Lonmin Regulatory News (LMI)

LEI No: 213800FGJZ2WAC6Y2L94

REGULATORY RELEASE

29 November 2018

2018 Final Results Announcement

Lonmin Plc ("Lonmin" or "the Group"), one of the world's largest primary Platinum producers, today publishes its Final Results for the year ended 30 September 2018.

Key Features

Safety

· Our safety strategy is centred on the belief that Zero Harm is achievable

· Tragically one fatality on 30 September, ending a 15-month fatality free period

· Rolling LTIFR to 30 September improved by 11.5% to 4.0 per million man hours year-on-year

· Improved safety performance and collaboration, resulting in Section 54 Stoppages reduction, with tonnes lost decreasing by 93% year-on-year

· Received the prestigious 'Best Safety Improvement Mining Company' award at the South African National MineSafe 2018 awards

· K3 Shaft UG2 Section won the JT Ryan award

Operational Highlights

· Platinum sales of 681,580 ounces exceeded our sales guidance of 650,000 to 680,000 ounces

· Unit cost increase contained to 5.2% at R12,307, within our unit cost guidance of between R12,000 and R12,500 per PGM ounce

· Improved our IAOR from 19 to 21 months, despite reduction in capital expenditure to R967 million

· Average Rand full basket price (including base metals) up 19.7% on prior year, at R13,447 per PGM ounce

· Generation 2 shafts production increased by 1.6% to 7.6 million tonnes

· Reduced high cost production by 13.2% in line with strategy

· Concentrators continue to deliver excellent underground mining recoveries at 87.3%

Financial Highlights

· Operating profit of $101 million (up from an operating loss of $1,079 million in 2017 following impairment)

· Net cash improved to $114 million at 30 September 2018, up from $103 million at 30 September 2017

· Revenue of $1,345 million up $179 million on the prior year, driven by higher PGM prices.

· Earnings per share of 14.9 cents (up from loss per share of 352.7 cents in 2017)

· First payment of Employee Profit Sharing

· Improved the Company's liquidity and funding arrangements after year end through a new $200 million forward metal sale facility, with pre-existing Rand and Dollar facilities consequently replaced

Strategic Highlights

· The all-share offer from Sibanye-Stillwater is expected to close in early 2019, subject to approval by shareholders and sanction by the courts of England and Wales

· Disposal of our 50% interest in Petrozim for $14.75 million plus gross dividend of $8 million, nears completion

· Lonmin sold its approximately 6.8% stake in Wallbridge Mining Company Limited, for a total consideration of $3 million after year end.

Guidance - 2019

· Platinum sales between 640,000 and 670,000 ounces in line with removing high cost production

· Unit costs expected to be in the range of R12,900 to R13,400 per PGM ounce

· Capital expenditure anticipated to be limited to a range of R1.4 billion to R1.5 billion, excluding any external funding for the MK2 project

Lonmin Chief Executive Officer Ben Magara said:

"We have kept our commitments and delivered a strong performance across the business, closing with an improved net cash position of $114 million, up from $103 million last year. I am pleased with Lonmin's return to profitability and that we are making a first payment to our Employee Profit Sharing Scheme. Market conditions have remained challenging but we have maintained our focus on strict management of controllable factors, cutting costs and driving efficiencies. We have an enviable mine-to-market business with strong assets. I am extremely mindful, however, of the liquidity constraints we continue to face and the significant investment needed in our mines to preserve and prolong their lifespan. We recognise that Lonmin would be better placed as part of a stronger, enlarged and diversified group. We therefore remain focused on completing the Transaction with Sibanye-Stillwater, which will provide a stronger platform for Lonmin's shareholders and other stakeholders, and a more sustainable business better able to withstand uncontrollable conditions."

FINANCIAL HIGHLIGHTS

Footnotes:

The Group measures performance using a number of non-GAAP measures which better allow for understanding of the financial performance and position of the Group

ENQUIRIES

Andrew Mari (Investor Relations) +27 60 564 6419

Media:

Notes to editors

Lonmin, which is listed on both the London Stock Exchange and the Johannesburg Stock Exchange, is one of the world's largest primary producers of PGMs. These metals are essential for many industrial applications, especially catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery.

