Half Yearly Report

REGULATORY RELEASE

12 May 2014

2014 Interim Results

Lonmin Plc, ("Lonmin" or "the Company"), the world's third largest primary platinum producer, today publishes its Interim Results for the period ended 31 March 2014 and an update on events to today's date.

Key Features

Safety is our number one priority:

o Improved LTIFR to3.23 incidents per million man hours compared to 3.66 in the prior year period

o We regret that we suffered one fatality at the start of H1 2014

Results significantly impacted by the industrial action:

o Minimal operations during the striking period - 3.2 million tonnes produced, down 43%

o 155,720 of equivalent saleable Platinum ounces lost as result of the strike

o Saleable metal in concentrate of 215,117 Platinum ounces, down 41% on prior year period

o Platinum sales of 263,675 ounces - down 19% on the prior year period

o Basket price down 16% to $1,056 per PGM ounce despite supply side concerns around the strike action

o Rand unit cost at R13,058 per PGM ounce, up 46% on prior year period

o Underlying EBIT $34 million, down from $93 million in the prior year period

o Solid track record in overall concentrator recoveries - improved from 86.8% in prior year period to 87.7%

o Net cash of $71 million with available committed debt facilities of $589 million

o Cash flow requirements on resumption of operations may put the business in a net debt position.

o Force majeure notices issued to customers, suppliers and contractors during strike period

Focus on maintaining integrity of operations, in readiness for re-start and safe and effective ramp up:

o Furnaces idling and being monitored; concentrators and refineries shut

o Pipeline stocks not fully depleted. It is intended to resume processing operations in May to process remaining pipeline

o Available ore reserve position at 3.7 million centares provides for flexibility

o Cash conservation measures reduced cash outflows by around 60% of normal operating costs and capital expenditure

Market outlook: 

o Deficits in 2014 as protected strike continues and South African supply shrinks

o Improving automotive demand and sustained and increasing jewellery demand

Guidance:

o K4 return to be delayed

o Sales guidance will be predicated on timing of return to work

o Expect unit cost per PGM ounce to be above wage inflation and capex to be lower than previous guidance of $210 million - we will provide guidance in due course

Ben Magara Chief Executive Officer, said: "This has been a challenging first half of the year, latterly dominated by protracted industrial action across the PGM sector. Whilst we continue to work to resolve this dispute we have also taken decisive and early action to reduce cash burn, to safeguard our great assets and protect our balance sheet integrity ahead of a safe and successful ramp up when the strike ends; something we have demonstrated we excel in."

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. Lonmin's mining operations extract ore from which the Process Division produces refined PGMs for delivery to customers. 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

Chief Executive Officer's Review

1. Introduction

The six month period to 31 March 2014 was significantly impacted by the protracted wage strike which has beset the platinum industry in South Africa and is now in its sixteenth week. The length of the strike has put an industry that is already struggling with the combined pressures of low PGM prices and high cost inflation under enormous pressure and challenges the viability of some of the marginal operating shafts in the industry.

At Lonmin, production at both the mining and processing divisions at our Marikana operations have been minimal since 23 January 2014 when the Association of Mineworkers and Construction Union (AMCU), representing 70% of the workforce (as at 31 March), commenced protected strike action, impacting performance for the half year.

· Sadly we lost a colleague due to a vehicle related accident at E3 shaft.

· We mined 3.2 million attributable tonnes during the period, down 43% from the prior year period. Production momentum in the first quarter was impacted by Section 54 safety stoppages and low productivity levels arising from the tensions around the then wage negotiations. In quarter two, operations have been at a virtual standstill for nine of the twelve possible weeks of production as a result of the strike.

· Production losses directly associated with industrial action are around 2.6 million tonnes, equivalent to 160,475 ounces of saleable Platinum ounces, of which 155,720 ounces were directly related to the strike.

· The depressed PGM pricing environment experienced in the first quarter of the financial year continued in the second quarter despite supply side concerns around the strike actions.

· We delivered 215,117 ounces of Platinum in concentrate, down 41% from the prior year period.

· However we achieved Platinum sales of 263,675 ounces during the period, down 19% as we benefitted from a healthy closing pipeline position at the end of the 2013 financial year. In addition, we anticipated the strike towards the end of quarter one and managed our stock to enable us to continue to supply our customers into quarter two.

· We have made progress with our unit cost containment in the last 18 months, but as a result of relatively low production volumes unit cost of production increased by 46% to R13,058 per PGM ounce when compared with the prior year period.

· The favourable ZAR/USD exchange rate was partially offset by the low PGM price environment and has resulted in underlying EBITDA of $103 million (excluding fixed production overheads incurred during the strike and other strike related costs which have been classified as special costs), compared to $171 million in the prior year period. When the strike related costs are included the operating loss in the half year was $131 million, compared to a profit of $90 million in the prior year period and loss before tax of $278 million compared to $54 million profit in 2013.

We have focused on safeguarding the business through a number of initiatives. This has been done with a view to ensuring an efficient ramp up when operations resume but also retaining the flexibility to effect further measures to safeguard the assets in the event of a prolonged strike:

· We took decisive action on cost containment and cash conservation measures during the strike and have seen normal cash outflows reduce by around 60%, with potential to decrease further. Our spend on capital was $46 million and our net cash balance was $71 million at 31 March 2014 with available committed debt facilities of $589 million. This compares with net cash of $201 million at 30 September 2013.

· We issued force majeure notices to our PGM customers, suppliers and contractors.

· We secured the integrity of our operations ahead of the strike and have been idling the furnaces. This, combined with the healthy available ore reserve position which stood at 3.7 million centares and our solid track record in consistently achieving high concentrator recovery rates means we are well positioned to safely and effectively ramp up when operations resume as we did in 2012.

· In anticipation of finding a solution to the strike we will start the processing operations during May 2014 to process the remaining material in the pipeline. However, if the strike continues, we will fully deplete the pipeline and limit further cash outflow.

· We have a programme for further cash conservation which potentially includes a restructuring plan should the anticipated start up not materialise. This will further reduce the daily cash burn.

