| Thu 26 Jan 2012, 9:01 | | LON - Lonmin Plc - Q1 2012 Production Report & Interim Management Statement |
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LON
LOLMI
LON - Lonmin Plc - Q1 2012 Production Report & Interim Management Statement
Lonmin Plc (Incorporated in England and Wales)
(Registered in the Republic of South Africa under
registration number 1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN: GB0031192486 ("Lonmin")
26 January 2012
Lonmin Plc
Q1 2012 Production Report & Interim Management Statement
Lonmin Plc ("Lonmin" or the "Company") today announces its production report for
the quarter to 31 December 2011 (unaudited) and Interim Management Statement for
the period from 1 October 2011 to today`s date.
Overview
Platinum metal in concentrate and refined Platinum production increased by 3.5%
and 24.3% respectively on a year on year basis. These results benefited from a
healthy opening ore stock position at the end of September 2011 and consistent
metallurgical recovery rates. Our mining performance in the first quarter of
2012 was however severely impacted by the increase in the Section 54 safety
stoppages from the Department of Mineral Resources (DMR) that were experienced
industry wide. Whilst total tonnes mined reduced by 110,000 tonnes on an
underlying year on year basis, the impact of the Section 54 stoppages resulted
in 177,000 tonnes of lost production.
We regretfully report that Mr Albino Moises Cuna was fatally injured on 9
December at E2 Shaft while clearing a blocked ore chute. Until that date, Lonmin
had been fatality free since 12 April, reflecting a 6 million fatality free
shift period of 8 months. Our Lost Time Injury Frequency Rate (LTIFR) for the
quarter was 4.67 incidents per million man hours versus 4.71 for Q4 2011 and
4.92 for Q1 2011.
Mining Division
Our underground operations at Marikana produced 2.7 million tonnes during the
first quarter of the 2012 financial year, a decrease of 50,000 tonnes or 1.8% on
Q1 2011. Our overall focus during the quarter was on safely improving our
production and moving down the cost curve. Our efforts however have been
significantly affected by the increased frequency and wide range of Section 54
safety reviews and stoppages that have been experienced across all our
operations when compared to the prior year period. In addition the number of
days it has taken to have a Section 54 lifted has increased from an average of 2
to 5 days. A summary of the direct impact on production of Section 54 stoppages
is detailed below.
Division Section 54 Stoppage
Production impact
Tonnes
Karee 35 582
Westerns 40 662
Middelkraal 60 400
Easterns 13 132
Open cast and JV 27 297
Total 177 073
Looking specifically at how our four mining divisions contributed to the
quarter`s total production over and above the impact of Section 54 stoppages set
out above, total tonnes mined at Karee were up 104,000 tonnes, representing a
9.4% increase from the prior year period. This increase was however offset by a
decrease in production at Westerns of 110,000 tonnes equivalent to 12.7% on the
prior year as the planned decline at Newman continued. In addition production at
Easterns decreased by 38,000 tonnes or 12.2% as a result of the fatality at E2,
and illegal social unrest around the Easterns operations. Production at
Middelkraal was broadly flat when compared to the prior year period as the
influence of poor ground conditions on two sections of Saffy hampered the
anticipated ramp up of production at Saffy. The total impact of the Section 54
shut downs was 177,000 tonnes in lost production across all the operations
(including joint ventures) compared to the prior year period losses of 21,000
tonnes. An additional 30,000 tonnes of production was lost as a result of the
Company`s support of the National Union of Mineworkers (NUM) industry safety
march on 4 October and the community and social labour unrest we experienced in
December which continued into the new calendar year.
Production at our Merensky opencast operations in the period was 118,000 tonnes,
a decrease of 75,000 tonnes when compared to Q1 2011. This reflects continued
slowdown in production of higher cost tonnes in order to optimise the grade
which has improved by 48% when compared to prior year period, whilst Pandora
production increased by 15,000 tonnes to 54,000 tonnes in line with its expected
ramp up.
Process Division
Total tonnes milled in the quarter were flat at 3.0 million from the prior year
as the increase in underground tonnes milled of 132,000 tonnes or 4.7% was more
than offset by a 157,000 tonnes reduction in opencast tonnes.
Underground milled head grade was 4.50 grammes per tonne (5PGE+Au), down 0.05
grammes per tonne or 1.2% compared to the prior year period, reflecting the
continued gradual increase in Merensky at our operations. The overall milled
head grade was 4.47 grammes per tonne, an improvement of 2.2% when compared to
the prior year period. This was due to the combination of higher grade and lower
proportion of opencast ore when compared to the prior year.
