Q1 2018 Production Report and Business Update

LEI No: 213800FGJZ2WAC6Y2L94

REGULATORY RELEASE

22 January 2018

First Quarter 2018 Production Report and Business Update

"Another solid operational performance quarter"

Lonmin Plc ("Lonmin" or "the Company"), one of the world's largest primary platinum producers, today announces its unaudited Quarter 1 2018 production results for the three months to 31 December 2017 and provides an operational update.

Lonmin also publishes today, in a separate announcement, its results for the financial year ended 30 September 2017.

Overview

· Fatality free first quarter with the twelve-month rolling LTIFR to 31 December 2017 improving by 5.3% to 4.28 per million man hours. 

· Mining performance improvement has been sustained from March 2017. Tonnes mined by our Generation 2 shafts increased by 11.4% to 1.8 million tonnes compared with the first quarter of 2017. Total tonnes mined increased by 2.4% to 2.4 million tonnes compared with the first quarter of 2017.

· E3/Pandora classified as Generation 2 whilst 4B has been reclassified as Generation 1.

· Refined production of 161,363 Platinum ounces increased by 17.7% against the first quarter of 2017.

· Sales of 147,216 Platinum ounces increased by 9.1% compared with the first quarter of 2017.

· Average Rand full basket price for the first quarter of R13,153 increased 26.8% on the first quarter of 2017.

· Our unit costs for the first quarter were R12,703 per PGM ounce (6E basis), an increase of 3.3% on the first quarter of 2017, but below the consumer price inflation (CPI) of around 5%. We are maintaining our unit cost guidance of between R12,000 and R12,500 per PGM ounce.

· Net Cash at 31 December 2017 of $63 million, reflecting reduction in the historical first quarter cash burn rate, as a result of improved production, prices and working capital management.

Ben Magara, Chief Executive Officer, said: "Another fatality free all-round operational performance, from mining, to processing through to sales, demonstrating the strength of our mine-to-market business. I am pleased that we have maintained the mining performance improvement since March 2017. The higher sales volume from good production, focus on working capital management, combined with better Palladium and Rhodium prices which boosted Dollar basket revenues, resulted in a historically reduced quarter one cash burn and a positive net cash position, however we still have much work to reduce costs."

Safety

Our safety strategy is centred on the belief that Zero Harm is achievable and important contributions are required from all stakeholders to achieve it. Lonmin remains fatality free since July to December 2017.

· We achieved significant milestones in the journey towards Zero Harm at the following operations:

o Precious Metal Refinery achieved 2 years LTI free in December 2017.

o EPL Concentrator achieved 1 year LTI free in October 2017.

o Marikana Mining Operations achieved 5 Million Fall of Ground Fatality Free Shifts in November 2017 and were on 3 Million Fatality Free Shifts at the end of Q1.

· The twelve month rolling LTIFR to 31 December 2017 was 4.28 per million man hours, an improvement of 5.3% on September 2017 at 4.52.

Mining Operations

It is pleasing to note that our focused effort in our core shafts is bearing fruit. The Marikana mining operations, including Pandora produced 2.4 million tonnes during the quarter, up 2.4% on the comparative period, driven by an 11.4% increase in production from our Generation 2 shafts.

Generation 2

Tonnes mined from our Generation 2 shafts were 1.8 million tonnes, an increase of 11.4%, or 0.2 million tonnes against the comparative period.

· K3, our biggest shaft, produced 695,000 tonnes, an increase of 17.9% on the prior period, demonstrating the shaft's recovery in performance from the challenges it faced in the prior year period.

· Rowland shaft produced 448,000 tonnes, an increase of 5.7% on the prior year period.

· Saffy shaft produced 521,000 tonnes, an increase of 5.6% on the prior year period.

· On completion of the Pandora acquisition, combined with the progress made pursuant to our recovery plans, the E3 shaft and Pandora production has been combined and reclassified as a Generation 2 shaft, with comparatives adjusted accordingly. The combined area produced 147,000 tonnes, an increase of 23.8% on the prior year period.

· Immediately available ore reserves for the Generation 2 shafts has been maintained at around 20 months.

Generation 1

The performance of the Generation 1 shafts is in line with our plan and we continue to reduce high cost production in a low price environment. Tonnes mined from our Generation 1 shafts (4B, Hossy, W1, E1 and E2) were 0.6 million tonnes, a decrease of 14.0%, or 0.1 million tonnes on the prior year period, reflecting the planned decline in production. The decrease is also due to both Newman and E2, which produced in Q1 2017, now being on care and maintenance.

We continually review each shaft on its merits and as reported, in light of 4B shaft's lacklustre performance, its short life of mine relative to the other Generation 2 shafts, and our capital constrains, 4B has been reclassified as a Generation 1 shaft and comparatives adjusted accordingly. 4B produced 306,000 tonnes, a decrease of 9.0% on the prior year period, as the bad geological conditions persist.

