Lon­min is des­per­ate to pre­serve jobs

The Star Early Edition - - BUSINESS REPORT - Di­neo Faku

LON­MIN, the world’s third largest platinum pro­ducer, yes­ter­day an­nounced the sale of up to 500 0000 platinum ounces a year of re­fined platinum to buf­fer the im­pact of the de­pressed com­mod­ity price en­vi­ron­ment and to pre­serve jobs.

The com­pany said it was tak­ing steps fol­low­ing a re­view of its op­er­a­tions to en­sure that the busi­ness was cash pos­i­tive af­ter cap­i­tal in­vest­ment.

It said it was tak­ing de­ci­sive ac­tion to en­sure a sus­tain­able busi­ness in a con­tin­u­ing ad­verse macroe­co­nomic en­vi­ron­ment.”

“The op­er­a­tional re­view is fo­cused on op­ti­mis­ing the cash pro­duced by the busi­ness, both from its op­er­a­tions and through re­leas­ing cap­i­tal from those ac­tiv­i­ties where the com­pany is cur­rently bear­ing the cost of ex­cess ca­pac­ity and un­re­alised devel­op­ment po­ten­tial,” the com­pany said.

Lon­min said the sale of ex­cess pro­cess­ing ca­pac­ity or re­fined platinum would al­low other South African platinum pro­duc­ers who sold con­cen­trate to sell more highly process ore for big­ger profit mar­gins.

The com­pany, how­ever, did not name any buy­ers, but said it planned to cut its over­head costs of R500 mil­lion by Septem­ber 30, 2018.

“The sub­stan­tial ma­jor­ity of over­head re­duc­tions will come from non-pro­duc­tion cen­tral func­tions as the com­pany seeks to right-size its over­heads to its op­er­a­tions,” Lon­min said. “In ad­di­tion, Lon­min will con­tinue to iden­tify fur­ther over­head and cost sav­ings.”

Lon­min said it planned to sell for cash or in­tro­duce joint ven­ture part­ners into its Lim­popo and Akanani op­er­a­tions.

Op­tions

It said it would also ex­plore op­tions to in­tro­duce fund­ing part­ners into its K4 shaft, ad­ding that it needed to fund the MK2 project which was nec­es­sary to ex­tend the life of its Row­land mine and pre­serve 5 000 jobs.

The an­nounce­ment comes as An­glo Amer­i­can Platinum, the world’s big­gest platinum pro­ducer, be­came the only miner to post a cash pos­i­tive re­port, de­spite the drop in the rand bas­ket price of platinum and high in­put costs.

Seleho Tsatsi, an in­vest­ment re­searcher at An­chor Cap­i­tal, said that Lon­min had done all it could to keep afloat.

“Lon­min ul­ti­mately needs a higher rand platinum price,” Tsatsi said.

“To­day’s an­nounce­ment is an at­tempt to buy time. They need fur­ther rand weak­ness or a re­cov­ery in Platinum Group Me­tals (PGM) prices. In the ab­sence of that, dras­tic mea­sures must be taken.”

Last month Lon­min re­ported that the av­er­age unit cost were 4.7 per­cent lower than the pre­vi­ous quar­ter, but 6.4 per­cent higher than the pre­vi­ous year for the quar­ter to June.

The com­pany said that the vol­ume of PGM sold grew by 10.8 per­cent to help gross cash grow to $236m at June 30 from $225m at March 31.

Tsatsi said the cut­ting of R500m of over­heads may not be suf­fi­cient.

“It is not a huge num­ber in the grand scheme of things, be­cause Lon­min’s cash costs is $1bn a year.

“Lon­min has tried to cut as close to the bone as they can, but they are still burn­ing a lot of cash,” he said.

“They are ex­pected to burn about $100m in the year to Septem­ber.

“Lon­min has pre­vi­ously gone to the mar­ket to raise funds, and last month it demon­strated that it was manag­ing the low platinum price en­vi­ron­ment when it an­nounced that it had im­proved pro­duc­tion and cut costs in the quar­ter to June.”

PHOTO: PHILL MAGAKOE

Sunrise falls on Karre Shaft 4 at Lon­min Platinum mine. The com­pany is manag­ing the low platinum price en­vi­ron­ment through im­proved pro­duc­tion and cost cut­ting.

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