Underground and overall concentrator recoveries were both 85.3%, an improvement
of 0.1 and 0.3 percentage points respectively when compared with the prior year
period and reflects the effectiveness of the mining approach on opencast.
Platinum in concentrate from the Marikana operations was 178,131 saleable
ounces, a 1.3% increase over the prior year period. In total the concentrators
produced 186,725 saleable ounces of Platinum in the quarter, a 3.5% increase
from the prior year period. This reflects the higher proportion of Merensky ore
in the mix which contained a higher percentage of Platinum.
Total refined production for the quarter was 113,950 ounces of saleable
Platinum, an increase from the prior year of 24.3%. The significant increase in
saleable Platinum against the prior year reflects the normalisation of the
operations following the rebuild and modification of the Number One furnace
which occurred in the prior year period. Total Platinum Group Metals (PGMs)
production for the quarter was 245,950 ounces of PGMs, an increase of 2.3% from
the prior year respectively.
Sales & Pricing
Platinum sales at 92,863 ounces were 39.8% higher than the prior year period as
a result of increased production and stock movement in the quarter. In addition
bad weather affected customer deliveries and impacted sales in the prior year
period. Total PGMs sales increased by 2.9% to 189,590 ounces.
Chrome sales have more than doubled when compared to the prior year period as
production at the chrome plants gains momentum.
The US dollar basket price at $1,136 during the first quarter was 3.3% less than
the prior year quarter. The corresponding Rand basket price was 14.4% higher
than the prior year period.
Wage Settlements
As announced on 5 December 2011, we reached a two year wage agreement with our
unions which resulted in an overall aggregated wage increase of around 8.5 % for
each of year 1 and year 2. The increase is effective from 1 October 2011 and is
in line with industry wage settlements.
Joint Venture Earn In
In December 2011, Lonmin achieved its sole funded exploration `earn-in`
milestone of $32 million on the Vale Joint Venture (JV), giving Lonmin the
exclusive right to a 50% interest in any PGM deposit on a JV property on which a
development decision is made. Vale and Lonmin will now jointly fund the agreed
2012 PGM exploration programme on an equal basis, including the Denison open pit
feasibility studies.
Outlook
Safety remains our priority and we continue to work cooperatively with the DMR
and our Union representative bodies in this area. During the first quarter of
our financial year our industry has been subject to an uncharacteristically high
level of safety inspections from the DMR, with a resultant increase in Section
54 notices. This has had an adverse effect on production and in our opinion
increases safety risk as operating momentum is interrupted. However, we have
highlighted to the DMR the need to work together to establish a more appropriate
mechanism that enables safety improvement without increasing the risk to safe
and sustainable operations.
Our production performance to date still supports our sales guidance for the
current year of 750,000 ounces of Platinum. We also maintain our guidance for
unit costs to increase by the aggregate wage settlement of 8.5% agreed with our
unions. However Platinum sales and unit costs will be adversely impacted should
the current trend of production losses from safety persist.
- ENDS -
ENQUIRIES:
Investors / Analysts:
Tanya Chikanza +44 (0) 207 201 6007
Head of Investor Relations
Media:
Cardew Group +44 (0) 207 930 0777
James Clark/Emma Crawshaw
Inzalo Communications +27 (0) 11 646 9992
Gillian Findlay/Bridget von Holdt
3 months 3 months
to 31 to 31 Dec
Dec
2011 2010
LTIFR 4.67 4.92
Tonnes Marikana Karee1 kt 1 211 1 107
mined
Westerns1 kt 761 872
Middelkraal1 kt 476 482
Easterns1 kt 272 310
Underground kt 2 720 2 770
Opencast kt 118 193
Total kt 2 838 2 963
Pandora Underground kt 54 39
attributable2
Lonmin Platinum Underground kt 2 774 2 809
Opencast kt 118 193
Total kt 2 892 3 002
% UG2 % 70.7% 72.2%
Tonnes Marikana Underground kt 2 820 2 740
milled3
