TIDMLMI
RNS Number : 1479V
Lonmin PLC
26 January 2017
REGULATORY RELEASE
26 January 2017
First Quarter 2017 Production Report and Update
Lonmin Plc ("Lonmin" or "the Company"), one of the world's
largest primary Platinum producers, today announces its unaudited
production results for the three months to 31 December 2016 and
provides an operational update.
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.
-- We achieved significant milestones in the journey towards
Zero Harm at the following operations:
o Saffy shaft achieved 4 million fatality free shifts on 14
December 2016;
o Newman shaft achieved 3 million fatality free shifts on 28
October 2016;
o Rowland shaft exceeded 1 million fatality free shifts on 13
January 2017; and
o The Precious Metal Refinery achieved one year without a lost
time injury as of 30 December 2016 and one year without a medical
treatment as of 27 October 2016.
-- The twelve month rolling LTIFR to 31 December 2016 was 4.99
per million man hours, a marginal increase of 0.4% on September
2016 at 4.97.
-- Regrettably, and as announced at the time, one of our
colleagues, Mr Joao Fernando Macamo, a Production Team Leader at E1
Shaft, was fatally injured following a tramming incident on
Thursday 10 November 2016. We extend our deepest condolences to his
family and friends.
-- We are addressing the root causes of safety incidents, and
ensuring that the lessons learnt from each incident are implemented
and shared across operations.
Mining Operations
The Marikana mining operations including Pandora produced 2.3
million tonnes during the quarter, down 7.8% or 0.2 million tonnes
on the comparative period partly due to the planned decline from
the closing of our high cost shafts. While the first quarter of our
financial year is historically our lowest producing quarter, the
mining performance was disappointing with production at our
Generation 2 shafts down 5.2% from the prior year period. The
implementation of initiatives to improve productivity is taking
longer than we planned, particularly in respect to improving
absenteeism; however we remain committed to delivering sustained
productivity improvements at our operations to ensure the long-term
viability of the business.
The reduction in Section 54 stoppages has continued, with tonnes
lost due to Section 54 safety stoppages down by 71% in the
quarter.
Generation 2
Tonnes mined from our Generation 2 shafts were 1.8 million
tonnes, a decrease of 5.2%, or 0.1 million tonnes on the
comparative period as K3's underperformance predominantly weighed
down the overall performance.
-- K3, our biggest shaft, produced 590,000 tonnes, a
disappointing decrease of 13.8% on the prior period. This shaft was
most impacted by the reorganisation from 2016 and during the
quarter experienced high management induced safety stoppages
resulting in 60,000 tonnes of lost production. Overall, the
relationship between operational management and unions at this
shaft is not working as effectively as we expected and the yielding
of results from the implementation of business improvement
initiatives at this shaft is taking longer than we would have liked
to see. As a result, we are deploying additional stoping and
vamping crews to the shaft to take advantage of the immediately
available ore reserves and improve production. This may have an
adverse impact on the shaft head cost per tonne which we would seek
to mitigate by further reducing our overhead costs.
-- Rowland shaft produced 424,000 tonnes, an increase of 9.6% on
the prior year period as this shaft is now starting to gain the
production benefits from improved safety performance.
-- Saffy shaft produced 493,000 tonnes, broadly in line with
prior year period, demonstrating that the shaft is maintaining its
steady state performance.
-- 4B produced 336,000 tonnes, a decrease of 10.7% on the prior
year period as a result of higher than planned frequency of
intersecting geological features and changes in middle
management.
Generation 1
The performance at the Generation 1 shafts is in line with our
plan and we are executing successfully the strategy to reduce high
cost production in a low price environment. Tonnes mined from our
Generation 1 shafts (1 B, Hossy, Newman, W1, E1, E2, E3 and Pandora
(100%)) were 0.5 million tonnes, a decrease of 21.8%, or 0.1
million tonnes on the prior year period, reflecting the planned
decline in production. Most of these shafts are run by contractors,
which provide better flexibility to retain or close them.