Lonmin's operations are situated in the Bushveld Igneous Complex in South Africa, where more than 70% of known global PGM resources are found.

The Company creates value for shareholders through mining, refining and marketing PGMs and has a vertically integrated operational structure - from mine to market. Underpinning the operations is the Group Shared Services function which provides high quality levels of support and infrastructure across the operations.

For further information, please visit our website: http://www.lonmin.com

CONTENTS

This document contains the following sections:

§ Chief Executive Officer's Review

§ Review of Operations 

§ Financial Review

§ Market Review and Outlook

§ Mineral Resource & Mineral Reserve Statement

§ Operating Statistics - 5 Year Review

§ Responsibility Statement of the Directors and

§ Financial Statements

CHIEF EXECUTIVE OFFICER'S REVIEW

I am pleased to report that Lonmin delivered a solid performance this year, closing with an improved net cash position of $114 million, up from $103 million in the prior year. Operating profit also increased to $101 million, up from an operating loss of $1,079 million in 2017 (following impairment), on the back of continued and relentless implementation of our 2015 Business Plan. Platinum sales of 681,580 ounces exceeded our guidance and unit costs at R12,307 per PGM ounce were within our guidance. This performance has been achieved by our continuous focus and strict management of controllable factors, cutting costs and driving efficiencies wherever possible, and despite business fundamentals remaining challenging throughout the year. Our average Rand full-basket price (including base metals) for the year was up 19.7% for the year, at R13,447 per PGM ounce. As a result, we realised an operating profit of $101 million, compared to an operating loss of $1,079 million in the prior year. I am pleased that Lonmin is able to pay its first Employee Profit Sharing to employees.

Safety remains our top operational priority, with our safety indicators continuing to show improvement, including achieving a 15-month fatality free period at the business. Despite these improvements, Mr Tembelani Manyana was fatally injured on 30 September 2018. We extend our very deepest condolences to his family and friends. I still believe zero harm is achievable and we continue to engage with all our stakeholders to deliver this.

The challenges facing Lonmin and our industry are well known and have been documented in previous reports. The strategic direction which underpinned our 2015 Business Plan to right-size the Company, cut costs and contain capital expenditure has enabled Lonmin to remain at least net cash positive. The improvement in Generation 2 Shafts production has positioned Lonmin to best counter the current market environment. Regrettably, however, despite all of these initiatives and the solid progress we have made this year, we continue to be financially constrained and unable to fund the significant investment required to sustain our business and jobs.

As previously reported in detail, following an extensive process, the Board reached agreement with Sibanye-Stillwater on the terms of an all-share offer for the Company (the "Transaction"), in December 2017. It is our belief that this Transaction represents a comprehensive solution to the challenges facing Lonmin and offers Lonmin and its stakeholders a more certain future. We believe that a combination of Sibanye-Stillwater and Lonmin will create a larger, more diversified and resilient company, better able to withstand market volatility.

The Transaction will enable our shareholders and our stakeholders to participate in the potential growth and value creation opportunities of the enlarged group and any long-term recovery in the fundamentals of the PGM sector. We strongly believe that the Transaction is in the best interest of Lonmin shareholders and our stakeholders and the Board unanimously recommends Lonmin shareholders vote in favour thereof.

With this Transaction in mind, let me therefore take this opportunity to briefly reflect on the Company's journey since the Rights Issue in November 2015.

Being a single asset producer in a single geography, Lonmin is highly leveraged to Platinum price and exchange rate fluctuations. As such, our business plan since 2015 has been to focus on factors within our control in order to preserve cash and liquidity. We took decisive action to protect the Company, which included freezing recruitment and right-sizing the business, to match our production profile, regrettably resulting in over 8,000 job losses as we put high cost shafts on care and maintenance. We also closed and relocated our Head Office from Melrose Arch to Marikana. Furthermore, the acquisition of the Pandora JV enabled Lonmin to defer at least R1.6 billion of development capital at Saffy shaft.

