First Quarter Production Report & IMS

28th Jan 2010 07:00



 

Lonmin Plc

Q1 2010 Production Report 

& Interim Management Statement

Lonmin Plc ("Lonmin" or the "Company") today announces its production report and Interim Management Statement for the quarter to 31 December 2009 (unaudited).

Overview

Our performance in the first quarter of 2010 exemplified management's focus on operational stability and delivering on its commitments,with metals in concentrate production from our underground operations at Marikana being equivalent to the prior year period. Tonnes mined from Marikana underground operations fell slightly, partly as a result of the planned closure of uneconomic production units in 2009.  However, this volume reduction was compensated for by improvements in grade and concentrator recoveries during the period and was achieved with a significantly reduced workforce. Following its successful re-build during October, the Number One furnace performed well.  

Mining

Our underground mining operations at Marikana produced 2.6 million tonnes during the first quarter of 2010, a like for like decline of 3.9%, equivalent to around 100,000 mined tonnes, from the same period in 2009. 

There were two reasons for this shortfall. Firstly, as expected, production was impacted by the previously announced closure of anuneconomic decline shaft and a number of half levels at Marikana during the third quarter of 2009. These unprofitable operations contributed around 35,000 mined tonnes during the first quarter of 2009. 

Secondly, whilst the frequency of Section 54 safety stoppages at Marikana during the first quarter of 2010 declined from the prior year period, the volume impact was worse with tonnes lost during the quarter being around 60,000 tonnes higher than the prior year period. This was predominantly due to production at our largest shaft, K3, being impacted by a 7 day Section 54 safety shutdown following a fatal incident at the shaft on 10 December 2009. 

Production at Saffy and Hossy shafts continued to perform well, delivering a combined tonnage increase of 46% from the prior year period. 

Pandora underground production increased slightly during the first quarter of 2010 from the prior year period. 

Total tonnes mined declined by 15.3% from the same period in 2009 to 2.6 million, following the planned closure of non-value adding production at our Limpopo operations and the opencast operations at Marikana and the Pandora joint venture during the 2009 financial year.  

Concentrators

As a result of the above factors, total tonnes milled for the quarter declined by 15.6% from the first quarter of 2009 to 2.6 million tonnes. However, total metals in concentrate production declined by just 6.6% to 161,845 saleable ounces of Platinum, with metals in concentrate production from our Marikana operations remaining flat at 156,025 saleable ounces of Platinum. This was due to improvements in grade and concentrator recoveries during the first quarter of 2010. Underground milled head grade during the period increased by 6.3% to 4.74 grammes per tonnes, as a result of a number of factors including cleaner mining across the property, a better ratio of stoping ore to development ore at Hossy and Saffy as well as an improved ore mix. This also helped underground concentrator recoveries, which improved significantly during the quarter to 84.5%, from 80.2% during the prior year period. The improvement in concentrator recoveries was also the result of continued benefits from our concentrator optimisation programme, excellent plant availability and a rigorous focus on batch milling the right ore through the right concentrators. It should also be noted that the performance in quarter one last year was impacted by an intensive maintenance programme which reduced recoveries. 

These improvements in grade and recoveries are pleasing. However, we need to see these sustained before being confident that we have made a step change in our performance.  

Smelter and Refineries

The planned 30 day re-build of the Number One furnace was completed successfully and the furnace has been operating consistently since matte was tapped on 9 November 2009.  A furnace re-build was also conducted during the prior year period and total refined PGM production was flat at 243,114 ounces. However, refined Platinum production for the first quarter of 2010 declined 16.7% 110,786ounces mainly as a result of metal-in-process inventory timing differences. 

Sales & Pricing

Consequently, Platinum sales for the first quarter of 2010 declined 13.6% from the prior year period to 109,044 ounces, whilst sales of total PGM's increased 4.8% to 239,685 ounces.

The US dollar PGM pricing environment improved considerably during the first quarter of the 2010 financial year from the prior year period, with the basket price improving 35%, but our South African Rand PGM basket price was flat due to a much stronger South African Rand against the US dollar during the quarter.

Incwala Resources

Discussions regarding the future of Incwala Resources (Pty) Ltd, our Black Economic Empowerment partner, are ongoing. We will update the market on these discussions, once they have been concluded. 