Hossy shaft remains on track for planned care and maintenance
closure by the end of this financial year and, as reported, at
Newman, contract mining is being used to extract the remaining ore
reserves.
Production Losses
We have been encouraged that the number and duration of Section
54 stoppages has continued to improve, as experienced during the
final quarter of FY2016. This resulted in a 71% improvement in lost
production due to Section 54 safety stoppages of 139,000 tonnes.
This was partially offset by an increase in management induced
safety stoppages which illustrate our non-negotiable stance on
safety. Most of these stoppages were at K3 shaft where 60,000
tonnes were lost. Overall total tonnes lost in the quarter reduced
to 147,000 tonnes, compared to 204,000 tonnes lost in Quarter 1
2016.
Q1 2017 Q1 2016
Tonnes Tonnes
Section 54 safety stoppages 58,000 197,000
Management induced safety
stoppages and other 89,000 7,000
Total tonnes lost 147,000 204,000
----------------------------- -------- --------
Update on Business Improvement Initiatives
In light of the Quarter 1 performance, we are deploying
additional stoping and vamping crews to Generation 2 shafts during
Quarter 2 in order to provide support for the achievement of
planned output, enabled by our healthy ore reserve position.
In addition, we continue our drive to implement the initiatives
announced at the time of our 2016 full year results to improve
productivity and these include:
-- Establishing a labour skills buffer;
o Following a successful trial of the labour skills buffer
concept during the first quarter of FY2017, a decision has been
made to introduce labour buffers to all high producing half levels
on Generation 2 shafts during Quarter 2.
-- Addressing employee absenteeism;
o This project continues with dedicated teams assigned to each
operation to analyse absenteeism trends and to ensure that
appropriate action is taken to address the behaviour of employees
who repeatedly absent themselves from work.
-- Introducing a programme aimed at the empowerment of frontline supervisors; and
o All planning and preparatory work has been completed during
Quarter 1 and the roll out of the programme will start at the
beginning of February at K3 and Saffy shafts.
-- Implementing the Theory of Constraints framework in order to
improve the optimisation of half levels at Generation 2 shafts.
o With the de-bottlenecking exercises mostly completed, the
implementation of theory of constraints started during December
2016 with an optimisation crew being deployed to underperforming
half level at each Generation 2 shaft.
Processing Operations
Underground milling production in the quarter of 2.4 million
tonnes was affected by lower than planned ore availability from the
mining operations and was 10.0% lower than in the prior year
period.
Underground milled head grade at 4.56 grammes per tonnes
(5PGE+Au) increased by 2.0% when compared to the 4.47 grammes per
tonne achieved in the prior year period and the overall milled head
grade was also 4.56 grammes per tonne, up 2.4% on the prior year
period, due to improved ore mix and also better mining head
grades.
Concentrator recoveries in the quarter remained excellent at
87.0%, marginally up from 86.8% in the prior year period.
Platinum production (Metals-in-Concentrate) was 152,925 ounces,
which was 8.4% lower than the prior year period and PGM production
(Metals-in-Concentrate) was 292,726, which was 8.6% lower than the
prior year period as relatively, we milled more than we mined in
the prior year period.
Total refined Platinum production of 137,123 ounces in the first
quarter, was 20.0% lower than the prior year period. There were no
refined platinum ounces from the smelter clean-up project in both
periods. Total PGMs produced were 263,283 ounces, a decrease of
20.5% on the prior year period.
Sales and Pricing
Platinum sales for the quarter were 134,954 ounces, 10.3% lower
than the prior year period sales of 150,420 ounces as a result of
the lower mined tonnes. PGM sales were 289,962 ounces, marginally
down (0.2%) on the prior year period sales of 290,475; there was a
release of built up stocks of Ruthenium, as a result of a change in
the Ruthenium refining process. In addition, converse to Q1 2016,
the Palladium to other metal sales ratio was brought in line with
the normal production ratio which cushioned the impact of the
decrease on PGM sales down.
