Lonmin buys remaining stake in Pandora, amid flat results and strike

May 15 2017 08:53
Matthew le Cordeur
Ben Magara, CEO of Lonmin

Ben Magara, CEO of Lonmin

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Lonmin plc [JSE:LON]

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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town – Lonmin [JSE:LON] has agreed to buy 7.5% of Pandora mines for R45.565m from Northam Platinum’s Mvelaphanda Resources to become the 100% owner.

It announced the purchase agreement on Monday, along with its interim results and 2017 second quarter production report. The announcements come as Lonmin continues to engage with strikers at its E2 and E3 shafts.

On 11 November 2016, Lonmin bought Anglo American Platinum’s 42.5% equity interest in the Pandora and is currently in the process of obtaining regulatory approvals for this acquisition which it anticipates to complete during 2017. Completion of the two transactions will result in Lonmin increasing its ownership in the Pandora JV to 100%, it explained.

The acquisition will allow Lonmin to consolidate its position in the shallow and high-grade mineral resource, it said. Pandora relies on Lonmin’s mining and processing infrastructure.

“This is an excellent strategic fit for Lonmin, which increases our exposure to a valuable asset with long-term development potential and allows us to maintain production levels at Saffy while significantly reducing our capital expenditure requirements at this operation over the short- and medium-term,” said Lonmin CEO Ben Magara in a statement on Monday.

Poor performance

Lonmin saw revenue decline 6% in 2017 to $486m, while net cash was down to $75m from $114m in 2016, it announced on Monday.

“The whole Lonmin team working in partnership reversed the weak mining performance seen in the first four months of our financial year,” said Magara in a separate statement.

“That improvement continues to be essential for the sustainability of the business in the prevailing low pricing environment. We are pleased to maintain our full year sales guidance at between 650 000 and 680 000 Platinum ounces.

“Although unit cost guidance has increased we remain determined to be at least cash neutral in the current environment. While the improvement in mining performance since March is pleasing, I am not yet satisfied that we have delivered all that I know we can, and all of us at Lonmin recognise that this improvement needs to be sustained.

“We are operating in a volatile and challenging environment, but we have the right team in place to manage these challenges.

“Further, to enable maximum focus on production, and in line with our hands-on approach, we are moving Lonmin’s South African headquarters from Johannesburg to our operations in Marikana.”  

Tonnes mined from our Generation 2 shafts were 1.9 million tonnes, a decrease of 2.8% or 55,000 tonnes on the

Regarding its second quarter production update from January to March 2017, Lonmin said its generation one shafts produced 0.5 million tonnes, a decrease of 21.8% on the comparative period. It said this was in line with its plan to “close high cost areas, in response to the oversupplied market, as seen from lower prices. Newman shaft was closed during the period.”

“The poor mining performance from Q1 2017 continued into January 2017, with mining production of 584 000 tonnes for the month,” it said on Monday.

“The March production of 978 000 tonnes illustrates the mining improvement from the poor performance in the first four months to 31 January 2017.”

Strike continues

The results come as Lonmin on Sunday met with representatives of both the Bapo ba Mogale Traditional Council and the Unemployed Youth grouping, who have been protesting outside the company’s E2 and E3 shafts since 2 May 2017.

Lonmin had intended re-opening its E2 and E3 shaft operations on Monday, it said. “However, the company has decided to keep the operations closed until it is satisfied that it is safe for employees to return to work at these two shafts.

“The company has lost approximately 5 830 platinum ounces in production, amounting to approximately R56m, in the past 10 days since the protest began on 2 May,” it said on Sunday.

“Lonmin remains committed to engaging with all stakeholders in the community, and appeals to the traditional council and community members to return to discussions so that practical and achievable solutions to the current impasse may be found. Further, Lonmin appeals to the protestors not to engage in acts of violence or destruction, and to desist from threatening or intimidating employees and others.”

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