Fourth Quarter and Full Year Production Report

2 November 2015

2015 Fourth Quarter and Full Year Production Report

Lonmin Plc ("Lonmin" or, together with its subsidiaries, the "Group"), a primary platinum producer, today announces its production results for the three and twelve months to 30 September 2015 (unaudited). This follows Lonmin's year-end trading update, business plan (the "Business Plan") and funding strategy released on 21 October 2015. 

A notice to shareholders of a General Meeting to be held on 19 November 2015 will be issued later today.

Overview

· Sadly three fatalities in the year and an increase in LTIFR to 5.41 from 3.34 due to the strike in 2014

· Production achievements for the year ended 30 September 2015:

o Unit costs for the quarter and full year were ZAR9,841 and ZAR10,339 per PGM ounce respectively

o Saffy shaft ramped up to steady state full production and reduced Group unit costs

o Refined platinum production of 759,695 ounces

o Platinum sales of 751,560 ounces, the highest since 2007 beating guidance of 730,000 ounces

o Total Platinum metal-in-concentrate for the year was 740,315 saleable ounces

o Mined production of 704,776 Platinum ounces - impacted by 48,000 ounces due to Section 54 safety stoppages

o Concentrator recovery rates of 86.7%  continue to be strong

o PGM instantaneous recovery rate of 87.2% outstanding, 1.0 percentage point higher than 2014

· The Group's net assets attributable to equity shareholders are expected to be valued between $1,600 and $1,800 million following significant impairment charge of $1,850 to $2,050 million for the year ended 30 September 2015

· Right sizing now 50% complete within six months with 2,978 workers exited (1,978 employees and 1,000 contractors)

Guidance

As announced on 21 October 2015, Lonmin is taking decisive action to mitigate the effects of the current low PGM pricing environment as demonstrated by the tight control of capital expenditure in the year ended 30 September 2015 to minimise capital spent to US$136 million from the original guidance of US$250 million. The Group is also removing high-unit cost PGM production and associated overhead costs. As a result, it is expected that the sales profile for the Group will be approximately 700,000 Platinum ounces for the year ending 30 September 2016 stabilizing to approximately 650,000 Platinum ounces for each of the years ending 30 September 2017 and 2018. The Group still boasts of its 22 months immediately available ore reserves and is maintaining this flexibility in all its four key Generation 2 shafts namely K3, Rowland, 4B and Saffy. Capital expenditure is anticipated to be limited to approximately US$132 million and US$110 million for the years ending 30 September 2016 and 2017 respectively. The Group anticipates that its capital expenditure for the year ending 30 September 2018 will increase to approximately US$188 million.

A large portion of the planned ore reserve development capital expenditure is for the development of the Middelkraal resource that the Group plans to extract via its existing, profitable Rowland shaft, as well as the further deepening of the existing, profitable K3 shaft. The continued investment in these projects will enable the hoisting capacity of these shafts to be fully used for an extended period and to drive their low unit costs.

The implementation of the Business Plan, as announced on 21 October, is anticipated to result in a cost reduction in FY15 real terms of approximately ZAR0.7 billion in financial year 2016 (against the annual cost base for the year ended 30 September 2015, unaudited) and a further cost reduction in real terms of approximately ZAR1.6 billion in financial year 2017 (against the forecast annual cost base for the year ended 30 September 2016).

The Group aims to keep its unit costs per PGM ounce in nominal terms broadly flat in line with the year ended 30 September 2015 at around ZAR10, 400 per PMG ounce, for three further years ending 30 September 2016, 2017 and 2018.

FOURTH QUARTER AND FULL YEAR PRODUCTION REPORT

Operational Overview and Safety

It is with regret that we have to report two fatalities in the fourth quarter. Our colleagues Bonisile Mapango, a winch driver at JV Pandora E3 shaft and Mark Potgieter, a Sandvik Mining contractor and General Foreman at Hossy shaft were both fatally injured in separate incidences in July. Subsequent to the year end, Zilindile Ndumela, a locomotive driver at Rowland shaft was fatally injured on 26 October. We extend our deepest condolences to their families and friends.

