Impairment move inflates Lonmin losses
Results will not affect Sibanye takeover
SOUTH African miner Lonmin announced a $1.1-billion (R13-billion) impairment charge yesterday due to weaker platinum prices and a firmer rand, plunging it deeper into operating losses ahead of its planned takeover by rival Sibanye-Stillwater.
Sibanye agreed last month to buy Lonmin for about $382-million (R4.6-billion) to create the world’s secondbiggest platinum producer to try to ride out depressed prices for the metal.
It said it planned to cut a third of Lonmin jobs.
Sibanye spokesman James Wellsted said yesterday Lonmin’s results did not change the takeover deal, as Lonmin’s assets remained the same and its resources were intact.
Platinum has tumbled in value because of bloated supply and falling demand from the automotive industry.
Lonmin has also suffered because of high costs and labour unrest.
Lonmin shares lost nearly a third of their value in one session in November after it announced a delay to its annual results while it conducted an operational review.
Giving an update on that review yesterday, Lonmin kept its spending, sales and production targets for this year, but said it was taking a $1.1-billion impairment charge due in part to changes about its assumptions for currencies and prices – with both dollar/rand and platinum prices seen weaker.
A stronger rand is negative for South African miners as most of their costs are in rand, while platinum is priced in dollars.
“The main drivers of the impairment is our assumptions into the future which have to do with prices,” Lonmin chief executive Ben Magara said on a results call.
Platinum is trading at less than half its 2008 peak.
The impairment resulted in Lonmin breaching its loan agreements with its banks, but it said it had secured a second waiver from its lenders.
Earnings before interest, taxes, depreciation and amortisation fell to $40-million (R484.5million) for the year ended September 30 from $115-million (R1.39-billion) a year earlier.
Operating loss reached $1.1-billion from $322-million (R3.9-billion) a year earlier.