Final Results

REGULATORY RELEASE

10 November 2014

2014 Final Results Announcement

Lonmin Plc, ("Lonmin" or "the Company"), one of the world's largest primary Platinum producers, today publishes its Final Results for the year ended 30 September 2014.

HIGHLIGHTS

Results dominated by strike impact

· Regrettably one fatality on 26 October 2013

· Improved Lost Time Injury Frequency Rate (LTIFR) by 4.6% to 3.34

· Lost 391,000 platinum saleable ounces due to five month strike

· Industry leading safe and exceptional ramp up in a record two months

· Operational flexibility maintained with available ore reserves at an average of 21 months production

· Exceptional instantaneous recovery rates improved to 86.2%

· Platinum sales of 441,684 ounces

Financial Results

· Underlying profit before tax $46 million ($158 million in 2013)

· Net debt of $29 million with available committed facilities of $575 million (Net cash of $201 million in 2013)

· Costs of idle production during the strike resulted in the cost of production per PGM ounce increasing by 47%

· Capital expenditure $93 million carefully managed through the strike

· Underlying earnings per share of 5.4 cents versus 20.5 cents in prior year

FY2015 Guidance

· Platinum saleable metal in concentrate production in the region of 750,000 ounces

· Sales of around 730,000 Platinum ounces

· Unit costs of production around R10,800 per PGM ounce

· Capital expenditure of around $250 million

· Stable operating environment is key

Medium-term Outlook

· Expect to maintain sales of circa 750,000 Platinum ounces supported by capital expenditure of around $250 million to $350 million per annum

· Contain future unit cost increases below wage inflation

· Cost reduction and productivity improvement programmes in place to ensure business is sustainable through all cycles - value benefits of more than R2.0 billion have been identified and will be targeted over the next three years

Lonmin Chief Executive Officer Ben Magara said: "This year has been unique, with a strike of unprecedented length halting production for five months. Notwithstanding that, we have made progress in a number of areas. Our ramp-up exceeded all expectations and we are renewing our operational credibility. Our business review has surfaced real opportunities to reduce costs, improve productivity and capital efficiency and we are seeing increasingly encouraging results in these areas. We have made significant management and operating model changes as we take Lonmin to the next level."

FINANCIAL HIGHLIGHTS

Footnotes:

ENQUIRIES

Investors / Analysts:

Lonmin

Media:

Cardew Group

Notes to editors

Lonmin, which is listed on both the London Stock Exchange and the Johannesburg Stock Exchange, is one of the world's largest primary producers of PGMs. These metals are essential for many industrial applications, especially catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery.

Lonmin's operations are situated in the Bushveld Igneous Complex in South Africa, where nearly 80% of known global PGM resources are found.

The Company creates value for shareholders through mining, refining and marketing PGMs and has a vertically integrated operational structure - from mine to market. Underpinning the operations is the Shared Services function which provides high quality levels of support and infrastructure across the operations.

For further information please visit our website: http://www.lonmin.com

CONTENTS

This document contains the following sections:

· Chief Executive Officer's Review;

· Operational Review;

· Market Review;

· Reserves & Resources;

· Financial Review;

· Responsibility Statement of the Directors;

· Operating Statistics - 5 Year Review; and

· Financial Statements

CHIEF EXECUTIVE'S REVIEW

The Business

The huge impact of a strike of unprecedented length across the South African Platinum Group Metals (PGM) sector resulted in Lonmin losing 391,000 equivalent saleable Platinum ounces

Our majority union AMCU downed tools on 23 January 2014, demanding a basic wage of R12,500 from the three largest PGM producers in South Africa, including Lonmin. The three affected producers were clear that such demands were impossible to meet if they were to remain viable companies and protect jobs and investment. Lonmin negotiated and communicated collectively with its two peers. That was the right thing to do, but it did not stop us working towards building better relationships with AMCU and our employees.

On 24 June 2014 an agreement was reached for a return to work. We believe we can have real confidence in this three year agreement, as there is an undertaking that there would be no industrial action in its duration, in respect of the issues covered by the wage agreement. We also concluded agreements with our minority unions to ensure that every employee can be heard. Behind the scenes much was being done. We took early, decisive action during the strike to protect the business.

Firstly, we anticipated the end of the strike and we planned and prepared. We also made important operational decisions early and applied a disciplined approach to monitoring and securing our operations during the strike to position ourselves well for a re-start when the time came. Secondly, we resumed our processing operations in May using the knowledge we had to judge the strike was close to coming to an end.

Finally, we were bold in our approach to re-starting all our shafts. We prioritised shafts which would generate cash early, even though they may have been amongst our smaller and older shafts, before moving to our newer, bigger shafts some of which are higher cost assets. Without the strike we may have chosen to prioritise differently, but we were clear that we needed to be generating cash as early as possible.

The combination of all this early planning and hard work on relationships meant that we saw 85% of employees return on day one, June 25th. The huge logistics operation we put in place around key areas such as medical health, strike-related poverty and transport proved invaluable.

The end result was an industry leading ramp up, achieving full production safely within two months. We optimised the immediately available ore reserves and built on a rapidly established team ethos at the shafts. We did so with impressive safety numbers and with equally impressive (and at Saffy, record) tonnages. Shortly after achieving full production we reported to the market the first fatality-free year in Lonmin's history. In mining, moving from dormancy to production is perhaps the most dangerous of times, so despite the lengthy strike the fact that we were able to ramp up so fast, and so safely, is a huge achievement.

Combined with this, the decisive cash conservation measures we put in place to minimise cash burn, together with the effective management of our stock pipeline drawdown, resulted in much improved financial flexibility as we ramped up.

All these measures have resulted in our small net debt position of $29 million as at 30 September 2014, leaving significant headroom to the $575 million in banking facilities available to the Company. In all this our management, from the reconfigured executive leadership team (described further below) down through the tiers, has performed well, and is delivering.

In addition, we committed last year to explore our options around reducing costs and improving profitability. This work has been completed and we have identified value benefits of more than R2 billion over three years.

Strategic Priorities

In 2013 we began a fundamental review of our business. Throughout and after the subsequent five month strike in 2014 we took the opportunity to adapt our thinking. This has developed into the strategy, which takes into account the Board initiatives laid out in early 2013 around social and community issues as well as operational ones and comprises the following four pillars:

· Operational Excellence

· Enhance Balance Sheet Strength

· Our People and Relationships

· Corporate Citizenship Agenda

1. Operational Excellence

1.1 Safety

We strive to be the industry leader in safety and we believe that "Zero Harm" is achievable. This starts with the safety and wellbeing of our employees and extends to everything we do including minimising the environmental impact of our operations. We believe that integrating our operational and sustainability strategies will enable us to deliver on our goal of zero harm.

1.2 Priorities

Our highest short term priority is our excellent Marikana operations which are some of the best in the industry in terms of quality, safety and performance. We are also the industry leader in UG2 mining and processing technology, an increasingly important part of the ore mix in the industry.

Within our mining operations, we will strive to achieve balance between our eleven shafts. Some are smaller, older, in the latter stages of their operational life and highly cash generative whilst some are larger, newer, still ramping-up to full potential and are therefore not currently at premium efficiency and operating cost.

As we told the market we would at this time last year, we launched a comprehensive review of our assets and operations to address asset utilisation, reduce the total cost of ownership (TCO), improve capital efficiency and productivity and, therefore, profitability and cash flow and increase potential for paying dividends as the markets improve. All of this aims to ensure that Lonmin becomes a superior low cost PGM operator in the medium term, whilst prudently managing risk through all cycles.

As a result of the review, we concluded that our Marikana portfolio utilisation can be further optimised and our return on the limited capital invested, enhanced. Utilisation of shaft hoisting capacity is too low and our concentrator, smelting and refining capacity is greater than required for the volume of output from mining. This coupled with low productivity and a high fixed cost base presents an opportunity for Lonmin to improve profitability.