2. Safety

Regrettably one of our colleagues, Mr Siyabonga Sibango, was fatally injured in an underground vehicle accident at E3 shaft on 26 October 2013. We extend our deepest condolences to his family and friends. This fatality and a rise in fatalities across the Rustenburg region contributed to the production losses attributable to management induced stoppages and Section 54s experienced only during quarter one. The safety of our employees is central to all that we do and we continue to emphasise the importance of applying safe working practices throughout our operations. Notwithstanding the loss of our colleague Siyabonga, our safety record during the first half of the year was encouraging. Our rolling twelve month average Lost Time Injury Frequency Rate (LTIFR) to 31 March 2014, improved to 3.23 incidents per million man hours, compared to 3.66 at 31 March 2013 and reflects the reduced hours of work as a result of the strike.

3. Production Performance 

Our production performance in the first half of the 2014 financial year declined significantly as a result of the industrial action led by AMCU. This unprecedented strike action has rendered the latter part of the half year unproductive, with limited mining activity from contract mining. 

Mining Division

Total tonnes mined during the half year of 3.2 million, showed a decrease of 43% when compared to the prior year period production of 5.7 million tonnes. The Marikana underground mining operations produced 3.0 million tonnes during the half year, a decrease of 2.3 million tonnes or 44% on the prior year period as the strike impacted all underground shafts.

Production from our Merensky opencast operations of 155,000 tonnes was 46% lower than the prior year period as this operation is run by non-striking contractors but has been scaled back due to the subdued price environment. Pandora (100%) production decreased by 107,000 tonnes, or 41% on the prior year period due to the impact of the strike.

In total, 2,806,000 tonnes of underground production were lost during the half year, of which 2,592,000 tonnes were lost due to industrial action, 191,000 tonnes related to Section 54 safety stoppages and 23,000 tonnes to management induced safety stoppages. This compared to a total of 220,000 tonnes lost in the prior year period of which 101,000 tonnes were due to Section 54 safety stoppages, and 40,000 tonnes and 79,000 tonnes were due to management induced safety stoppages and labour stoppages respectively.

Ore reserve development

The reserve position remains healthy such that our immediately available ore reserves at Marikana at the end of the period, were 3.7 million centares. This level of ore reserves represents an average of 18 months based on production levels before the start of the strike and will support our ramp up programme when operations re-start as we will have the necessary flexibility to deploy our production stoping crews and effectively ramp up.

Process Division

Concentrators

Operations in the Process Division have also been impacted by the strike action in view of the minimal production from mining. Total tonnes milled in the half year period at 3.4 million tonnes were down 2.3 million tonnes on the prior year period or 41% as the concentrating division was also shut down from 23 January.

Underground milled head grade decreased by 0.7% to 4.60 grammes per tonne (5PGE+Au) compared to the prior year period. Overall the milled head grade was 4.50 grammes per tonne, down 1.3% on the prior year period due to a change in mix between the higher grade and lower grade shafts.

Underground concentrator recoveries for the half year increased by 1.2% to 87.9% when compared to the prior year period. Overall concentrator recoveries for the period continued the upward improvements and increased by 1.1% to 87.7% when compared to the prior period.

Total PGMs and Platinum in concentrate for the period under review were 412,170 and 215,117 saleable ounces respectively being 40% and 41% lower respectively when compared to the prior year period as a result of strike related concentrator plant shut down.

Smelters and Refineries

Our furnaces have idled and our refinery plants have been shut during the strike period to save power and costs. As a result, total refined production for the period at 257,217 ounces of saleable Platinum was down 21% when compared against the prior year period. PGMs produced in the half year were 543,179 ounces, representing a decrease of 12% on the prior year period.

Pipeline

At this stage we have not fully depleted our pipeline stocks. We will however start the processing operations comprised of three concentrators and one furnace in May to process ore from the contract mine areas as well as third party concentrate and the remaining material in the pipeline.

Platinum sales for the half year at 263,675 ounces were 19% lower than the prior year period, and the 547,413 PGM ounces achieved during the period, were 6.7% lower than the prior year period.

Production statistics for Quarter Two of the year can be found in a separate announcement published today or on the Company's website: www.lonmin.com.

4. Wage Negotiations and Strike Update

Industrial relations remain an increasing challenge and risk in South Africa's mining industry with the platinum sector losing billions of Rand in revenue to wage strikes since 2011. Lonmin and AMCU have been engaged in wage negotiations around increases which would be effective from 1 October 2013, with AMCU seeking a basic wage of R12,500 per month for the lowest level employee. Following non-resolution, a protected strike, unlike the illegal strike we experienced during the Events at Marikana in August 2012, commenced on 23 January. The strike involves an estimated 70,000 AMCU members across the three affected platinum producers, namely Lonmin, Impala Platinum Holdings and Anglo Platinum (the Companies). This action has seen the Companies come together in seeking resolution to this impasse. Although unsuccessful in gaining resolution, we are grateful to the South African Government for its intervention early on in the process, through the Commission for Conciliation, Mediation and Arbitration (CCMA), and more recently through the Department of Labour. More still needs to be done with regards to law enforcement in order to allow employees freedom to come to work should they so wish.

Revised Settlement Offer

In April 2014, the Companies tabled a revised settlement offer in respect of the wages and benefits to AMCU and its members. This followed engagements between the CEOs of the Companies and the President of AMCU, Mr Joseph Mathunjwa, and AMCU's national leadership, facilitated by the officials of the Department of Labour.

This revised offer ensures that the minimum total cash remuneration (comprising basic wages and holiday, living out and other allowances) for entry level underground employees will rise to R12,500 per month take home pay before deductions from 1 July 2017. To achieve this, the basic salary for the Lonmin employees would rise by between 7.5% and 9.5% per year across the various bands of our employees.

Fundamentally, AMCU's insistent demand to achieve R12,500 basic monthly salary over four years still represents an annual increase of 29%. This remains completely unaffordable and would have disastrous consequences for our business, people, communities and country if we were to agree to it as it will result in shaft closures and job losses. In addition, the prolonged industrial action by AMCU has made restructuring inevitable.