The increased sales of Ruthenium in the quarter had an adverse
impact on the basket price. As such, the US Dollar basket price
(including base metal revenue) at $739 per ounce during the quarter
was down 3.8% on Q1 2016 while the corresponding Rand basket price
of R10,372 per ounce was 4.5% lower than the Q1 2016. Since the
period end, Ruthenium sales have returned to normalised levels.
The average Rand to US Dollar exchange rate was 2.3% stronger at
13.90 compared to 14.22 in Q1 2016.
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.
Unit Costs
The distorting impact of the holidays in December typically
results in unit costs peaking in the first quarter of the financial
year. An additional public holiday declared in December by the
President of The Republic of South Africa extended the Christmas
break period in the quarter and impacted production and costs.
Unit costs of R12,296 per PGM ounce were 12.3% higher on the
prior year period, in part reflecting the increase in labour costs
as set in the multi-year agreement, signed at the end of October
2016, but also reflecting the weak mining performance. As stated at
the time of the 2016 Final Results in November 2016, unit costs
will remain under pressure until we see a sustained improvement in
production throughput from mining. We remain vigilant in containing
our costs and continue to work to reduce our operating costs in
order to preserve the achievement of our unit cost guidance in the
range of R10,800 to R11,300 per PGM ounce for the full financial
year.
Capital Expenditure
We are maintaining our focus on Generation 2 shafts but we are
reviewing the capital expenditure profile and expect to provide an
update in due course.
Balance Sheet and Liquidity
Lonmin is highly geared to PGM prices and at current levels,
would not be cash neutral. We continue to proactively manage our
cashflows and balance sheet through initiatives such as seeking
ways of containing our capital spend.
Net cash at 31 December 2016 was $49 million, after working
capital and capital expenditure investment of $106 million during
the quarter. The working capital impact is typically greater in the
first quarter of our financial year due to the December holidays
and the nature of our sales profile, which is weighted towards the
second half of our financial year. Total liquidity at 31 December
2016 was $414 million.
Ore Reserves
Operational flexibility was preserved with the immediately
available ore reserve position of 3.7 million square metres at the
end of the quarter, or 22 months average production.
Excess Processing Facility Initiatives
Our processing facilities have excess capacity and we are
continuing with various initiatives to fill the pipeline and
utilise the excess capacity.
Pandora Acquisition Update
On 11 November 2016, we announced that Lonmin had reached
agreement to acquire Anglo American Platinum's 42.5% interest in
the Pandora Joint Venture. Since then we have received Northam's
consent for this transaction and have submitted the Merger
Notification to the Competition Authorities and requisite
application for section 11 consent to the DMR. We expect the
transaction to complete in late 2017.
FTSE4Good Index Series
Lonmin is pleased to advise that it has been confirmed a
constituent of the FTSE4Good Index Series and FTSE Russell ESG
Rating following the review of our strong environmental, social and
governance practices.
Outlook and Guidance
We have been disappointed by the Quarter 1 production at our
Generation 2 shafts. With the initiative of deploying additional
stoping and vamping crews, as well as the expected Platinum ounces
from the smelter clean-up project, our sales guidance for the 2017
full year is maintained at between 650,000 and 680,000 Platinum
ounces. At this stage we still expect unit costs to remain in the
range of R10,800 to R11,300 per PGM ounce for the full year subject
to seeing sustained improvement in production during the year. We
will be reviewing our capital expenditure and will provide an
update on guidance in due course.