We are actively pursuing a process of allocating capital to projects that we believe will provide no less than 15% returns, taking account of risk, and we are reducing capital expenditure in line with cash generation

1.3 Actions

In light of priorities set out above the actions being taken will fall under the following headings:

· Marikana asset flexibility

· Cost savings

· Additional Projects 

1.3.1 Marikana asset flexibility

We have instituted new operating philosophies at old shafts in decline to maximize cash generation and minimise expenditure, specifically at East 1, East 2, East 3 and Newman.

We are accelerating improvement initiatives through theory of constraints at our big, low cost shafts of the future to increase and sustain shaft hoisting performance and improve capital efficiency. It is expected that K3, 4B/1B, Rowland, Saffy and Hossy shafts will benefit from this.

Saffy ramp-up profile was delivered in line with 2013 promises despite the strike. We have driven the optimal ramp-up of the shaft by maintaining 18 months of available ore reserve to support the required extraction rate, putting stoping crews in place ahead of schedule and improving crew efficiencies. We have deployed a highly skilled business improvement team to identify and eliminate bottlenecks and improved infrastructure to support planned production levels.

Hossy's long term plan has been adversely impacted by numerous capital deferrals over its life resulting in increased unit costs. We had already identified it as a high-cost marginal shaft. As we resumed operations following the strike, it was important to safely ramp up as quickly as possible. The significant attendance we saw across the entire business enabled us to restart all the shafts. However, we also discussed with the unions the fact that Hossy was at risk in view of its high cost nature and productivity issues. The excellent rate of production we have demonstrated illustrates the success of the collaborative effort.

The additional capital required to develop the Hossy shaft to the level where we would see costs come down significantly is currently unaffordable and must rank behind other projects in attractiveness. As our highest cost and therefore most vulnerable shaft, Hossy has been the focus of our efforts to reduce costs and we are carrying out a full technical review of the shaft's long term prospects while instituting targeted interventions to reduce real unit costs as follows: discarding the XLP mining method and continuing with hybrid mining whilst increasing the volume of production; reviewing the contractor model at the shaft; driving efficiency improvement projects and reviewing shaft overheads and right sizing the operation to 100,000 tonnes per month from a name plate capacity of 120,000 tonnes per month.

K4 shaft offers the best brownfield replacement and growth optionality for Lonmin. We placed it on care and maintenance in 2012 as market conditions deteriorated but in line with Saffy and Hossy, K4 will be the next shaft to benefit from our new approach. We are now placing a dedicated team into K4 to look at how we can begin to prepare K4 for an effective ramp up in due course without requiring excessive capital. We will use the excess productive labour from other shafts. It is likely that we will see some preparation activity at K4 during the 2015 financial year.

We will continue to mine our opencast pit as long as this makes economic sense and it is likely to deplete by December 2015 at current extraction rates.

We decided to defer the restart of the Number One UG2 concentrator in order to match concentrator capacity to mining output.

1.3.2 Value Benefits

The value benefits we anticipate, denominated in Rand, as most of our expenses are incurred in Rand, are targeted over the next three years and amount to more than R2 billion.

Operating Model Cost Savings

We anticipate cost savings of around R600 million to come from a review of our contractor model; redeployment of employees and contractors; freezing some recruitment; and natural attrition. Additionally we expect continuous procurement cost savings through the Total Cost of Ownership project.

Productivity and Efficiencies

We expect value benefits arising from productivity and efficiencies improvements. This includes half level optimisation of key shafts and our focus on stoping crew efficiencies.

Process Operations

We have a number of initiatives within our processing operations which are anticipated to yield benefits. This includes reducing our metals in process pipeline and continued processing recovery improvements through the bulk tailing treatment project. This project which was delayed as a result of the impact of the strike on capital spend, is progressing and is anticipated to deliver near term returns.

In addition we intend to leverage customer relationships to optimise revenues generated from our basket and pursue collaboration in market development.

2. Enhance Balance Sheet Strength

We plan to preserve a conservative balance sheet with access to sufficient funds to finance both ongoing operations and prudent and efficient capital expenditure.

Our excellent project pipeline should not be funded by bank debt which should be used sparingly, principally to fund working capital fluctuations. Our ability to re-invest in our asset base is therefore contingent on our own profitability. Importantly part of our savings from cost and capital efficiency has to go into social investment as this has proven a business imperative. Going forward we recognise that there will be a need to balance our shareholders' need to receive a dividend and the need for capital and social spend.

3. Our People and Relationships

The unprecedented five month strike has refocused our energy on rebuilding relations with employees and their representative trade unions. In the wake of the strike we have continued to reach out to our employees and all unions, through meetings and structured workshops aimed at ensuring that any issues can be dealt with swiftly and without recourse to industrial action. The relationships with our employees and their representative trade unions are critical to our success. They form the central part of how we conduct our business and an acknowledgement of their respective roles in ensuring a sustainable operating environment.

We are increasing our efforts to communicate directly with employees and to reclaim our role as the primary source of communication. This direct engagement with employees through the existing line management structures and the periodic communication forums, forms part of the way we work and the basis of creating empowered, high performance teams. Through the leadership development and team effectiveness training programmes, we continue to develop our managers' capacity to manage this new form of direct engagement.

In addition we have initiated a relationship building programme. This programme has culminated in the Relationship Charter, which outlines our aspirations of the nature of relationship that will be built with the unions and measures that are being implemented to give effect to the Charter. The Charter presents a real opportunity to strengthen relations with trade unions inter alia through constructive and regular engagements.

Management has begun to drive through the strategic actions from the asset review and we are seeing encouraging results. The solid ground-work that we have done over recent months underpins the excellent traction we have gained and will enable us to realise future opportunities.

We have made major changes to our top team in order to create a cohesive business with empowered operating teams. We have experienced and skilled middle management teams and they now have been given a greater say and control over their various areas which is already bearing fruit. The reshaped management team is now more focused on value and delivery.

The new structure will enable us to utilise the skilled resources we have across the mining and processing operations and develop a common culture. This provides for our employees' growth and development with great benefits to Lonmin. Our new approach is also improving our ability to attract, develop and retain the best talent.

More information around the relationship charter we have developed to guide this process can be found under the Operational Review of this report.

4. Our Corporate Citizenship Agenda

4.1 Stakeholder Engagement

The importance of genuine and robust stakeholder engagement and relationship building has become increasingly apparent over the past decade, given the need to understand stakeholder expectations and communicate on key issues transparently, consistently and in a timely manner. We have identified and prioritised our stakeholder groups and individuals and allocated relationship "owners" to each grouping. Our aim is to rebuild and protect Lonmin's relationships with all and critical stakeholders who have a significant ability to impact Lonmin's operations and investment case. The renewed focus and energy on stakeholder engagement acknowledges the role of partnerships in confronting the challenges plaguing the industry. Functional partnerships between Government, organised labour and community leaders are essential if we are to create the necessary environment for a sustainable future.

4.2 Corporate Communications and Reputation Management

The role of communications has been critically examined, specifically with respect to rebuilding trust externally as well as internally between management and employees, and creating an environment of peace and tolerance. This renewed focus on communication, transparency and genuine engagement led to several structural changes in a bid to align the Company and our stakeholders to a shared vision of a sustainable and profitable Lonmin through all cycles and minimise business interruptions.

4.3 Social licence to Operate

Maintaining our social license to operate through securing the trust and acceptance of communities and stakeholders is material as they host our operations. This is achieved through:

- stakeholder engagement to ensure social expectations are understood and managed

- community upliftment initiatives to address social issues

- transformation initiatives to meet the government's social and economic development goals

- ethical business practices that include a commitment to upholding human rights

- corporate and community partnerships

Lonmin is supportive of and commits to participate in the South African government's National Development Plan.

4.4 BEE ownership

The new year is also vital for our BEE responsibilities. We concluded a historic deal with the Bapo community in 2014, and we must maintain this momentum as we approach various deadlines.

Lonmin was one of the first mining companies to conclude a BEE transaction, transferring 18% of the operations to HDSAs in 2004. Lonmin was subsequently unable to finalise the last 8% and, even though this has been challenging in this deadline year, I am confident that the transactions will be completed within the required time frame.