In the fourth quarter of 2015 Saffy shaft successfully ramped up to full production as planned which contributed to the 7.6% increase in total tonnes mined compared to the fourth quarter of the prior financial year. The metals in process pipeline stock returned to normal levels as the build-up in stock during the smelter down time in the second quarter of 2015 was fully processed by the year end as guided.

Production losses for the year due to an increase in section 54 safety stoppages amounted to approximately 48,000 platinum ounces but we are encouraged by interaction at industry level to address this increase. The rolling 12 month average Lost Time Injury Frequency Rate (LTIFR) for the 12 months to 30 September 2015 increased to 5.41 incidents per million man hours compared to 3.34 at 30 September 2014. This continued deterioration, which has been seen across the platinum industry since the five month strike in 2014, indicates the real impact that breaks in operational continuity can have on employee focus.

Fourth Quarter Production Overview

Mining Operations

The Marikana underground mining operations (including Pandora (100%)) produced 2.9 million tonnes during the fourth quarter, an increase of 0.3 million tonnes, or 9.4% on the fourth quarter of the prior financial year.

Generation 2 shafts

Production from our Generation 2 shafts (K3, Rowland, Saffy, 4B/1B and Hossy) was 2.4 million tonnes during the fourth quarter, an increase of 10.4% on the fourth quarter of the prior financial year. This represented 81.1% of total production for the fourth quarter in the year ended 30 September 2015.

· K3, Rowland, Saffy and 4B/1B all increased output compared to 2014.

· Saffy shaft recorded an increase of 42.8% on the fourth quarter of the prior financial year demonstrating the successful ramp up to full production (although the month of August was impacted by section 54 safety stoppages).

· There was a decrease in production from Hossy shaft of 24.6% on the prior year period driven by safety shutdowns following the fatality in July 2015, which slowed the momentum that had been established at this shaft. As announced on 24 July 2015 we are commencing an orderly shutdown and placement on care and maintenance of Hossy shaft.

· The 1B shaft was closed and placed on care and maintenance in October 2015.

Generation 1 shafts

Production from our Generation 1 shafts (Newman, W1, E1, E2, E3 and Pandora (100%)) at 0.5 million tonnes during the fourth quarter was 3.3% higher than the fourth quarter of the prior financial year.

· In line with its end of life plans, production from Newman shaft decreased by 7.3% year on year. As announced in July, we are commencing orderly shutdown and placement of care and maintenance of Newman shaft.

· W1, E1 and E2 shafts each saw year on year increase in production for the fourth quarter of 34.2%, 13.8% and 11.7% respectively.

· Production from Pandora (100%) of 124,000 tonnes was 3,000 tonnes during the fourth quarter, or 2.4% lower than the fourth quarter of the prior financial year due to safety shutdowns following the fatality in July.

We had limited activity at K4 shaft in the fourth quarter with production of 8,000 tonnes. This shaft will remain on care and maintenance in light of the prevailing low PGM price environment.

Production from our depleting Merensky opencast operations of 59,000 tonnes in the fourth quarter was 41,000 tonnes, or 40.9% lower than the fourth quarter of the prior financial year and mining ceased at the end of the fourth quarter. Filling of the final void and final rehabilitation of the area is planned to be completed during the first half of the 2016 financial year.

A total of 297,000 tonnes of production were lost in the fourth quarter mainly due to safety stoppages particularly at Hossy, Saffy and Rowland shafts. In the fourth quarter of the prior financial year 679,000 tonnes were lost due to the protected wage strike.  

Process Operations

Total tonnes milled in the fourth quarter of 3.0 million tonnes were 0.6 million tonnes higher than the further quarter of the prior financial year. We continue to use six out of our seven Marikana concentrators as part of our measures to reduce costs demonstrating our ability to scale our operations as required.