The revised settlement offer, represents an increase from the 7.5% to 9% per year CCMA offer, and the 7.5% to 8.5% per year offer made prior to the commencement of the strike. The Companies, acting in good faith, have made various attempts over the last three months to end the industrial action. The offer will result in an overall 9.7% increase in total cost to Company of our current salary and wage bill for the 2014 financial year. Labour costs account for approximately 55% to 60% of annual production costs and unsustainable increases in these costs will be damaging to the viability of the industry and the South African economy.

The offer currently includes the payment of wage increase back pay related to the annual increase from 1 October 2013 for Lonmin employees, for which there is no legal requirement. The affordability of the back pay becomes increasingly challenging as the duration of the strike increases. The principle of 'no work, no pay' applies for the duration of the strike.

Alternative Solutions

Unfortunately this revised offer has been rejected by AMCU. As a result, Lonmin similar to Impala and Anglo Platinum has now taken the offer directly to its employees as individuals, as allowed by the South African labour law. We expect to be able to assess the success of the return to work by the end of May 2014 with production provisionally scheduled to start in June if successful. In the event that the positive responses we have received from employees are not sufficient to enable operations to resume, the Company will consider its other options to mitigate against further costs and conserving cash in order to protect our business. These may include measures to reduce capital and a review of the business operations. Fundamentally, the longer the strike continues, the greater the impact on our higher cost shafts, our ability to return to a normal operating environment and critically, on jobs.

Our Philosophy on Unions and Wage Negotiations

We are committed to finding peaceful solutions to challenging issues and believe that the fact we have been talking with AMCU, and other unions represented at Lonmin and directly with our employees, reflects Lonmin's commitment to finding peaceful and sustainable solutions to these issues. We are resolute that our improving relationships with employees and unions will continue when operations resume.

We have worked hard to rebuild relationships with both our majority and minority unions in what is a changing landscape - not just in the mining industry but other sectors as well. We acknowledge that employees choose the union they wish to represent them. We are clear about the fact that the Company's future, and by implication its profitability, rests as much on the relationships it has with its employees and wider stakeholder group as it does on the core fundamentals of mining and the market. Lonmin is focused on improving its relationship with its employees and empowering managers to have a direct relationship with their employees. Instrumental in the process has been the establishment of an internal communications structure and establishment of workplace forums to facilitate a two way dialogue. This has been particularly useful in the two-way communication we have had with our employees around the status of negotiations and in receiving feedback during the strike.

Impact on Employees and our Communities

While the negative impact of the strike on our national GDP and the country's balance sheet is well understood, the impacts on the ground - in the communities around our operations and from which we draw our labour - are far reaching given the multiplier effect of the platinum mines' revenues and expenditures. The strike has also eroded the health and financial position of our employees, with many workers in an unstable financial situation. We believe much responsibility and care should be exercised by union leadership in educating their members on the economic realities of our business, as opposed to continually advancing arguments that price jobs beyond what the markets can afford.

Holistic Solution Required as Response to the Social Issues

We acknowledge that there are historical labour inequities in South Africa. We believe that many steps have been and are being taken towards remedying these inequalities over the years, but we also acknowledge that much more still needs to be done. It has, however, been recognised that business cannot deal with many of these socioeconomic challenges alone and a holistic solution is required for meaningful and sustainable changes to the labour system. We welcome the greater involvement of Government in this area.

Meaningful and sustainable changes to the labour system are required. However, structural change can only be achieved over time through a carefully considered labour compact that not only considers the disposable income of workers, but also the socioeconomic wellbeing of workers and the mining communities that host our operations; and the sustainability of these operations.

5. Cash Management

Cash and Cost Conservation

Since the strike started on 23 January we have implemented a series of cash conservation measures, resulting in reducing normal cash outflows by around 60% of normal operating costs on the back of a similar reduction in both planned operating costs and capital expenditure. However, given our single location dependency, these measures have been taken with a view to maintaining a business state most prepared for a safe and rapid ramp up on resolution of the strike. Measures taken include temporarily putting on hold leave encashment and encouraging non-striking employees with overdue leave to go on leave. This has been voluntary and we are grateful to all employees who actioned this call for assistance.

Net cash as at 31 March 2014 reduced to $71 million from $201 million at 30 September 2013. The Group has additional support in the form of its debt facilities comprised of a revolving credit facility of $400 million at a Lonmin Plc level and three bilateral facilities of R660 million each, the sum total of which is equivalent to $189 million at a subsidiary level. These facilities have been committed and are available to use.

The Company has a robust programme for further cash conservation measures to protect the assets, which may include a restructuring plan should the anticipated start up in June 2014 not materialise. This will further reduce the daily cash burn rate. Whilst this will conserve cash and is crucial in the near term, it will ultimately impact our ability to quickly ramp up when operations eventually resume.

Capital Expenditure

As a result of the strike, we scaled back our capital expenditure in line with our management agenda to conserve cash by deferring major capital spend during this period. As a result, capital spend in the half year was $46 million compared to $73 million in the prior year period. Capital expenditure in the first six months was mainly on stay in business capital across the various shafts and processing facilities, development of ore reserves at K3, Rowland and Saffy shafts as well as critical ore pass rehabilitation work on K4. The hostel conversion programme continued as it is an important part of improving the living conditions of our employees. The feasibility study on the bulk tailings retreatment initiative was also completed. We will start this project when cash flows permit.

Customers and Suppliers

We have issued force majeure notices to suppliers and contractors and placed a moratorium on new hires, travel and training, unless absolutely critical or already contracted. We have also sadly declared force majeure with our customers due to the prolonged strike. We are, however, still able to deliver a small amount of metal being returned from our tolling contracts. The relationships we have with our customers are longstanding. We are grateful for their understanding and we continue to find ways to manage their requirements.