Opencast kt 77 234
Total kt 2 897 2 973
Pandora4 Underground kt 126 75
Lonmin Platinum Underground kt 2 946 2 815
Head grade5 g/t 4.50 4.55
Recovery % 85.3% 85.1%
rate6
Opencast kt 77 234
Head grade5 g/t 3.33 2.24
Recovery % 85.7% 80.7%
rate6
Total kt 3 023 3 048
Head grade5 g/t 4.47 4.38
Recovery % 85.3% 85.0%
rate6
3 3 months
months
to 31 to 31 Dec
Dec
2011 2010
Metals in Marikana Platinum oz 178 131 175 769
concentrate7
Palladium oz 81 041 82 759
Gold oz 4 664 4 459
Rhodium oz 22 463 23 352
Ruthenium oz 35 349 36 357
Iridium oz 7 739 7 997
Total PGMs oz 329 387 330 694
Nickel8 MT 966 884
Copper8 MT 624 570
Pandora4 Platinum oz 8 595 4 665
Palladium oz 3 993 2 177
Gold oz 65 32
Rhodium oz 1 310 714
Ruthenium oz 2 012 1 114
Iridium oz 345 183
Total PGMs oz 16 321 8 886
Nickel8 MT 13 8
Copper8 MT 7 4
Lonmin Platinum Platinum oz 186 725 180 433
Palladium oz 85 035 84 936
Gold oz 4 730 4 491
Rhodium oz 23 773 24 066
Ruthenium oz 37 361 37 472
Iridium oz 8 084 8 180
Total PGMs oz 345 708 339 579
Nickel8 MT 978 892
Copper8 MT 631 574
3 3 months
months
to 31 to 31 Dec
Dec
2011 2010
Refined Lonmin refined Platinum oz 112 220 81 982
production metalproduction
Palladium oz 58 818 42 744
Gold oz 3 663 2 545
Rhodium oz 20 037 14 279
Ruthenium oz 31 965 20 877
Iridium oz 9 320 4 643
Total PGMs oz 236 022 167 070
Toll refined Platinum oz 1 730 9 700
metal production
Palladium oz 4 124 35 545
Gold oz 202 2 028
Rhodium oz 1 580 10 179
Ruthenium oz 1 704 13 064
Iridium oz 588 2 780
Total PGMs oz 9 928 73 295
Total refined Platinum oz 113 950 91 682
PGMs
Palladium oz 62 942 78 289
Gold oz 3 865 4 573
Rhodium oz 21 616 24 459
Ruthenium oz 33 668 33 941
Iridium oz 9 908 7 424
Total PGMs oz 245 950 240 366
Base metals Nickel9 MT 730 923
Copper9 MT 366 488
3 months 3 months
to 31 to 31 Dec
Dec
2011 2010
Sales Refined metal Platinum oz 92 863 66 426
sales
Palladium oz 39 492 58 205
Gold oz 3 618 3 276
Rhodium oz 18 235 21 395
Ruthenium oz 24 684 30 163
Iridium oz 10 698 4 853
Total PGMs oz 189 590 184 317
Nickel9 MT 791 893
Copper9 MT 321 389
Chrome9 MT 261 205 113 108
Average Platinum $/oz 1 532 1 750
prices
Palladium $/oz 627 683
Gold $/oz 1 668 1 080
Rhodium $/oz 1 549 2 276
Ruthenium $/oz 121 163
Iridium $/oz 1 041 732
$ basket price excl. by- $/oz 1 136 1 175
product revenue11
R basket price excl. by- R/oz 9 204 8 046
product revenue11
R basket price incl. by- R/oz 9 935 9 008
product revenue12
Nickel9 $/MT 15 287 20 750
Copper9 $/MT 6 874 7 983
Chrome9 $/MT 19 26
Exchange Average rate for R/$ 8.09 6.88
Rates period13
Closing rate R/$ 8.07 6.61
Notes:
1 Karee includes the shafts K3, 1B and 4B and K4. Westerns comprises
Rowland, Newman and ore purchases from W1. Middelkraal represents
Hossy and Saffy. Easterns includes E1, E2 and E3.
2 Pandora attributable tonnes mined includes Lonmin`s share (42.5%) of
the total tonnes mined on the Pandora joint venture.
3 Tonnes milled exclude slag milling.
4 Lonmin purchases 100% of the ore produced by the Pandora joint
venture for onward processing which is included in downstream
operating statistics.
5 Head grade is the grammes per tonne (5PGE + Au) value contained in
the tonnes milled and fed into the concentrator from the mines
(excludes slag milled).
6 Recovery rate in the concentrators is the total content produced
divided by the total content milled (excluding slag).
7 Metals in concentrate include metal derived from slag processing and
have been calculated at industry standard downstream processing
losses to present produced saleable ounces.
8 Corresponds to contained base metals in concentrate.
9 Nickel is produced and sold as nickel sulphate crystals or solution
and the volumes shown correspond to contained metal. Copper is
produced as refined product but typically at LME grade C. Chrome is
produced in the form of chromite concentrate and volumes shown are
in the form of chromite.
10 Concentrate and other sales have been adjusted to a saleable ounce
basis using industry standard recovery rates.
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.
Date: 26/01/2012 09:01:25 Produced by the JSE SENS Department.
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