4.5 Living Conditions and Completion of Hostel Conversion

Housing for employees is one of the areas which goes to the heart of our licence to operate, both in terms of the Mining Charter, and in terms of our relationship with our employees.

Whilst it requires significant investment to achieve, a successful housing policy and plan brings long-term benefits in terms of increased productivity and reduced absenteeism.

In our Social and Labour Plan, we originally committed to convert 128 traditional single-sex blocks into a mixture of family and bachelor units. We will complete the conversion by the end of December 2014. Upon completion, the 128 converted hostel blocks will yield 796 family units and 1,868 single units.

Acknowledgements

We have now put the top team in place for the challenges and plans ahead. I expect a step change, given the focus on operational delivery created by the reconfigured structure and team. I would like to take this opportunity to welcome Johan Viljoen, who brings industry-leading expertise and experience to his position as Chief Operating Officer. We also welcome back Ben Moolman, a Lonmin and Platinum stalwart, who will run the Business Support Office (BSO) we established this year. The BSO is the conscience of the business ensuring we get value from every Dollar and every ounce and also deliver on our social commitments.

We saw three senior colleagues leave us this year, Albert Jamieson, Natascha Viljoen and Mark Munroe and furthermore, Barnard Mokwena will be leaving us at the end of December. They have all given great service to this Company. They leave with our high praises. I know you will join me in wishing them all the best for their future, and in welcoming our new colleagues, who form part of an Exco which is driving Lonmin to the next level.

Conclusion

The long term fundamentals of the PGM market remain solid and Lonmin is well positioned for improvement when it comes. We have put a bold cost reduction and productivity improvement programme in place to ensure the business is sustainable through all cycles and profitable in the near term.

We will mine for value, not just for volume. We will continue to rebuild our relationships with our employees and develop our relationship with all the unions that represent our employees, building on the Relationship Charter we agreed in early August this year. We will also use the advantages our new senior management structure gives us to empower our skilled and experienced middle management tier. Where we have done this already, at Saffy and Hossy, we see encouraging traction on the ground which contribute to creating a sustainable Lonmin.

Guidance

2015 Financial year

For 2015 we expect platinum metal in concentrate (MIC) production in the region of 750,000 ounces and, after re-stocking the pipeline, sales are guided to be around 730,000 Platinum ounces. We expect to maintain sales of around 750,000 platinum ounces thereafter with the flexibility to increase or reduce sales dependent on market outlook. As a result of the continued suppressed market conditions and capital discipline, capital spend on growth ounces has been deferred and capital expenditure for 2015 reduced from previous guidance of around $400 million to around $250 million. This will be predominantly focused on Rowland, the K3 incline and Saffy as well as on the bulk tailings project. We will also spend limited capital on K4 shaft as we begin to prepare this shaft for its eventual restart in 2017, subject to favourable market conditions.

Taking into account cost savings, productivity initiatives, increased production profile for 2015 and the increase in wages, we anticipate the unit cost of production to be around R10,800 per ounce.

Medium term outlook

For the medium term, we expect to maintain sales of around 750,000 platinum ounces. This will be supported by capital expenditure of between $250 million and $350 million per annum. We will continue to manage a balance between capital investment and maintaining a sound balance sheet. Consequently, capital spend in any year will be subject to prevailing market conditions. Despite the significant inflationary pressures we face, we would expect to contain increases in unit costs to below wage inflation.

Thank you

Every employee matters greatly to me - Lonmin is not shafts and machines, it is people. That is why safety is our first priority and everything I have mentioned above must be seen in this context.

I am grateful to our banking syndicate, our core advisors and customers for their continued support but my greatest thanks as always goes to our employees. I am also appreciative of Brian and his Board for their support and guidance in such a challenging year. I appreciate the continued commitment of our shareholders and I remain conscious of the need to pay dividends to shareholders at the earliest appropriate time.

Yours faithfully

Ben Magara

Chief Executive Officer

9 November 2014

OPERATIONAL REVIEW

Safety

Whilst the Company can be proud of its safety record, Zero Harm remains the goal. Safety is a journey which does not end. We are never complacent and we are greatly saddened by the death of our colleague, Mr Siyabonga Sibango who lost his life in a tragic accident at East 3 shaft on 26 October 2013. He is survived by his wife Ms Nolusindiso Sibango and their two children Qhama and Lungako. 

At Lonmin, we believe that Zero Harm is achievable, every day for everybody and everywhere. We are proud to have achieved one year fatality free on 27 October 2014, acknowledging the five month strike. The same day, mining operations achieved six million fatality free shifts.

In 2014 our safety record showed another year on year improvement continuing the impressive trend of recent years. The LTIFR decreased by 4.6% to 3.34 notwithstanding the impact of the strike. This is particularly pleasing given the heightened safety risk when operations resume after a standstill.

The manner in which we were able to efficiently, rapidly and safely return to work is testimony of our ability to operate according to a set of systems and procedures that enable Zero Harm. The prolonged strike had a potential negative impact on safety at Lonmin. Firstly, prolonged work stoppages such as the five months protected strike, negatively impact on the integrity of mining geology, infrastructure and equipment. For this reason, Lonmin continued running maintenance and performance checks on all active shafts and plants throughout the duration of the strike. Secondly, safe behaviour is habitual and easily unlearned over long periods away from work. As such, employees required extensive re-training before they were cleared to safely return underground or to the plants after the strike.

Achievements

· Our Karee 4B/1B shaft has been recognised this year with the JT Ryan award for Safest Mine in South Africa for the third year in a row at the annual MineSafe Conference held in August 2014. This shaft is the industry leader in safety with more than eight million fatality free shifts. This conference is collaborative and is supported by mining companies, industry bodies, employee representative organisations and government.

· Smelting and Refining recorded a major safety achievement of a lost time injury (LTI) free year on 4 September 2014.

· Lonmin Group achieved one year without a fatality on 27 October 2014 which is an industry record for hard rock mining in South Africa.

· Finally, we appreciate that an individual's safety and health are affected as much by issues outside the workplace as within it and we continue to work with all stakeholders to extend our safety awareness and healthcare programmes to all communities in the Greater Lonmin Community.

Mining Division

Overview

The 2014 financial year was one of the most challenging periods experienced by the Marikana operations in recent history.

The year began with a disappointing first quarter where performance was negatively affected by an unusually high number of safety stoppages as well as go slow activity associated with the wage negotiations that were taking place at the time. The five month AMCU led strike, which started on 23 January and was eventually resolved on 24 June, was the dominant event for the year and accounted for almost all of the underperformance for the year.

Following the strike, production was safely and successfully ramped up and the operations were able to reach normal production during August. This is testament to the good operational fundamentals of the business, an improving safety outlook, a well-executed care and maintenance strategy during the strike period as well as thorough planning and well controlled execution of the ramp up process.

Given the challenging and disruptive environment outlined above, tonnes mined at 6.4 million tonnes were 47.3% less than in 2013.

It is estimated that the impact of the strike on tonnes mined, including disruptions during the wage negotiations leading up to the strike, was 6.4 million tonnes. Tonnes lost due to Section 54 stoppages are estimated to be 0.3 million tonnes with a further 0.1 million tonnes lost due to management induced safety stoppages.

Marikana Ore Reserves

The ore reserve position remained largely unchanged when compared to 2013 at 3.7 million square meters, an average of 21 months of production. This level provides the flexibility required to ensure a consistent production output from the operations.

Productivity

Productivity measured as square meters per total mining employee was 2.57. This is a deterioration of 50.5% when compared to 2013 as would be expected given the strike impacted total production. However, productivity in August and September 2014 exceeded the same period in the prior year.

