| Mon 14 May 2012, 8:01 | | LON - Lonmin Plc - 2012 Interim Results Announcement |
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LON
LOLMI
LON - Lonmin Plc - 2012 Interim Results Announcement
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")
14 May 2012
Lonmin Plc
2012 Interim Results Announcement
Lonmin Plc, (Lonmin or the Company), the world`s third largest Platinum
producer, today announces its Interim Results for the half year period ended
31 March 2012.
HIGHLIGHTS
* Solid half year performance in a challenging environment:
- Platinum sales of 318,402 ounces - broadly flat on H1 2011 -
impacted by significant disruptions to production
- Revenue basket price down 10% in Dollar terms
- Rand unit cost 10.9% up on H1 2011 - full year guidance maintained
- Net operating profit of $14 million - impacted by weak pricing and
higher Rand costs
- Net debt of $356 million and net gearing contained at 11% - tighter
working capital management
* Production momentum maintained at Marikana operations:
- Improved safety performance - LTIFR of 4.69 per million man hours
worked vs 5.4 in H1 2011
- Tonnes produced at 5.8 million, 1.7% decrease - impacted by Section
54 safety stoppages
- 347,000 Section 54 tonnes lost, up 398%
- Ore reserves at 3.1 million centares, up 10.7% - healthy level
being achieved
- Saleable metal in concentrate up 3.8% to 368,175 Platinum ounces
- High Concentrator recovery rates maintained - 85.5%
* Investing in growth for the future:
- Continued investment in our growth shafts to increase our
production capacity at Marikana
- Balancing capex spend with return on projects and prudent balance
sheet management remains key
* Market outlook:
- Gradual industrial and auto demand recovery
- Supply constraints by South African producers will lead to deficits
- Near term pricing outlook remains unpredictable
- Medium to long term market fundamentals remain positive as demand
will outstrip supply
* 2012 guidance on track:
- 750,000 Platinum ounces absent any further abnormal production
interruptions from safety stoppages, labour and community unrest
- Guidance maintained for the full year at 8.5% on Rand unit
operating costs
- Capex spend maintained at $450 million - but maintain flexibility
to moderate consistent with markets and balance sheet prudence
- Number Two Furnace commissioning on schedule for Q3
Ian Farmer, Chief Executive Officer, commented:
"Lonmin performed well in a period where unprecedented high levels of Section
54 safety stoppages, labour and community unrest impacted on our production.
The impact was slightly less in Quarter Two however as we saw the benefits of
our partnership approach with the DMR in tackling the safety journey start to
come through. We expect production to ramp up in the second half as normal,
absent any further abnormal disruptions.
The inflationary increases in our costs and what seemingly appears to be an
unrelenting depressed pricing environment also impacted our profitability and
cash flows. We have been managing our net debt closely and will continue to
do so. We remain on track to meet our full year guidance.
Whilst we are continuing to invest in our growth shafts at Marikana to build
our production profile and ultimately achieve the optimal cost profile for
our operations, we do so with an element of caution in a market where demand
is currently soft. In our view the medium to long term PGM market
fundamentals however, remain sound and this strategy will benefit our
shareholders as the market improves. We are therefore predisposed towards the
continuation of our investment programme but we will defer capital to the
extent deemed necessary to remain within prudent debt parameters.
I am pleased to report that we have made considerable progress with further
improving our safety record and our LTIFR has been trending positively as we
continue to focus on the safety initiatives we embarked on last year to drive
further improvements."
FINANCIAL HIGHLIGHTS
6 months to 6 months
31 March to
2012 31 March
2011
Revenue $751m $938m
Underlying i operating profit $14m $148m
Operating profit ii $14m $144m
Underlying i profit before taxation $6m $149m
Profit before taxation $18m $159m
Underlying i (loss) / earnings per share (6.9)c 45.0c
(Loss) / earnings per share (11.8)c 44.5c
Trading cash inflow per share iii 55.6c 148.4c
Free cash (outflow) / inflow per share iv (41.6)c 54.3c
Net debt as defined by the Group v $356m $296m
Interest cover (times) vi 8.4x 11.3x
Gearing vii 11% 9%
Notes on Financial Highlights:
i Underlying results and earnings per share are based on reported results
and earnings per share excluding the effect of special items as
disclosed in note 3 to the interim statements.
ii Operating profit is defined as revenue less operating expenses before
impairment of available for sale financial assets, finance income and
expenses and before share of profit of equity accounted investments.
iii Trading cash flow is defined as cash flow from operating activities.
iv Free cash flow is defined as trading cash flow less capital expenditure
on property, plant and equipment and intangibles, proceeds from
disposal of assets held for sale and dividends paid to non-controlling
interests.
v Net debt as defined by the Group comprises cash and cash equivalents,
bank overdrafts repayable on demand and interest bearing loans and
borrowings less unamortised bank fees.
vi Interest cover is calculated for the 12 month periods to 31 March 2012
and 31 March 2011 on the underlying operating profit divided by the
underlying net bank interest payable excluding exchange.
vii Gearing is calculated as the net debt attributable to the Group divided
by the total of the net debt attributable to the Group and equity
shareholders` funds.
ENQUIRIES:
Investors / Analysts:
Tanya Chikanza +44 (0) 207 201 6007
Head of Investor Relations
Ruli Diseko
Investor Relations Manager +44 (0) 207 201 6000
Media:
Cardew Group +44 (0) 207 930 0777
James Clark/Emma Crawshaw
Inzalo Communications +27 (0) 11 646 9992
Gillian Findlay
This press release is available on www.lonmin.com. A live webcast of the
Interim Results presentation starting at 09.00hrs (London) on 14 May 2012 can
be accessed through the Lonmin website. There will also be a web question
facility available during the presentation. An archived version of the
presentation, together with the presentation slides, will be available on the
Lonmin website.
Chief Executive`s Review
1 Introduction
I am pleased to report that we delivered a solid operational performance in
the first half of the 2012 financial year in spite of the known and
significant disruptions that we experienced during the period. The results
reflect the healthy state of our operating assets and a team that is growing
in its confidence and ability to deliver in a challenging environment. The
key features during this first half are as follows.
Our mining operations produced 5.8 million tonnes in the first half of 2012,
a decrease of 1.7 % when compared to the 2011 half year. Productivity was
impacted by the uncharacteristically high Section 54 safety stoppages that
were seen across the South African PGM mining industry during this period,
labour and community unrest as well as management induced safety stoppages.
The total impact of these disruptions in the period was a loss of some
464,000 tonnes, compared to 166,000 tonnes lost in 2011 half year.
Metals in Concentrate were up 3.8 % to 368,175 Platinum ounces whilst
Platinum sales, at 318,402 were in line with 2011 half year. Revenue was
however significantly impacted by lower PGM prices and volumes sold and fell
by 20% to $751 million. The weak pricing environment and higher unit costs
have significantly impacted our profitability and today we report operating
profits for the half year of $14 million compared to $144 million in the
prior year period and profit before tax of $18 million compared to profit
before tax of $159 million in 2011 first half.
In March 2012, we entered into a pre-paid sale of 70,700 gold ounces and
yielded around $107 million in cash flow. The proceeds from this arrangement
have provided flexibility around our debt headroom and at 31 March 2012 we
have a moderate net debt level of $356 million, compared to the net debt of
$234 million we had at the beginning of the financial year. This represents a
relatively low gearing of 11%.
2 Safety performance
The safety of our employees is our first consideration in everything we do.
Regrettably we recorded one fatality during the period and we extend our
sincere condolences to the family and friends of Mr Albino Moises Cuna who
died in December 2011.
We have made considerable progress with improving our safety results. Our
Lost Time Injury Frequency Rate (LTIFR) at 4.69 per million man hours worked
showed an improvement when compared to the 2011 year rate of 4.71 per million
hours and 5.4 for the same period in 2011. During the period, Rowland shaft
continued to be an industry leader as it recorded the significant industry
achievement of 12.9 million Fall of Ground Fatality Free Shifts over a ten
year period. We also recorded a best ever five million Fatality Free Shifts
for Lonmin as a whole. We remain diligently focused on improving our safety
working in partnership with the Department of Mineral Resources (DMR).
3 Mining Division
Introduction
Our Marikana mining operations have been able to maintain production despite
the headwinds of industrial relations, Section 54 safety stoppages and
community unrest. I believe this reflects the healthy technical state of the
business and the team`s competency.
The total impact of the Section 54 Safety shutdowns was 347,000 tonnes in
lost production across all operations including the joint venture, compared
to 70,000 tonnes in the 2011 half year. The frequency of stoppages and losses
in tonnage was quite marked, particularly in January when around 100,000
tonnes of production were lost. Following some high level dialogue across all
levels of the DMR around the end of January, losses have subsequently fallen
to lower levels.
We incurred an additional 48,000 and 69,000 tonnes of lost production as a
result of management induced safety stoppages, and community and labour
unrest at our operations respectively.
Production statistics for the second quarter of the year can be found in a
separate announcement published today.
Grade
Underground milled head grade fell to 4.48 grammes per tonne in the first
half of 2012 from 4.56 grammes per tonne in the prior year period as a result
of an increase in the overall contribution of Merensky ore to the mix. The
overall head grade for the same period including open cast however, increased
by 1.8% from 4.34 grammes per tonne to 4.42 grammes per tonne as a result of
an increase in the opencast grade and a decrease in opencast ore in the mix.
The Merensky:UG2 mix is now 27%, up from 23% in the prior year period.
Overall we are comfortable, that given our current mining mix, the current
grade is in line with expectations.
Development
We continue to make progress in improving our ore reserve position and
immediately available ore reserves at Marikana at the end of the first half
of the 2012 financial year were 3.1 million centares compared to 2.9 million
centares at the end of the 2011 financial year and 2.8 million centares at 31
March 2011. This represents around 19 months of current production and
supports Lonmin`s capacity growth strategy.
Mine production
Overall production at our operations of 5.8 million tonnes for the period,
compared to 5.9 million tonnes for the prior year period has been
satisfactory.
Total underground tonnes mined from the Marikana operations were relatively
flat at 5.5 million compared to the first half of 2011. The greatest
contribution was made by Karee which mined 2.5 million tonnes compared to 2.2
million in the same period last year, despite losing 90,000 tonnes to Section
54 safety stoppages.
