced 25% more ore than in2006 from the eastern side of the Marikana property. During the year the concentrators experienced a decline in recoveries as wetried to manage the mix of feed including higher than anticipated opencasttonnage, the lower head grade and the continued shortage of skilled personnel.We are addressing this recovery issue and have moved the management of theConcentrators into the Process Division to ensure the right focus on planningand recoveries. We have also developed, with the help of our Six Sigma team, anew model for the running of the concentrators which, we believe, will allow usto improve recoveries as we manage more effectively the feed and mix across our8 concentrators. Process Division On 18 December 2006 we had a burn through in the Number One furnace next to oneof the matte tap holes. The investigation that followed indicated that a fullrebuild of the furnace hearth was required. This was successfully completedduring the second quarter of our financial year and the furnace came back onlinewith its first matte tap on 30 April 2007. We completed the re-commissioning of our Merensky furnace on 12 March 2007 whenwe tapped matte for the first time. The addition of this vessel plus our threePyromets now gives us 40 megawatts of installed capacity. This is a 25% increaseon our 2006 installed capacity giving us surplus capacity in the Smelter inrelation to our current production and much greater flexibility in thisoperation. During the Number One furnace outage we made a decision to stockpile as muchconcentrate as possible ahead of the Smelter for processing in the second halfof the year. A proportion of Concentrate which we did not have the room to storewas toll refined externally. Since 30 April 2007 we have run the Number Onefurnace and the Merensky furnace and have consumed substantially all of theseconcentrate stockpiles. The improved operational discipline introduced by thenew management team in the Process Division has been evident in the performanceof the Smelter. At our Base Metal Refinery ("BMR") we continue to upgrade the facility to reachour target throughput rate of 37 tonnes per day. The BMR performed well in thesecond half of the year with throughput of 5,276 tonnes of matte. The Precious Metal Refinery produced 695,842 ounces of Platinum and 1,289,857ounces of total PGMs during the year, a decrease of 12.9% and 15.2% respectivelyon 2006 after stripping out the effect of the additional seven days in the prioryear. In order to improve operational efficiencies we have increased our year endinventory by around 65,000 Platinum ounces, predominantly within the Base MetalRefinery. We estimate that, of this year end stock, around 46,000 ounces ofPlatinum will be added to our metal in process within the value chain to allowus to achieve stable steady state operations and 19,000 ounces should bereleased through the value chain in the 2008 financial year. In total we received back 93,609 ounces of Platinum and 174,378 ounces of totalPGMs from toll treatment to give total metal sales for the period of 793,584ounces of Platinum and 1,490,184 ounces of total PGMs. Six Sigma Our Six Sigma continuous improvement programme has delivered an additional R173million of net EBIT benefit below the challenging target of R400 million we setourselves. We won, for the second year running, the Best Achievement of SixSigma in Manufacturing at the Global Six Sigma Awards. We now have a total of 7 Master Black Belts and 28 Black Belts within theprogramme and are progressing with the training of all our senior managementteam as Green Belts. We are continuing to work to improve cycle times forprojects. Costs and Capital Expenditure Our C1 cost per ounce was significantly impacted by the lower production volumesat R3,165 per PGM ounce sold for Marikana net of base metal credits. This is29.7% higher than last year with lower volumes being a key driver of this. OurC1 ounces reduced by 16%. The C1 cost per PGM ounce sold for Marikana andLimpopo combined was R3,434 net of base metal credits. The base metal credit perPGM ounce sold was R762. In common with the rest of the South African mining industry we have continuedto experience cost pressures with substantial increases in the cost of power,water and other key consumables starting to impact the business. The shortageof, and difficulty in retaining, skilled labour has also increased the cost baseas we have had to stay competitive in our packages for certain key skills. Our gross capital expenditure for the year was US$276 million which is lowerthan forecast. Looking forward to 2008 we expect our capital spending to bearound US$400 to US$450 million. This will include some carry forward from 2007,spending at the Marikana operations on the completion of our K4 shaft and subdecline projects at Rowland and K3 plus initial work on our planned nextgeneration