Lon­min shares slump af­ter weaker out­put re­sults

The Star Early Edition - - BUSINESS REPORT - Sandile Mchunu and Reuters

LON­MIN shares slumped more than 22 per­cent on the JSE yes­ter­day af­ter the plat­inum pro­ducer re­ported weaker than ex­pected out­put. Shares in Lon­min closed at R23.31 yes­ter­day af­ter open­ing the day at R29.30.

Lon­min said the big­gest dis­ap­point­ment in the quar­ter to De­cem­ber was the pro­duc­tion from its Gen­er­a­tion 2 plant, par­tic­u­larly the K3 shaft.

K3, the com­pany’s big­gest shaft, pro­duced 590 000 tons dur­ing the quar­ter. The com­pany said this was a dis­ap­point­ing de­crease of 13.8 per­cent com­pared to the prior pe­riod.

The shaft was im­pacted by the re­or­gan­i­sa­tion last year and ex­pe­ri­enced high man­age­ment in­duced safety stop­pages dur­ing the quar­ter, re­sult­ing in 60 000 tons of lost pro­duc­tion.

Lon­min’s lat­est per­for­mance has led an­a­lysts to cast doubt about its 2017 pro­duc­tion tar­gets, de­spite the com­pany main­tain­ing its sales guid­ance. Lon­min said it was dis­ap­pointed by first quar­ter pro­duc­tion at its Gen­er­a­tion 2 shafts. How­ever, it said its sales guid­ance for the full 2017 year was main­tained at be­tween 650 000 and 680 000 plat­inum ounces, based on the ini­tia­tive of de­ploy­ing ad­di­tional stop­ing and vamp­ing crews and the ex­pected plat­inum ounces from the smelter clean-up project.

“We ex­pect unit costs to re­main in the range of R10 800 to R11 300 per plat­inum group met­als (PGM) ounce for the full year, sub­ject to see­ing a sus­tained im­prove­ment in pro­duc­tion dur­ing the year,” it said.

An­other dis­ap­point­ment was the Marikana min­ing op­er­a­tions, in­clud­ing Pan­dora, which pro­duced 2.3 mil­lion tons dur­ing the quar­ter, 7.8 per­cent lower than the comparative pe­riod, which re­sulted partly from the planned de­cline from the clos­ing of the com­pany’s high-cost shafts.

The com­pany said the first quar­ter of its fi­nan­cial year was his­tor­i­cally its low­est pro­duc­tion quar­ter, but the per­for­mance was dis­ap­point­ing with pro­duc­tion at its Gen­er­a­tion 2 shafts down 5.2 per­cent from the cor­re­spond­ing pe­riod in the prior year.

The pro­duc­tion short­fall added to steep losses for Lon­min’s volatile share price.

Plat­inum prices, which rose just 1 per­cent last year, have failed to join a rally in other com­modi­ties and Lon­min has lagged the wider re­cov­ery in the min­ing sec­tor that started last year. How­ever, the com­pany said it was en­cour­aged by the per­for­mance of the Row­land shaft, which pro­duced 424 000 tons, an in­crease of 9.6 per­cent on the pre­vi­ous cor­re­spond­ing pe­riod.

The com­pany said the per­for­mance of its Gen­er­a­tion 1 shafts was in line with its plans and it was suc­cess­fully ex­e­cut­ing the strat­egy to re­duce high cost pro­duc­tion in a low price en­vi­ron­ment.

See Page 17

PHOTO: REUTERS

Demon­stra­tors out­side Lon­min’s an­nual gen­eral meet­ing in Lon­don yes­ter­day. The com­pany re­ported weaker than ex­pected out­put, which saw its shares fall by more than 22 per­cent on the JSE yes­ter­day.

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