Production from our Middelkraal unit, comprising of Hossy and Saffy shafts,
mined 965,000 tonnes, an increase of 5% when compared against 919,000 tonnes
in the prior year period. Middelkraal had one of the highest frequency of
Section 54s, losing 121,000 tonnes during the six months to 31 March 2012.
Saffy`s ramp up has also been slightly slower than anticipated due to poor
ground conditions. We are making progress with our programme of introducing
hybrid mining in some upper quadrants at Hossy, to minimise the risks of
interruption to production from machine breakdowns and lack of availability
of artisans. We are converting the top levels of the shaft to hybrid. The
middle sections are remaining on XLP, whilst the bottom levels are being
developed conventionally. Production at Hossy has increased by around 23% to
465,000 tonnes when compared to the prior year, supporting the approach
taken.
At Easterns, production declined by 10% to 556,000 tonnes, mainly due to
community unrest and having lost 10,000 tonnes as a result of Section 54
safety stoppages.
At Westerns, the planned decline in production at Newman shaft, and lost
production due to Section 54s of 86,000 tonnes at both Newman and Rowland
shafts contributed to production at Westerns falling by 12.6% from the prior
year period to 1.5 million tonnes.
We continued to scale back on our production at the Merensky opencast
operations as we focused on grade improvement. We produced 196,000 tonnes
compared to 336,000 tonnes in the prior year period.
Underground production at Pandora, our joint venture, is increasing at a
steady rate and contributed 104,000 attributable tonnes for the first half of
2012, an increase of 25.3% when compared against the prior year period.
Lonmin purchases 100% of the ore from the Pandora joint venture and this ore
contributed 15,608 saleable Platinum ounces in concentrate and 29,617
saleable PGM ounces in concentrate to our production, representing increases
of 40.9% and 40.3% respectively from the prior year period due to higher
volumes and better grades.
We expect our production performance in the second half of 2012 to continue
to be supported by increased contributions from our major shafts, K3 and
Rowland as well as the continued ramping up of Saffy and Hossy shafts.
4 Process Division
Introduction
The performance of our Process Division was impacted by a build up of stocks
in the Smelter, as explained below. The overall refining recovery rate which
measures recoveries across the processing chain was a satisfactory 81.3 % for
the half year, a decrease from the 2011 year end rate of 82.5%.
Concentrators
Total tonnes milled were flat at 6.0 million for the half year to 31 March
2012 when compared to the prior year period whilst total Metals in
concentrate production from Marikana increased by 2.3 % to 351,695 saleable
ounces of Platinum driven by higher grades as a result of increased
underground ore tonnes milled.
Total metals in concentrate produced increased by 3.8% from 354,863 saleable
Platinum ounces for the half year 2011 to 368,175 and saleable PGM ounces
increased by 2.0% from 667,088 to 680,528 in the same period.
The Easterns tailings treatment plant was successfully commissioned during
March 2012. This plant is already showing early signs of contributing to an
improvement in concentrator recoveries in the Easterns concentrators.
Smelters and Refineries
Total refined production for the six months to 31 March 2012 was 304,329
ounces of Platinum and 601,540 ounces of PGMs, a decrease of 3.9% and 11.6%
respectively on the prior year period. The decrease has arisen as refined
production was temporarily affected by a smelting stock build up due to an
increase in sulphur in the feed to the smelter. This occurred as a result of
a greater percentage of Merensky ore being milled due to the series of
Section 54 safety stoppages and internal safety stoppages that predominantly
impacted our UG2 production. The PGM percentage decrease is greater due to a
disproportionately higher number of Other Precious Metals which were returned
by third party toll refiners during the prior year period. The Smelter will
operate at normal stock levels by the end of the third quarter.
Plans for the commissioning of the new Number Two Furnace are on schedule for
the third quarter. While there is an inherent risk within the commissioning
procedure, the Processing team will be working through a comprehensive
implementation plan to ensure a safe and successful start up.
5 Cost management
Management continued to focus on operational delivery in an environment that
faced severe business disruption. Containing operational costs has
consequently been challenging. Our gross Rand operating costs increased by
9.4 % from R5.3 billion to R5.8 billion mainly as a result of inflationary
increases. We also incurred high cost ounces at K4 as it commences early
stage production. The overall effect of these factors was to increase unit
cost by 10.9% to R8,172 per PGM ounce produced when compared to the first six
months of 2011. Adjusted for the impact of Section 54 stoppages, labour
unrest and deferred stripping costs, the increase would have been 9.2%.
Production volumes are traditionally second half weighted benefiting unit
costs in the second half of the year.
Managing structural unit cost inflation and arresting the decreasing
productivity trend is paramount and is receiving attention through a number
of integrated initiatives such as our line of sight management system that
tracks and rewards productivity. A new team training system has also been
piloted at the 1B/4B shaft at Karee and positive results are in evidence. It
will be gradually rolled out to other shafts over the coming months.
6 Progress with transformation objectives and equity ownership
Human Resources Development
Transformation is a fundamental element of our licence to operate and the
right thing to do, and we are pursuing a number of initiatives within our
Human Resource Development (HRD) plan which enable a holistic approach to our
transformation strategy. In April 2012, the Minister of Mineral Resources, Ms
Susan Shabangu officially opened the new Lonmin Artisan Training Centre at
Marikana. This facility, is an important building block in our HRD strategy
and complements the bursary programme, the mining skills training and Adult
Basic Education and Training (ABET) to enable us to offer a full spectrum of
up-skilling opportunities to people within the local community and nationally
whatever their level of current educational advancement. As a result we are
well placed to feed Lonmin`s future talent requirements over time.
We are making good progress with our equity targets and as at 31 March 2012,
35% of management was Historically Disadvantaged South Africans (HDSA). We
are committed to various social projects and raising visibility thereof
within the community. We will report progress in this area in more detail at
year end.
Equity ownership
A Concept Paper has been submitted to the DMR outlining our proposal for
increasing BEE equity ownership to achieve Phase Two compliance by 2014. Good
progress has been made in discussions with the DMR in clarifying the
different initiatives we are progressing. These include incorporating broad
based ownership around employees and our communities via ESOPs and community
ownership schemes and migrating HDSA equity and royalty holdings in the
various Lonmin entities into Lonmin Plc as well as consolidating future HDSA
ownership at this level.
Shanduka, our BEE partner is also undertaking a feasibility study on Limpopo
which if positive will result in Shanduka acquiring a direct stake in the
Limpopo operations. The feasibility study is expected to be completed in
quarter four of this financial year. We will report our progress in this area
in more detail at the year end.
7 Market outlook
PGM prices weaker over review period
PGM prices were under downward pressure in the six month period ending 30
March 2012, compared to the same period a year before. Platinum weakened by
10% from an average of $1,745 per ounce in first half of 2011 to $1,566 per
ounce in the first half of 2012, while palladium declined 11% from $734 per
ounce to $655 per ounce and rhodium lost 36% year on year to $1,524 per
ounce. However, the price weakness in Dollar terms was largely offset by a
14% weakening of the Rand against the Dollar, resulting in the overall Rand
basket price declining by 0.5% to R9, 600 per ounce over the corresponding
period.
Automotive demand encouraging
The recovery in the auto industry, our largest end use market, continues
despite the uncertain global economic conditions. Companies such as LMC
Automotive are still forecasting unit volume growth of 5% for 2012 and 8% per
year in the two years after that.
The growth is however more subdued than previously anticipated and somewhat
fragmented. Demand in Europe is declining but is expected to stabilise in
2013 and Euro 6 emission legislation requirements for the 2014 model year
will start to provide a boost for platinum in Europe in 2013. Demand from
China was flat in the first quarter of 2012 but is expected to accelerate as
the year progresses.
However, the US has experienced strong overall demand growth of 13% in the
first quarter of calendar 2012. Much of the strength in the US market is
coming from pent-up demand, with the average age of their cars at 10.8 years
and with fuel prices rising, many buyers are opting to buy more fuel
efficient cars. Diesel and hybrid sales for example have increased in Q1 by
35% and 37 % respectively, with diesel vehicles now accounting for around 3%
of US sales.
Investment demand remaining steadfast
Platinum ETFs have withstood recent price movements relatively well, with ETF
holdings dropping late last year, when prices softened but adding these
ounces back in early 2012. We believe that the investment market has matured
and will continue to exhibit this "stickiness", particularly once industrial
fundamentals become the main price driver. We therefore continue to hold the
view that the investment sector will be a net contributor to demand over
time.
The palladium investment market has shown a bit more volatility, but that can
be expected in a market where the price has increased almost four-fold in the
space of two years against a backdrop of uncertain economic conditions. As is
the case in platinum, ETF volume movements in recent months appear to be
following prices. This will have important implications when we enter the PGM
recovery phase as the investment market may not be providing the liquidity
needed in a deficit market if investors believe prices are going to rise
further.
Supply forecasts
Platinum supply estimates have been progressively revised downwards since
2007, due to supply disruptions and constraints in South Africa. 2012 has
already seen disruptions affecting over 200,000 ounces worth of production
due to strikes and industry wide safety related stoppages. Some analysts are
estimating that 2012 could see supply disruptions of up to 400-500,000
ounces, which would almost certainly lead to supply deficits, despite softer
demand.
PGM Supply-Demand estimates
We have changed our view of a marginally oversupplied platinum market in
2012, to one of slight deficit. This is largely due to supply disruptions
from South Africa. However industrial users have taken advantage of recent
low prices and find themselves well stocked at a time when the rate of global
growth is once again unclear. As a result we are likely to see a short term
period of price weakness until such time as this situation unwinds. When this
occurs we do not expect the supply response to be robust enough to meet a
sustained recovery in demand which we now anticipate during 2013. We expect
this to lead to deepening market deficits and rising prices in coming years.
Palladium is expected to head for large deficits as Russian exports are
drying up and gasoline auto markets such as the US and China are showing
stronger growth than the diesel auto market in Europe. Continued substitution
of platinum by palladium is also expected to drive demand in the next few
years.
The rhodium market is still seen as oversupplied this year, but may also move
into a small deficit by 2013 on the back of recovering auto and industrial
demand and its low price.
PGM Market Outlook
In summary, short term conditions are likely to be difficult to predict due
to high working inventories and investor speculation. However, with the
market already moving towards a deficit, conditions will get tighter as
supply will not be able to keep up with recovering demand and we expect
deeper deficits in the 2013 to 2015 period.