Underground milled head grade at 4.47 grammes per tonne (5PGE+Au) for the fourth quarter was 2.4% higher than the fourth quarter of the prior financial year of 4.37 grammes per tonne largely due to the mix of UG2 to Merensky ore. The overall milled head grade at 4.45 grammes per tonne for the fourth quarter, was up 3.3% on the fourth quarter of the prior financial year due to the increase in underground head grade combined with the decrease in opencast ore in the mix. Concentrator recoveries for the fourth quarter were strong at 86.4% compared to fourth quarter of the prior financial year. Total platinum metal-in-concentrate for the fourth quarter at 185,659 saleable ounces was 44,035 ounces higher than the fourth quarter of the prior financial year.

Our furnaces are operating at normal production levels and we succeeded in processing the build-up of concentrate by the end of the fourth quarter of the year ended 30 September 2015. A planned shutdown of the Number Two furnace for scheduled refractory brick replacement and design upgrades on the roof and off-gas system is taking place in the first quarter of financial year 2016. During this period the Pyromet furnaces will be used as required.

Total refined platinum production for the fourth quarter of 256,222 ounces was 113,510 ounces higher than the fourth quarter of the prior financial year. This was the highest volume refined in a single quarter since the fourth quarter of year ended 30 September 2013 and demonstrates the benefit of our back-up smelting capacity which enables timeous processing of stock build-ups. Total PGMs produced in the fourth quarter were 495,022 ounces, an increase of 238,623 on the fourth quarter of the prior financial year.

Sales & Pricing

Platinum sales for the fourth quarter of 253,841 ounces were in line with refined production. This was an increase of 101,571 ounces on the fourth quarter of the prior financial year. PGM sales of 481,976 ounces for the fourth quarter were up 208,993 ounces compared to fourth quarter of the prior financial year.

The weak price environment continued during the fourth quarter. The platinum US Dollar price decreased by 30.0% on the fourth quarter of the prior financial year. The Rand basket price of R10,336 per ounce for the fourth quarter was 15.3% lower than the fourth quarter of the prior financial year impacted by the Rand weakness as the average Rand to US dollar exchange rate was 20.7% weaker at 13.00 compared to 10.76 in the fourth quarter of the prior financial year. Post year end the platinum price remains volatile ranging from a low of $905 per ounce on 2 October 2015 to a high of $1,020 on 21 October 2015.

Full Year Production Overview

It is important to note that there was an industrial strike extending over five months of the year ended 30 September 2014 making year on year comparisons between 2015 and 2014 inappropriate.

Mining Operations

A total of 11.3 million tonnes was mined in the year ended 30 September 2015, 4.9 million tonnes higher than the strike impacted prior financial year. We saw improved performance by the Generation 2 shafts in the year ended 30 September 2015 and the planned delivery of Saffy shaft to steady state was achieved. Output from the Generation 1 shafts was in line with the management of the depleting shafts. Mining operations in the year ended 30 September 2015 were held back by an increase in the frequency and duration of section 54 safety stoppages, in particular at K3, our biggest shaft, as well as at Pandora E3 and Hossy.

As announced in July, the Group plans to carry out the orderly closure and placement on care and maintenance of Newman and Hossy shafts, by stopping development and capital work and only mining immediately available ore reserves. The 1B shaft was closed and place on care and maintenance in October 2015.

Mining at E1 and W1 shafts will continue for the year ending 30 September 2016 following renegotiation of ore purchase agreements between the Group and contractor management on more favourable terms, and a favourable outcome from the section 189 consultation process.

Tonnes lost mainly due to increased Section 54 safety stoppages and management induced safety stoppages at 0.9 million tonnes for year ended 30 September 2015 were lower than the strike impacted prior financial year but were 0.3 million tonnes higher than the year ended 30 September 2013. 

Process Operations

Total tonnes milled in the year ended 30 September 2015 were 11.8 million tonnes, 5.7 million tonnes higher than the prior financial year as the concentrating operations were also impacted by the strike action and shut down. Compared to the year ended 30 September 2013 tonnes milled were flat despite only running six out of our seven Marikana concentrators. The impact on tonnes milled due to load shedding was a reduction of 93,000 tonnes for the year ended 30 September 2015.