In addition to our actions to preserve cash, we also sought key levers to generate cash, namely; the smelter clean-up project, the OPM project, pipeline stock reduction and the TOC and TCO projects, including securing innovative third party funding for the Bulk Tailings Re-Treatment ('BTT') project. Our goal was to do all we could within our control to remain at least cash neutral until prices improve. Pleasingly, Lonmin has remained net cash positive every quarter since December 2015 and we have achieved an operating profit.

The business plan is focused on Generation 2 shafts, and we have increased that part of our production by 9.7% to 7.6 million tonnes over the period since 2015. Our efforts and investment in Saffy shaft are worthy of particular note, with production increasing 25.8% over the same period, and achieving a record shaft hoisting utilisation of 92% for the year just ended.

We took decisive action to reduce high cost production in an oversupplied market. As a result, we have cut production from our Generation 1 shafts by 44.5% since 2015, from 4.1 million tonnes to 2.3 million tonnes and placed some of these shafts on care and maintenance.

To deliver the necessary restructuring and headcount reductions, relationships are vital and since my appointment as Chief Executive Officer in July 2013, building relationships with our key stakeholders, including employees, unions and communities especially, has been of primary importance. We have made significant progress in this area and I believe the maturity in many of these relationships has been reflected through our achievements over the years, including managing to implement our restructuring productively without labour unrest or business disruption.

By removing two layers of management and making changes to our operational management structure, we have streamlined communication within the business. This has created a more responsive decision-making environment and increased accountability, which, in turn, has energised the business for high performance. The diversity in our executive management team has, I believe, been instrumental in driving our safety, operational performance and profitability initiatives.

Capital Expenditure

We have improved our Immediately Available Ore Reserves ("IAOR") from 19 to 21 months year on year despite capital expenditure being limited to R967 million ($73 million). The R967 million capital expenditure includes R74 million of third party funding for the BTT project.

The ore reserve position of the Marikana mining operations is still at a level that provides the necessary flexibility required for efficient mining (industry benchmark of around 15 months). I am pleased that Rowland shaft's IAOR have been increased from 11 months to over 14 months during this year as a result of the innovative redesign and development of the MK2 project.

Cash and liquidity, profitability and costs

Net cash improved to $114 million at 30 September 2018, up from $103 million at 30 September 2017. Revenue increased by $179 million on the prior year driven by higher PGM prices. EBITDA of $115 million compared with $40 million in the prior year and operating profit was $101 million (up from 2017's operating loss of $1,079 million following impairment in 2017).

Post financial year end, we took new and prudent measures to refinance the business, entering into a $200 million forward metal sale agreement with Pangaea Investments Management Limited (PIM) in October. We consequently settled our pre-existing term loan and undrawn facilities. The new facility has enhanced the Company's short-term liquidity and has removed the restrictive conditions contained in the previous debt facilities (notably the Tangible Net Worth covenant). This new facility is not however a long-term solution to the challenges faced by Lonmin.

The unit cost increase was contained to 5.2% at R12,307, which was within our guidance of between R12,000 and R12,500 per PGM ounce. The containment to below wage inflation was largely driven by the focus on safe production as well as continued focus on cost control notwithstanding the inflationary wage increases experienced in the year.

Disposal of non-core assets

During the year we continued with our programme to dispose of non-core assets. In June, we entered into a conditional Sale of Shares Agreement to sell Lonmin's 50% interest in Petrozim Line (Private) Limited (Petrozim) for a gross cash consideration of $14.75 million to the National Oil Infrastructure Company of Zimbabwe (Private) Limited. As part of the sale, Lonmin will also receive $8 million in the form of gross special dividends from Petrozim. The sales proceeds and special dividends will be used for working capital management. After the year end, we also sold our 6.8% portion of the outstanding shares of Wallbridge Mining Company Limited, for a total consideration of $3 million.

Both these disposals have enhanced Lonmin's liquidity.

The Market

During the financial year the platinum market remained depressed, while Palladium improved strongly. The Rhodium price continued to advance strongly, owing to strong buying in China and a decline in supply from South Africa. Given South Africa's dominance in Rhodium and other precious metals supply, mine cuts have reduced primary production capacity.

Platinum's contribution to Lonmin's PGM basket revenues reduced from 58% to 45%, while Palladium improved to 23% and Rhodium increased to 16% of the total revenue basket.