8 Maintaining balance sheet strength whilst investing capital for growth
Marikana
We continue to focus on growing our capacity to achieve target production and
sales volumes of 950,000 Platinum ounces. We are in the attractive position
of having three new generation shafts; Hossy, Saffy and K4, as well as sub
declines at K3 and Rowland in which we are investing to grow our production
capacity and ultimately achieve the lower cost and improved profitability
profile for our operations.
We have been successful in thrifting our Rand capital expenditure, but given
the strength of the Rand, this translated into capital expenditure of $197
million in the first half. Our capital programme guidance for 2012 remains
around $450 million funded by operating cash flow and debt.
Other assets
We are making progress with the feasibility study on Pandora which is a
proposed extension of the current underground operations from the E3 shaft
and a new incline shaft in the Pandora block. The study is expected to
complete in the Quarter Three. The pre-feasibility study on the mining and
processing at 240,000 tonnes per month at Akanani is also progressing and is
expected to complete in Quarter Four.
We are encouraged with the positive prefeasibility study on the potential
modest open pit operation on our Vale PGM joint venture in Sudbury and
together with our partner are contemplating next steps. Encouraging results
from other properties in the joint venture are being followed up in the
summer drilling programme.
We have increased our equity in Wallbridge Mining Company back to close to
16% and elected to form a further joint venture on the prospective North
Range properties, the second such PGM joint venture with Wallbridge in the
Sudbury area.
9 Looking ahead
Safety
Achieving our goal of safe production requires constant vigilance. We will
endeavour to continue to foster a partnership approach with the DMR in
tackling this journey and in doing so we hope to minimise the frequency of
safety interventions by the inspectorate.
Labour
Successfully managing labour relations represents the biggest challenge to
the effective operation of our mines and indeed the industry as a whole.
Labour dynamics are going through a sea change, with the emergence of an
alternative trade union in the PGM mining industry, in the form of the
Association of Mineworkers and Construction Union (AMCU), to rival the
dominance of NUM. The rivalry for membership between the unions could be a
feature for the foreseeable future with a corresponding increase in the risk
of escalation of costs and disruptions to production.
AMCU now has a presence at our Karee mining division where a third of the
employees have become members. We have agreed limited organisational rights
with AMCU to reflect this position.
Overall we continue to professionally manage the relationship with the
individual unions as stakeholders and representatives of our employees,
constructively engaging with representatives on a regular basis to mitigate
the risk adverse labour relations may pose to the business.
We will also continue to adopt a zero tolerance approach to those that
practice intimidation and violence and the South African law enforcement
agencies have been fully supportive of this approach.
Community unrest and resource nationalism
As a result of high unemployment and poverty, social and community unrest is
an increasing risk. We experienced business disruption as a result of this
several times during the first half of 2012. We are aware of this issue and
constantly engage with relevant community stakeholders.
The ground swell of support for the Nationalisation of the mining industry
appears to have finally been discounted. However, the debate surrounding
Resource Nationalism and the Mining sector`s ability to contribute to the
country`s development continues apace and we can expect this to persist
throughout this year as the ANC prepares for its policy conference in June
and its leadership elections in December.
10 Keysha
In January 2012, the Director General of the DMR rejected Lonmin`s appeal
against the granting to Keysha Investments 220 (Pty) Limited of a prospecting
right for associated minerals and metals that are found as part our PGM ore
body on part of our mining right area. We have appealed to the Minister as is
required by the process laid down by the MPRDA. We remain confident of our
legal position and given our view that this decision is procedurally and
substantively incorrect, are taking the necessary measures to protect
Lonmin`s rights. This will include taking the matter to Court for review if
necessary.
11 Outlook
We have delivered a solid operational performance despite the headwinds of a
difficult operating environment. Whilst the period has been challenging, it
has given us the opportunity to demonstrate that our assets are technically
healthy and the team is well capable of tackling the challenges effectively.
Guidance
We expect momentum to build up in the second half and we are maintaining our
guidance, absent any abnormal disruptions, of safely and profitably producing
around 750,000 Platinum ounces for the full 2012 with a unit cost increase
per PGM ounce of around 8.5% - in line with wage settlements.
We expect our production performance in the second half of 2012 to continue
to be supported by the following:
* Improved production performance and consistency at K3 shaft as it
benefits from improved ore reserves. Successful management of
labour relations at Karee however will be important given the split
of employees between non-unionised employees, members of NUM and
AMCU;
* Continuing momentum at Rowland which will offset the ongoing
planned decline of Newman;
* Continued ramping up of production at Middelkraal`s Hossy and
Saffy. We expect the poor ground conditions that have been seen at
Saffy to remain a feature for the rest of the year;
* Positive contribution from Easterns supported by healthy ore
reserves whilst closely monitoring the area to mitigate the risk of
community unrest; and
* Sustained concentrator recoveries at the levels achieved in the
first half.
Our guidance for 2012 capex spend remains at $450 million, the bulk of which
is either committed or has been spent. The objectives of the capex programme
are to reduce costs at Marikana, in particular at our three growth shafts,
and to work towards our target capacity of 950,000 profitable Platinum
ounces. Our expectations for the medium term price environment for PGMs
support our predisposition towards the continuation of the investment
programme. However, we are not immune to the effect on cash flow from short
term prices, the outlook for which remains uncertain. Given our stated intent
to manage the balance sheet prudently and produce profitable ounces, we will
defer this capital investment to the extent deemed necessary. We are watching
the situation carefully and as we have demonstrated in the past, we will
react if we deem it prudent to do so.
12 Employee contribution
Finally, I would like to express my sincere gratitude to all our employees,
contractors and community members for their support and commitment to
delivering a solid performance in the first half of 2012.
Ian Farmer
Chief Executive Officer
11 May 2012
Financial Review
Overview
The 2012 interim period has been characterised by declining profitability
driven mainly by reduced revenues. Automotive and industrial demand for PGMs
has remained subdued which has had an adverse impact on the pricing
environment. The volume of PGMs sold has also declined from the 2011 interim
period. This is due to anticipated production increases not materialising as
a result of production losses due to heightened Section 54 stoppages as well
as management induced safety stoppages and community unrest disruptions.
On the cost side, wage and electricity tariff increases continued at above
inflation rates putting further strain on profitability. However, the
resultant increase in costs was mitigated by favourable exchange movements
and positive metal stock movements. Unit costs remain under pressure as cost
escalations have not been offset by the expected increase in production as
mentioned above. The C1 unit cost per ounce produced for the 2012 interim
period was 10.9% higher than the comparative 2011 period.
We continue to invest in capital expenditure as we build our production base.
Not only will this allow us to meet our objective of moving down the industry
cost curve, but it will also enable us to increase production from our
Marikana infrastructure at a time when we believe that the market will
require the additional production. While this has had the consequence of
increasing our net debt to $356 million at 31 March 2012, our gearing at 11%
remains relatively low. We continue to demonstrate balance sheet capacity
afforded us by existing debt facilities and other funding measures we are
able to execute in the short term. One such funding measure was the prepaid
sale of gold undertaken in March which yielded $107 million in cash flow.
We will constantly monitor and balance the need to invest for future
production and the requirement to maintain a strong balance sheet, with the
overriding objective to provide an optimal return for our shareholders.
Income Statement
The $134 million movement between the underlying operating profit of $14
million for the six months ended 31 March 2012 and that of $148 million for
the six months ended 31 March 2011 is analysed below.
$m
Period to 31 March 2011 reported operating 144
profit
Period to 31 March 2011 special items 4
Period to 31 March 2011 underlying operating 148
profit
PGM price (119)
PGM volume (92)
PGM mix 37
Base metals (13)
Revenue changes (187)
Cost changes (including foreign exchange impact 53
of $60m)
Period to 31 March 2012 underlying operating 14
profit
Period to 31 March 2012 special items -
Period to 31 March 2012 reported operating 14
profit
Revenue
Total revenue decreased by $187 million from the six months ended 31 March
2011 to $751 million for the six months ended 31 March 2012.
As noted in the overview the PGM pricing environment during the period
deteriorated over the prior period and the impact on the average prices
achieved on the key metals sold is shown below:
Six Six
months months
ended ended
31.03.12 31.03.11
$/oz $/oz
Platinum 1,568 1,777
Palladium 660 755
Rhodium 1,462 2,345
PGM basket (excluding by-product 1,155 1,290
revenue)
PGM basket (including by-product 1,231 1,382
revenue)
The US Dollar PGM basket price (excluding by-products) decreased by 10%
contributing $119 million to the overall decline in revenue.
While Platinum sales volume was in line with that achieved in the 2011
comparative period, PGM sales volume for the six months to 31 March 2012 at
608,579 ounces was down 10% on the six months to 31 March 2011.The decline in
PGM volumes had a negative effect of $92 million. Overall production was
significantly impacted by increased production losses associated with Section
54 and management induced safety stoppages as well as community unrest.
However, the mix of metals sold resulted in a positive impact of $37 million
mainly due to the higher proportion of Platinum arising from metal-in-process
inventory timing differences. Base metal revenue was down $13 million due to
a combination of volume and price movements.
Operating costs
Total underlying costs in US Dollar terms decreased by $53 million with the
impact of cost escalations being offset by a combination of reduced
production (from opencast and toll refining), positive foreign exchange
movements and a build up of stock in process. A track of these changes is
shown in the table below:
$m
Six months ended 31 March 2011 - underlying 790
costs
Increase / (decrease):
Marikana underground mining 56
Marikana opencast mining (10)
Limpopo mining 3
Concentrating and processing 5
Overheads 17
Operating costs 71
Pandora and W1 ore purchases 3
Metal stock movement (68)
Foreign exchange (60)
Depreciation and amortisation 1
Cost changes (including foreign exchange (53)
impact)
Six months ended 31 March 2012 - underlying 737
costs
Marikana underground mining costs increased in the period by $56 million or
12%, mainly due to wages and electricity costs escalating at rates above
average CPI. There was also a marginal increase in underground production.
Marikana opencast mining costs decreased by $10 million or 40% largely driven
by a reduction in production reflecting the continued slowdown in opencast
production that commenced in the first quarter as we focus on grade
improvement.
Concentrator and processing costs increased by $5 million or 3%, on the prior
year period, as cost escalation effects were diluted by a decrease in toll
refined metal production.
Ore purchases increased by $3 million or 10% on the back of increased volumes
of ore purchased.
Overheads increased by $17 million or 30% largely due to cost escalation
effects. Additional spend was also made on exploration and in the
sustainability and transformation areas (e.g. bursaries, training and
community projects), in line with our commitment to meeting our Mining
Charter targets.
