Publications
Partners
London - Platinum miner Lonmin [JSE:LON] more than doubled first-half profit compared to a troubled 2012 and lifted its production guidance for the year but warned of the "significant challenge" of wage talks ahead.
Lonmin, the world's third-largest primary platinum producer, was at the centre of a wave of South African labour unrest and violence last year that left dozens dead. Lonmin's finances were left so battered it had to tap shareholders for cash and has been battling to return to full production since.
On Monday, however, the South African miner beat market expectations with a first-half pre-tax profit of $54m, compared to $18m a year ago, helped by a lower than expected 5.8% increase in costs.
Soaring costs have been a major problem for South African platinum miners. The industry has struggled with rises of 14% per year on average since 2007, driven by labour costs, electricity and raw material prices.
Cheering its investors, however, Lonmin - long one of the industry's highest-cost producers - said costs rose just 5.8% in the six months to the end of March versus a year ago. The group brought down guidance for increases over the year to "below 8%" from 10%.
Costs in the second half are expected to see a steeper increase as production ramps up and winter electricity tariffs kick in.
In the six months, the group produced 366,059 ounces of platinum in concentrate, and said platinum sales totalled 326,142 ounces. Lonmin stick to its full-year sales guidance of 660,000 ounces, due to smelter constraints after outages, but raised its production guidance to "in excess of 700,000 ounces".
The South African platinum sector has been battered by strikes, safety stoppages, weak prices and soaring costs, and analysts fear the impact of a tough South African winter ahead as wage negotiations begin.
Lonmin said it anticipated a "significant challenge" as it begins wage talks. The company has yet to strike a new recognition agreement with its majority union, Amcu.
Lonmin's London shares were up 5.6% at 294 pence at 07:50 GMT, outperforming a 0.8% drop in the broader sector.