Communities

We have remained focused on our Social and Labour Plans and committed to investing in the needs of the Greater Lonmin Community by uplifting the infrastructure and quality of education. It is important for me to highlight that only a committed thriving and profitable business can contribute meaningfully to social development.

Our investment in housing since 2014 has exceeded R500 million which has made it possible to convert all the single-sex legacy hostels into 2,162 single units and 759 family units. A total of 793 infill apartments, have been built and occupied. Delivery of the remaining 447 infill apartments is expected by December 2018, resulting in a total 1240 apartments.

We have continued to invest in the areas of community healthcare, education and social infrastructure, and opened two schools this financial year. In March, we handed over the new Marikana Primary School in the North West Province. In April, we handed over the Sethethwa High School, to the Limpopo Department of Education and the Makoeng community, which augurs well for better educational opportunities and a brighter future for the young minds of our country. Lonmin currently supports high schools in the North West and Limpopo provinces via teacher training initiatives and learner development programmes. On education, I am also particularly proud of the work that the sixteen-eight Memorial Trust has done and we wish good fortune to the two beneficiaries who have so far graduated from their respective tertiary institutions as they pursue their future ambitions. It is tangible and meaningful improvements such as these that enhance the lives of those living in our communities and are testimony of Lonmin's dedication to create shared value.

In April, our new Grievance Handling System was launched, aptly named Buang Le Rona (meaning "talk to us"), which is aimed at further increasing ways in which we can communicate with our communities and all stakeholders.

Board Changes

In March this year, Dr Len Konar decided to step down as a Non-Executive director on the Lonmin Board, thereby relinquishing his membership and chairmanship of various Board Committees. On behalf of my colleagues, I would like to thank Len for his contribution and commitment to the Board and the Company during his eight years with Lonmin and we wish Len every success for the future. Len's vacated position on the Board has not been filled due to the proposed Transaction with Sibanye-Stillwater. As a consequence of Len's departure, Jonathan Leslie was appointed Chairman of the Audit and Risk Committee, and Kennedy Bungane was appointed a member. In addition, Kennedy was appointed Chairman of the Social, Ethics and Transformation Committee.

Transaction Update

On 28 June 2018, the UK's Competition and Markets Authority unconditionally cleared the all-share offer for Lonmin by Sibanye-Stillwater. On 18 September 2018, the South African Competition Commission recommended that the South African Competition Tribunal approve the proposed Transaction, subject to certain conditions, which were agreeable to both Sibanye-Stillwater and the Commission.

On 21 November, the South African Competition Tribunal cleared the all-share offer for Lonmin by Sibanye-Stillwater, subject to certain agreed conditions with Sibanye-Stillwater. General Meetings of the shareholders of Sibanye-Stillwater and Lonmin are scheduled for early 2019. These approvals and the sanction of the Courts of England and Wales remain the final substantive conditions required to complete the Transaction.

Guidance

Given the continuing challenging operating environment as a stand-alone company, we will continue to place high cost Generation 1 shafts on care and maintenance. We therefore expect Platinum sales to be between 640,000 and 670,000 ounces for the 2019 financial year.

Unit costs are expected to be in the range of R12,900 and R13,400 per PGM ounce for 2019. We remain vigilant on cost control and will continue to seek out cost savings where possible. Capital expenditure is anticipated to be limited to a range of R1.4 billion to R1.5 billion for the year ending 30 September 2019, excluding external funding of approximately R150 million assumed for the MK2 project.

Conclusion

Despite tough market conditions, we have delivered more than we promised in most areas of our business. These pleasing results demonstrate once again that despite these uncertain times, Lonmin has continued to use all the levers within its control to preserve the net cash position. I am pleased to have presided over the restructuring and turnaround of Lonmin over the past five years, resulting this year in an operating profit of $101 million this year, up from an operating loss of $1,079 million the previous year. As a consequence of the operating profit, I am also encouraged by the first payments of our Employee Profit Sharing Scheme to our qualifying employees.

