Lonmin shares slump after weaker output results
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.
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