Business Improvement Initiatives

Half Level Optimisation

Half levels across our operations are currently at varying levels of optimisation. The greater the proportion of optimised half levels on an operation, the smaller the operating footprint and the better the efficiencies. This initiative seeks to increase the proportion of optimised half levels mined at each operation by:

· Developing a simulation tool to assist operations management to analyse half level performance and to perform a diagnostic to determine the reasons as to why a particular half level is not optimised

· Operations management will develop action plans to address the issues that are causing sub optimal performance

· These actions will be tracked and updated on a monthly basis

· Half level optimisation status has been introduced as a key performance management area for senior operations management and a system has been developed to monitor progress quarterly

Improved output per stoping crew

Our objective is to improve stope crew output steadily over the medium term. The primary focus is to increase the number of times that a stoping crew achieves a production blast during the month. This is to be achieved by:

· Ensuring that there is sufficient mineable face length to provide the requisite flexibility for crews to move without delay when they encounter problems.

· Line of sight system: Improved short interval control focused on the interrogation of reasons for lost blasts and the implementation of corrective measures to prevent similar losses in the future

· Interventions aimed at improving the performance of the bottom 20% of performers significantly. These include deployment of best practice teams to assist with diagnostics and corrective action plans, weekly monitoring by senior operations management and on-the-job training for supervisors.

Integrating Theory of Constraints philosophy into operating practices

After the successful integration of the philosophy into the Rowland shaft operating practices, a decision has been made to roll the integration process out to all of the operating units at Marikana. Our Best Practice teams have been trained in the operating practices and they will be used to conduct the roll out to all operations. The roll out is already underway at Saffy shaft.

Overview of Marikana mines

Karee

Karee operations, comprised of K3, 4B/1B and K4, experienced the brunt of the disruptions related to the slow down during wage negotiations during the first quarter of the financial year. This together with the full impact of the strike period was the cause of the significant under performance. Tonnes mined of 2.4 million were down 52.0% on the prior year. The hoisted 6E mill grade of 4.13 g/t was 4.2% lower in 2014 than in 2013 as a result of the increased proportional mix of Merensky to UG2 ore as well as some build-up of stocks in the concentrator at the year end. K3 and 4B/1B have successfully ramped up after the strike and are currently operating close to full capacity. K4 remained on care and maintenance during the year under review.

Westerns

Westerns operations comprising Rowland, Newman, Hossy, West 1 and East 1 mined 2.2 million tonnes during the year, a decrease of 48.2% when compared to 2013. The under performance is purely as a result of the strike. Production at Rowland shaft improved significantly during the first quarter of the year and the excellent performance has been resumed following the strike with the shaft delivering a fast ramp up to be operating at planned capacity during September. Newman shaft has recovered well after the strike and is currently operating at planned output levels.

Production output at Hossy shaft improved steadily during the first quarter of the year. This improvement has continued following the resumption after the strike, with the shaft ramping up to planned production levels very quickly and delivering the best ever production output of just under 112,000 tonnes during September. The outcome of the Asset Review regarding this shaft can be found in the CEO review.

West 1 and East 1 have effectively reached the end of their lives and contract mining is being employed to extract the last remaining pillars and ore accumulations. Grade has remained constant throughout the period under review.

Easterns

The Easterns operations comprising Saffy shaft, East 2 and East 3 (Lonmin) mined 1.1 million tonnes during 2014. This equates to a 34.8% decrease when compared to FY13. The deterioration in performance is related mainly to the effects of the five month strike but was also impacted by a very challenging first quarter that was marred by incessant safety stoppages at Saffy shaft and East 3 shaft. Easterns operations have ramped up well following the strike, with East 2 and East 3 returning to planned output levels during September.

Notwithstanding the disruption caused by the strike, the production build up at Saffy shaft has been exceptional and ahead of plan. Good momentum has been achieved during the ramp up with the shaft achieving its best ever monthly output of just under 163,000 tonnes in September. Saffy has now reached 80% of its nameplate capacity compared to 48% in 2013. The ore reserve has been developed to a healthy position of 0.6 million square meters which is in excess of 18 months at a full production stoping rate. Investments have been made to upgrade and de-bottleneck infrastructure and further work in this regard has been planned with the roll out of the Theory of Constraints management philosophy to the shaft. With the required face length available, it is expected that the stoping crews will show steady progress in building up their performance output so that the shaft achieves planned production in 2015.

The 2014 hoisted 6E mill grade for Saffy of 4.62g/t is 2.4% higher than the previous year. This is mainly due to the proportion of stoping ore increasing relative to reef development ore.

Opencast

The opencast operations operated throughout the strike, albeit at a reduced level of output. Immediately after the conclusion to the strike, production was restored to pre-strike levels. Tonnes mined of 0.3 million were down 36.8% on the prior year. The delivered 6E mill grade of 3.11g/t is 6.2% improved on the previous year due to less dilution through improved operational controls. There are only limited ore reserves remaining at this operation and it is anticipated that they will be completely mined out by December 2015.

Pandora Joint Venture

Tonnes mined at the joint venture for 2014 were 47.7% less than during 2013 and this reflects the difficult first quarter where production was interrupted on a number of occasions by safety stoppages that were related to the fatal accident that occurred during October. The five month strike also took its toll on the operation but recovery post the strike has been good and normal planned production levels were restored during August.

Capital Spend

Of the limited capital expenditure incurred by the Group of $93 million, $64 million was incurred in the mining operations as a result of the cash conservation measures adopted during the strike period. The majority of the limited capital was spent on sustaining capital across the various shafts and central engineering. The majority of the project capital funds were allocated to the K3 UG2 decline project, Saffy shaft and Rowland shaft to continue with ore reserve development projects that are currently in execution.

Process Operations

During the financial year our total tonnes milled decreased by 48.2% to 6.1 million tonnes. This reflects the production loss due to the protracted strike. The total milled head grade declined to 4.39 grammes per tonne or 3.4% lower than the prior year period. The decline in head grade is directly attributable to the ore mix milled which was dictated by the strike, with the amount of lower-grade opencast Merensky ore increasing from 3.3% to 6.9% when compared to the prior year period.

The planned start-up of the Number One UG2 concentrator was delayed to reduce costs and this plant will now be commissioned in Q2 of 2015.

For the financial year, we achieved 380,359 saleable ounces of Platinum in concentrate; down 49.3% from the previous year, as a result of the extended strike. Refined production was higher than concentrate produced as a result of stock releases across the processing value chain. We are looking to reduce our working capital requirements by running at lower stock levels and we will not necessarily need to refill the pipeline in 2015 to the same extent.

Platinum sales of 441,684 ounces were achieved during 2014.

The new design on Number One furnace, the design changes implemented on Number Two furnace and a combination of operational excellence and an experienced workforce assisted in keeping both furnaces idling during the strike period. This in turn led to a smooth ramp up at the end of the strike.

PGM ounces produced of 882,094 were down 34.0% compared to the prior year period.

The instantaneous recovery rate achieved in 2014 of 86.2% is outstanding and represents a 1.2 percentage point increase on the prior year despite operations being heavily impacted by the strike. The continuous year on year improvements are a result of extensive optimization and improvement plans across our processing operations that continue to yield positive results.

Capital Spend

Other Assets

Limpopo

The deadline for Shanduka to exercise its option over Limpopo remains 31 March 2015. In the interim, a number of conditions precedent to the completion of the transaction need to be satisfied. The conditions include completion of a bankable feasibility review, the securing of funding and obtaining all necessary approvals. Shanduka is reworking certain areas of the bankable feasibility study prior to completion thereof. In the interim, a detailed programme and budget has been completed for submission to the Shanduka Board that would form the basis of potential renegotiation around the transaction completion date of 31 March 2015. Feedback is expected from Shanduka once their Board has considered the programme and budget.

Akanani

Akanani offers the prospect of a large, long life, low cost and highly mechanised mine and a decision has been taken to compile and submit a Mining Right Application. A Concept Study has commenced and is expected to be completed in the next six months. Akanani provides us with options in the long-term.

Exploration

Americas

Lonmin is exploring for PGM depositsaround the Sudbury Basin in Ontario, Canada in joint ventures with WallbridgeMining Company Limited and Vale S.A. Drilling is being undertaken on the Vale JV for further geotechnical studies and to better define the potential PGM resource.