The six months under review saw a build up of stock in process as ore mix
challenges affected smelter efficiency. This has resulted in a $68 million
positive impact on operating profit, excluding exchange impacts, arising from
metal stock movements.
The Rand weakened considerably against the US Dollar during the period under
review averaging ZAR7.91 to USD1 compared to an average of ZAR6.93 to USD1 in
the 2011 period resulting in a $60 million positive impact on operating
costs.
Cost per PGM ounce
The C1 cost per PGM ounce produced for the six months to 31 March 2012 was
R8,172. This was an increase of 10.9% compared to the same period in 2011.
This increase was largely driven by higher than inflation increases in the
wage bill (8.5%) and electricity tariffs (24%). These escalations were not
mitigated by the expected increase in production due to the increased Section
54 and management induced safety stoppages as well as community unrest
disruptions during the period.
Further details of unit costs analysis can be found in the Operating
Statistics.
Special operating costs
There were no special operating costs incurred for the six months ended 31
March 2012.
Impairment of available for sale financial assets
The $6 million impairment of available for sale financial assets represents
the loss in value of our share in Platmin Limited following the company`s
delisting in December 2011.
Net finance income
6 months to 31
March
2012 2011
$m $m
Net bank interest and fees (11) (20)
Capitalised interest payable and 10 20
fees
Exchange (2) 2
Other (6) (4)
Underlying net finance costs (9) (2)
HDSA receivable 18 14
Net finance income 9 12
The total net finance income of $9 million for the six months ended 31 March
2012 represents a $3 million adverse movement compared to the total net
finance income of $12 million for the six months ended 31 March 2011.
Net bank interest and fees decreased from $20 million to $11 million for the
six months ended 31 March 2012 largely as a result of a lower average net
debt during the period and substantially better interest rates on debt
funding. Interest totalling $10 million was capitalised to assets (2011 - $20
million).
The Historically Disadvantaged South Africans (HDSA) receivable, being the
Sterling loan to Shanduka Resources (Proprietary) Limited (Shanduka),
increased by $18 million during the period to 31 March 2012 representing
exchange movements and accrued interest.
Taxation
Reported tax for the current six month period was a charge of $52 million
which exceeds the recorded profit before tax of $18 million. This was largely
driven by foreign exchange impacts arising from the fact that overseas tax
charges are predominantly calculated in Rand as required by the local
authorities while the functional currency of these subsidiaries is US Dollar.
These exchange impacts have added $39 million to the reported tax charge
split between exchange impacts on the translation of Rand denominated current
and deferred tax balances ($26 million) and exchange impacts on Rand taxable
profits ($13 million). A detailed tax rate reconciliation is included in note
5 to the financial statements.
Cash generation and net debt
The following table summarises the main components of the cash flow during
the year:
Six months ended 31
March
2012 2011
$m $m
Operating profit 14 144
Depreciation, amortisation and 61 62
impairment
Changes in working capital 40 109
Other 15 12
Cash flow generated from 130 327
operations
Interest and finance costs (12) (19)
Tax (8) (7)
Trading cash inflow 110 301
Capital expenditure (197) (191)
Investment expenditure (4) (1)
Free cash (outflow) / inflow (91) 109
Dividends paid to equity (31) (30)
shareholders
Cash (outflow) /inflow (122) 79
Opening net debt (234) (375)
Foreign exchange 1 -
Unamortised fees (1) -
Closing net debt (356) (296)
Trading cash inflow (cents per 55.6c 148.4c
share)
Free cash (outflow) / inflow (41.6)c 54.3c
(cents per share)
Cash flow generated from operations in the six months ended 31 March 2012 at
$130 million reflects a $197 million decrease from the same period in 2011.
This was largely as a result of subdued profitability on the back of lower
revenues mainly driven by adverse price and volume movements. Cash flow
generated from operations for the six months ended 31 March 2012 includes
deferred revenue received on the forward sale of gold of $107 million as well
as the benefit of improved payment terms negotiated with one of our large
customers.
Trading cash inflow for the six months to 31 March 2012 amounted to $110
million (2011 - $301 million). The cash flow on interest and finance costs
decreased by $7 million. Tax payments remained flat and represent provisional
corporate tax payments. The trading cash inflow per share was 55.6 cents for
the six months ended 31 March 2012 against 148.4 cents for 2011.
Capital expenditure cash flow at $197 million was $6 million above the prior
period. In Mining the expenditure incurred was focused on operating
developments at Hossy and Saffy shafts, equipping and development at K4 and
investment in sub-declines at K3. In the Process Division spend largely
comprised additional furnace capacity.
The proposed dividend of 15 cents per share for the financial year ended 30
September 2011 was paid during the period under review resulting in a cash
outflow of $31 million.
Net debt at $356 million has increased by $122 million since 30 September
2011. Pressure on net debt as a result of subdued profitability and the
continued capital programme was mitigated by the deferred revenue proceeds
mentioned above.
As a result gearing, calculated on net borrowings attributable to the Group
divided by those attributable net borrowings and the equity interests
outstanding at the balance sheet date, was 11% at 31 March 2012 (31 March
2011 - 9%). We continue to closely monitor our liquidity risk as discussed in
more detail under the financial risk management section below.
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. There is an extensive discussion of the principal risks
and uncertainties facing the Company on pages 37 to 40 of the 2011 Annual
Report, available from the Company`s website, www.lonmin.com. This financial
review focuses on financial risk management.
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), fluctuations in
interest and foreign exchange rates and commodity prices.
These are the critical factors to consider when addressing the issue of
whether the Group is a Going Concern. As is clear from the following
paragraphs, the Group is in a strong position regarding financial risk. There
are, however, factors which are outside the control of management,
specifically, volatility in the Rand / US Dollar exchange rate and PGM
commodity prices, which can have a significant impact on the business.
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. This is supplemented with additional risk mitigation
strategies such as those described below in respect of foreign currency and
commodity price risk.
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. 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.
During the course of 2011 Lonmin`s bank debt facilities were reorganised into
new facilities totalling approximately $945 million. These facilities have
been operating smoothly and are adequate for the Group`s current liquidity
requirements.
As at 31 March 2012, Lonmin had net debt of $356 million, comprising $515
million of drawn facilities net of $157 million of cash and equivalents and
$7 million of unamortised bank fees as well as a further $5 million of
external debt incurred to fund the construction of a chrome treatment plant
with an outside partner.
The effective cost of debt funding for the first half of the 2012 financial
year was circa 4.6%.
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 payments terms are very short, thereby reducing trade
receivable credit risk significantly.
HDSA receivables
HDSA receivables are secured on the HDSA`s shareholding in Incwala.
Interest rate risk
Currently, the bulk of Lonmin`s outstanding borrowings are in US Dollars. Of
the USD borrowings, the base rate in respect of the $300 million term
facility has been fixed through an interest rate swap for the term of the
facility which runs until May 2016. In respect of the remaining USD
borrowings and the ZAR borrowings these are at floating rates of interest
linked to LIBOR and JIBAR respectively. The interest position is kept under
constant review in conjunction with the liquidity policy outlined above and
the 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.
Because of the current depressed level of our revenue basket when expressed
in Rands and the sensitivity of this price to a strengthening Rand, a
decision has been taken to use hedging instruments in respect of the Rand /
US Dollar currency exposure for a portion of revenues in the second half of
the 2012 financial year when the opportunity arises.
The approximate effects on the Group`s results of a 10% movement in the Rand
to US Dollar based on the year-to-date 2012 average exchange rate would be as
follows:
EBIT +/- $67m
Profit for the year +/- $39m
EPS (cents) +/- 19.5c
These sensitivities are based on year-to-date 2012 prices, costs and volumes
and assume all other variables remain constant. Current hedges have not been
taken into account in the calculations. They are estimated calculations only.
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 is to hedge up to a maximum of 75% of the future cash
flows from the sale of these products. The Group did not undertake any
hedging of base metals under this authority in the financial period 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 pre-paid 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. This will be used to help fund the capital expenditure
programme. The upfront receipt has been accounted for as deferred revenue on
our balance sheet and will be released to profit and loss as deliveries take
place at an average price of $1,510/oz delivered.
The approximate effects on the Group`s results of a 10% movement in the year-
to-date 2012 average metal prices achieved for Platinum (Pt) ($1,568 per
ounce), Palladium (Pd) ($660 per ounce) and Rhodium (Rh) ($1,462 per ounce)
would be as follows:
Pt Pd Rh
EBIT +/- $50m +/- $9m +/- $7m
Profit for the year +/- $29m +/- $5m +/- $4m
EPS (cents) +/- 14.5c +/- 2.6c +/- 2.1c
These sensitivities are based on year-to-date 2012 costs and volumes and
assume all other variables remain constant. They are estimated calculations
only.
Contingent liabilities
The Group provided third party guarantees to the Department of Minerals and
Energy in connection with environmental and rehabilitation obligations which
the Group has to fund in order to restore the environment once all mining
operations have ceased. At 31 March 2012 these guarantees amounted to $54
million (2011 - $50 million).
