Mine deaths hit Lonmin’s quarterly production
Distressed platinum producer Lonmin has suffered a significant drop in mining output after two fatalities adversely affected production in the last three months of 2018.
In a quarterly production report published on Friday, the company announced 166,000 tonnes of lost production in the three months ended December 2018. Although output in this period is typically the lowest in the annual production cycle because of holidays and annual stocktaking, it was affected by the death of two workers, which resulted in safety stoppages.
This accounted for 95,000 lost tonnes, compared with 18,000 tonnes lost in the three months ended December 2017. Overall losses were 116,000 tonnes for the period, bringing total production for the quarter to 2.2-million tonnes.
Refined Platinum production, too, was 10.4% lower; platinum sales were 4.6% lower; and platinum group metals (PGMs) sales were 12.7% lower. Meanwhile, the average rand to dollar exchange rate was 5% weaker at R14.29. Unit costs were R14,795 per PGM ounce an increase of 16.5% as a result of the safety stoppages, lower production, lower grade and recoveries in this period.
Lonmin CEO Ben Magara said the loss of life was deeply regretted and extended the company’s deepest condolences to affected family and friends.
Going into the second quarter, he said Lonmin would continue to focus on safe mining production. “We are, therefore, maintaining our sales, costs and capex guidance for 2019.”
He said he was encouraged by the increase in the PGM basket price. Although the platinum prices remain at 10-year lows of about $800 an ounce, the overall PGM basket price was up, driven by palladium and rhodium. Palladium, used as a substitute for platinum in the manufacture of vehicles is, for the first time more expensive than gold.
The company also improved its liquidity and debt maturity profile through the new $200m forward metal-sale facility and the settlement of the pre-existing term loan of $150m, which was due to expire in May 2019.
However, Magara said the challenges of this quarter and the volatility of the exchange rate underscored the vulnerability of the company’s business and the importance of a sustainable solution for the company. That solution would be the allshare offer for the acquisition of Lonmin by Sibanye-Stillwater. Conditional approval of the deal was granted by the Competition Tribunal, but was appealed by the Association of Mineworkers and Construction Union. The hearing is set down for April 2.
A company statement said, “The combination of Sibanye Stillwater and Lonmin will create a larger, more resilient company, with greater geographical and commodity diversification, which is better able to withstand short-term commodity price and foreign exchange volatility.”