Europe

Lonmin signed a memorandum of understanding to work with a joint venture partner on two of our Northern Ireland licences for gold and silver. Subsequent to the year-end we have entered into a joint venture agreement.

Greenfields exploration, geophysical surveys and drilling continued to generate targets for follow up in the coming year both in Canada and Northern Ireland.

South Africa

An application for renewal of Vlakfontein's prospecting right has been submitted to the DMR and we await their response. Lonmin has a joint venture with Boynton in the eastern Bushveld but has held arbitration proceedings against Boynton on the basis that it failed to comply with its promise to deliver an unencumbered asset to the joint venture. We are currently awaiting the arbitrator's decision. In the interim, Boynton awaits a response from the DMR on whether its application for renewal of prospecting right has been successful.

People

Engaging with Employees and Unions

We launched the relationship building programme with AMCU immediately after the end of the strike in an endeavour to rebuild our relations. The relationship building programme entailed a series of 2-day break-away sessions across all levels within Lonmin and AMCU structures aimed at having honest and frank conversations about the state of our relationship and agreeing measures to bolster the relationship. These break-away sessions have culminated in a relationship charter, which outlines our desired relationship and the specific measures that will be implemented to ensure that this is achieved. Similar session will also be held with minority unions.

Our managers have also increased their efforts to communicate directly with employees. This direct engagement and communication with employees forms part of our drive to reclaim our role as managers and an employer.

Wage agreement: key facts

· A 3-year agreement which enables stabilisation of our operations

· The agreement is effective from 1 October 2013 until 30 June 2016

· Within a week of the settlement agreement, all employees received back pay from the increase date of 1 October 2013 to 22 January 2014, the day before the start of the industrial action

· An annual basic salary increase of R1,000 per month for A-band employees

· All other employees, particularly those in the bargaining unit, will receive an 8% increase for the first year and 7.5% for the next two years

· Benefits (including medical aid and pension fund contribution) and allowances (including living out allowance, annual leave allowance and attendance allowance) will increase by amounts linked to the inflation rate

· Associated increased labour costs to the Company were 12.9% for 2014, 8.8% for 2015 and 8.2% for 2016

Workforce Profile

Our total workforce at end September was 38,292 compared to 38,421 in September 2013 of which 28,276 were permanent employees and 10,016 were contractors. 83% of the overall workforce is South African, with 17% still being migrant. 8.2% are women.

Employment Equity

Transformation is a key element of how we work and empowerment is important to Lonmin. Transformation imperatives are entrenched in policies within our recruitment, succession planning and talent management functions that enable opportunities for Historically-Disadvantaged South Africans (HDSAs).

Community Relations and Our Corporate Citizenship Agenda

Community Value Proposition (CVP)

Contributing to a long-term social, economic and infrastructural development is a direct investment in the sustainability of the mines as well as that of communities affected by mine activities. The CVP project that we commenced in 2013 is aimed at better understanding the impact and community development needs to deliver focused social investment that is impactful and sustainable. The Company's objective is to make a social investment that has lasting impact beyond the life of the mines.

Our corporate citizenship agenda

We engage in a range of activities aimed at uplifting our communities. These include education, health and social infrastructure projects.

Social and Labour Plan (SLP)

Social and Labour Plans (SLPs) required by Mineral and Petroleum Resources Development Act (MPRDA) are submitted to Department of Mineral Resources for approval on a five-year basis. These plans include a number of initiatives that Lonmin delivers as part of its legal and social licence to operate. To this end the new SLPs for the coming years will be focused on accelerating transformation and implementing measures to significantly improve the living conditions of our employees, host communities and major labour sending communities

BEE EquityOwnership

The Company is required to increase HDSA ownership in its prospecting and mining ventures by 31 December 2014 from its current holding of 18% to at least 26% as required under the Mining Charter.

As flagged to shareholders in the regulatory release of July 2014, Lonmin announced that it had entered into binding agreements with the Bapo ba Mogale Traditional Community (the Bapo) in relation to a series of transactions which will enable Lonmin to meet its Black Economic Empowerment (BEE) targets. Lonmin also stated its intention to implement an Employee Share Ownership Plan (ESOP) and a Community Share Ownership Trust (CSOT) (for the benefit of the local communities on the western portion of our Marikana operations). All three transactions will collectively provide the additional 8% equity empowerment which Lonmin requires to achieve the 26% effective BEE equity ownership target by 31 December 2014.

· Bapo Transaction

The Bapo Transaction involved a royalty for equity swap and the sale of the Bapo 7.5% stake in the Pandora Joint Venture to a Lonmin subsidiary. This transaction provided the Bapo Community with equity participation of circa 2.25% at Plc level, a deferred royalty payment of R20 million per annum payable by Lonplats (Eastern and Western Platinum combined) in each of the five years following completion of the transaction, and a minimum procurement spend of R200 million over the 18 months following the completion of the transaction. Whilst binding legal agreements were signed in July 2014, two conditions precedent remain to be satisfied and are expected to be satisfied during November 2014 at which stage the transaction will be complete and implemented. Certain members of the Bapo Community have indicated that they may institute legal action challenging, amongst other things, the authority of the Bapo to enter into this transaction. These threats to institute legal action have not been acted upon at this stage.

· Employee Share Ownership Plan

Whilst engagements between Lonmin and unions continue as regards the nature of the ESOP to be implemented at Lonmin the ESOP proposed by Lonmin (which is based on a profit-sharing scheme) will be implemented before the end of 2014. The ESOP will result in economic participation and ownership by our employees and sharing the responsibilities and involvement that, that ownership brings. This implementation will ensure that Lonmin receives HDSA equity accreditation of 3.8%.

· Community Trusts

Two separate community trusts are being established - one for the Bapo Community and other for the communities on the western side of our operations. Each community trust will hold Lonplats shares and will be entitled to dividend payments to be used for the upliftment of the respective communities. To the extent that the dividend payable in a particular year is less than R5 million, each community trust will be entitled to a minimum annual payment of R5 million escalating in line with CPI each year. The two community trusts will entitle Lonmin to an HDSA equity accreditation of 1.8%.

At this stage, the Company expects that completion of all of these arrangements should be achieved by December 2014.

Judicial Commission of Inquiry

The process of giving evidence at the Commission has concluded and all parties are scheduled to complete the presentation of final arguments by 15 November 2014. Judge Farlam is required to compile a report by 30 March 2015 setting out his findings and recommendation. This report is required to be handed to the President who will have discretion as to when and the extent to which the contents of the report are made available to the public.

Once Judge Farlam delivers his report we will engage publically on some of these issues and provide a balanced perspective of events and circumstances that is currently missing, particularly from media reports

MARKET REVIEW

Overview

During the year under review the platinum price has fallen short of market expectations. Significant destocking by mining companies during the longest strike in platinum's history, not to mention the growth of platinum ETF products in South Africa, should have led to higher prices than prevail today.

However, speculative investment positions have been long for some time constraining upward price movement leaving platinum largely range bound throughout most of 2014. During the last two weeks of September a strengthening dollar combined with uneven global economic trends resulted in significant liquidation and price depreciation.

Nonetheless, as investors have shifted from relatively overweight to underweight in platinum, the health of market fundamentals is expected to exert greater influence on future price recovery.

Sales

In 2014 Lonmin sold 441,684 ounces of Platinum into the market. Platinum sales contributed 64% of our turnover. Palladium was the second highest contributor to the revenue basket with the 212,500 ounces sold constituting 17% of Lonmin's income. Combined sales of rhodium, ruthenium and iridium contributed a further 11% and Gold and Base Metals made up the balance.

PGM Prices

Despite the five month strike experienced by the three largest PGM producers both platinum and rhodium prices are lower in Dollar terms compared to the same period under review in 2013.

The average price of platinum was $1,426 per ounce in the year to September compared to $1,537 per ounce (7% lower) for 2013, while rhodium lost just $7 on average. Palladium grew by 11%.