Simon Scott
Chief Financial Officer
11 May 2012
Operating Statistics
6 months 6 months
to to
Uni 31 March 31 March
ts 2012 2011
Tonnes Marikana Karee 1 kt 2,459 2,214
mined
Westerns 1 kt 1,508 1,725
Middelkraal 1 kt 965 919
Easterns 1 kt 556 615
Underground kt 5,489 5,473
Opencast kt 196 336
Pandora attributable 2 Underground kt 104 83
Lonmin Platinum Underground kt 5,593 5,556
Opencast kt 196 336
Total kt 5,789 5,891
% tonnes mined from % 71.0 72.4
the UG2 reef
Tonnes Marikana Underground kt 5,533 5,275
milled 3
Opencast kt 239 550
Pandora 4 Underground kt 226 175
Lonmin Platinum Underground kt 5,759 5,451
Opencast kt 239 550
Total kt 5,998 6,000
Milled head Lonmin Platinum Underground g/t 4.48 4.56
grade 5 Opencast g/t 2.89 2.20
Total g/t 4.42 4.34
Concentrato Lonmin Platinum Underground % 85.5 85.6
r
recovery Opencast % 85.0 81.8
rate 6
Total % 85.5 85.4
Metals in Marikana Platinum oz 351,695 343,789
concentrate Palladium oz 159,805 161,419
7
Gold oz 9,582 9,133
Rhodium oz 44,338 44,982
Ruthenium oz 69,023 71,091
Iridium oz 15,009 15,564
Total PGMs oz 649,452 645,978
Pandora 4 Platinum oz 15,608 11,074
Palladium oz 7,232 5,179
Gold oz 118 77
Rhodium oz 2,389 1,689
Ruthenium oz 3,655 2,654
Iridium oz 615 438
Total PGMs oz 29,617 21,112
Concentrate purchases Platinum oz 872 -
Palladium oz 310 -
Gold oz 3 -
Rhodium oz 104 -
Ruthenium oz 127 -
Iridium oz 43 -
Total PGMs oz 1,458 -
Lonmin Platinum Platinum oz 368,175 354,863
Palladium oz 167,346 166,597
Gold oz 9,703 9,210
Rhodium oz 46,831 46,671
Ruthenium oz 72,805 73,745
Iridium oz 15,667 16,002
Total PGMs oz 680,528 667,089
6 months 6
to months
Uni 31 March to
ts 2012 31
March
2011
Metals in Lonmin Platinum Nickel 8 MT 1,963 1,823
concentrate Copper 8 MT 1,258 1,157
7
Refined Lonmin refined metal Platinum oz 284,309 280,980
production
production Palladium oz 136,502 138,386
Gold oz 8,536 6,664
Rhodium oz 51,760 38,524
Ruthenium oz 72,969 72,407
Iridium oz 16,705 13,411
Total PGMs oz 570,782 550,372
Toll refined metal Platinum oz 20,019 35,854
production
Palladium oz 4,189 48,635
Gold oz 200 2,866
Rhodium oz 1,662 13,892
Ruthenium oz 3,682 23,999
Iridium oz 1,006 5,091
Total PGMs oz 30,759 130,337
Total refined PGMs Platinum oz 304,329 316,834
Palladium oz 140,691 187,021
Gold oz 8,736 9,530
Rhodium oz 53,421 52,416
Ruthenium oz 76,651 96,406
Iridium oz 17,711 18,502
Total PGMs oz 601,540 680,709
Base metals Nickel 9 MT 1,645 2,113
Copper 9 MT 899 1,214
Sales Lonmin Platinum Platinum oz 318,402 318,306
Palladium oz 135,554 189,531
Gold oz 9,333 8,638
Rhodium oz 49,020 54,807
Ruthenium oz 77,911 91,773
Iridium oz 18,359 16,503
Total PGMs oz 608,579 679,557
Nickel 9 MT 1,793 2,110
Copper 9 MT 870 1,077
Chrome 9 MT 596,032 241,746
Average Platinum $/o 1,568 1,777
prices z
Palladium $/o 660 755
z
Gold $/o 1,673 1,125
z
Rhodium $/o 1,462 2,345
z
Ruthenium $/o 103 170
z
Iridium $/o 1,041 840
z
Basket price of $/o 1,155 1,290
PGMs 10 z
Basket price of R/o 9,070 8,990
PGMs 10 z
Basket price of R/o 9,638 9,619
PGMs 11 z
Nickel 9 $/M 16,087 22,241
T
Copper 9 $/M 7,321 8,720
T
Chrome 9 $/M 18 26
T
Footnotes:
1 Karee includes the shafts K3, 1B and 4B and will also include K4 once
production commences. 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 represents Lonmin`s share (42.5%) of
the total tonnes mined on the Pandora joint venture.
3 Tonnes milled excludes 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 includes slag and has been calculated using
industry standard downstream processing losses.
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 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.
11 As per note 10 but including revenue from base metals.
6 months 6 months
to to
Uni 31 March 31 March
ts 2012 2011
Capital Expenditure 1 Rm 1,552 1,069
$m 197 154
Group cost per PGM ounce sold 2
Mining - Marikana R/o 5,698 5,111
z
Concentrating - Marikana R/o 973 922
z
Process division R/o 961 920
z
Shared business services R/o 540 420
z
C1 cost per PGM ounce produced R/o 8,172 7,372
z
Stock movement R/o (413) (337)
z
C1 cost per PGM ounce sold before base metal R/o 7,759 7,036
credits z
Base metal credits R/o (568) (629)
z
C1 costs per PGM ounce sold after base metal R/o 7,190 6,407
credits z
Amortisation R/o 780 600
z
C2 costs per PGM ounce sold R/o 7,970 7,007
z
Pandora mining cost:
C1 Pandora mining cost (in joint venture) R/o 5,326 5,340
z
Pandora JV cost/ounce produced to Lonmin R/o 8,079 8,251
(adjusting Lonmin share of profit) z
Exchange rates Average rate for period 3 R/$ 7.91 6.93
Closing rate R/$ 7.65 6.77
Footnotes:
1 Capital expenditure is the aggregate of the purchase of property, plant
and equipment and intangible assets (includes capital accruals and
excludes capitalised interest).
2 Exchange rates are calculated using the market average daily closing rate
over the course of the period.
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) DTR 4.2.7R 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) DTR 4.2.8R 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.
For and on behalf of the Board
Roger Phillimore Simon Scott
Chairman Chief Financial Officer
11 May 2012
INDEPENDENT REVIEW REPORT TO LONMIN PLC
Introduction
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 2012 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.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the
Disclosure and Transparency Rules ("the DTR") of the UK`s Financial Services
Authority ("the UK FSA"). Our review has been undertaken so that we might
state to the company those matters we are required to state to it in this
report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the company for
our review work, for this report, or for the conclusions we have reached.
Directors` responsibilities
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 FSA.
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.
Scope of 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 2012 is not prepared, in
all material respects, in accordance with IAS 34 as adopted by the EU and the
DTR of the UK FSA.
Robert M. Seale
for and on behalf of KPMG Audit Plc
Chartered Accountants
15 Canada Square
London E14 5GL
11 May 2012
Consolidated income statement
for the 6 months to 31 March 2012
6 months Spec 6 6 months Spec 6 Year Speci Year
to ial months to ial months ended al ended
31 March item to 31 March item to 30 Sep items 30 Sep
2012 s 31 2011 s 31 2011 2011
March March
2012 2011
Underly- (not Total Underlyi (not Total Underl (note Total
ing i e 3) ng i e 3) ying i 3)
Continu- N $m $m $m $m $m $m $m $m $m
ing o
operati t
ons e
Revenue 2 751 - 751 938 - 938 1,992 - 1,992
EBITDA 2 75 - 75 208 (2) 206 433 (2) 431
ii
Depreci (61) - (61) (60) (2) (62) (122) (2) (124)
ation,
amortis
ation
and
impairm
ent
Operati 2 14 - 14 148 (4) 144 311 (4) 307
ng
profit
iii
Impairm - (6) (6) - - - - - -
ent of
availab
le for
sale
financi
al
assets
Finance 4 2 18 20 3 14 17 5 15 20
income
Finance 4 (11) - (11) (5) - (5) (10) (33) (43)
expense
s
Share 1 - 1 3 - 3 9 - 9
of
profit
of
equity
account
ed
investm
ents
Profit 6 12 18 149 10 159 315 (22) 293
before
taxatio
n
Income 5 (26) (26) (52) (44) (13) (57) (56) 84 28
tax
(expens
e) /
credit
iv
(Loss) (20) (14) (34) 105 (3) 102 259 62 321
/
profit
for the
period
Attribu
table
to:
- (14) (10) (24) 91 (1) 90 226 47 273
Equity
shareho
lders
of
Lonmin
Plc
- Non- (6) (4) (10) 14 (2) 12 33 15 48
control
ling
interes
ts
(Loss) 6 (11.8) 44.5c 134.8c
/ c
earning
s per
share
Diluted 6 (11.8) 44.3c 134.4c
(loss) c
/
earning
s per
share v
Footnotes:
i Underlying results and earnings per share are based on reported results
and earnings per share excluding the effect of special items as defined
in note 3.
ii EBITDA is operating profit before depreciation, amortisation and
impairment of goodwill, intangibles and property, plant and equipment.
iii Operating profit is defined as revenue less operating expenses before
impairment of available for sale financial assets, finance income and
expenses and before share of profit of equity accounted investments.
iv The income tax (expense) / credit substantially relates to overseas
taxation and includes exchange losses of $26 million (6 months to 31
March 2011 - $10 million and year ended 30 September 2011 - exchange
gains of $82 million) as disclosed in note 5.
v Diluted earnings per share is based on the weighted average number of
ordinary shares in issue adjusted by dilutive outstanding share options.