of deeper shafts. At Limpopo we will continue to conduct work on ourexpansion of this property to the east. For Akanani we have included aroundUS$20 million of capital to cover the planning stage on the project during 2008. Attributable Mineral Resources and Reserves Our directly attributable mineral resources increased by 27.1% versus 30September 2006 primarily as a result of the addition of the Akanani resourceswhich added an additional 30.0 million ounces of PGMs (3PGE+Au). Attributablereserves increased 9.2% to 51.3 million PGM ounces (3PGE+Au) with the completionof our pre-feasibility study on the Limpopo expansion significantly enhancingthe Limpopo overall reserves. At Marikana the reserves and resources remainedrelatively consistent year on year as we continued to replace mined tonnes withfurther ore reserves. The table below sets out our reserves and resources as at30 September 2007 versus the position at the end of 2006. The full reserves andresources statement including all the accompanying notes can be found on ourwebsite at www.lonmin.com. Attributable Mineral Resources (Total Measured, Indicated and Inferred)+-----------+-----------------------------------+------------------------------------+|Area | 30 September 2007 | 30 September 2006 || +-------+------------------+--------+--------+------------------+--------+| | Mt | 3PGE+Au1 | Pt | Mt | 3PGE+Au1 | Pt || | +---------+--------+--------+ +---------+--------+--------+| | | g/t | Moz | Moz | | g/t | Moz | Moz |+-----------+-------+---------+--------+--------+--------+---------+--------+--------+| Marikana | 644.4 | 4.94 | 102.3 | 61.2 | 650.4 | 4.94 | 103.3 | 61.5 |+-----------+-------+---------+--------+--------+--------+---------+--------+--------+| Limpopo2 | 178.8 | 4.19 | 24.1 | 12.1 | 124.6 | 4.72 | 18.9 | 9.5 |+-----------+-------+---------+--------+--------+--------+---------+--------+--------+| Akanani | 269.7 | 3.46 | 30.0 | 12.5 | - | - | - | - |+-----------+-------+---------+--------+--------+--------+---------+--------+--------+|Pandora JV3| 56.7 | 4.33 | 7.9 | 4.9 | 55.4 | 4.09 | 7.3 | 4.6 |+-----------+-------+---------+--------+--------+--------+---------+--------+--------+|Loskop JV4 | 10.1 | 4.04 | 1.3 | 0.8 | 5.2 | 4.35 | 0.7 | 0.5 |+-----------+-------+---------+--------+--------+--------+---------+--------+--------+| Total |1,159.7| 4.44 | 165.6 | 91.6 | 835.7 | 4.85 | 130.3 | 76.1 |+-----------+-------+---------+--------+--------+--------+---------+--------+--------+ Attributable Mineral Reserves (Total Proved and Probable)+-----------+-----------------------------------+--------------------------------------+|Area | 30 September 2007 | 30 September 2006 || +------+-------------------+--------+---------+-------------------+--------+| | Mt | 3PGE+Au1 | Pt | Mt | 3PGE+Au1 | Pt || | +----------+--------+--------+ +----------+--------+--------+| | | g/t | Moz | Moz | | g/t | Moz | Moz |+-----------+------+----------+--------+--------+---------+----------+--------+--------+|Marikana |331.4 | 4.18 | 44.5 | 26.6 | 334.9 | 4.14 | 44.6 | 26.6 |+-----------+------+----------+--------+--------+---------+----------+--------+--------+|Limpopo2 | 64.3 | 3.26 | 6.7 | 3.4 | 20.3 | 3.58 | 2.3 | 1.2 |+-----------+------+----------+--------+--------+---------+----------+--------+--------+|Pandora JV3| 0.30 | 4.55 | 0.04 | 0.03 | - | - | - | - |+-----------+------+----------+--------+--------+---------+----------+--------+--------+|Total |396.0 | 4.03 | 51.3 | 30.0 | 355.2 | 4.11 | 47.0 | 27.7 |+-----------+------+----------+--------+--------+---------+----------+--------+--------+ The Lonmin Mineral Resources and Reserves information was prepared on thefollowing basis: 1. 3PGE+Au = Pt+Pd+Rh+Au (Loskop JV excludes Rh).2. Limpopo includes Dwaalkop JV, in which Western Platinum Limited (82% owned by Lonmin) has an interest of 50%.3. Pandora JV: Eastern Platinum Limited (82% owned by Lonmin) has an attributable interest of 42.5% in the Pandora Joint Venture with Anglo Platinum, Mvelaphanda Resources and the Bapo Ba Mogale Mining Company.4. Loskop JV: Western Platinum Limited (82% owned by Lonmin) has an attributable interest of 50% in the Loskop Joint Venture with Boynton Investments.5. Incwala Resources owns 18% of both Western Platinum Limited and Eastern Platinum Limited and 26% of Akanani.6. All quoted Resources and Reserves include Lonmin's attributable portion only and the following percentages were applied to the total Mineral Resource and Reserve for each property: Area Marikana Limpopo - Limpopo - Akanani Pandora Loskop Dwaalkop JV Baobab, Doornvlei, ZebedeliaLonmin 82% 41% 82% 74% 34.85% 41%Attributable The 2006 Mineral Resources and Mineral Reserves have been re-stated in order toreflect Lonmin's portion only. 7. All figures are reported as metric tonnes (millions), grammes per tonne, percent or troy ounces (millions).8. All tabulated