6. Ramp Up

We have developed a comprehensive ramp up programme aimed at ensuring a safe start up when employees return to work. This has been presented to the Department of Minerals and Resources (DMR) to ensure there is alignment to our zero harm aspirations when we start up. Our ability to ramp up safely was demonstrated in the first quarter of the 2013 financial year following the Events at Marikana in 2012. Unlike 2012, we anticipated the current industrial action and managed an orderly shut down of our operations and mitigated the risks to the integrity of our infrastructure. We secured our shafts and underground work areas were made safe whilst heavy equipment has been parked away in clean dry places for its protection. We also continue to carry out routine maintenance.

Furnace Integrity

The Furnaces performed well up to the commencement of the strike. Furnace One reliability was increased by the new barrel installed in June 2013. Furnace Two also performed well and the design changes made to the roof proved to be successful.

During this extended strike, maintaining the integrity of the furnaces has remained critical to ensure a successful start up of the smelting operations. The measureable and monitored parameters on the furnaces (furnace movement and hearth temperatures) are still showing a stable trend after sixteen weeks. The furnaces are monitored daily and changes are made as required to ensure a reduced impact on furnace integrity. The concentrators, base metal and precious metal refineries have been safely shut down in such a manner as to enable an efficient start up in May.

Initial Phase

As part of the production ramp up, we will secure the return of our employees as many went home at the beginning of the strike. We will invest many hours in safety training and carrying out medicals on the employees before re-opening operations in order to minimise the risk of any safety failure. The initial phase of the ramp up will also involve checks of the operations. Our ongoing monitoring of work areas indicate that there has been minimal damage to underground workings to date although actual conditions will become more apparent once the rock faces are re-started. The healthy state of our ore reserves will provide us with the flexibility we will need to resume operations as we will have the option to move crews from compromised areas to more secure levels as we re-start.

The longer the strike continues the greater the risk that the strike will cause irreparable damage to our assets and make the operations unsafe and more costly for us to rehabilitate and safely re-start.

7. Going Concern

The Directors have assessed the Group's ability to continue as a going concern and have concluded that the Group's capital structure provides sufficient head room to cushion against downside operational risks and minimise the risk of breaching debt covenants on the assumption that the strike action will end and employees return to their stations in June 2014. However, a delayed resolution of the strike action would require the Group to take other operational measures to ensure that it has sufficient funds to facilitate all ongoing operations on start up. The lack of clarity over the end date of the strike represents a material uncertainty that may cast doubt about the going concern assumptions.

Nevertheless, based on the Group's expectation that the strike action will be resolved within a reasonable period and further management actions which would be taken if this proved not to be the case being possible and successful, the Directors believe that the Group will continue to have adequate financial resources to meet obligations as they fall due and comply with its financial covenants and accordingly have formed a judgement that it is appropriate to prepare the financial statements on a going concern basis. Therefore, these financial statements do not include any adjustments that would result if the going concern basis of preparation is inappropriate.

8. Transformation 2014 Targets

The Mining Charter, which was originally issued in October 2002 and revised and reissued in September 2010 alongside a new Scorecard, following consultation with government and industry stakeholders, creates a statutory framework which formalises the mining industry transformation responsibilities. The charter and scorecard are a fundamental element of our licence to operate as it is both a legal obligation which is linked to the delivery of our Social Labour Plan (SLP) commitments and the right thing to do. We are committed to contributing towards this fundamental change that is required and we continue to strive to do so. A healthy and profitable Lonmin brings benefits to all stakeholders, be they investors, our employees, the authorities or communities in which we operate.

We have a robust plan around achieving our December 2014 goals and have made significant inroads in working towards some of them. We have six headline transformation targets, linked to our SLPs:

· Black Economic Empowerment (BEE) equity - Achieve 26% equity ownership in Lonmin by Historically Disadvantaged South Africans (HDSAs);

· HDSAs in management - Increase the participation of employees from designated groups within each level of management to at least 40%;

· Women in Mining - Increase female participation at the mine to 10%;

· Procurement - Meet the Charter targets on our discretionary spend with HDSA suppliers;

· Housing and accommodation - Work towards individual and family accommodation for employees, moving away from the single sex hostel system; and

· Communities - Improve the quality of life of employees and the communities around our operations.

BEE Equity Ownership

Lonmin is continuing with its projects to achieve 26% BEE equity ownership by December 2014. This is not only because of a regulatory requirement but because our values support improving and developing the communities where we are operating and aligning the interests of employees and host communities with those of shareholders. In that context, engagements are ongoing on three transactions to increase our BEE equity ownership:

· a transaction with the Bapo ba Mogale community to convert royalties and their share in Pandora into equity;

· an Employee Share Ownership Plan (ESOP); and

· a Community Trust.

Engagements on these transactions are ongoing. The ongoing strike action is delaying the consultation process and implementation, however, we are confident that the above proposed transactions or a combination thereof will be implemented timeously so that we achieve our targets.

HDSA Management

Lonmin has committed to achieve 40% HDSA in management by the end of 2014. As at 31 March 2014, 49% of Lonmin's management was HDSA, including white females, as prescribed by the DMR. We also monitor our HDSA percentage, excluding white females and this was 38% at the end of the half year. We continue to focus on this and are striving to achieve this target by the end of the calendar year. For Lonmin, it is not just compliance but more about creating an environment where all employees irrespective of their race and gender are able to be their best as this ultimately also benefits Lonmin and the greater community.

Women in Mining

We continue to target women to join the industry as we believe this to be beneficial for the industry and our wider transformation goals. However, this is an area in which we face both historical and cultural challenges, not least in making underground work appealing to women, something which has not always been easy. We are targeting women for our mining related skills programmes, but acknowledge that achieving the 10% of women in mining target by the end of the 2014 calendar year will remain a big challenge. The uptake of women has been severely impacted by the current industrial action. In addition, the drive for this programme of recruitment will likely be impacted by cash constraints, given the strike.

Procurement

Lonmin has made excellent progress in this area in meeting our targets as we aim to broaden economic participation in our host communities. However, many local HDSA companies do not have the experience or resources to meet our business needs. We introduced supplier development programmes as an integral part of our preferential procurement strategy to bridge the gap. The strike has significantly impacted our HDSA suppliers as we have issued force majeure to some of them, many of whom are in the Greater Lonmin Community (GLC).