Underground milled head grade was 4.51 grammes per tonne, up 0.7% on the prior financial year. Overall the milled head grade was 4.47 grammes per tonne, up 1.8% on the prior financial year due to the increase in underground grade and a decrease in lower grade opencast ore in the mix. Underground and overall concentrator recoveries for the year at 86.8% and 86.7%, respectively, remain strong. Total Platinum metal-in-concentrate for the year at 740,315 saleable ounces exceed the mining production of 704,776 Platinum ounces as the stock piles of ore ahead of the concentrators gave us the flexibility to overcome the impact of Section 54 safety stoppages at our mining operations.

As previously reported, smelting and refining operations were constrained in the second quarter due to shutdowns for repairs of both the Number One and Number Two furnaces. Subsequently, these operations ran at full capacity processing the stock that had built-up and achieved refined Platinum production for the year ended 30 September 2015 of 759,695. This was the highest since 2007, 74.2% higher than the financial year 2014 and 7.1% higher than the financial year 2013. PGMs produced in the year were 1,447,364 ounces, the highest since 2011. This was 64.1% higher than financial year 2014 and 8.3% higher than financial year 2013. The initiative to reduce the metals in process pipeline and improve recovery rates as part of the value benefits programme has yielded benefits earlier than anticipated. An increase in production of around 10,000 PGM ounces has been attributed to this initiative in the year ended 30 September 2015.

Sales & Pricing

Sales for the year were 751,560 platinum ounces, the highest since 2007, and 1,433,883 PGM ounces, the highest since 2011.

The weak price environment continued during the year with the platinum price decreasing by 22.0% on the prior financial year and the US Dollar basket price (including base metal revenue) falling by 15.9% to $902 per ounce (on 2 October 2015). The corresponding lowest Rand basket price of R10,829 per ounce for the year ended 30 September 2015 was 4.0% lower than the prior financial year impacted by the Rand weakness as the average Rand to US dollar exchange rate was 13.8% weaker at 12.01 compared to 10.55.

Unaudited results for year ended 30 September 2015

Our audited results for the year ended 30 September 2015 are expected to be published on 9 November 2015. It is expected that these results will show an operating loss of US$207 million before impairment charges of $1,850-$2,050 million which are expected to be recognised in connection with the completion of the audit process for the year ended 30 September 2015. The impairment charge is primarily driven by lower PGM prices and the Business Plan which has an impact on future discounted cash flows over the life of mine business plan across the Group's operations. As a result of the impairment charge it is expected that net assets attributable to equity shareholders of Lonmin Plc as at 30 September will be in the range of $1,600 million and $1,800 million. Full details of the impairment charge and net assets will be set out in the Group's audited results for the year ended 30 September 2015.

Update on Right Sizing the Group

Our workforce has reduced by 2,623 people from 38,292 as at 30 September 2014, to 35,669 people as at 30 September 2015, of which 1,308 were Lonmin employees and 1,315 were contractors. At 30 September 2015 Lonmin provided employment for 26,968 permanent employees and 8,701 contractors.

Progress continues with the restructuring programme due to new bench marked operating model and removal of high cost production. In total 2,978 people had left the Group with 1,978 employees leaving through voluntary separations and early retirement by 30 October 2015 and the net reduction in the contractor headcount was 1,000.

Lonmin expects to announce its full year audited results for the year ended 30 September 2015 on 9 November 2015.

- ENDS -

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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 more than 70% of known global PGM resources are located.

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 support and infrastructure across the operations.