W1, E1 and E2 are shafts at the end of their resource lives. E2 shaft was put on care and maintenance in November 2017. Contractors have continued to run W1 and E1, and are responsible for all the costs associated with such shafts, and we thus retain the flexibility to cease production if required.

Hossy shaft was scheduled to be put on care and maintenance, but it continues to contribute to the business. Based on its relative contribution and the available IAOR, which stood at 11 months at FY 2017, we will continue to operate Hossy for the duration of FY 2018.

Production Losses

Overall total tonnes lost in the quarter reduced to 57,000 tonnes, compared to 147,000 tonnes lost in the first quarter of 2017. We have been encouraged that the number and duration of Section 54 stoppages has continued to improve, as experienced during the FY2017.

Processing Operations

Underground milling production in the quarter of 2.5 million tonnes was 3.0% higher than in the prior year period.

Underground milled head grade at 4.63 grammes per tonne (5PGE+Au) increased by 1.5% when compared to the 4.56 grammes per tonne achieved in the prior year period and the overall milled head grade was also 4.63 grammes per tonne, up 1.5% on the prior year period, due to improved quality of mining.

Concentrator recoveries in the quarter remained excellent at 88.0%, up 1.2% from 87.0% in the prior year period.

Platinum production (Metals-in-Concentrate) was 164,488 ounces, which was 7.6% higher than the prior year period and total PGMs production (Metals-in-Concentrate) was 315,316 ounces, which was 7.7% higher than the prior year period.

Refined Platinum production of 161,363 ounces in the first quarter, was 17.7% higher than the prior year period, with the smelter clean-up project not contributing any Platinum ounces as expected, (no contribution in Q1 2017). We expect minimal ounces from the smelter clean-up project in the 2018 financial year as the ounces are depleting. Total PGMs produced were 308,774 ounces, an increase of 17.3% on the prior year period.

Number One furnace had a run out on 2 December 2017, necessitating it's planned shutdown scheduled for the end of 2018 to be brought forward. We expect some lock up of ounces in the second quarter, which will unwind within the financial year. As such overall output is not expected to be affected owing to capacity at other furnaces, as we will be running the number two furnace and the three pyromets.

Sales and Pricing

Platinum sales for the quarter were 147,216 ounces, 9.1% higher than the prior year period sales of 134,954 ounces. PGM sales were 292,335 ounces, marginally higher (0.8%) on the prior year period sales of 289,962 ounces; Ruthenium sales decreased by 33.7%, as the Ruthenium to other metal sales ratio was brought in line with the normal production ratio in this quarter, converse to Q1 2017 when there was a release of built up stocks of Ruthenium, which reduced the impact of the increase of the other PGM metals sales.

The US Dollar basket price (including base metal revenue) at $968 per ounce during the quarter was up 30.9% on Q1 2017, while the corresponding Rand basket price of R13,153 per ounce was 26.8% higher than the Q1 2017, with the stronger Rand diluting the increase.

The average Rand to US Dollar exchange rate was 2.1% stronger at 13.61 compared to 13.90 in Q1 2017.

Business and Operating Environment Update

The operating environment has remained challenging as the Company strives to balance the economic, social and environmental imperatives. Management continues to participate in strategic multi-stakeholder engagements to address these challenges.

As part of our Operational Review, we identified cost reduction initiatives, to reduce annual overhead costs by a minimum of ZAR500 million by the end of 30 September 2018. These initiatives are ongoing. We expect the substantial majority of overhead reductions to come from non-production central functions and high cost production areas as their production comes to an end. As highlighted in the 2017 Financial Results announcement released separately today, a section 189 process commenced in October 2017 and is ongoing, with over 600 employees already having left the business.

Unit Costs

Unit costs of R12,703 per PGM ounce were 3.3% higher on the prior year period. Whilst this increase is below the CPI of around 5%, the increase highlights the need for us to remain vigilant in working to reduce our operating costs and we maintain our unit cost guidance in the range of R12,000 to R12,500 per PGM ounce for the full 2018 financial year.

Balance Sheet and Liquidity

Net cash at 31 December 2017 was $63 million, after working capital and capital expenditure investment during the quarter. The higher production and metal prices in the quarter and management of working capital initiatives resulted in the historical quarter 1 cash burn of around $120 million being contained to only $40 million.

Outlook and Guidance

Sales guidance for the full year is maintained at between 650,000 and 680,000 Platinum ounces. We are maintaining unit cost guidance of between R12,000 and R12,500 per PGM ounce produced. Our capital expenditure guidance for the year of between R1.4 billion and R1.5 billion is maintained.

- 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 found.

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

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