As anticipated, on 18 December 2009, R147 million ($20 million) was paid to Impala Platinum Holdings Limited (Impala), as part of the vendor financing indemnity given by Lonmin to Impala at the time of the creation of Incwala. Following an earlier payment in October 2009, a total of R441 million ($59 million) has been paid to Impala in relation to this vendor financing indemnity. Further details of these and other indemnity agreements can be found in Note 25 on page 121 of the 2009 Annual Report. 

Wage Settlements 

As announced on 4 December 2009, we completed a two year wage agreement with the National Union of Mine Workers in respect of our Marikana operations. Employees will receive a 10% wage increase during the first year of the agreement, which has been backdated to 1 October 2009. In the second year of the wage agreement, employees will be eligible to receive a CPI (Consumer Price Index) plus 2% wage increase. In addition, certain minimum rates of pay will be increased over the life of the wage agreement. In November 2009, we also concluded a one year wage agreement with Solidarity, under the terms of which employees will receive a 9.5% wage increase for the 2010 financial year.

Outlook 

Our production performance during the first quarter of 2010 represents a solid start to the year and supports our 2010 sales guidance of 700,000 ounces of Platinum, as published on 16 November 2009. Our cost guidance for the increase in South African Rand gross operating costs to be below local inflation, still stands despite the above inflation wage increases agreed. We therefore reiterate our sales and cost guidance for the year. 

ENQUIRIES: 

Investors / Analysts: 

Rob Gurner +44 (0) 207 201 6050

Head of Investor Relations

Media:

Cardew Group +44 (0) 207 930 0777

Anthony Cardew / Rupert Pittman

Financial Dynamics +27 (0) 21 487 9000

Dani Cohen / Ravin Maharaj

  

						3 months	3 months
						to 31st December	to 31st December
						2009	2008
Tonnes mined		Marikana	Underground - total	000		2,571	2,674
			Underground - conventional	000		2,148	2,385
			Underground - Hossy & Saffy1	000		422	289
			Opencast	000		-	216
			Total	000		2,571	2,890
		Limpopo	Underground	000		-	87
			Opencast	000		-	-
			Total	000		-	87
		Pandora attributable2	Underground	000		38	34
			Opencast	000		-	68
			Total	000		38	103
		Lonmin Platinum	Underground	000		2,609	2,796
			Opencast	000		-	285
			Total	000		2,609	3,080
Tonnes milled3		Marikana	Underground	000		2,447	2,662
			Opencast	000		61	116
			Total	000		2,508	2,778
		Limpopo	Underground	000		-	92
		Pandora4	Underground	000		89	80
			Opencast	000		-	124
			Total	000		89	205
		Lonmin Platinum	Underground	000		2,535	2,835
			Head grade5	g/t		4.74	4.46
			Recovery rate6	%		84.5%	80.2%
			Opencast	000		61	240
			Head grade5	g/t		1.96	4.74
			Recovery rate6	%		42.3%	69.9%
			Total	000		2,596	3,075
			Head grade5	g/t		4.68	4.48
			Recovery rate6	%		84.0%	79.4%

  

						3 months	3 months
						to 31st December	to 31st December
						2009	2008
Metals in concentrate7		Marikana	Platinum	oz		156,025	157,450
			Palladium	oz		72,596	72,825
			Gold	oz		3,361	3,613
			Rhodium	oz		21,678	21,809
			Ruthenium	oz		33,350	33,836
			Iridium	oz		7,281	7,410
			Total PGMs	oz		294,291	296,944
			Nickel8	MT		661	679
			Copper8	MT		417	421
		Limpopo	Platinum	oz		-	3,770
			Palladium	oz		-	3,331
			Gold	oz		-	243
			Rhodium	oz		-	487
			Ruthenium	oz		-	688
			Iridium	oz		-	159
			Total PGMs	oz		-	8,679
			Nickel8	MT		-	76
			Copper8	MT		-	54
		Pandora3	Platinum	oz		5,820	12,013
			Palladium	oz		2,745	5,406
			Gold	oz		40	93
			Rhodium	oz		911	1,657
			Ruthenium	oz		1,403	2,427
			Iridium	oz		231	456
			Total PGMs	oz		11,151	22,051
			Nickel8	MT		9	12
			Copper8	MT		5	7
		Lonmin Platinum	Platinum	oz		161,845	173,232
			Palladium	oz		75,341	81,563
			Gold	oz		3,401	3,949
			Rhodium	oz		22,589	23,953
			Ruthenium	oz		34,754	36,952
			Iridium	oz		7,512	8,025
			Total PGMs	oz		305,442	327,674
			Nickel8	MT		669	767
			Copper8	MT		422	481