Housing and Accommodation

Hostel Conversions

Lonmin is in the last year of fulfilling its commitment to convert its hostel blocks to decent and affordable family and single units. Of the 128 single-sex traditional hostel blocks, 108 blocks were converted as at the end of the 2013 financial year. Our aim is to complete the remaining 20 hostel blocks during this calendar year at an estimated cost of R90 million. As in earlier phases of this programme, we have continued to contract this work out to HDSA GLC contractors. Our ability to complete the conversion on time is however being hampered by the ongoing strike. At the end of the programme the 128 converted blocks will yield a total of 2,664 units, comprised of 796 family and 1,868 single units.

Communities

We continue to look at the most effective ways of improving employees' living conditions and create programmes to deliver on these commitments. We have launched a comprehensive review of requirements to create sustainable communities. We will review infrastructure requirements, such as number, location and type of accommodation units required and the rental and ownership mix, as well as the financial commitment necessary to achieve this. We are partners with all levels of local government, the Department of Human Settlements and projects such as the Presidential Task team's Rustenburg living conditions initiative.

Marikana Extension 2 Housing Project

On 29 October 2013, we donated the Marikana Extension 2 comprising 50.1 hectares, to the Rustenburg Local Municipality under the direction of, and in collaboration with the North West Member of the Executive Committee (MEC) responsible for Human Settlement under the auspices of the Special Presidential Initiatives. The donated land comprises 850 serviced stands that will be developed by the Rustenburg Local Municipality utilising provincial and national government funding. At this early planning phase, rezoning and consolidation is being considered to develop approximately 2,600 of mixed housing schemes. The beneficiaries will be the Marikana community of which Lonmin category 4 to 9 employees represent the greatest portion.

9. Strategy - Development and Optimisation

Our immediate priority to enhance value creation through higher asset utilisation for improved returns has been adversely impacted by the prolonged strike. Saffy is among the key ramp up shafts where progress has been disrupted and we continue to prepare this shaft for its re-start. We anticipate continuing with our plans to deploy crews from low margin shafts to enhance returns and drive down costs but industrial action will delay the timing to steady state production. We will provide more detail around this in due course.

The momentum established at Rowland following the gains achieved from the de-bottlenecking project have been eroded by the industrial action. The full impact will be better understood as employees return to work.

K4, an important shaft in our portfolio, was scheduled to be brought back from care and maintenance in the 2015 financial year, predicated on improved market conditions and the Company being cash flow positive. We now anticipate that as a consequence of the industrial action, K4 will continue to be on care and maintenance until the Company is cash flow positive and market circumstances allow for its return. The exact timing of when this shaft may be brought back will be better understood once the strike has ended. The delay is likely to result in K4's ounces being replacement rather than growth ounces.

Exploration

Lonmin has PGM exploration joint ventures with Vale and Wallbridge Mining on properties around the Sudbury Basin in Ontario, Canada. Lonmin as the operator of the Vale Sudbury PGM joint venture will be carrying out further drilling and studies on the Denison PGM resource as well as pursuing targets on other properties. We are planning to spend approximately $5 million on exploration on our Wallbridge Sudbury Camp and North Range joint ventures this year, with the summer programme focused on trenching and drilling of targets identified from extensive geophysical surveys.

10. Markets

Looking beyond the current challenges, we remain confident about the fundamentals of PGMs as the world will continue to need platinum and other PGMs. Emissions legislation continues to tighten in established markets and is planned to do the same in emerging ones. Whilst we will always see thrifting and three-way substitution, new markets and applications continue to open up. Whilst we are going through a very tough period in terms of demand and prices, we remain optimistic on the future fundamentals and that the protracted strike may have brought that future nearer.

Automotive Production - positive growth bodes well for PGM demand

Vehicle production trends continue to moderately increase with a rise of 13.7 million units recorded between 2007 and 2013; 2.2 million were added last year alone. LMC Automotive forecast growth in most of the markets in 2014 and almost 50 million units are expected to be added between 2013 and 2025.

Automotive PGM Demand

The return to growth in many automotive markets coupled with tightening emissions legislation bodes well for demand in PGMs. Europe is expected to remain the biggest automotive platinum market where demand will be driven by ever stricter emissions legislation and a sustained diesel market. Platinum demand will also continue to grow in Heavy Duty Diesel and Non-road demand. Automotive palladium demand rose strongly in North America, Western Europe and China. The biggest increase in demand was recorded in China, where palladium-rich gasoline cars dominate and where vehicle production was up by 12%. Rhodium automotive demand also rose in all major markets except Japan and India. Rhodium is expected to retain an important role in automotive catalyst formulations and demand is expected to grow.

Jewellery Remains a Platinum Affair

The China platinum jewellery market grew year on year from 2012 to 2013 by an estimated 3% according to Platinum Guild International and is forecast to grow by a further 5% in 2014 if current price ranges prevail. The Indian wedding market is growing due to a larger middle class and active promotion of the engagement ring in addition to wedding bands only. SFA Oxford estimates that India's demand for platinum jewellery could more than double over the next ten years.

Fuel Cells Vehicles - a real market for platinum

Automotive fuel cell technology represents a growing market for our metals, with several automakers on track to put noteworthy numbers of vehicles into the mainstream market in 2015. The success of Fuel Cell Vehicles is a virtuous circle, as loadings come down to affordable levels fuelling infrastructure gets built and, governments give tax breaks to get emissions down - much of this growth potential relies on the nature of these tax breaks offered by legislators in given markets. Stationary fuel cells also provide growth opportunities.

Investment Gaining Momentum

Last year began quietly for platinum Exchange Traded Fund (ETF) demand until Absa Bank (Absa) launched its NewPlat ETF in May 2013. Within nine weeks it became the largest single platinum ETF and finished the year holding 910,000 ounces. The Absa ETF was almost entirely responsible for global ETF holdings rising by 909,000 ounces to 2,559,000 ounces in 2013. January 2014 saw the first concerted selling from the Absa ETF which dropped to 885,000 ounces by February, but buying then picked up and the fund has now breached 1 million ounces. The major palladium ETF's had a subdued 2013 with holdings at 2,035,000 ounces. The two South African palladium ETF's, launched at the end of March this year, were met with interest and could potentially add to the already deep fundamental deficit placing further pressure on prices and potentially accelerating a switch back to platinum and rhodium.