-S -
ENQUIRIES
Investors / Analysts:
Tanya Chikanza (Head of Investor +27 11 218 8358 / +44 207
Relations) 201 6007
Andrew Mari (Investor Relations
Manager) +27 11 218 8420
Media:
Wendy Tlou +27 83 301 9663
Anthony Cardew / Emma Crawshaw,
Cardew Group +44 207 930 0777
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
3 months 3 months
to 31 to 31
Dec Dec
2016 2015
------------ --------- ---------
Tonnes Generation
mined(1) 2 K3 Shaft kt 590 684
Rowland Shaft kt 424 387
Saffy Shaft kt 493 497
4B Shaft kt 336 376
Generation 2 kt 1 842 1 944
------------------------ ------------------------------------------ --------- ---------
Generation
1 1B Shaft kt 6
Hossy Shaft kt 171 159
Newman Shaft kt 23 132
W1 Shaft kt 39 47
East 1 Shaft kt 31 30
East 2 Shaft kt 67 77
East 3 Shaft kt 17 6
Pandora (100%)(2) kt 102 118
Generation 1 kt 450 575
------------------------ ------------------------------------------ --------- ---------
Total underground kt 2 292 2 519
Opencast kt 38 7
------------------------ ------------------------------------------ --------- ---------
Total Tonnes Mined
Lonmin (100%) (100%) kt 2 330 2 526
% tonnes mined from
UG2 reef (100%) % 74.9% 76.0%
------------------------ ------------------------------------------ --------- ---------
Lonmin (attributable) Underground & Opencast kt 2 279 2 467
Ounces Lonmin excluding 141 149
Mined(3) Pandora Pt Ounces oz 476 658
Pandora (100%) Pt Ounces oz 7 112 7 921
--------- ---------
148 157
Lonmin Pt Ounces oz 588 579
Lonmin excluding 270 287
Pandora PGM Ounces oz 638 744
Pandora (100%) PGM Ounces oz 14 067 15 558
--------- ---------
284 303
Lonmin PGM Ounces oz 705 303
----------------------- ------------------------ ------------------ --------- ---------
Tonnes
milled(4) Marikana Underground kt 2 277 2 524
Opencast kt 11 31
Total kt 2 288 2 555
Pandora(5) Underground kt 102 118
--------- ---------
Lonmin Platinum Underground kt 2 378 2 642
Milled head grade(6) g/t 4.56 4.47
Recovery rate(7) % 87.1% 86.8%
Opencast kt 11 31
Milled head grade(6) g/t 4.47 2.71
Recovery rate(7) % 62.5% 84.2%
Total kt 2 390 2 673
Milled head grade(6) g/t 4.56 4.45
Recovery rate(7) % 87.0% 86.8%
------------------------ ------------------------------------------ --------- ---------
3 months 3 months
to 31 to 31
Dec Dec
2016 2015
----------------- ----------------- ------------ ---- --------- ---------
Metals-in- 145 157
concentrate(8) Marikana Platinum oz 211 873
-------------------
Palladium oz 66 662 73 936
Gold oz 3 695 3 718
Rhodium oz 20 477 22 912
Ruthenium oz 34 567 37 021
Iridium oz 7 098 7 157
277 302
Total PGMs oz 709 616
Nickel(9) MT 739 822
Copper(9) MT 461 501
------------ ----------------------------------------
Pandora Platinum oz 7 112 7 921
Palladium oz 3 358 3 704
Gold oz 50 22
Rhodium oz 1 196 1 328
Ruthenium oz 1 947 2 164
Iridium oz 404 420
Total PGMs oz 14 067 15 558
Nickel(9) MT 14 22
Copper(9) MT 6 8
------------ ---------------------------------------- --------- ---------
Concentrate Platinum oz 603 1 160
Purchases Palladium oz 164 376
Gold oz 2 3
Rhodium oz 58 149
Ruthenium oz 99 215
Iridium oz 24 60
Total PGMs oz 950 1 962
Nickel(9) MT 0 1
Copper(9) MT 0 1
------------ ---------------------------------------- --------- ---------
152 166
Lonmin Platinum Platinum oz 925 953
Palladium oz 70 184 78 016
Gold oz 3 746 3 743
Rhodium oz 21 731 24 389
Ruthenium oz 36 613 39 399
Iridium oz 7 526 7 637
292 320
Total PGMs oz 726 137
Nickel(9) MT 753 844
Copper(9) MT 467 511
------------ ---------------------------------------- --------- ---------
3 months 3 months
to 31 to 31
Dec Dec
2016 2015