data have been rounded to one decimal place for tonnage and content and two decimal places for grades.9. Mineral Resources are inclusive of Mineral Reserves.10. Mineral Resources are reported as "in situ" tonnes and grade and allow for geological losses such as faults, dykes, potholes and Iron Rich Ultramafic Pegmatite (IRUP).11. Proved and Probable Mineral Reserves are reported as tonnes and grade expected to be delivered to the mill, are inclusive of diluting materials and allow for losses that may occur when the material is mined.12. Mine tailings dams are excluded from the above Mineral Resource summary.13. For economic studies and the determination of pay limits, an exchange rate of R7.25/US$ and the following metal prices were assumed: Metal Pt Pd Rh Ru Ir Au Metal Ni CuUSD/Oz 1,270 350 4,000 530 410 680 USD/tonne 33,000 6,600 14. Dilutions are quoted as waste tonnes/ore tonnes in percent.15. Unless otherwise stated, the Lonmin Mineral Resources and Reserves estimates were prepared or supervised by various Lonmin Competent Persons. Markets Most of the physical PGM markets, apart from Palladium, remained tight during2007, as global demand for the metals from industrial applications, inparticular in the autocatalyst sector, continued to grow. Supply remainedconstrained as the South African PGM industry, the world's largest source of PGMproduction, continued to face challenges such as skills shortages as well ascapital project cost and wage inflation. The Platinum market remains tightly balanced and continues to be supported byon-going demand growth for diesel autocatalysts, Platinum jewellery in China andthe continued use of the metal in industrial and electronic applications. TheRhodium market remains tight due to strong demand from the autocatalyst sector,which contributes around 89% of demand for the metal, whilst supply remainsconstrained, as it continues to be produced mainly as a by-product of SouthAfrican Platinum production. The autocatalyst sector remains the most importantdemand driver for Palladium although demand is also being supported by thejewellery market. South Africa remains the world's dominant production source of other Platinumgroup metals, in particular Ruthenium and Iridium. The country continues to becritical in meeting the growing demand for the application of these metals innew and innovative industrial manufacturing technologies. Growth Profile Our growth in the period to 2012 will come primarily from the development of ourmechanised shafts at Marikana and the completion of the Limpopo easternexpansion. The combination of these, and the steady rate of production from ourdeep shafts at Marikana will, we believe, allow us to reach production of around1.2 million ounces of Platinum in 2012. This target and the detailed plans toreach it will be fully reviewed in the next few months by the new mining team. Marikana At Marikana we will continue the conversion to mechanised mining with Saffy andHossy reaching full production in 2011 and 2012 respectively. Our K4 mechanisedshaft on the western side of the Marikana property will come into productionlate in 2009 and at full production, which we anticipate will be around 5 yearslater, is planned to contribute an additional 180,000 Platinum ounces. Theselarge new shafts, plus the extension of K3 and Rowland shafts, will offset thedecline of a number of smaller, shallow shafts which are expected to depleteover the next few years. Limpopo Our existing Limpopo operations at Baobab shaft encountered an area of adverseground around an IRUP body during 2007. This event resulted in a loss of orereserves and to address this situation, we are focusing on development workthrough the IRUP body to ensure we can sustain our targeted production levels inthe future. We completed a pre-feasibility study on the Limpopo expansion project in Marchthis year confirming our view that the project could be developed as a fullymechanised mine. We have undertaken further work on the project since thecompletion of this study to look at the potential for a larger project on theproperty. Permitting for this project is underway. This new work will also lookat short term opportunities to make optimal use of our existing concentratorcapacity at Limpopo including the possibility of accessing ore from theexpansion to the east where the reef is closer to the surface. Akanani In the second half of the year we continued drilling at the Akanani project(which is on the northern limb of the Bushveld complex) to increase ourconfidence in the mineral resource. The drilling in the southern section hascontinued to confirm the continuity of the mineralisation and the consistency ofthe grades and thickness. The results of the P2 in-fill drill holes completedsince our interim announcement are set out below and show a weighted mean widthof 20.88 metres at a grade of 6.06 grammes