Consolidated statement of comprehensive income
for the 6 months to 31 March 2012
6 months 6 Year
to months ended
31 March to 30
2012 31 September
March 2011
2011
$m $m $m
(Loss) / profit for the period (34) 102 321
Other comprehensive income / (expense):
- Change in fair value of available for 2 (5) (20)
sale financial assets
- Net change in fair value of cash flow - 1 -
hedges
- Ineffective portion of changes in fair (1) - (9)
value of cash flow hedges
- Changes in cash flow hedges released to 2 - -
the income statement
- Changes in settled cash flow hedges - - 1
released to the income statement
- Foreign exchange on retranslation of 2 - (8)
equity accounted investments
- Deferred tax on items taken directly to - - (4)
the statement of comprehensive income
Total comprehensive (loss) / income for (29) 98 281
the period
Attributable to:
- Equity shareholders of Lonmin Plc (20) 86 235
- Non-controlling interests (9) 12 46
(29) 98 281
Consolidated statement of financial position
as at 31 March 2012
As at As at As at
31 March 31 March 30
2012 2011 September
2011
Not $m $m $m
e
Non-current assets
Goodwill 113 113 113
Intangible assets 990 980 993
Property, plant and equipment 2,718 2,330 2,567
Equity accounted investments 178 176 175
Other financial assets 416 417 399
4,415 4,016 4,247
Current assets
Inventories 467 454 384
Trade and other receivables 99 198 154
Tax recoverable 1 - 1
Cash and cash equivalents 8 157 115 76
724 767 615
Current liabilities
Trade and other payables (315) (297) (354)
Interest bearing loans and borrowings 8 (215) (56) (10)
Derivative financial instruments (4) - (5)
Deferred revenue 9 (23) - -
Tax payable - (4) (2)
(557) (357) (371)
Net current assets 167 410 244
Non-current liabilities
Interest bearing loans and borrowings 8 (298) (355) (300)
Derivative financial instruments (9) - (9)
Deferred tax liabilities (762) (802) (716)
Deferred revenue 9 (84) - -
Provisions (137) (110) (125)
(1,290) (1,267) (1,150)
Net assets 3,292 3,159 3,341
Capital and reserves
Share capital 203 202 203
Share premium 997 997 997
Other reserves 81 88 80
Retained earnings 1,609 1,486 1,650
Attributable to equity shareholders of 2,890 2,773 2,930
Lonmin Plc
Attributable to non-controlling 402 386 411
interests
Total equity 3,292 3,159 3,341
Consolidated statement of changes in equity
for the 6 months to 31 March 2012
Equity shareholders` funds
Called Share Non-
up premium Other Retained Control- Total
share ing
capital account reserves earnings Total interests equity
i ii iii
$m $m $m $m $m $m $m
At 1 October 202 997 88 1,422 2,709 373 3,082
2010
Profit for the - - - 90 90 12 102
period
Comprehensive - - - (4) (4) - (4)
expense:
- Change in - - - (5) (5) - (5)
fair value of
available for
sale financial
assets
- Net change in - - - 1 1 - 1
fair value of
cash flow hedges
Items recognised - - - (22) (22) 1 (21)
directly in
equity:
- Share-based - - - 8 8 1 9
payments
- Dividends - - - (30) (30) - (30)
At 31 March 2011 202 997 88 1,486 2,773 386 3,159
At 1 April 2011 202 997 88 1,486 2,773 386 3,159
Profit for the - - - 183 183 36 219
period
Comprehensive - - (8) (26) (34) (2) (36)
expense:
- Change in - - - (15) (15) - (15)
fair value of
available for
sale financial
assets
- Net change in - - - (1) (1) - (1)
fair value of
cash flow hedges
- Effective - - (9) - (9) - (9)
portion of
changes in fair
value of cash
flow
hedges
- Changes in - - 1 - 1 - 1
settled cash
flow hedges
released to the
income
statement
- Foreign - - - (6) (6) (2) (8)
exchange gain on
retranslation of
equity
accounted
investments
- Deferred tax - - - (4) (4) - (4)
on items taken
directly to the
statement of
comprehensive
income
Items recognised 1 - - 7 8 (9) (1)
directly in
equity:
- Share-based - - - 7 7 1 8
payments
- Shares issued 1 - - - 1 - 1
on exercise of
share options
- Dividends - - - - - (10) (10)
At 30 September 203 997 80 1,650 2,930 411 3,341
2011
Consolidated statement of changes in equity (continued)
for the 6 months to 31 March 2012
Equity shareholders` funds
Called Share Non-
up premium Other Retained Control- Total
share ing
capital account reserves earnings Total interests equity
i ii iii
$m $m $m $m $m $m $m
At 1 October 203 997 80 1,650 2,930 411 3,341
2011
Loss for the - - - (24) (24) (10) (34)
period
Comprehensive - - 1 3 4 1 5
income :
- Change in - - - 2 2 - 2
fair value of
available for
sale financial
assets
- Ineffective - - (1) - (1) - (1)
portion of
changes in fair
value of cash
flow
hedges
- Changes in - - 2 - 2 - 2
cash flow hedges
released to the
income
statement
- Foreign - - - 1 1 1 2
exchange gain on
retranslation of
equity
accounted
investments
Items recognised - - - (20) (20) - (20)
directly in
equity :
- Share-based - - - 11 11 - 11
payments
- Dividends - - - (31) (31) - (31)
At 31 March 2012 203 997 81 1,609 2,890 402 3,292
Footnotes:
i Other reserves at 31 March 2012 represent the capital redemption
reserve of $88 million (31 March 2011 and 30 September 2011 - $88
million) and a $7 million hedging loss net of deferred tax (31 March
2011 - $nil and 30 September 2011 - $8 million).
ii Retained earnings include $15 million of accumulated credits in respect
of fair value movements on available for sale financial assets (31
March 2011 - $11 million and 30 September 2011 - $13 million) and a $9
million credit of accumulated exchange on retranslation of equity
accounted investments (31 March 2011 - $14 million and 30 September
2011 - $8 million).
iii Non-controlling interests represent an 18% shareholding in Eastern
Platinum Limited, Western Platinum Limited and Messina Limited and a
26% shareholding in Akanani Mining (Pty) Limited.
Consolidated statement of cash flows
for the 6 months to 31 March 2012
6 months 6 months Year
to to ended
31 March 31 March 30
2012 2011 September
2011
Note $m $m $m
(Loss) / profit for the period (34) 102 321
Taxation 5 52 57 (28)
Share of profit after tax of equity (1) (3) (9)
accounted investments
Finance income 4 (20) (17) (20)
Finance expenses 4 11 5 43
Impairment of available for sale 3 6 - -
financial assets
Depreciation, amortisation and 61 62 124
impairment
Change in inventories (83) (58) 12
Change in trade and other 55 216 260
receivables
Change in trade and other payables (39) (49) (27)
Change in provisions 7 3 (13)
Deferred revenue 107 - -
Share-based payments 11 9 17
Loss on disposal of property, plant - - 2
and equipment
Other non-cash items (3) - -
Cash inflow from operations 130 327 682
Interest received 1 1 3
Interest and bank fees paid (13) (20) (39)
Tax paid (8) (7) (16)
Cash inflow from operating 110 301 630
activities
Cash flow from investing activities
Investment in joint venture (1) (1) (2)
Additions to other financial assets (3) - (30)
Purchase of property, plant and (197) (191) (408)
equipment
Purchase of intangible assets - - (2)
Cash outflow from investing (201) (192) (442)
activities
Cash flow from financing activities
Equity dividends paid to Lonmin (31) (30) (30)
shareholders
Dividends paid to non-controlling - - (10)
interests
Proceeds from current borrowings 8 246 - 10
Repayment of current borrowings 8 (46) (11) (71)
Proceeds from non-current 8 - 149 300
borrowings
Issue costs of non-current - - (8)
borrowings
Repayment of non-current borrowings 8 - (250) (454)
Issue of ordinary share capital - - 1
Cash inflow / (outflow) from 169 (142) (262)
financing activities
Increase / (decrease) in cash and 8 78 (33) (74)
cash equivalents
Opening cash and cash equivalents 8 76 148 148
Effect of exchange rate changes 8 3 - 2
Closing cash and cash equivalents 8 157 115 76
Notes to the accounts
1 Statement on accounting policies
Basis of preparation
Lonmin Plc (the Company) is a Company domiciled in the United Kingdom. The
condensed consolidated interim financial statements of the Company as at and
for the 6 months to 31 March 2012 comprise the Company and its subsidiaries
(together referred to as the Group) and the Group`s interests in equity
accounted investments.
These condensed consolidated interim financial statements have been prepared
in accordance with IAS 34 - Interim Financial Reporting, as adopted by the
EU. The annual financial statements of the Group are prepared in accordance
with International Financial Reporting Standards (IFRSs), as adopted by the
EU. As required by the Disclosure and Transparency Rules of the Financial
Services Authority, the condensed set of financial statements have been
prepared applying the accounting policies and presentation that were applied
in the preparation of the Company`s published consolidated financial
statements for the year ended 30 September 2011, except as noted below. They
do not include all of the information required for full annual financial
statements and should be read in conjunction with the consolidated financial
statements of the Group for the year ended 30 September 2011.
The comparative figures for the financial year ended 30 September 2011 are
not the Group`s full statutory accounts for that financial year. Those
accounts have been reported on by the Group`s auditors and delivered to the
registrar of companies. The report of the auditors was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report, and (iii) did
not contain a statement under section 498 (2) or (3) of the Companies Act
2006.
The consolidated financial statements of the Group as at and for the year
ended 30 September 2011 are available upon request from the Company`s
registered office at 4 Grosvenor Place, London, SW1X 7YL.
These condensed consolidated interim financial statements were approved by
the Board of Directors on 11 May 2012.
These condensed consolidated interim financial statements apply the
accounting policies and presentation that will be applied in the preparation
of the Group`s published consolidated financial statements for the year
ending 30 September 2012.
The Group has considerable debt facilities in place and the directors believe
that it is well placed to manage its business risks successfully despite the
current uncertain economic outlook. The directors have reasonable expectation
that the Group has adequate resources to continue in operational existence
for the foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing these financial statements.
New standards and amendments in the period
The following revised IFRSs and interpretations have been adopted in these
condensed consolidated financial statements. The application of these IFRSs
has not had any material impact on the amounts reported for the current and
prior years, but may affect the accounting for future transactions or
arrangements.
IAS 24 (revised 2009) Related Party Disclosures (effective 1 January 2011)
amends the definition of a related party and modifies certain related party
disclosure requirements for government related entities.
Amendments to IFRS 7 Disclosures - Transfers of Financial Assets
(effective 1 July 2011) increase the disclosure requirements for transactions
involving transfers of financial assets to provide greater transparency
around risk exposures where the transferor retains some level of continuing
exposure in the asset.
There were no other new standards, interpretations or amendments to standards
issued and effective for the period which materially impacted the Group.
Notes to the accounts (continued)
Statement on accounting policies (continued)
The Group has amended its accounting policy for Stripping Costs such that it
is now consistent with the principles set out in IFRIC 20 `Stripping Costs in
the Production of a Surface Mine`. IFRIC 20, which has yet to be adopted by
the EU, requires that stripping costs incurred which provide improved access
to the ore be recognised as a non-current asset (stripping activity asset)
when certain criteria is met. The application of this change of accounting
did not have a material impact on the amounts reported for the current and
prior years.
New standards that are relevant to the Group but not yet effective
There were no new standards, interpretations or amendments to standards
issued, but not yet effective for the period which are expected to materially
impact the Group`s financial statements.
Segmental analysis
The Group distinguishes between three reportable operating segments being the
Platinum Group Metals (PGM) Operations segment, the Evaluation segment and
the Exploration segment.
The PGM Operations segment comprises the activities involved in the mining
and processing of PGMs, together with associated base metals, which are
carried out entirely in South Africa. These operations are integrated and
designed to support the process for extracting and refining PGMs from
underground. PGMs move through each stage of the process and undergo
successive levels of refinement which result in fully refined metals. The
Chief Executive Officer, who performs the role of Chief Operating Decision
Maker (CODM), views the PGM Operations segment as a single whole for the
purposes of financial performance monitoring and assessment and does not make
resource allocations based on margin, costs or cash flows incurred at each
separate stage of the process. In addition, the CODM makes his decisions for
running the business on a day to day basis using the physical operating
statistics generated by the business as these summarise the operating
performance of the entire segment.