  

						3 months	3 months
						to 31st December	to 31st December
						2009	2008
Metallurgy12		Lonmin refined metal Production	Platinum	oz		110,786	132,935
			Palladium	oz		70,967	60,756
			Gold	oz		3,408	3,496
			Rhodium	oz		21,564	18,749
			Ruthenium	oz		25,632	25,338
			Iridium	oz		9,921	2,544
			Total PGMs	oz		242,278	243,818
		Toll refined metal production	Platinum	oz		-	-
			Palladium	oz		-	-
			Gold	oz		-	-
			Rhodium	oz		324	-
			Ruthenium	oz		512	-
			Iridium	oz		-	-
			Total PGMs	oz		835	-
		Total refined PGMs	Platinum	oz		110,786	132,935
			Palladium	oz		70,967	60,756
			Gold	oz		3,408	3,496
			Rhodium	oz		21,888	18,749
			Ruthenium	oz		26,144	25,338
			Iridium	oz		9,921	2,544
			Total PGMs	oz		243,114	243,818
		Base metals	Nickel9	MT		668	764
			Copper9	MT		378	499
Sales		Refined Metal Sales	Platinum	oz		109,044	126,202
			Palladium	oz		68,572	53,345
			Gold	oz		2,020	3,379
			Rhodium	oz		25,262	17,102
			Ruthenium	oz		25,511	25,668
			Iridium	oz		9,277	3,108
			Total PGMs	oz		239,685	228,805
		Concentrate and other10	Platinum	oz		-	-
			Palladium	oz		-	-
			Gold	oz		-	-
			Rhodium	oz		-	-
			Ruthenium	oz		-	-
			Iridium	oz		-	-
			Total PGMs	oz		-	-
		Lonmin Platinum	Platinum	oz		109,044	126,202
			Palladium	oz		68,572	53,345
			Gold	oz		2,020	3,379
			Rhodium	oz		25,262	17,102
			Ruthenium	oz		25,511	25,668
			Iridium	oz		9,277	3,108
			Total PGMs	oz		239,685	228,805
			Nickel9	MT		572	676
			Copper9	MT		483	403

  

						3 months	3 months
						to 31st December	to 31st December
						2009	2008
Prices		Average	Platinum	$/oz		1,411	882
			Palladium	$/oz		363	187
			Gold	$/oz		1,163	819
			Rhodium	$/oz		2,214	2,347
			Ruthenium	$/oz		118	248
			Iridium	$/oz		386	421
			Basket price of PGMs11	$/oz		1,017	751
			Nickel9	$/MT		16,606	15,143
			Copper9	$/MT		6,431	4,950
Exchange Rates		Average rate for period		R/$		7.46	9.92
		Closing rate		R/$		7.37	9.45
Notes:
1	Hossy and Saffy are replacement/growth shafts in ramp up. Hossy is fully mechanised whilst Saffy has conventional stoping but mechanised development. In previous production reports this section showed all M&A/Hybrid mining. All comparatives have been restated.
2	Pandora attributable tonnes mined includes Lonmin's share (42.5%) of the total tonnes mined on the Pandora joint venture.
3	Tonnes milled excludes slag milling.
4	Lonmin purchases 100% of the ore produced by the Pandora joint venture for onward processing which is included in downstream operating statistics.
5	Head Grade is the grammes per tonne (5PGE + Au) value contained in the tonnes milled and fed into the concentrator from the mines (excludes slag milled).
6	Recovery rate in the concentrators is the total content produced divided by the total content milled (excluding slag).
7	Metals in concentrate include slag and have been calculated at industry standard downstream processing losses.
8	Corresponds to contained base metals in concentrate.
9	Nickel is produced and sold as nickel sulphate crystals or solution and the volumes shown correspond to contained metal. Copper is produced as refined product but typically at LME grade C.
10	Concentrate and others sales essentially relates to BMR concentrate and BMR/PMR residues.
11	Basket price of PGMs is based on the revenue generated from the actual PGMs (5PGE + Au) sold in the period.
12	Lonmin refined metal production and sales include an estimated 3koz saleable ounces of Platinum produced from toll refining third party concentrate (Q1 2009 - nil).

ENDMSCFMGZMVNRGGZM

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