per tonne (3PGE+Au). Once the infilldrilling programme is completed we will publish an updated mineral resourcesstatement for the property. Work has commenced on mine design for high volumemechanised mining at Akanani looking at options which could range from 400,000to 1 million tonnes hoisted per month. +----------------+----------------+----------------+----------------+----------------+| Borehole | Drilled width | 3PGE+Au | Cu | Ni || | | | | || | (metres) | (g/t) | (%) | (%) |+----------------+----------------+----------------+----------------+----------------+| ZF015 | 13.27 | 2.62 | 0.16 | 0.25 |+----------------+----------------+----------------+----------------+----------------+| ZF043* | 25.60 | 5.51 | 0.17 | 0.36 |+----------------+----------------+----------------+----------------+----------------+| ZF044* | 35.98 | 9.64 | 0.17 | 0.34 |+----------------+----------------+----------------+----------------+----------------+| ZF045 | 28.00 | 2.51 | 0.14 | 0.22 |+----------------+----------------+----------------+----------------+----------------+| ZF046 | 11.74 | 8.31 | 0.21 | 0.40 |+----------------+----------------+----------------+----------------+----------------+| ZF047 | 0.97 | 4.08 | 0.03 | 0.26 |+----------------+----------------+----------------+----------------+----------------+| ZF049 | 30.64 | 6.25 | 0.12 | 0.24 |+----------------+----------------+----------------+----------------+----------------+| Weighted Mean | 20.88 | 6.06 | 0.15 | 0.30 |+----------------+----------------+----------------+----------------+----------------+ * Average of two intersections In addition to the P2 section of the Platreef we continue to believe that the P1mineralisation has significant selective mining potential which has beenconfirmed by our drilling of the P1 section of the reef to date. Recent drillholes indicated a width in this section of the reef of between 16.5 to 38.4metres at grades of between 3.16 to 5.11 grammes per tonne (3 PGE+AU). +-----------+-----------+-----------+-----------+-----------+-----------+-----------+| Borehole | From | To | Drilled | 3PGE+Au | Cu | Ni || | | | width | | | || | | | | (g/t) | (%) | (%) || | | | (metres) | | | |+-----------+-----------+-----------+-----------+-----------+-----------+-----------+| ZF044 | 1226.87 | 1264.56 | 37.69 | 3.16 | 0.09 | 0.14 |+-----------+-----------+-----------+-----------+-----------+-----------+-----------+| ZF044 | 1282.52 | 1301.91 | 19.39 | 5.09 | 0.11 | 0.20 |+-----------+-----------+-----------+-----------+-----------+-----------+-----------+| ZF044_ED1 | 1317.13 | 1333.59 | 16.46 | 4.41 | 0.18 | 0.27 |+-----------+-----------+-----------+-----------+-----------+-----------+-----------+| ZF045 | 976.14 | 1014.51 | 38.37 | 5.11 | 0.20 | 0.31 |+-----------+-----------+-----------+-----------+-----------+-----------+-----------+| ZF046 | 1018.46 | 1041.52 | 23.06 | 4.17 | 0.13 | 0.23 |+-----------+-----------+-----------+-----------+-----------+-----------+-----------+ At the time of our acquisition of the project, the Platreef mineralisation hadonly been drilled along 3 km of strike in the southern section of the property.Since February a further fourteen drill holes have been completed alongapproximately six kilometres of strike in the northern portion of the asset.These drill holes indicate that the promising mineralisation continues along theentire nine kilometres of strike at the property. Set out below are the resultsof the 6 drill holes completed since our interim announcement in May 2007: +----------------+----------------+----------------+----------------+----------------+| Borehole | Drilled width | 3PGE+Au | Cu | Ni || | | | | || | (metres) | (g/t) | (%) | (%) |+----------------+----------------+----------------+----------------+----------------+| MO009 | 7.56 | 5.78 | 0.07 | 0.18 |+----------------+----------------+----------------+----------------+----------------+| MO013 | 1.92 | 3.08 | 0.18 | 0.31 |+----------------+----------------+----------------+----------------+----------------+| MO014 | 26.27 | 1.99 | 0.10 | 0.17 |+----------------+----------------+----------------+----------------+----------------+| MO016 | 0.86 | 4.62 | 0.05 | 0.08 |+----------------+----------------+----------------+----------------+----------------+| MO019 | 3.45 | 2.66 | 0.04 | 0.06 |+----------------+----------------+----------------+----------------+----------------+| MO020 | 24.34 | 3.07 | 0.09 | 0.16 |+----------------+----------------+----------------+----------------+----------------+ New Order Mining Licence A fundamental part of security of tenure for mining in South Africa is theconversion of Old Order Mining Rights to New Order Mining Rights, under thecountry's mining legislation effective 1 April 2004. In October 2006, we achieved conversion of our Marikana mining rights. Thesegive us the right to mine at Marikana for 30 years, with