Market Outlook 2015

The platinum-group metals continue to offer solid, captive demand through increasing global vehicle sales and tighter emissions standards, not to mention robust demand in industrial applications and strong emerging growth in platinum jewellery in India. Therefore, as the market continues to destock, platinum prices are expected to begin to appreciate and the platinum market to recover. The market and prices remain vulnerable to asynchronous global economic growth and further Rand weakness.

Supply in 2014

Mine supply from South Africa contracted by 1.3 million ounces year on year mostly due to the prolonged strike. However, sales for the year are expected to reduce the loss to around 0.8 million ounces as producers destocked the pipeline during this time. Outside of South Africa supply remained mostly flat with a decline in Zimbabwe due to the temporary closure of Bimha mine as a result of ground conditions. Recycling in automotive grew by 3.2% but was offset by the decline in jewellery recycling. Net recycling is estimated to come in at around 1.0% growth year on year. The reduction in metal prices in calendar Q4 is expected to act as a reduced incentive to recycle platinum.

Demand in 2014

Automotive catalyst demand continues to dominate the end uses of the three primary PGM's. The recovery of this sector remains ahead of global GDP growth in most geographies and coupled with ever tightening tailpipe emissions legislation has underpinned the fundamentals of the metals. In addition, platinum jewellery and other industrial sector demands have remained relatively supportive.

Strengthening Collaboration on Market Development

During 2014 the industry continued with its collaborative effort to promote the use of platinum in jewellery. The significant growth in India can be ascribed to the perseverance of select South African mining industry participants including Lonmin and the vision of committed jewellery partners in the region. Further, more intensified efforts should see the Indian jewellery market grow from strength to strength in the near term. In addition, the industry has also comprehensively joined forces and are working together to establish and launch a new industry body that will focus on educating and promoting the market on the value of holding platinum as an investment

MINERAL RESOURCES AND MINERAL RESERVES

2014 Mineral Resources

The main features of the Lonmin Mineral Resources as at 30 September 2014 are:

· Attributable Mineral Resources were 179.1 million ounces of 3PGE+Au in 2014, unchanged with 2013.

· Revisions to the South African Mineral Resource estimates were confined to the Marikana and Pandora properties. The Mineral Resources at Marikana (excluding tailings) were unchanged in 2014. This is attributed to the net effect of an increase in the Merensky Mineral Resources being offset by a decrease of the UG2 Mineral Resources. The Merensky Measured and Indicated Mineral Resources increased by 0.8 million ounces whereas Inferred Mineral Resources increased by 0.2 million ounces due to re-evaluation after depletion. The decrease in UG2 Mineral Resources of 1.0 million ounces is the result of mining depletion (0.6 million ounces) and loss on evaluation (0.4 million ounces).

· The Pandora Mineral Resource decreased by 20,000 ounces of 3PGE+Au, the net result of mining depletion partially offset by reduced geological losses.

· The Marikana Tailings, Akanani, Limpopo and Loskop Mineral Resources were unchanged during 2014.

· The Mineral Resources for the Denison 109 Deposit in Canada have been reported unchanged.

· Revisions to the non-South African Mineral Resources have been reported for the Bumbo base metal and gold deposit in Kenya. Changes to the Mineral Resource classification was made by converting 28.2 kilo tonnes of Cu-equivalent metal from Inferred to the Indicated confidence category.

2014 Mineral Reserves

The main features of the Lonmin Mineral Reserves as at 30 September 2014 are:

· Revisions to the South African Mineral Reserves were confined to Marikana. There were no changes to the Limpopo Reserves.

· The attributable total Mineral Reserves for Marikana were 35.5 million ounces of 3PGE+Au in 2014, compared with 36.0 million ounces in 2013.

· The Proved Mineral Reserves increased by 0.1 million ounces 3PGE+Au in 2014. This is the nett effect of depletion (0.5 million ounces) offset by the conversion of Probable to Proved Mineral Reserves (0.6 million ounces).

· No changes occurred with respect to the operating shaft boundaries at Marikana during the period.

· There were no fundamental changes in the Lonmin life of business plan from the 2013 reporting period. Considering the disruptions experienced during 2014, the original 2013/2014 LTP plan was applied for the purposes of quantifying the Mineral Reserves for 2014.

PGE Mineral Resources (Total Measured, Indicated & Inferred)1,4

Notes

1) All figures are reported on a Lonmin Plc attributable basis, the relative proportions ofownershipare per operation or project. Resources are reported Inclusive of Reserves.

2) Limpopo2 excludes Baobab shaft.

3) Loskop and Sudbury PGM JV exclude Rh, due to insufficient assays, and therefore 2PGE+Au are reported. Tailings Dam exclude Au, due to assay values below laboratory detection limit, and therefore are reported as 3PGE.

4) Quantities and grades have been rounded to one or two decimal places, therefore minor computational errors may occur.

PGE Mineral Reserves (Total Proved & Probable)1,3

Notes

1) All figures are reported on a Lonmin Plc attributable basis, the relative proportions of ownership are per operation or project.

2) Limpopo excludes Baobab shaft.

3) Quantities have been rounded to one decimal place and grades have been rounded to two decimal places, therefore minor computational errors may occur.

4) Tailings Dam exclude Au, due to assay values below laboratory detection limit, and therefore are reported as 3PGE.

FINANCIAL REVIEW

Overview

While the impact of the longest strike in the history of the South African platinum sector is a dominant feature of our financial performance during the year ended 30 September 2014, the balance sheet strength displayed by our ability to absorb the financial impact of the business disruption and fund a successful ramp up demonstrates the flexibility and resilience we have built into our capital structure since the events of 2012.

The depressed PGM pricing environment experienced in the first half of the financial year continued in the second half despite significant supply side constraints due to the strike action. As a result revenue was severely impacted by reduced production as well as subdued metal prices.

On the cost side, we have separately accounted for idle production costs incurred during the strike for which there was no associated production output as well as additional costs arising directly as a result of the strike action. These have been disclosed as special costs to assist in understanding the financial performance achieved by the Group on a comparable basis with prior years. As a result, our underlying performance excludes the impact of the strike action. Other than the impact of the strike, movements in underlying costs were driven primarily by the release of stock locked up at end of the previous financial year and utility and labour escalations (including above inflation wage rate increases), somewhat mitigated by favourable exchange movements. The cost of production per PGM ounce for 2014, including the adverse impact of the strike action, was R13,538 compared to R9,182 for 2013. The wage agreement signed at the end of the strike continues the trend of above inflation wage increases which will impact unit costs going forward.

Despite a decrease in capital expenditure during the period, the declining profitability on the back of the strike action impacted the Group's ability to generate cash. However, we put in place measures to conserve cash and protect our balance sheet position during the strike while maintaining our ability to ramp up the business. As a result of these measures, coupled with our balance sheet strength, we were able to fund a successful ramp up to full production in the last quarter and end the year with net debt of just $29 million.

From a tax point of view, our philosophy is to comply with the tax legislation of all the countries in which we operate by paying all taxes due and payable in those countries in terms of the applicable tax laws. Transactions entered into by the Group are structured to follow bona fide business rationale and tax principles. We recognise that in order to be a sustainable and responsible business, the Group must have appropriate tax policies that are adhered to and managed properly. We seek to maintain a proactive and cooperative relationship with local tax authorities in all our business and tax transactions and conduct all such transactions in a transparent manner.

Income Statement

The $112 million movement between the underlying operating profit of $52 million for the year ended 30 September 2014 and that of $164 million for the year ended 30 September 2013 is analysed below.

Revenue

Total revenue for the year ended 30 September 2014 decreased by 37% (or $555 million) to $965 million compared to prior year revenue of $1,520 million.

The strike impact on production saw PGM sales volume for the year decreasing by 31% compared to the volume sold in the prior year which contributed $442 million to the total decline in revenue. The impact of the strike was partially diluted by the release of inventory locked up at the end of the 2013 financial year as a result of the smelter incident and the reduction of stock in the pipeline during the latter half of the year.