------------- ---------------- ------------ ---- --------- ---------
Lonmin refined
Refined metal 136 170
Production production Platinum oz 102 931
----------------
Palladium oz 61 721 77 782
Gold oz 3 190 4 859
Rhodium oz 21 646 30 303
Ruthenium oz 31 892 35 450
Iridium oz 7 199 10 936
261 330
Total PGMs oz 751 261
------------ ----------------------------------- --------- ---------
Toll refined
metal
production Platinum oz 1 021 510
----------------
Palladium oz 189 197
Gold oz 7 9
Rhodium oz 68 60
Ruthenium oz 234 222
Iridium oz 14 36
Total PGMs oz 1 532 1 033
------------ ----------------------------------- --------- ---------
Total
refined 137 171
PGMs Platinum oz 123 441
----------------
Palladium oz 61 910 77 978
Gold oz 3 197 4 868
Rhodium oz 21 714 30 364
Ruthenium oz 32 126 35 672
Iridium oz 7 212 10 972
263 331
Total PGMs oz 283 294
------------ ----------------------------------- --------- ---------
Base metals Nickel(10) MT 715 990
Copper(10) MT 354 549
------------ ----------------------------------- --------- ---------
Refined
metal 134 150
Sales sales Platinum oz 954 420
----------------
Palladium oz 60 060 62 332
Gold oz 2 889 4 714
Rhodium oz 26 130 35 195
Ruthenium oz 59 016 29 157
Iridium oz 6 913 8 656
289 290
Total PGMs oz 962 475
------------ ----------------------------------- --------- ---------
Nickel(10) MT 928 1 071
Copper(10) MT 215 406
385 438
Chrome(10) MT 496 717
------------ ----------------------------------- --------- ---------
3 months 3 months
to 31 to 31
Dec Dec
2016 2015
------------ ----------------------------- ------------------ ------------- -------------
Average
prices Platinum $/oz 945 886
Palladium $/oz 687 586
Gold $/oz 1 154 1 323
Rhodium $/oz 730 715
$ basket excl. by-product
revenue(11) $/oz 683 711
$ basket incl. by-product
revenue(12) $/oz 739 769
R basket excl. by-product
revenue(11) R/oz 9 624 10 055
R basket incl. by-product
revenue(12) R/oz 10 372 10 859
----------------------------------- ------------- ------------- -------------
Nickel(10) $/MT 8 989 7 292
Copper(10) $/MT 5 411 4 700
----------------------------------- ------------- ------------- -------------
Cost of production per
Unit Costs PGM ounce ZAR/oz 12 296 10 948
-------------- ----------------------------------- ------------- ------------- -------------
Exchange
Rates Average rate for period(13) R/$ 13.90 14.22
Closing rate R/$ 13.73 15.46
-------------- ----------------------------------- ------------- ------------- -------------
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. Ounces mined have been calculated at achieved concentrator
recoveries and with Lonmin standard downstream processing
recoveries to present produced saleable ounces.
4. Tonnes milled exclude slag milling.
5. Lonmin purchases 100% of the ore produced by the Pandora
joint venture for onward processing which is included in downstream
operating statistics.
6. 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).
7. Recovery rate in the concentrators is the total content
produced divided by the total content milled (excluding slag).
8. Metals-in-concentrate have been calculated at Lonmin standard
downstream processing recoveries to present produced saleable
ounces.
9. Corresponds to contained base metals in concentrate.
10. 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.
11. 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.
12. As per note 11 but including revenue from base metals.
13. Exchange rates are calculated using the market average daily
closing rate over the course of the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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