an option to renew thelicence for an additional 30 years. The table below lays out the status of licensing for our major projects: +-----------------+---------------------+------------------------------+----------+|Project |Current Rights/ |Current Status of Conversion |Effective || |Permits | | BEE || | | |Ownership |+-----------------+---------------------+------------------------------+----------+|Marikana |New Order Mining |Converted. | 18% || |Rights | | || | | | |+-----------------+---------------------+------------------------------+----------+|Limpopo - Baobab |Old Order Mining |Application for conversion of | 18% ||shaft |Right |Old Order Mining Right | || | |submitted in March 2007. | || | | | || | | | |+-----------------+---------------------+------------------------------+----------+|Limpopo - |Converted Prospecting|Application for New Order | 59% ||Expansion |Right which is |Mining Rights to be submitted | ||(Dwaalkop) |currently subject to |in November 2007. | || |a Renewal Application| | || | | | || | | | |+-----------------+---------------------+------------------------------+----------+|Limpopo - |Old Order Mining |Application for conversion of | 18% ||Expansion |Right |Old Order Mining Right being | || | |drafted with submission | ||(Doornvlei) | |anticipated in first quarter | || | |of 2008. | || | | | || | | | |+-----------------+---------------------+------------------------------+----------+|Pandora Joint |Old Order Mining |Application for conversion of | 15% ||Venture |Right |Old Order Mining Right | || | |submitted in 2006. Processing | || | |ongoing due to amendments made| || | |to initial documents | || | |submitted. | || | | | || | | | |+-----------------+---------------------+------------------------------+----------+|Akanani |Converted Prospecting|Application for New Order | 26% || |Right |Mining Right will be made | || | |following completion of | || | |pre-feasability study | || | | | || | | | |+-----------------+---------------------+------------------------------+----------+ Dividend The Board has recommended a final dividend of 60.0 cents per share, an increaseof 9.0% on the final dividend last year, reflecting the Board's confidence inthe fundamentals of Lonmin's business. This gives a full year dividend inrespect of the year of 115.0 cents per share up 15.0% on 2006. Outlook and 2008 Guidance We currently anticipate sales for the 2008 financial year will be around 900,000ounces of Platinum. 2008 will be a year of consolidation as we continue to growour mechanised mining at Marikana with forecast production increasing from ourmechanised operations to around 17% of underground ore mined at Marikana. Thecontinuing ramp-up of our mechanised Hossy and Saffy shafts will contribute tothe mix and grade impact we saw in 2007 continuing into 2008 with our growth atMarikana next year coming predominantly from the eastern side of the operation.We are conducting a review of the ongoing viability of our opencast pits giventheir impact on concentrator recoveries and increasing costs. However, we arecurrently planning for these pits to continue to contribute during 2008. AtLimpopo the emphasis on development will continue. In the Process Division wewill focus on improving recoveries across the value chain with a strong focus onour Concentrators. We expect the current challenging cost environment will continue in 2008. SouthAfrican inflation in the mining sector for both operating costs and capitalprojects is accelerating rapidly due to the combined impact of the mining boom,construction boom, and 2010 World Cup infrastructure spend. The labour marketfor all skills at artisan level and above is very competitive with overallindustry wage settlements increasing at double digit annual rates. Utility costsare rising rapidly as are the costs of basic materials such as steel, lubricantsand fuel. These factors, plus the current stronger South African Rand, willincrease unit costs in 2008. We are currently forecasting that our C1 costsbefore base metal credits for the 2008 financial year will be 15% ahead of theR4,196 in 2007 and base metal credits per PGM ounce sold will be in line withthat recorded in 2007. The contribution of Lonmin employees, contractors and community members duringthe last year is highly valued and their hard work and dedication is greatlyappreciated. The markets for Platinum and our other key metals continue to look robust and wehave added further growth to our portfolio with the acquisition of Akanani. Weare taking actions to address the operational issues we have encountered in thelast twelve months and are confident that this work will strengthen the companyand build a solid foundation for our long term growth plans. Bradford A MillsChief Executive 14 November 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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