I am humbled to have steered this Company for the last five years and am excited at the prospect of the Company embarking on a more certain new era as part of Sibanye-Stillwater. We remain focused on completing the Transaction with Sibanye-Stillwater where Lonmin will be part of a much stronger, enlarged and diversified group. This will provide a stronger and more resilient platform for Lonmin's shareholders and our stakeholders and allow them to benefit from the long-term upside potential of an enlarged and geographically diversified precious metals group.

I wish to thank my 30,000 colleagues, our stakeholders and our effective Board for their continued hard work and dedication. In particular, I also want to thank our Chairman Brian Beamish for his guidance and productive and honest friendship.

Yours faithfully,

Ben MagaraChief Executive Officer

REVIEW OF OPERATIONS

Safety

Our continued collaboration with key stakeholders, including employees, the Department of Mineral Resources ("DMR") and our majority union, the Association of Mineworkers and Construction Union ("AMCU"), continues to yield results, as we have experienced improved safety performance and decreasing Section 54 stoppages. We continue to improve our safety initiatives to meet our goal of Zero Harm.

Our twelve month rolling Lost Time Injury Frequency Rate ("LTIFR") to 30 September 2018 improved by 11.5% to 4.00 per million man hours from 4.52 per million man hours in the prior year due to a 17.4% reduction in Lost Time Injuries. Our twelve month rolling Total Injury Frequency Rate ("TIFR") to 30 September 2018 improved by 5.2% to 10.14 per million man hours from 10.70 in the prior year due to a 11.5% reduction in total injuries.

Tragically we had a fatal incident of Mr Tembelani Manyana on 30 September 2018. We extend our deepest condolences to his family and friends.

Lonmin achieved 15 months fatality free from 29 June 2017 to 29 September 2018, which resulted in the Company receiving the most prestigious award at the South African National MineSafe 2018 - Best Safety Improvement Mining Company. Our K3 Shaft UG2 Section also won the JT Ryan award (underground) and four other awards were received in two more categories.

Operations

Momentum across all the business functions was maintained throughout the 2018 financial year, the highlights of which include:

Mining

The improvement in our mining production performance and the mining rhythm, established following implementation of flatter management structures and other measures to improve performance, has continued in the current year, with our key Generation 2 shafts which produce around 76% of total mining production, increasing production by 1.6% to 7.6 million tonnes. The average shaft utilisation capacity for our Generation 2 shafts is a pleasing 83%.

We experienced a reduction in Section 54 safety stoppages, which have become fewer and of a shorter duration, and consequently, are having a much reduced impact on lost production. Tonnes lost due to Section 54 safety stoppages were 20,000 tonnes compared to 276,000 tonnes in 2017.

Generation 2 shafts

K3

K3, our largest shaft, produced 2.9 million tonnes, an increase of 1.0% on the prior year.

Saffy

Saffy shaft produced 2.2 million tonnes, an increase of 1.7% on the prior year. This shaft continues to perform well and is operating at full production. Saffy production for the last quarter of 609,000 tonnes was the highest for the past 2 years. Saffy achieved an average shaft utilisation of 92%.

Rowland

Rowland shaft produced 1.9 million tonnes, down 1.1% on the prior year, notwithstanding 4.6% year on year increase in the fourth quarter, achieved by opening new reserves, releasing backlog sweepings and equipping previously unavailable remnant "white" areas. The production for the fourth quarter was 544,000 tonnes which was the shaft's best quarterly production since 2011. Rowland shaft has put in extra ordinary measures to secure the monthly tonnage performance despite limited ore reserves by focusing on cleaning up old areas and sweepings. The MK2 project intersected reef at the end of FY17, and this year the shaft achieved 1.2 kilometer of on-reef development which resulted in the opening of the first mineable ore reserves of 78,000 square metres. The shafts ore reserve position improved from 11 months in FY17 to 14 months in FY18.

E3

The combined E3 unit (E3 shaft plus Pandora) produced 0.7 million tonnes (the best annual production since 2011) for FY18, an increase of 13.8% on the prior year, on the back of safety performance, productivity gains and steadfast management and following the consolidation with and the unlocking of synergies after the full acquisition of Pandora.

