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Alliance News

Lonmin Production Falls While Costs Rise In Quarter Of "Challenges"

Fri, 8th Feb 2019 07:23

LONDON (Alliance News) - Platinum producer Lonmin PLC on Friday reported first-quarter production fell, with the miner believing the period demonstrated the "vulnerability" of the business and the importance of a "sustainable solution" for the company.

Mining production was down 7% to 2.2 million tonnes in the three months to December 31, with refined platinum production down 10% year-on-year to 144,651 ounces.

Platinum sales were down 4.6% and platinum group metals sales down 13% on last year, at 140,488 ounces and 255,152 ounces respectively.

"The first quarter of the financial year is historically a period of lowest production in our annual production cycle, due to the December holiday season and the impact of annual stocktaking. In addition, performance for Q1 2019 was also impacted by a fatality," the miner explained.

Unaudited total cost of production increased 6.4% to ZAR3.9 billion from ZAR3.7 billion. Unit costs were ZAR14,795 per PGM ounce, up 17% on a year ago.

More positively, the dollar basket price of USD1,076 per ounce was up 11% on a year ago.

"Our first quarter's production is always our most disturbed and challenging period. I am encouraged by the increase in the PGM basket price driven by palladium and rhodium. Going forward into the second quarter, the Lonmin team continues to focus on safe mining production. We are therefore maintaining our sales, costs and capex guidance for 2019," said Chief Executive Ben Magara.

He added: "The challenges of this quarter and the volatility of the exchange rate underscore the vulnerability of our business and the importance of a sustainable solution for the company."

Lonmin is currently in the process of being taken over by South African precious metals miner Sibanye Gold Ltd.

The two are currently waiting until April 2 for the Competition Appeal Court of South Africa to hear an appeal filed to the competition regulator by the Association of Mineworkers & Construction Union. The appeal is against the South African Competition Tribunal's decision in November to approve the takeover.

The all-share deal between Sibanye, which trades as Sibanye-Stillwater, and Lonmin was first announced in December 2017. Approval for the deal was granted after Sibanye agreed not to instigate any job losses in the first six months after closing the deal.

Lonmin shares were up 0.3% at ZAR10.90 in South Africa early Friday. Sibanye was up 2.4% at ZAR13.46.

By Lucy Heming;

Copyright 2019 Alliance News Limited. All Rights Reserved.

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