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

This announcement includes forward-looking statements. All statements other than statements of historical fact included in this announcement, including without limitation those regarding Lonmin's plans, objectives and expected performance, are forward-looking statements. Lonmin has based these forward-looking statements on its current expectations and projections about future events, including numerous assumptions regarding its present and future business strategies, operations, and the environment in which it will operate in the future. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "could", "would", "expect", "intend", "estimate", "anticipate", "believe", "plan", "aim" or "continue", or, in each case, their negative, or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors related to Lonmin, including, among other factors: (1) material adverse changes in economic conditions generally or in relevant markets or industries in particular; (2) fluctuations in demand and pricing in the mineral resource industry and fluctuations in exchange rates; (3) future regulatory and legislative actions and conditions affecting Lonmin's operating areas; (4) obtaining and retaining skilled workers and key executives; and (5) acts of war and terrorism. By their nature, forward-looking statements involve risks, uncertainties and assumptions and many relate to factors which are beyond Lonmin's control, such as future market conditions and the behaviour of other market participants. Actual results may differ materially from those expressed in forward-looking statements. Given these risks, uncertainties, and assumptions, you are cautioned not to put undue reliance on any forward-looking statements. In addition, the inclusion of such forward-looking statements should under no circumstances be regarded as a representation by Lonmin that Lonmin will achieve any results set out in such statements or that the underlying assumptions used will in fact be the case. Other than as required by applicable law or the applicable rules of any exchange on which Lonmin's securities (the "Securities") may be listed, Lonmin has no intention or obligation to update or revise any forward-looking statements included in this announcement after the publication of this announcement.

This announcement is an advertisement and not a prospectus. It does not constitute, or form part of, an offer to sell or a solicitation of any offer to buy the securities of the Company and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the prospectus to be published by the Company in due course in connection with the Proposed Rights Issue, and any supplement or amendment thereto (the "Prospectus"). Copies of the Prospectus will, following publication, be available from the Company's registered office.

This announcement is not an offer to sell or a solicitation of any offer to buy any Securities in the United States, Australia, Canada, Japan or in any other jurisdiction where such offer or sale would be unlawful or to any person to whom it would be unlawful to make such offer or solicitation.

The Securities have not been and will not be registered under the US Securities Act of 1933 (the "Securities Act"), or with any securities regulatory authority of any State or other jurisdiction of the United States, and may not be offered, sold, resold, pledged, taken up, exercised, renounced or otherwise delivered, distributed or transferred, directly or indirectly, into or within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any State or other jurisdiction of the United States. No public offering of the Securities is being made in the United States.

This communication is for distribution only to, and directed only at, persons in member states of the European Economic Area who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive (as amended by Directive 2010/73/EU) ("Qualified Investors"). For the purposes of this provision, the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each member state of the European Economic Area which has implemented the Prospectus Directive. In addition, in the United Kingdom, this communication is for distribution only to, and is directed only at, Qualified Investors who (i) have professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), or (ii) are persons falling within Article 49(2)(a) to (d) of the Order, or (iii) are persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this communication relates is available only to and will only be engaged in with such persons. This communication must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the European Economic Area (including the United Kingdom), by persons who are not Qualified Investors.

All financial figures for the year ended 30 September 2015 are on an unaudited basis. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per share for the current or future financial years would necessarily match or exceed the historical published earnings per share. Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser.

Notes:

1 Reporting of shafts are in line with our operating strategy for Generation 1 and Generation 2 shafts.

2 Pandora underground tonnes mined represents 100% of the total tonnes mined on the Pandora joint venture of which 42.5% for October and November 2014 and 50% thereafter is attributable to Lonmin.

3 Limpopo underground tonnes mined represents low grade development tonnes mined whilst on care and maintenance.

4 Ounces mined have been calculated at achieved concentrator recoveries and with Lonmin standard downstream processing recoveries to present produced saleable ounces.

5 Tonnes milled excludes slag milling.

6 Lonmin purchases 100% of the ore produced by the Pandora joint venture for onward processing which is included in downstream operating statistics.

7 Limpopo tonnes milled represents low grade development tonnes milled.

8 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).

9 Recovery rate in the concentrators is the total content produced divided by the total content milled (excluding slag).

10 Metals-in-concentrate have been calculated at Lonmin standard downstream processing recoveries to present produced saleable ounces.

11 Corresponds to contained base metals-in-concentrate.

12 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. Chrome is produced in the form of chromite concentrate and volumes shown are in the form of chromite.

13 Basket price of PGMs is based on the revenue generated in Rand and Dollar from the actual PGMs (5PGE + Au) sold in the period based on the appropriate Rand / Dollar exchange rate applicable for each sales transaction.

14 As per note 13 but including revenue from base metals.

15 Exchange rates are calculated using the market average daily closing rate over the course of the period.