South African Strike Impacts 2014

By the end of March, SFA Oxford estimated a loss of 640,000 ounces of platinum, 300,000 ounces of palladium and 85,000 ounces of rhodium supply from South African operations as a result of the strike. However, this does not include the possibility of lost production from re-starting mines up to steady state levels and the restocking of the process pipeline stocks. Taking this into consideration South African output could drop to just over 3 million platinum ounces in 2014 compared with 4.13 million ounces in 2013. The strikes have also widened the palladium market deficit to 1.8 million ounces in 2014. There are also concerns over future supplies of palladium from Russia, given geo-political events in that region. Reverse substitution of palladium back to rhodium in three-way autocatalysis could relieve some pressure on stocks. Currently it is once again cheaper to manufacture a rhodium-rich catalyst. The impact of current strike action could lead to a deficit of 150,000 ounces of rhodium for this year.

PGM recycling an Established Supply Competitor

Global PGM recycling has grown from less than 1 million ounces in 2000 to 4.6 million ounces in 2013. Palladium has grown the most, it being 9.5 times higher than in 2000, compared to platinum and rhodium which are 3.6 times and 2.6 times higher respectively. This growth can be attributed to both the cocktail of metals and higher loadings of metals in catalysts that are coming back to market via scrapped vehicles. Recycling has become essential to ensure sustainability of the PGM market, helping to cap extreme metal price volatility, particularly with supply from South Africa contracting since 2006.

Diversity and Innovation Sustain PGM Markets

The market will be in significant deficit in 2014, drawing down at least 1 million ounces of above ground stocks, possibly more, depending on duration of the strike. Looking ahead, automotive production will continue to grow, legislation continues to tighten and jewellery will remain strong especially in China and is growing in India.

Opportunities lie with a stronger recovery in Europe and higher loadings as Euro 6 is promulgated in 2014, while jewellery demand in China is growing strongly beyond bridal. China was the world's largest consumer of platinum in 2013, mainly in jewellery. In addition, the Indian platinum jewellery market is burgeoning with supportive demographics. Jewellery looks set to continue to be an important and growing end use for platinum adding diversity to its portfolio. The risk of substitution, however, remains ever present.

11. Legislative Environment - MPRDA Update

MPRDA Update

The end of February saw an announcement that the South African Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill was going to be delayed to allow for further consultations to determine whether the oil and gas sectors should be dealt with in a separate legislation. Notwithstanding this publicly announced delay, it was subsequently announced by the Public Portfolio Committee that it had approved its amendments to the Bill. The Bill has also been approved by the National Council of Provinces and is currently awaiting signature by President Zuma.

Whilst several concessions in respect of the Bill were made by the DMR during a bilateral consultation process headed by the Chamber of Mines, the extent to which Ministerial discretion is permitted remains a challenge. The discretion granted to the Minister to declare a mineral as strategic is likely to have the biggest impact on Lonmin and other mining companies, given that the Minister may declare PGM's as strategic in which event the Minister is empowered to determine what volumes of such minerals are to be available to be sold locally. The lack of clarity on pricing and rates information to be used remains a concern. However this would not be a concern if free market pricing was to be allowed.

With the general downturn of investment in greenfield mining projects, South Africa's need for a sound mining legislative framework has been greatly increased. The current MPRDA Amendment Bill is far from perfect, but does provides a platform for a regulatory framework and a policy direction for the future of mining in South Africa. The Regulations to the Bill have not yet been drafted so implementation of the Act's provisions is likely to be delayed until the Regulations are completed. 

Labour Relations Act

Progress has been slow as regards finalising the labour relations legislative framework. Whilst the Employment Tax Incentive Act (otherwise known as the Youth Subsidy Act) became law on 1 January 2014 and provides tax incentives to employers who employ qualifying persons between the ages of 18 and 29, amendments to the Labour Relations Act and the Basic Conditions of Employment Act continue to be debated before submission to Cabinet for final approval. Contentious issues include whether there should be circumstances in which a strike can be suspended and who can take part in picketing activities. It appears that the amended legislation will not contain provisions banning labour brokers or providing for a ballot process prior to the implementation of a strike. Once the amended versions of the various pieces of legislation have been submitted to and approved by Cabinet, the President will be entitled to sign the amended legislation into law and it will become effective on a date stipulated in the Amendment Acts.

12. Farlam Commission

The Farlam Commission of Inquiry into the Events at Marikana in August 2012 is still in progress. 'Phase 1' is continuing and is looking at evidence relating to the events, on and leading up to, 16 August 2012. The Commission has now concurrently embarked on 'Phase 2' of its inquiry, which will look at the underlying socioeconomic conditions that may have contributed to the events. This has taken the form of a series of public seminars to enable the Commission to obtain information and advice from a wide range of experts on identified topics (such as migrant labour and collective bargaining) and open these matters up for public debate. While the inquiry was due to conclude at the end of April 2014, it has been granted a final extension to 31 July 2014 by President Zuma. The Commission is still investigating the role of the South African Police Services' leadership and is yet to call Lonmin to the stand.

Lonmin continues to fully support the inquiry and is cooperating fully with the Commission's investigations.

13. Outlook

The protracted wage strike which has been the main feature of the first half of the year, has significantly impacted the Company's profitability. Our ability to achieve a sustained steady state production is predicated on when operations resume. We expect unit costs to exceed wage inflation and capital spend to be less than the previously guided $210 million. We will update the market on the production, associated unit costs and capital spend outlook once the strike has ended.

14. Management and Board Update

On 7 November 2013, we announced that the Chairman, Roger Phillimore, had indicated his intention to retire from office during 2014. As a result, Roger Phillimore retired as Chairman and as a Director of the Company at the close of business on 30 April 2014.

Brian Beamish, an independent Non-executive Director who joined the Board on 1 November 2013, became Interim Chairman with effect from 1 May 2014.