PGM prices weakened during the year under review as the metal pricing environment remained subdued despite the longest strike in the platinum industry's history. The impact on the Group's average prices achieved on the key metals sold is shown below:

The US Dollar PGM basket price (excluding base metals) was 8% down compared to the 2013 average prices. This resulted in a $56 million reduction in revenue. The Rand basket price (excluding by-products) increased by 4% as a result of the relatively weaker Rand.

The mix of metals sold resulted in a negative impact of $22 million mainly due to a lower proportion of platinum sold compared to other refined metals. Base metal revenue was down $35 million mainly as a result of lower volumes sold.

Operating costs

As explained in the financial overview, the impact of the disruptions caused by the strike action has been reported as special costs. Total underlying operating costs for the year decreased by $443 million mainly due to the impact of decreased production levels and positive foreign exchange movements resulting from the weaker Rand partially offset by adverse metal stock movements. A track of these changes is shown in the table below.

Marikana underground mining costs decreased by $189 million or 22%, as wage and utility escalations were more than offset by the impact of reduced production and withholding of wages as a result of the strike action. Marikana opencast mining costs decreased by $26 million or 52% as operations have been scaled back as a result of the subdued price environment.

Concentrator and processing costs reduced by $62 million or 20% compared to the prior year, as the impact of reduced production as a result of the strike was partially offset by cost escalations and an increase in maintenance during plant idle time.

Ore, concentrate and other purchases also reduced by $21 million or 33% as volume produced was impacted by the strike action. The subdued price environment has also resulted in a decrease in ore purchase costs.

The year under review saw a release of stock in process locked up following last year's smelter incident as well as a general reduction in inventory as a result of lower production due to the strike and a drawdown of the processing pipeline during the second half of the year. This has resulted in a $336 million negative impact on operating profit, excluding exchange impacts, arising from metal stock movements. The $336 million comprises of a $133 million stock decrease in 2014 and a $203 million increase in stock in 2013.

The Rand weakened against the US Dollar during the year averaging ZAR10.55 to USD1 compared to an average of ZAR9.24 to USD1 in the 2013 financial year resulting in a $170 million positive impact on operating costs.

Depreciation is calculated on a unit of production basis, spreading costs in relation to proven and probable reserves. Due to reduced production levels, depreciation and amortisation decreased by $16 million compared to the 2014 financial year.

Cost of production per PGM Ounce

The loss in production as a result of the five month strike and lower production in the first quarter due to increased section 54 stoppages as well as production disruptions leading up to the strike impacted negatively on the cost of production per PGM ounce. The cost of production per PGM ounce for the 2014 financial year, which includes idle production costs reported as special costs, increased by 47% to R13,538 compared to R9,182 for the year ended 30 September 2013.

Further details of unit costs can be found in the Operating Statistics.

Special operating costs

Special operating costs for the year ended 30 September 2014 are made up as follows:

As mentioned above, idle production overheads incurred during the strike period for which there was no associated production output as well as costs arising directly as a result of the strike action have been classified as special items. The total of these strike related costs amounted to $307 million. The major portion of the costs comprised idle fixed production costs incurred during the strike period which totalled $287 million. The cost of additional security amounted to $10 million. Costs relating to contractors not being able to fulfil their obligations as a result of the disruption amounted to $3 million. Other costs include legal, communication, medical and various other start-up costs.

For the year ended 30 September 2013, special costs totalled $17 million. This included an amount of $7 million consisting of communication costs for reputational rebuild as a result of the August 2012 events at Marikana, as well as costs incurred on the Farlam Commission. An additional amount of $10 million was incurred on the management restructuring exercise during the 2013 financial year.

Net Finance costs

Total net finance costs increased by $55 million to $64 million for the year ended 30 September 2014 compared to $9 million incurred in the prior year.

Net bank interest and fees incurred in the 2014 financial year were $25 million which was 25% or $5 million higher than the $20 million incurred during the year ended 30 September 2013. This was largely as a result of an increase in average drawn facilities during the year as we sought to protect liquidity during the strike period. Interest totalling $13 million was capitalised to assets (2013 - $11 million). Dividends received relate to arrear dividends accruing from our investment in Petrozim Line (Private) Limited which were remitted during the year.

The Historically Disadvantaged South Africans (HDSA) receivable, being the Sterling loan to Shanduka Resources (Proprietary) Limited (Shanduka) decreased by $62 million during the year as a result of an impairment charge of $80 million partially offset by interest accrued of $18 million. The impairment charge arose as the value of the security for the loan (being the value of Shanduka's shareholding in Incwala calculated based on discounted cash flows of Incwala's underlying investments in WPL, EPL and Akanani) had fallen below the carrying amount of the receivable, largely driven by a decline in long term PGM price assumptions applied in the valuation models. The net movements in exchange rates during the year did not have a significant impact on the loan. The $62 million movement compares to a movement of $18 million in the prior year which consisted of foreign exchange gains of $1 million and accrued interest of $17 million. At 30 September 2014 the balance of the receivable was $337 million (2013 - $399 million).

Taxation

Reported tax for the current financial year was a credit of $123 million compared to $58 million in the 2013 period. The underlying tax charge of $5 million in the 2014 period becomes a $123 million tax credit after taking into account exchange gains on the retranslation of Rand denominated deferred tax liabilities ($42 million) and the tax impact of special items ($86 million). These gains are treated as special. In the prior year comparative period exchange gains had an effect of $80 million on the tax charge.

Our philosophy on taxation is to comply with the tax legislation of all the countries in which we operate by paying all taxes due and payable in those countries in terms of the applicable tax laws. Transactions entered into by the Group are structured to follow bona fide business rationale and tax principles. We recognise that in order to be a sustainable and responsible business, the Group must have appropriate tax policies that are adhered to and managed properly. We seek to maintain a proactive and cooperative relationship with local tax authorities in all our business and tax transactions and conduct all such transactions in a transparent manner.

With the Group's primary operations being in South Africa, the tax liability follows such activity which has the effect that the majority of the Group's taxes are paid in that country. Following the financial crisis of 2008 and other more recent events including the events at Marikana of 2012, lethargic global growth which has impacted PGM markets and more recently the five month industry-wide strike which have impacted profitability, the level of corporate tax has reduced. However, the Group continues to pay significant amounts in respect of other forms of tax including:

· Employee taxes

· Customs and excise duties

· Value Added Tax

· State royalties

Our philosophy on transfer pricing is that related party transactions should be charged at arm's length prices. Transfer pricing studies were performed by transfer pricing specialists on all our related party transactions and such transactions were found to be within acceptable norms compared to comparable transactions in similar companies. Lonmin inherited a number of companies in tax haven jurisdictions from previous unbundling and acquisition transactions. These companies are dormant entities and therefore do not receive any income. Furthermore, Lonmin does not pay any of its income to any of the dormant tax haven companies in these inherited structures.

Cash Generation and Net (Debt)/Cash

The following table summarises the main components of the cash flow during the period:

Cash flow utilised in operations in the year ended 30 September 2014 increased by $153 million from an inflow of $53 million in the prior year to an outflow of $100 million in the year under review. The cash outflow for the 2014 financial year is largely driven by the operating loss as result of the strike action partially offset by positive working capital movements which comprised mainly of stock released during the period. In 2013 the cash outflow was largely as a result of working capital movements, a significant portion of which was attributed to the replenishment of the metal in process pipeline following the production stoppage of 2012.

Trading cash outflow for the year increased by $132 million to $116 million compared to the prior year trading cash inflow of $16 million. The cash outflow on interest and finance costs decreased by $17 million largely due to the timing of payments over the two periods under review. The trading cash outflow per share was 20.4 cents compared to a cash inflow of 3.0 cents in the prior year.