The Evaluation segment covers the evaluation through pre-feasibility of the
economic viability of newly discovered PGM deposits. Currently all of the
evaluation projects are based in South Africa.
The Exploration segment covers the activities involved in the discovery or
identification of new PGM deposits. This activity occurs on a worldwide
basis.
No operating segments have been aggregated. Operating segments have
consistently adopted the consolidated basis of accounting and there are no
differences in measurement applied. Other covers mainly the results and
investment activities of the corporate Head Office. The only intersegment
transactions involve the provision of funding between segments and any
associated interest.
Notes to the accounts (continued)
2 Segmental analysis (continued)
6 months to 31 March 2012
PGM Evaluat Explora Other Interseg Total
Operati ion tion $m ment $m
ons Segment Segment Adjustme
Segment $m $m nts
$m $m
Revenue (external
sales by product):
Platinum 499 - - - - 499
Palladium 89 - - - - 89
Gold 16 - - - - 16
Rhodium 72 - - - - 72
Ruthenium 8 - - - - 8
Iridium 19 - - - - 19
PGMs 703 - - - - 703
Nickel 29 - - - - 29
Copper 6 - - - - 6
Chrome 13 - - - - 13
751 - - - - 751
Underlying i :
EBITDA / (LBITDA) ii 79 (2) (3) 1 - 75
Depreciation, (61) - - - - (61)
amortisation and
impairment
Operating profit / 18 (2) (3) 1 - 14
(loss) ii
Finance income 1 - - 10 (9) 2
Finance expenses (9) - - (11) 9 (11)
Share of profit / 2 - - (1) - 1
(loss) of equity
accounted investments
Profit / (loss) before 12 (2) (3) (1) - 6
taxation
Income tax expense (26) - - - - (26)
Underlying loss after (14) (2) (3) (1) - (20)
taxation
Special items (note 3) (14)
Loss after taxation (34)
Total assets iii 3,805 865 1 1,350 (882) 5,139
Total liabilities iv (1,871) (310) (46) (502) 882 (1,847)
Net assets / 1,934 555 (45) 848 - 3,292
(liabilities)
Share of net assets of 52 - - 126 - 178
equity accounted
investments
Additions to property, 208 1 - - - 209
plant, equipment and
intangibles
Material non-cash 11 - - - - 11
items - share-based
payments
Notes to the accounts (continued)
2 Segmental analysis (continued)
6 months to 31 March 2011
PGM Evaluat Explora Other Interseg Total
Operati ion tion $m ment $m
ons Segment Segment Adjustme
Segment $m $m nts
$m $m
Revenue (external
sales by product):
Platinum 566 - - - - 566
Palladium 143 - - - - 143
Gold 9 - - - - 9
Rhodium 128 - - - - 128
Ruthenium 16 - - - - 16
Iridium 14 - - - - 14
PGMs 876 - - - - 876
Nickel 47 - - - - 47
Copper 9 - - - - 9
Chrome 6 - - - - 6
938 - - - - 938
Underlying i :
EBITDA / (LBITDA) ii 206 (1) 2 1 - 208
Depreciation, (60) - - - - (60)
amortisation and
impairment
Operating profit / 146 (1) 2 1 - 148
(loss) ii
Finance income 3 - - 4 (4) 3
Finance expenses (9) - - - 4 (5)
Share of profit of 3 - - - - 3
equity accounted
investments
Profit / (loss) before 143 (1) 2 5 - 149
taxation
Income tax (expense) / (44) (2) - 2 - (44)
credit
Underlying profit / 99 (3) 2 7 - 105
(loss) after taxation
Special items (note 3) (3)
Profit after taxation 102
Total assets iii 3,469 844 7 996 (533) 4,783
Total liabilities iv (1,678) (300) (45) (134) 533 (1,624
)
Net assets / 1,791 544 (38) 862 - 3,159
(liabilities)
Share of net assets of 54 - - 122 - 176
equity accounted
investments
Additions to property, 191 6 - - - 197
plant, equipment and
intangibles
Material non-cash 9 - - - - 9
items - share-based
payments
Notes to the accounts (continued)
2 Segmental analysis (continued)
Year ended 30 September 2011
PGM Evaluat Explora Other Interseg Total
Operati ion tion $m ment $m
ons Segment Segment Adjustme
Segment $m $m nts
$m $m
Revenue (external
sales by product):
Platinum 1,275 - - - - 1,275
Palladium 280 - - - - 280
Gold 29 - - - - 29
Rhodium 220 - - - - 220
Ruthenium 32 - - - - 32
Iridium 32 - - - - 32
PGMs 1,868 - - - - 1,868
Nickel 88 - - - - 88
Copper 21 - - - - 21
Chrome 15 - - - - 15
1,992 - - - - 1,992
Underlying i :
EBITDA / (LBITDA) ii 425 6 (1) 3 - 433
Depreciation, (122) - - - - (122)
amortisation and
impairment
Operating profit / 303 6 (1) 3 - 311
(loss) ii
Finance income 8 - - 7 (10) 5
Finance expenses (20) - - - 10 (10)
Share of profit of 9 - - - - 9
equity accounted
investments
Profit / (loss) before 300 6 (1) 10 - 315
taxation
Income tax (expense) / (60) 4 - - - (56)
credit
Underlying profit / 240 10 (1) 10 - 259
(loss) after taxation
Special items (note 3) 62
Profit after taxation 321
Total assets iii 3,541 866 1 1,206 (752) 4,862
Total liabilities iv (1,587) (306) (42) (338) 752 (1,521
)
Net assets / 1,954 560 (41) 868 - 3,341
(liabilities)
Share of net assets of 48 - - 127 - 175
equity accounted
investments
Additions to property, 486 23 - - - 509
plant, equipment and
intangibles
Material non-cash 17 - - - - 17
items -
share-based payments
Notes to the accounts (continued)
2 Segmental analysis (continued)
Revenue by destination is analysed by geographical area below:
6 months to 6 months to Year ended
31 March 2012 31 March 2011 30 September
$m $m 2011
$m
The Americas 184 239 414
Asia 238 267 557
Europe 175 239 616
South Africa 154 193 405
751 938 1,992
The Group`s revenues are all derived from the PGM Operations segment. This
segment has two major customers who contributed 56% and 33% of revenue in
the 6 months to 31 March 2012, 60% and 27% in the 6 months to 31 March 2011
and 59% and 27% in the year ended 30 September 2011.
Metal sales prices are based on market prices which are denominated in US
Dollars. The majority of sales are also invoiced in US Dollars with the
exception of certain sales in South Africa which are invoiced in South
African Rand based on exchange rates determined in accordance with the
contractual arrangement.
Non-current assets, excluding financial instruments, by geographical area
are shown below:
6 months to 6 months to Year ended
31 March 2012 31 March 2011 30 September
$m $m 2011
$m
South Africa 3,998 3,598 3,847
Europe 1 1 1
3,999 3,599 3,848
Footnotes:
i Underlying results are based on reported results excluding the effect
of special items as defined in note 3.
ii EBITDA / (LBITDA) and operating profit / (loss) are the key profit
measures used by management.
iii The assets under "Other" include the HDSA receivable of $369 million
(31 March 2011 - $332 million, 30 September 2011 - $351 million) and
intercompany receivables of $807 million (31 March 2011 - $458
million, 30 September 2011 - $742 million).
iv The liabilities under "Other" include borrowings of $465 million (31
March 2011 - $105 million, 30 September 2011 - $300 million).
Notes to the accounts (continued)
3 Special items
"Special items" are those items of financial performance that the Group
believes should be separately disclosed on the face of the consolidated
income statement to assist in the understanding of the financial performance
achieved by the Group and for consistency with prior periods.
6 months to 6 months to Year ended
31 March 31 March 30
2012 2011 September
2011
$m $m $m
Operating loss: - (4) (4)
- Impairment of property, plant and - (2) (2)
equipment
- Restructuring and reorganisation - (2) (2)
costs
Impairment of available for sale (6) - -
financial assets i
Net finance income / (expenses): 18 14 (18)
- Interest accrued from HDSA 8 7 15
receivable ii
- Exchange gain / (loss) on HDSA 10 7 (3)
receivable ii
- Movement in fair value of HDSA - - (24)
derivative
- Net change in fair value of cash - - (6)
flow hedges
Profit / (loss) on special items 12 10 (22)
before taxation
Taxation related to special items (26) (13) 84
(note 5)
Special (loss) / gain before non- (14) (3) 62
controlling interests
Non-controlling interests 4 2 (15)
Special (loss) / gain for the period (10) (1) 47
attributable to equity shareholders of
Lonmin Plc
Footnotes:
i The $6 million impairment of available for sale financial assets
represents the loss in value of our share in Platmin Limited following
the company`s delisting in December 2011.
ii During the year ended 30 September 2010 the Group provided financing to
assist Shanduka to acquire a majority shareholding in Incwala, Lonmin`s
Black Economic Empowerment partner. This financing gave rise to foreign
exchange movements and the accrual of interest.
Notes to the accounts (continued)
4 Net finance income / (expenses)
6 months to 6 months to Year ended
31 March 31 March 30
2012 2011 September
2011
$m $m $m
Finance income: 2 3 5
- Interest receivable on cash and 1 1 3
cash equivalents
- Ineffective portion of interest 1 - -
rate swaps
- Exchange gains on net debt i - 2 2
Finance expenses: (11) (5) (10)
- Interest payable on bank loans and (9) (15) (30)
overdrafts
- Effective portion of cash flow
hedges released to the (2) - -
income statement
- Bank fees (3) (6) (12)
- Unamortised bank fees realised on
settlement of old loan - - (7)
facility
- Capitalised interest ii 10 20 46
- Unwind of discounting on provisions (5) (4) (7)
- Exchange losses on net debt i (2) - -
Special items (note 3): 18 14 (18)
- Interest accrued on HDSA receivable 8 7 15
- Exchange gain / (loss) on HDSA 10 7 (3)
receivable
- Movement in fair value of HDSA - - (24)
derivative
- Net change in fair value of cash - - (6)
flow hedges
Net finance income / (expenses) 9 12 (23)
Footnotes:
i Net debt is defined by the Group as cash and cash equivalents, bank
overdrafts repayable on demand and interest bearing loans and borrowings
less unamortised bank fees.
ii Interest expenses incurred have been capitalised on a Group basis to the
extent that there is an appropriate qualifying asset. The weighted
average interest rate used by the Group for capitalisation in the period
was 4.6% (6 months to 31 March 2011 - 5.8%, year ended 30 September 2011
- 5.9%).
