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Johannesburg - Lonmin, the world’s third-largest platinum producer, said costs may rise above the level targeted this year following its life-saving rights issue at the end of 2015.
Costs per platinum group-metal ounce produced will be R10 400 to R10 700 in the year ended September 30, the Johannesburg-based company said in a statement Monday. Lonmin had previously targeted costs of R10 400 a ounce.
Two people died at the company’s operations, and safety stoppages reduced output by about 311 000 tonnes in the three months ending June 30, Lonmin said.
Labour costs increased 8.2% from a year earlier. Unit costs were 10,596 rand an ounce, compared with the average PGM basket price of R11 864 an ounce.
Lonmin has cut its workforce by almost 20% as it attempts to reduce unprofitable production following the December $407m rights issue, sold at a 94 percent discount. Along with the world’s two biggest platinum miners, Lonmin was hit hard by a five-month strike in South Africa in 2014.
It previously raised $457m from shareholders in 2009 and a further $817m in 2012 after police opened fire on striking miners near one of its shafts in Marikana.
Productivity gains
The company had net cash of $91m at the end of June after working capital and capital expenditure investment of $51m, it said. Lonmin shares have almost tripled this year and on Monday climbed 3.6% to 246.75 pence at 8:07 a.m. in London.
The quarter “has been marked by complex and competing themes as the operating environment has remained challenging,” Lonmin said. “Whilst we are pleased with the implementation of our business plan, we have yet to fully harness the associated benefits and productivity gains.”
The current quarter, the fourth in the company’s financial year, is normally its best due to an uninterrupted production run.
“We are, however, conscious of a number of events occurring during this year’s fourth quarter, including local government elections, wage negotiations, and various holidays, which have the potential to interfere with production,” Lonmin said.
Royal Bafokeng Platinum, a fellow miner of the metal, swung to a R150m profit in the first half of the year from a loss of R115.6m the previous year. Platinum production rose 16% to 91 600 ounces.