We are grateful for Roger's commitment and wise contributions to the Company over the last seventeen years. He joined the Board in 1997, became Deputy Chairman in 2002 and then took over the mantle of Chairman in 2009. During his five years as our Chairman he has led the Board through some of the most challenging years in the Company's long history. We welcome Brian who brings a wealth of experience, knowledge and skills to our boardroom, and in particular has a deep insight into the needs of 21st century South Africa which we value greatly.

15. Employee Contribution

I would like to express my gratitude to the Lonmin Board, employees and management, our contractors, the GLC and all stakeholders who have shown incredible amount of resilience and support during what has been a challenging first half of the year. I hope that AMCU and its members make the right choice to return to work so as to ensure a sustainable Lonmin for their and our benefits and should avoid the prolonged suffering of our employees, partners and the GLC.

Ben Magara

Chief Executive Officer

9 May 2014

Financial Review

Overview

The impact of the protected strike action in the South African platinum sector which commenced on 23 January 2014 is a dominant feature of our financial performance during the six months ended 31 March 2014. Key in this impact has been the reduction in the volume of Platinum Group Metals (PGMs) produced and sold while fixed production costs continued to be incurred during the strike period which has had an adverse effect on the Group's profitability.

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

On the cost side we have separately accounted for fixed production overheads incurred during the protected 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 periods. 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 end and utility and overhead escalations, somewhat mitigated by favourable exchange movements. The cost of production per PGM ounce for the 2014 period, including the adverse impact of the strike action, was R13,058 compared to R8,960 for the 2013 corresponding period. The loan to Shanduka, our HDSA partner, was impaired by $160 million during the period. The security for the loan is the value of Shanduka's shareholding in Incwala. This valuation has fallen driven by a downward revision in PGM price assumptions. At 31 March the balance of the receivable stood at $260 million.

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, the balance sheet strength attained during the 2013 financial year when we undertook a rights issue and settled our debt has allowed the Group to absorb the operational disruption caused by the strike to date and still end the period in a net cash position of $71 million. We continue to put in place measures to conserve cash and protect our balance sheet position in order to support a successful ramp up on return to production. However uncertainty remains around the strike resolution date which may have a bearing on the going concern assumption as detailed in the basis of preparation section of the interim financial statements.

Income Statement

The $59 million movement between the underlying operating profit of $34 million for the six months ended 31 March 2014 and that of $93 million for the six months ended 31 March 2013 is analysed below.

Revenue

Total revenue for the six months ended 31 March 2014 decreased by $157 million from the six months ended 31 March 2013 to $578 million.

As noted in the overview the PGM pricing environment deteriorated over the prior period and the impact on the average prices achieved on the key metals sold is shown below:

The US Dollar PGM basket price (excluding by-products) decreased by 15% resulting in a $71 million reduction in revenue. It should be noted that whilst the US Dollar basket price has decreased by 15% over the 2013 comparable period, in Rand terms the basket price (excluding by-products) remained flat compared to 2013 propped up by the significantly weaker Rand.

PGM sales volume for the six months to 31 March 2014 was 7% down on the six months to 31 March 2013. 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. The reduction in PGM volumes contributed $46 million to the overall decrease in revenue. The mix of metals sold resulted in a negative impact of $27 million mainly due to a higher proportion of Palladium, Rhodium and Ruthenium due to metal-in-process inventory timing differences. Base metal revenue was down $13 million on the back of lower volumes sold and softer metal prices.

Operating Costs

Total underlying costs (excluding the impact of the strike disruption) in US Dollar terms decreased by $98 million mainly due to the impact of decreased production as a result of the strike and positive foreign exchange movements partially offset by the impact of metal stock movements and cost escalations. A track of these changes is shown in the table below.

Marikana underground mining costs decreased in the period by $62 million or 14%, 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 $14 million or 48% due to similar reasons.

Concentrator and processing costs remained flat compared to the prior year period, as the impact of reduced production as a result of the strike was offset by cost escalations and an increase in maintenance during plant idle time.

Overheads increased by $8 million or 9% largely due to cost escalation effects.

Ore purchases decreased by $11 million or 36% as volumes of ore produced were impacted by the strike action.

The six months 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. This has resulted in a $285 million negative impact on operating profit, excluding exchange impacts, arising from metal stock movements. The $285 million comprises of a $157 million stock decrease in 2014 and a $128 million increase in stock in 2013.

The Rand weakened considerably against the US Dollar during the period under review averaging ZAR10.46 to USD1 compared to an average of ZAR8.79 to USD1 in the 2013 period resulting in a $135 million positive impact on operating costs.

Depreciation and amortisation decreased by $9 million over the 2013 period reflecting the decrease in production during the period. Depreciation is calculated on a units of production basis, spreading costs in relation to proved and probable reserves.

Cost of Production per PGM Ounce

The cost of production per PGM ounce for the six months to 31 March 2014 was R13,058 compared to R8,960 for the six months to 31 March 2013, an increase of 45.7%. Cost escalations during the period were exacerbated by significant production disruptions due to increased Section 54 and management induced safety stoppages in the first quarter of the year and the protected strike action over the major portion of the second quarter. It should be noted that the cost of production per PGM ounce is based on all production costs including idle fixed production overheads which have been excluded from our underlying results as discussed below. If these strike related costs are excluded the unit cost per PGM ounce produced for the 2014 reporting period would have actually reduced by 2.5% compared to the 2013 reporting period.

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

Special Operating Costs

Special operating costs for the six months ended 31 March 2014 are made up as follows:

As highlighted earlier, fixed production overheads incurred during the strike period for which there was no associated production output and 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 $164 million. Idle fixed production costs incurred during the strike period amounted to $157 million. Costs relating to contractors not being able to fulfil their obligations amounted to $3 million while the costs of additional security totalled $4 million.

For the six months ended 31 March 2013, special costs totalled $3 million and related to residual costs arising from the strike action of 2012 ($2 million) and restructuring costs ($1 million).

Net Finance Costs

The total net finance costs of $145 million for the six months ended 31 March 2014 represent a $106 million movement compared to total net finance costs of $39 million for the six months ended 31 March 2013.