Notes to the accounts (continued)
5 Taxation
6 months 6 months Year
to to ended
31 March 31 March 30
2012 2011 September
$m $m 2011
$m
Current tax charge / (credit) (excluding
special items):
United Kingdom tax credit
- Current tax credit at 26% (2011 - 28%) - (2) -
i
Overseas current tax expense at 28% (2011 6 6 13
- 28%)
- Corporate tax expense - current year 6 6 18
- Adjustment in respect of prior years - - (6)
- Tax on dividends remitted - - 1
Deferred tax charge (excluding special
items):
Deferred tax expense - UK and overseas 20 40 43
- Origination and reversal of temporary 18 40 47
differences
- Adjustment in respect of prior years 2 - (4)
Special items - UK and overseas (note 3): 26 13 (84)
- Reversal of utilisation of losses from - 1 (2)
prior periods to offset
deferred tax liability
- Exchange on current taxation ii - - (1)
- Exchange on deferred taxation ii 26 10 (81)
- Deferred tax on special items impacting - 2 -
profit before tax
52 57 (28)
Actual tax charge / (credit)
26 44
Tax charge excluding special items (note 56
3)
289% 36%
Effective tax rate (9%)
433% 30%
Effective tax rate excluding special items 18%
(note 3)
Notes to the accounts (continued)
5 Taxation (continued)
A reconciliation of the standard tax charge to the actual tax charge was as
follows:
6 6 6 6 Year Year
months months months months ended ended
to to to to 30 30
31 31 31 31 Septemb Septemb
March March March March er er
2012 2012 2011 2011 2011 2011
% $m % $m % $m
Tax charge on profit at 28 5 28 45 29 85
standard tax rate
Tax effect of:
- Overseas taxes on - - - - - 1
dividends remitted by
subsidiary
companies
- Unutilised losses iii 51 9 1 2 1 5
- Foreign exchange impacts 72 13 - - (12) (38)
on taxable profits
- Adjustment in respect of 11 2 - - (3) (10)
prior years
- Other (17) (3) - (1) 4 13
- Special items as defined 144 26 7 11 (28) (84)
above
Actual tax charge / 289 52 36 57 (9) (28)
(credit)
The Group`s primary operations are based in South Africa. The South African
statutory tax rate is 28% (2011 - 28%). Lonmin Plc operates a branch in
South Africa which is subject to a tax rate of 28% on branch profits (2011 -
33%). The secondary tax rate on dividends remitted by South African
companies was 10% (2011 - 10%). As from 1 April 2012 the secondary tax on
companies was replaced by dividend withholding tax at a standard rate of
15%. Dividends payable by the South African companies to Lonmin Plc will be
subject to a 5% withholding tax benefitting from double taxation agreements.
Footnotes:
i Effective from 1 April 2012 the United Kingdom tax rate changed from
26% to 24%. This does not significantly impact the Group`s deferred
tax liabilities.
ii Overseas tax charges are predominantly calculated in Rand as required
by the local authorities. As these subsidiaries` functional currency is
US Dollar this leads to a variety of foreign exchange impacts being the
retranslation of current and deferred tax balances and monetary assets,
as well as other translation differences. The Rand denominated deferred
tax balance in US Dollars at 31 March 2012 is $539 million (31 March
2011 - $574 million, 30 September 2011 - $569 million).
iii Unutilised losses reflect losses generated in entities for which no
deferred tax is provided as it is not thought probable that future
profits can be generated against which a deferred tax asset could be
offset or previously unrecognised losses utilised.
Notes to the Accounts (continued)
6 (Loss) / earnings per share
(Loss) / earnings per share ((LPS) / EPS have been calculated on the loss
for the period attributable to equity shareholders amounting to $24 million
(6 months to 31 March 2011 - earnings of $90 million, year ended 30
September 2011 - earnings of $273 million) using a weighted average number
of 202.7 million ordinary shares in issue for the 6 months to 31 March 2012
(6 months to 31 March 2011 - 202.3 million ordinary shares, year ended 30
September 2011 - 202.4 million ordinary shares).
Diluted (loss) / earnings per share is based on the weighted average number
of ordinary shares in issue adjusted by dilutive outstanding share options
in accordance with IAS 33 - Earnings Per Share.
6 months to 31 6 months to 31 Year ended 30
March 2012 March 2011 September 2011
Loss Number Per Profit Numbe Per Profit Numb Per
for of share for r shar for er share
the shares amount the of e the of amoun
peri period share amou year shar t
od s nt es
$m millio cents $m milli cent $m mill cents
ns ons s ions
Basic (LPS) / (24) 202.7 (11.8) 90 202.3 44.5 273 202. 134.8
EPS 4
Share option - 0.4 - - 0.6 (0.2 - 0.6 (0.4)
schemes )
Diluted (LPS) (24) 203.1 (11.8) 90 202.9 44.3 273 203. 134.4
/ EPS 1
6 months to 31 6 months to 31 Year ended 30
March 2012 March 2011 September 2011
Loss Number Per Profit Numb Per Profit Numb Per
for of share for er shar for er shar
the shares amount the of e the of e
peri period shar amou year shar amou
od es nt es nt
$m millio cents $m mill cent $m mill cent
ns ions s ions s
Underlying (14) 202.7 (6.9) 91 202. 45.0 226 202. 111.
(LPS) / EPS 3 4 6
Share option - 0.4 - - 0.6 (0.2 - 0.6 (0.3
schemes ) )
Diluted (14) 203.1 (6.9) 91 202. 44.8 226 203. 111.
underlying 9 1 3
(LPS) / EPS
Underlying (loss) / earnings per share has been presented as the Directors
consider it important to present the underlying results of the business.
Underlying (loss) / earnings per share is based on the (loss) / earnings
attributable to equity shareholders adjusted to exclude special items (as
defined in note 3) as follows:
6 months to 31 March 6 months to 31 Year ended 30
2012 March 2011 September 2011
Loss Number Per Profit Numb Per Profit Numb Per
for of share for er shar for er shar
the shares amount the of e the of e
period period shar amou year shar amou
es nt es nt
$m millio cents $m mill cent $m mill cent
ns ions s ions s
Basic (LPS) / (24) 202.7 (11.8) 90 202. 44.5 273 202. 134.
EPS 3 4 8
Special items 10 - 4.9 1 - 0.5 (47) - (23.
(note 3) 2)
Underlying (14) 202.7 (6.9) 91 202. 45.0 226 202. 111.
(LPS) / EPS 3 4 6
Notes to the Accounts (continued)
6 Earnings per share (continued)
Headline (loss) / earnings and the resultant headline (loss) / earnings per
share are specific disclosures defined and required by the Johannesburg
Stock Exchange.
These are calculated as follows:
6 months 6 months to Year ended
to 31 March 30
31 March 2011 September
2012 2011
$m $m $m
(Loss) / earnings attributable to (24) 90 273
ordinary shareholders (under IAS 33)
Add back loss on disposal of property, - 1 2
plant and equipment
Add back impairment of assets (note 3) 6 2 2
Tax related to the above items - (1) (1)
Non-controlling interests - - (1)
Headline (loss) / earnings (18) 92 275
6 months to 31 March 6 months to 31 Year ended 30
2012 March 2011 September 2011
Loss Number Per Prof Numb Per Prof Numb Per
for the of share it er share it er shar
period shares amount for of amount for of e
the shar the shar amou
peri es year es nt
od
$m millio cents $m mill cents $m mill cent
ns ions ions s
Headline (18) 202.7 (8.9) 92 202. 45.5 275 202. 135.
(LPS) / EPS 3 4 8
Share option - 0.4 - - 0.6 (0.2) - 0.6 (0.4
schemes )
Diluted (18) 203.1 (8.9) 92 202. 45.3 275 203. 135.
Headline 9 1 4
(LPS) / EPS
7 Dividends
No dividends were declared during the period (6 months to 31 March 2011 -
$nil and year ended 30 September 2011 - $31 million proposed dividend). The
proposed dividend as at September 2011 was paid during the period.
Notes to the Accounts (continued)
8 Analysis of net debt i
As at Cash flow Foreign As at
1 October exchange 31 March
2011 and non-cash 2012
movements
$m $m $m $m
Cash and cash 76 78 3 157
equivalents
Current borrowings (10) (200) (6) (216)
Non-current borrowings (308) - 4 (304)
Unamortised bank fees 8 - (1) 7
ii
Net debt as defined by (234) (122) - (356)
the Groupi
As at Cash flow Foreign As at
1 April exchange 30
2011 and non-cash September
movements 2011
$m $m $m $m
Cash and cash 115 (41) 2 76
equivalents
Current borrowings (60) 50 - (10)
Non-current borrowings (359) 53 (2) (308)
Unamortised bank fees 8 - - 8
ii
Net debt as defined by (296) 62 - (234)
the Groupi
As at Cash flow Foreign As at
1 October exchange 31 March
2010 and non-cash 2011
movements
$m $m $m $m
Cash and cash 148 (33) - 115
equivalents
Current borrowings (71) 11 - (60)
Non-current borrowings (462) 101 2 (359)
Unamortised bank fees 10 - (2) 8
ii
Net debt as defined by (375) 79 - (296)
the Groupi
Footnotes:
i Net debt as defined by the Group comprises cash and cash equivalents,
bank overdrafts repayable on demand and interest bearing loans and
borrowings less unamortised bank fees.
ii At 31 March 2012, $7 million (31 March 2011 and 30 September 2011 - $8
million) of unamortised bank fees have been offset against loans
according to the amortisation profile.
Notes to the Accounts (continued)
9 Deferred revenue
In March 2012 Lonmin entered into a pre-paid sale of 75% of its current gold
production for the next 54 months. Under 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 $106.7 million. Proceeds of the pre-
paid sale are treated as deferred revenue and amortised to profit as
deliveries occur.
6 months to 6 months to Year ended
31 March 31 March 30
2012 2011 September
2011
$m $m $m
Current liabilities
Deferred revenue (23) - -
Non-current liabilities
Deferred revenue (84) - -
Date: 14/05/2012 08:01:01 Produced by the JSE SENS Department.
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