Lon­min shares gain 14.82% on the JSE

The Star Early Edition - - BUSINESS REPORT - Di­neo Faku

LON­MIN, the world’s third largest platinum pro­ducer ral­lied on the JSE yes­ter­day to strengthen more than 10 per­cent in early trade at R12.36 a share on the news of im­proved min­ing pro­duc­tion in the third quar­ter to June, which re­sulted in it cut­ting costs.

The stock firmed as the mar­ket also warmed up to the 10.8 per­cent in­crease of platinum ounce sales on the prior year, the higher net cash lev­els, and the de­ci­sion by the com­pany to main­tain its pro­duc­tion guid­ance for the full year.

The shares closed 14.82 per­cent higher at R12.86 on the JSE yes­ter­day.

The up-tick came de­spite the 3 per­cent de­cline in the av­er­age rand platinum group me­tals (PGM) on the prior year to R11 506 an ounce, Lon­min chief ex­ec­u­tive Ben Ma­gara said.

“We had a pleas­ing oper­a­tional per­for­mance all round and con­tinue with our de­ci­sive work and aim to be at least cash neu­tral, even at cur­rent low PGM prices and a strong rand,” Ma­gara said.

“We con­tinue to find levers to pull, in this “lower prices for longer” en­vi­ron­ment and to make the im­prove­ment of our per­for­mance a pri­or­ity. I am par­tic­u­larly pleased that our net cash has im­proved.”

Lon­min also recorded a 4.7 per­cent drop in unit costs quar­ter-on-quar­ter to R11 278 an ounce while main­tain­ing its full-year sales guid­ance of 650 000 ounces to 680 000 ounces.

Net cash dur­ing the pe­riod also im­proved to $86 mil­lion, up from $75m recorded dur­ing the end of the sec­ond quar­ter.

Lon­min, which was the scene of the Marikana mas­sacre in mid-Au­gust 2012, con­tin­ued to be rocked by com­mu­nity un­rest in May, when youth of the area de­manded jobs.


Ma­gara said the com­pany was work­ing with com­mu­nity lead­ers to re­build re­la­tions. He also said Lon­min had help from labour and other key stake­hold­ers to as­sist to cre­ate a sta­ble op­er­at­ing en­vi­ron­ment.

“Con­trac­tors have also been en­gaged, where pos­si­ble, to make op­por­tu­ni­ties for job cre­ation for com­mu­nity mem­bers.

“Gen­er­ally the com­mu­nity re­la­tions around the oper­a­tions are im­prov­ing,” he said.

Rene Hochre­iter, a min­ing an­a­lyst, Noah Cap­i­tal Mar­kets, said yes­ter­day that the re­sults were tes­ta­ment that Lon­min was able to man­age its costs and re­spond well to to the low platinum price en­vi­ron­ment.

“Most peo­ple have said that Lon­min is go­ing to be the first ca­su­alty to suc­cumb to the low platinum price – these re­sults have proved them wrong,” said Hochre­iter.

“Up to now it did not seem pos­si­ble that South African pro­duc­ers can re­duce their in­put costs, and Lon­min has shown that it can cut its costs.”

Hochre­iter also said that Lon­min’s man­age­ment changes at 4B shaft helped im­prove the com­pany’s for­tunes.

He said he re­mained op­ti­mistic that Lon­min would meet its an­nual pro­duc­tion guid­ance.

Lon­min bought the re­main­ing 7.5 per­cent stake in the Pan­dora platinum op­er­a­tion from Northam Platinum.

Full own­er­ship of Pan­dora would al­low Lon­min to ex­tend the min­ing at Saffy shaft fur­ther on strike east and west of the shaft, and it also al­lowed it to de­fer more than R2.6 bil­lion of al­lo­cated cap­i­tal ex­pen­di­ture re­quired for the fur­ther deep­en­ing of Saffy shaft, of which R1.6bn would be over the next four years.

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