Net bank interest and fees decreased from $14 million to $8 million for the six months ended 31 March 2014 largely as a result of the non-recurring unwinding of previously unamortised bank fees on settlement of old loan facilities in 2013 and a reduction in average drawn facilities during the period under review. Interest totalling $4 million was capitalised to assets (2013 - $9 million).

The Historically Disadvantaged South Africans (HDSA) receivable, being the Sterling loan to Shanduka Resources (Proprietary) Limited (Shanduka), decreased by $139 million during the period to 31 March 2014 as positive exchange movements of $12 million and accrued interest of $9 million were more than offset by an impairment charge of $160 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 downward revision in PGM price assumptions applied in the valuation models. This compares to adverse exchange movements of $23 million and accrued interest of $8 million in the period to 31 March 2013. At 31 March 2014 the balance of the receivable stood at $260 million (2013 - $366 million).

The financial effects of forward exchange contracts in synchronisation with the Rights Issue process and unwinding of the interest rate swap in 2013 did not recur in 2014.

Taxation

Reported tax for the current six month period was a credit of $67 million compared to a credit of $34 million in the 2013 period. The underlying tax charge of $2 million in the 2014 period becomes a $67 million tax credit after taking into account exchange gains on the retranslation of Rand denominated deferred tax liabilities ($23 million) and the tax impact of special items ($46 million). These gains are treated as special items. In the prior year comparative period exchange gains had an effect of $47 million on the tax credit.

Cash Generation and Net Cash

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

Cash flow utilised in operations in the six months ended 31 March 2014 at $64 million reflects a $4 million increase from the same period in 2013. For the six months ended 31 March 2014, the cash outflow is largely driven by the operating loss as a result of the strike action partially offset by improved working capital movements on the back of a release of stock. 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 six months to 31 March 2014 amounted to $71 million (2013 - $85 million). The cash flow on interest and finance costs decreased by $15 million largely as a result of non-recurring amendment fees for the revised facilities and the costs of unwinding the interest rate swap in 2013. The trading cash outflow per share was 12.5 cents for the six months ended 31 March 2014 (2013 - 17.2 cents).

Capital expenditure cash flow at $46 million was $27 million below the prior period as our capital investment programme was impacted by the strike. Capital expenditure in the first six months was mainly on stay in business capital across the various shafts and processing facilities, development of ore reserves at K3, Rowland and Saffy shafts as well as critical ore pass rehabilitation work on K4. The hostel conversion programme continued as it is an important part of improving the living conditions of our employees. The feasibility study on the bulk tailings retreatment initiative was also completed.

Dividends paid to minority shareholders in the year of $16 million reflect the minimum payments required to enable Incwala to service its loan facilities.

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 proceeds of the Rights Issue were utilised to settle debt resulting in a net cash position at 31 March 2013 of $194 million. This position of balance sheet strength has allowed the Group to absorb the operational disruption caused by strike to date. However, the impact of the strike action on the business has resulted in the net cash position receding to $71 million at 31 March 2014.

Principal Risks and Uncertainties

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 principal risks and uncertainties highlighted in our 2013 annual report have largely remained unchanged except for the elevation of the risk associated with employee relations given the ongoing strike action and the resulting liquidity concerns as detailed below.

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, volatility in the Rand / US Dollar exchange rate, PGM commodity prices and in recent times, production disruptions as a result of labour action.

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 ongoing 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; and

· Three bilateral facilities of R660 million each at a Western Platinum Limited (WPL) level.

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

While the capital structure referred to above has allowed the business to absorb the impact of the current strike action to date, the impact on the balance sheet has been a reduction in net cash resources as highlighted above. The non-resolution of the strike will impact the availability of funds to meet business needs and the going concern assumption as discussed in detail in the basis of preparation section of the interim financial statements. It is envisaged that the working capital requirements of the business to ramp up production following the resolution of the strike as well as its ongoing sustaining capital requirements may result in the business operating in a net debt position for the foreseeable future. This may necessitate steps such as a review of the Group's capital structure or a reduction in capital expenditure in future.

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 ongoing 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

Currently amounts on deposit as well as our outstanding borrowings are in both US Dollars and South African Rand and at floating rates of interest. Given current market rates, this position is not considered to be high risk at this point in time. This position is kept under constant review in conjunction with the liquidity policy outlined above and 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 Rand. 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 period 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/oz delivered.

Contingent Liabilities

The Group provided third party guarantees to Eskom as security to cover estimated electricity consumption for three months.At 31 March 2014 these guarantees amounted to $10 million (2013 - $10 million).

Simon Scott

Chief Financial Officer

Operating Statistics for the 6 months to 31 March 2014

Operating Statistics for the 6 months to 31 March 2014 (continued)

Operating Statistics for the 6 months to 31 March 2014 (continued)

Operating Statistics for the 6 months to 31 March 2014 (continued)

Footnotes:

Operating Statistics for the 6 months to 31 March 2014 (continued)

Footnotes:

Responsibility statement of the directors in respect of the interim financial report

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, and

· the interim management report includes a fair review of the information required by:

(a) DTR4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Brian Beamish Simon Scott

Chairman Chief Financial Officer

9 May 2014

INDEPENDENT REVIEW REPORT TO LONMIN PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2014 which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Emphasis of matter - Going concern

In forming our conclusion on the condensed set of financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 1 in the condensed set of financial statements concerning the Group's ability to continue as a going concern; in particular, the uncertainty over the end date of the strike which has been ongoing since 23 January 2014, and the uncertainty as to the continued availability of sufficient, appropriate debt facilities, including the ability of the Group to withstand down side scenarios affecting cash flows and covenants and the successful implementation of any mitigating operational measures. These conditions, along with the other matters explained in note 1 of the condensed set of financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern. The condensed set of financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

Robert Seale

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London E14 5GL

9 May 2014

Consolidated income statement

for the 6 months to 31 March 2014

Footnotes:

Consolidated statement of comprehensive income

for the 6 months to 31 March 2014

Consolidated statement of financial position

as at 31 March 2014