The Star Early Edition

A de­lay in its fi­nan­cials blud­geons Lon­min’s shares

- Di­neo Faku Business · Lonmin

PLAT­INUM pro­ducer Lon­min was the big­gest loser on the JSE on Fri­day – af­ter tank­ing 28 per­cent – to trade at R14 a share on news that it would de­lay the re­lease of its fi­nan­cial re­sults for the year to Septem­ber, 2017.

Lon­min shares dived 28.31 per­cent on the JSE on Fri­day to close at R14. The de­lay was un­prece­dented for the world’s third-big­gest plat­inum pro­ducer, which has been min­ing plat­inum in Marikana, North West, since 1969.

Man­age­ment was sched­uled to re­lease the re­sults next Mon­day, but said on Fri­day it would an­nounce the new date.

It at­trib­uted the de­lay to the op­er­a­tional re­view, which was cur­rently un­der way, adding that it would have po­ten­tially sig­nif­i­cant out­comes.

“This in­cludes ar­eas of ma­te­rial ac­count­ing judg­ment like im­pair­ment of as­sets, the ba­sis of prepa­ra­tion of ac­counts and the im­pact on any out­comes of the op­er­a­tional re­view thereon.

“Lon­min and its au­di­tors re­quire ad­di­tional time to com­plete the au­dit,” the com­pany said in its fourth quar­ter and full-year to Septem­ber pro­duc­tion up­date.

The op­er­a­tional re­view aims to help Lon­min con­serve cash and in­cludes cut­ting over­head costs by R500 mil­lion by the end of Septem­ber, 2018.

Seleho Tsatsi, an in­vest­ment re­searcher at An­chor Cap­i­tal, said Fri­day’s share price move­ment il­lus­trated con­cern around the vi­a­bil­ity of the bal­ance sheet.

“The share is very volatile, per­haps re­flect­ing the vul­ner­a­bil­ity of un­der­ly­ing operations and sen­si­tiv­ity of cash flows to ex­oge­nous fac­tors, and the im­pact that that has on the bal­ance sheet,” Tsatsi added.

René Hochre­iter, a min­ing an­a­lyst at Noah Cap­i­tal Mar­kets, said it was un­likely that the de­ci­sion to de­lay the re­sults was a mis­take.

“I don’t know what the prob­lem is. Lon­min has more cash than debt,” he said. Net cash im­proved to $103m (R1.46 billion) at Septem­ber 30, 2017 – up from $86m at June 30, 2017.

Lon­min said the group’s tan­gi­ble net worth at the end of Septem­ber would be in the re­gion of the covenant level re­quired by its bank­ing fa­cil­i­ties of $1.1bn.

The covenant was waived, how­ever, un­til March 30, 2018.

Sales for the year were ex­pected to hit 706 030 plat­inum ounces, ex­ceed­ing the pre­vi­ous sales guid­ance of 650 000 to 680 000 plat­inum ounces.

It’s Saffy shaft fourth quar­ter pro­duc­tion was the high­est in its his­tory – up 10.3 per­cent on the fourth quar­ter of 2016.

The com­pany said it had de­layed its de­ci­sion to place the Hossy shaft on care and main­te­nance as a re­sult of the im­proved per­for­mance.

The E2 shaft would be placed on care and main­te­nance by Jan­uary, 2018, as it had reached a stage where the re­main­ing ore re­serve was in­suf­fi­cient to sup­port an eco­nom­i­cally vi­able op­er­a­tion.

Lon­min also warned that unit costs would re­main un­der pres­sure.

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