LONDON (Alliance News) - Platinum producer Lonmin PLC Thursday reported a significant rise in production during the first quarter of the financial year as the company continues its effort to restructure the company.
The South African miner said production of refined platinum in the quarter ended December 31 rose almost 23% year-on-year to 171,441 ounces after its smelter complex "operated well" compared to a year earlier when the smelter experienced shutdowns.
Platinum sales totalled 150,420 ounces in the three-month period, representing a 2.4% increase from the corresponding quarter a year earlier. Lonmin reiterated its full year guidance to sell 700,000 ounces of refined platinum in the current financial year.
However, rand platinum prices dropped 5.5% in the quarter compared to a year ago, which Lonmin said it was expecting. Exacerbating those price falls was a 5.5% rise in unit costs in the quarter, partly caused by wage increases. The miner said unit costs are usually seasonally higher in the first quarter of the financial year due to the distorting impact of the holiday period in December.
Lonmin said unit costs will reduce over the financial year due to end in September, and should come within the company's guidance range of ZAR10,400 per platinum group metal ounce compared to the first quarter unit cost of ZAR10,949 per ounce.
The miner took drastic restructuring measures last year to deal with falling platinum prices and a generally deteriorating environment within the mining sector. On Thursday, Lonmin said 5,077 of its workers have left the company, which represents around 85% of the company's planned headcount reduction. Redundancy costs in the quarter totalled USD13.0 million.
"Removal of high cost production has advanced with the shutdown of the 1B shaft and opencast completed and further cost reductions are being made through our total cost of ownership projects. Our Business Plan assumes that a low pricing environment will persist in the short to medium term and we are managing our business on that basis," said the miner.
Lonmin said it is on track to deliver ZAR700,000 of cost savings in 2016 through the headcount reduction and other measures. The miner said estimated labour costs at the end of the first quarter was around ZAR194.0 million lower than a year ago.
The capital expenditure budget for the current financial year remains at USD132.0 million, of which USD16.0 million was spent in the first quarter.
Lonmin shares were trading up 6.0% to 60.93 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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