Capital expenditure cash flow at $93 million was $66 million (or 42%) below the prior year spend because the Group's capital investment programme was impacted by the strike. In Mining the majority of the project capital funds were allocated to the K3 UG2 decline project, Saffy shaft and Rowland shaft to continue with ore reserve development projects that are currently in execution. In 2014, the Process operations spent $21 million on capital compared to $52 million in 2013. The 2014 expenditure included completion of the feasibility studies for the Bulk Tailings project and startup of the PMR OPM circuit upgrade which is due to be completed by December 2015 and sustaining capital.

During the 2013 financial year, the Group undertook a successful Rights Issue which was completed in December 2012 and raised total net proceeds of $767 million after costs and foreign exchange charges. The balance sheet strength attained following this equity issuance coupled with cash conservation measures resulted in the Group absorbing the operational disruption caused by the strike. This has allowed the Group to fund the production ramp up following the strike from current cash resources, limiting net debt at 30 September 2014 to just $29 million.

Key Financial Risks

The Group faces many risks in the operation of its business. The Group's strategy takes into account known risks, but risks will exist of which we are currently unaware. The financial review focuses on financial risk management.

Financial Risk Management

The main financial risks faced by the Group relate to the availability of funds to meet business needs (liquidity risk), the risk of default by counterparties to financial transactions (credit risk) and fluctuations in interest, foreign exchange rates and commodity prices (market risk). Factors which are outside the control of management which can have a significant impact on the business remain, specifically, the fluctuations in the Rand/US Dollar exchange rate and PGM commodity prices.

These are the critical factors to consider when addressing the issue of whether the Group is a Going Concern.

Liquidity Risk

The policy on liquidity is to ensure that the Group has sufficient funds to facilitate all on-going operations. The Group funds its operations through a mixture of equity funding and borrowings. The Group's philosophy is to maintain an appropriately low level of financial gearing given the exposure of the business to fluctuations in PGM commodity prices and the Rand / US Dollar exchange rate. We ordinarily seek to fund capital requirements from equity.

As part of the annual budgeting and long-term planning process, the Group's cash flow forecast is reviewed and approved by the Board. The cash flow forecast is amended for any material changes identified during the year, for example material acquisitions and disposals or changes in production forecasts. Where funding requirements are identified from the cash flow forecast, appropriate measures are taken to ensure these requirements can be satisfied. Factors taken into consideration are:

· the size and nature of the requirement;

· preferred sources of finance applying key criteria of cost, commitment, availability, security / covenant conditions;

· recommended counterparties, fees and market conditions; and

· covenants, guarantees and other financial commitments.

The Group's current debt facilities are summarised as follows:

· Revolving Credit Facility of $400 million at a Lonmin Plc level which matures in May 2016; and

· Three bilateral facilities of R660 million each at a Western Platinum Limited (WPL) level, each consisting of a R330 million five year committed component which matures in June 2016 and a R330 million one year committed component that can be rolled annually.

The following financial covenants apply to these facilities:

· consolidated tangible net worth will not be less than $2,250 million;

· consolidated net debt will not exceed 25 per cent of consolidated tangible net worth; and

· if:

o in respect of the amended US Dollar Facilities Agreement, the aggregate amount of outstanding loans exceeds $75 million at any time during the last six months of any test period; or

o in respect of both the amended US Dollar Facilities Agreement and the amended Rand Facilities Agreements, consolidated net debt exceeds $300 million as of the last day of any test period,

the capital expenditure of the Group must not exceed the limits set out in the table below, provided that, if 110 per cent of budgeted capital expenditure for any test period ending on or after 30 September 2013 is lower than the capital expenditure limit set out in the table below for that test period, then the capital expenditure limit for that test period shall be equal to 110 per cent of such budgeted capital expenditure.

Test Period Capital expenditure limit (ZAR)

1 October 2012 to 31 March 2013 (inclusive) . . . . . . . . . . . . . . . . . . . . . 800,000,000

1 October 2012 to 30 September 2013 (inclusive) . . . . . . . . . . . . . . . . . . 1,600,000,000

1 April 2013 to 31 March 2014 (inclusive) . . . . . . . . . . . . . . . . . . . . . . . . 1,800,000,000

1 October 2013 to 30 September 2014 (inclusive) . . . . . . . . . . . . . . . . . . 2,000,000,000

1 April 2014 to 31 March 2015 (inclusive) . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000,000

1 October 2014 to 30 September 2015 (inclusive) . . . . . . . . . . . . . . . . . . 4,000,000,000

1 April 2015 to 31 March 2016 (inclusive) . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000,000

1 October 2015 to 30 September 2016 (inclusive) . . . . . . . . . . . . . . . . . . 4,000,000,000

Credit Risk

Banking Counterparties

Banking counterparty credit risk is managed by spreading financial transactions across an approved list of counterparties of high credit quality. Banking counterparties are approved by the Board and consist of the ten banks that participate in Lonmin's bank debt facilities. These counter-parties comprise: BNP Paribas S.A., Citigroup Global Markets Limited, FirstRand Bank Limited, HSBC Bank Plc, Investec Bank Limited, J.P. Morgan Limited, Lloyds TSB Bank Plc, The Royal Bank of Scotland N.V., The Standard Bank of South Africa Limited and Standard Chartered Bank.

Trade Receivables

The Group is exposed to significant trade receivable credit risk through the sale of PGMs to a limited group of customers.

This risk is managed as follows:

· aged analysis is performed on trade receivable balances and reviewed on a monthly basis;

· credit ratings are obtained on any new customers and the credit ratings of existing customers are monitored on an on-going basis;

· credit limits are set for customers; and

· trigger points and escalation procedures are clearly defined.

It should be noted that a significant portion of Lonmin's revenue is from two key customers. However, both of these customers have strong investment grade ratings and their payment terms are very short, thereby reducing trade receivable credit risk significantly.

HDSA Receivables

HDSA receivables are secured on the HDSA's shareholding in Incwala Resources (Pty) Limited. Refer to note 8 in the financial statements for details on the valuation of this security and the resulting impairment charge.

Interest Rate Risk

Although the Group is in a net debt position, this risk is not considered to be high at this point in time. The interest position is kept under constant review in conjunction with the liquidity policy outlined above and the future funding requirements of the business.

Foreign Currency Risk

The Group's operations are predominantly based in South Africa and the majority of the revenue stream is in US Dollars. However, the bulk of the Group's operating costs and taxes are paid in Rands. Most of the cash received in South Africa is in US Dollars. Most of the Group's funding sources are in US Dollars.

The Group's reporting currency is the US Dollar and the share capital of the Company is based in US Dollars.

During the year under review Lonmin did not undertake any foreign currency hedging.

Commodity Price Risk

Our policy is not to hedge commodity price exposure on PGMs, excluding gold, and therefore any change in prices will have a direct effect on the Group's trading results.

For base metals and gold, hedging is undertaken where the Board determines that it is in the Group's interest to hedge a proportion of future cash flows. The policy allows Lonmin to hedge up to a maximum of 75% of the future cash flows from the sale of these products looking forward over the next 12 to 24 months. The Group did not undertake any hedging of base metals under this authority in the period under review and no forward contracts were in place in respect of base metals at the end of the period.

In respect of gold, Lonmin entered into a prepaid sale of 75% of its current gold production for the next 54 months in March 2012. In terms of this contract Lonmin will deliver 70,700 ounces of gold over the period with delivery on a quarterly basis and in return received an upfront payment of $107 million. The upfront receipt was accounted for as deferred revenue on our balance sheet and is being released to profit and loss as deliveries take place at an average price of $1,510 per ounce delivered.

Contingent Liabilities

The Group provided third party guarantees to Eskom as security to cover estimated electricity consumption for three months. At 30 September 2014 these guarantees amounted to $9 million (2013 - $10 million).

Simon Scott

Chief Financial Officer

9 November 2014

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND ACCOUNTS

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the Directors' report and Strategic report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Brian Beamish Simon Scott

Chairman Chief Financial Officer

9 November 2014

OPERATING STATISTICS - 5 year review

OPERATING STATISTICS - 5 year review

OPERATING STATISTICS - 5 year review

OPERATING STATISTICS - 5 year review

Footnotes:

OPERATING STATISTICS - 5 year review