FIGHT­ING BACK

Lon­min is ex­pected to re­main un­der pres­sure this year as it fore­casts lower plat­inum sales

The Star Early Edition - - BUSI­NESS RE­PORT - Ka­belo Khu­malo

BEN Ma­gara, the chief ex­ec­u­tive of Lon­min, re­leas­ing the com­pany’s an­nual re­port on Fri­day, said the min­ing group ex­pected to re­main un­der pres­sure in the year ahead and fore­cast lower plat­inum sales.

Lon­min’s unit costs were ex­pected to be R10 800 to R11 300 per plat­inum group metal (PGM) ounce for the 2017 fi­nan­cial year, with plat­inum sales ex­pected to be be­tween 650 000 and 680 000 ounces for the year – down from the 735 747 plat­inum ounces the pre­vi­ous year. The group’s plat­inum sales con­trib­uted 65 per­cent to the com­pany’s 2016 turnover.

Lon­min said the ex­pected re­duc­tion in plat­inum sales for 2017 was due to the com­pany’s fo­cus on the larger gen­er­a­tion 2 shafts and clo­sure of in­ef­fi­cient shafts that had high pro­duc­tion costs.

Ma­gara said the group’s re­turn to prof­itabil­ity po­si­tioned it well to re­alise max­i­mum value for its share­hold­ers, but that the fo­cus would be on costs and be­ing cash pos­i­tive af­ter cap­i­tal ex­pen­di­ture.

“I am par­tic­u­larly pleased with our re­turn to prof­itabil­ity and the in­crease in our cash po­si­tion and liq­uid­ity. We re­main vig­i­lant in our cost con­trol and ex­pect our over­heads and sup­port-ser­vices struc­tures to align with our sales pro­file,” Ma­gara said.

Re­duc­ing costs

The com­pany said it had in­creased its net cash po­si­tion from $69 mil­lion (R938m) at the end of the first quar­ter to $173m at the end of the year, and cut costs by R1.3 bil­lion.

The group last year re­ported an op­er­at­ing profit of $7m from a loss of $134m in 2015.

Lon­min ex­pected its to­tal cap­i­tal ex­pen­di­ture for the year to be R1.8bn, which in­cludes R400m re­lated to the Bulk Tail­ings Treatment (BTT) pro­ject.

The BTT pro­ject is the re-min­ing of Lon­min’s East­ern Tail­ings dam and the re­pro­cess­ing of 26 mil­lion tons of tail­ings ma­te­rial.

The com­pany said it ex­pected the pro­ject to pro­duce 29 000 ounces of plat­inum a year and 50 000 ounces of PGM. The pro­ject is ex­pected to be com­mis­sioned for full pro­duc­tion dur­ing the 2018 fi­nan­cial year.

Bar­rie van der Merwe, the chief fi­nan­cial of­fi­cer, said it was im­por­tant to keep pro­duc­tion lev­els up to off­set neg­a­tive mar­ket sen­ti­ments. “This in­dus­try has been in con­trac­tion for the past eight years – we have seen flat price lines. Lon­min has be­come more ef­fi­cient and pro­duc­tive, and we will en­sure we man­age pro­duc­tiv­ity and have good spend con­trol,” Van der Merwe said.

He high­lighted it was im­por­tant for the group to keep mak­ing profits in or­der to meet its com­mit­ments to pro­vide de­cent hous­ing for its 33 000-strong work­force. The com­pany said it had yet to build hous­ing for 11 500 of its em­ploy­ees. The group has com­mit­ted R500m over five years to de­velop 1 240 mod­ern houses for its em­ploy­ees.

Lon­min shares were un­changed on Fri­day at R28.17.

PHOTO: NI­CHOLAS RAMA

Lon­min’s chief ex­ec­u­tive Ben Ma­gara briefs the me­dia in Mel­rose Arch on Fri­day. He said he was par­tic­u­larly pleased with the group’s re­turn to prof­itabil­ity.

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