Generation 1 shafts

In line with the Group's rationalisation of high cost areas, production from our Generation 1 shafts (4B, Hossy, W1 and E1) at 2.3 million tonnes was 13.2% lower than the prior year as planned, as we optimise our remaining ore reserves in these shafts. Newman shaft was placed on care and maintenance in March 2017. E2 was put on care and maintenance in November 2017.

4B shaft

4B shaft produced 1.3 million tonnes, a decrease of 3.7% as it was impacted by worse than anticipated geological conditions. As previously reported, following a review of 4B's performance and reserve life, this shaft was reclassified as a Generation 1 shaft and comparative numbers adjusted accordingly.

Hossy shaft

Hossy shaft produced 0.6 million tonnes, 11.3% lower than the prior year. Hossy shaft is scheduled to be put on care and maintenance mid-year in 2019, subject to its financial performance, which is closely monitored to ensure it continues to contribute positively.

W1, East 1 and East 2 shafts

As W1 and E1 are at the end of their resource lives, mining is in remnant areas. Consequently, contractors operate these shafts and are responsible for all the costs associated with them. Lonmin pays a predetermined rate per tonne of ore produced. We thus retain the flexibility to cease production if and when these shafts become unprofitable.

W1 and E1 together produced 0.4 million tonnes, 19.1% higher than the prior year. E2 shaft was put on care and maintenance at the end of November 2017, contributing only 32,000 tonnes to our annual production in 2018 this year.

Immediately Available Ore Reserves (IAOR)

The IAOR position of our Generation 2 shafts at 30 September 2018 was equivalent to 21 months average production versus 19 months at 30 September 2017.

We closely monitor our IAOR position, in order to protect our operational flexibility.

· We have successfully increased Rowland shaft's IAOR to 14 months as at 30 September 2018 from 11 months, mainly due to the first raise holings in the MK2 area which have established additional mining faces.

· Lonmin is progressing discussions to secure third party funding for the MK2 extension project.

· The ore reserve position of the Marikana mining operations is still at a level that provides the necessary flexibility required for efficient mining (industry benchmark of around 12-15 months).

· The planned decrease in the ore reserve position at the Generation 1 shafts can be largely attributed to the curtailment of development, as the mineral resource within the shaft boundaries are largely depleted and the closure of E2 incline.

· The months reported for immediately available ore reserves for Generation 1 is only based on 4B Incline.

Business Improvement Initiatives

We continually facilitate and monitor the implementation of business improvement initiatives by line management, to increase productivity and improve performance.

Initiatives implemented during the year to improve productivity are:

· The Theory of Constraints framework with a particular focus at E3 shaft is being rolled out. Bottlenecks have been identified, actioned and implementation is being monitored, with productivity increasing from 4.3 to 4.9 square meters per employee.

· A project launched last year identifying areas where backlog sweepings exist on the various shafts has been implemented. Action plans and schedules have been developed to remove these backlogs and these are being monitoring and tracked. Rowland shaft total sweepings (current plus backlog) improved by 37% on the previous year to 158% sweepings extracted.

Productivity measured as square metres per mining employee at our Generation 2 shafts is up at 5.7 compared to 5.6 for the prior year. E3 shaft and Saffy shaft year on year improvement are 15% and 4% respectively.

Processing

The efforts to improve the performance and reliability of the processing plants over recent years, based on on-going optimisation and improvement plans across the processing operations, continue to pay off, with the concentrators achieving levels of PGM recoveries amongst the highest in their history.

Concentrator production - Mining

Total tonnes milled from mining operations for the year at 9.8 million tonnes decreased 2.0%, on the prior year, with reduced output from depleting Generation 1 shafts.

Metals-in-concentrate produced at 653,792 Platinum ounces were broadly flat compared to the prior year, largely due to increased concentrate purchases and the contribution from the BTT plant.

Underground milled head grade at 4.57 grammes per tonne (5PGE+Au) decreased marginally by 0.9% when compared to the 4.61 grammes per tonne achieved in the prior year.

Concentrator recoveries from underground mining for the financial year increased marginally to 87.3% compared to 87.1% achieved in the prior year.

Concentrator production - Bulk Tailings Re-Treatment Project ("BTT")

The BTT project was successfully commissioned in February. Total tonnes milled from the BTT project were 2.0 million tonnes for the year, with a head grade of 1.10 grammes per tonne and a recovery rate of 21.3%, producing metals-in-concentrate of 7,423 Platinum ounces and 14,593 PGM ounces.

Smelting and refining

The Number One furnace had an unplanned outage in December 2017 bringing forward its planned shutdown scheduled for the end of 2018. Number Two furnace was on a planned shut-down from April till May 2018. During these periods the three Pyromet furnaces were in operation.

Both the main furnaces have been stable after their individual shutdowns, continue to run normally and the metal that was previously locked up has been released.

Total saleable refined Platinum production at 678,588 ounces was 1.3% lower than the prior year production, in-line with the planned reduction of Generation 1 high cost production. Total saleable PGMs produced were 1,318,618 ounces, broadly flat on the prior year.

The smelter clean-up project and permanent release from the smelting and refining plants continued during the current year and released a total of 6,000 ounces of Platinum during the year, less than the 31,682 ounces released in the prior year as this project is coming to an end as expected.

Filling the pipeline

Several purchase of concentrate contracts are in place as part of the initiatives to fill the pipeline and utilise the excess processing capacity.

Concentrate purchases increased to 21,703 saleable Platinum ounces from 4,871 saleable Platinum ounces in the prior year, as we sought to maximise downstream processing utilisation and reduce unit costs.

Capital Expenditure

Our strategy remains to limit capital expenditure to levels required to satisfy regulatory and safety standards, to essential sustaining capital expenditure in the continuing shafts and ensuring that IAOR positions are maintained at an acceptable level to sustain production at our Generation 2 shafts, where applicable.

Union relations

In terms of the Labour Relations Act of South Africa, No. 66 of 1995, as the majority union AMCU has collective bargaining rights, unrestricted access to the workplace and rights to deductions, full-time shop stewards and office facilities on the Company's premises.

The implementation of the terms of the Relationship Charter and regular and constructive engagements, such as Future Forums, continue to strengthen Lonmin's relationship with the trade union. This is evidenced by our superior safety performance and steady production rhythm despite the uncertain times brought about by the pending all-share offer by Sibanye-Stillwater.

Towards the end of 2017, Lonmin completed its reassessment of employee representatives outside the majority union. At the end of September 2018, 19,206 employees (82.1%) were members of trade unions AMCU - The Association of Mineworkers and Construction Union - and CEPPAWU - The Chemical, Energy, Paper, Printing, Wood and Allied Workers' Union.

The New Mining Charter

Mining Charter III was gazetted in September 2018 and is a significant improvement on prior drafts. We welcome the "new dawn" as government has embarked on a path of partnership and engagement. As a business, we are committed to playing our part to create shared value through economic growth and transformation. Areas of ambiguity remain in the Charter and it is hoped that a Guideline document to be published in late-2018 will provide further clarity.

Transformation

Transformation is more than just achieving numbers and Black Economic Empowerment targets. Lonmin is pleased with the look and feel of the business and the high performance culture brought about by the strength of diversity across all levels of the company today.

Social Labour Plans (SLPs) and Corporate Licence to Operate

Our commitment to developing and empowering our host communities remains one of the pillars of our transformation journey. The main objective beyond the required compliance is to ensure that members of our host communities are given opportunities to improve their lives in a meaningful way.

We invested R59 million (2017: R80.56 million) in approved projects that form part of Western Platinum Limited ("WPL") and Eastern Platinum Limited ("EPL") SLPs. These projects are managed by the project management office.

Lonmin is concluding the current five-year SLP commitments which expired on 30 September 2018 and will submit a close-out report to the DMR. Due to financial constraints, we were not able to implement all our current SLP commitments for the 2014 to 2018 time period. However, we have formulated a remedial plan to address the backlog, which was reviewed and approved by the DMR. We are implementing our undertakings to address the backlog, with extension for our SLP obligations 2014 to 2018, granted till 2020.

In July, we submitted the new SLPs, commonly referred to as Generation III, for the period 2019 to 2023, to the DMR and approval is pending.

The focus for our Social and Labour Plans ("SLP"s) are:

· Health complemented by nutrition awareness and education;

· Education, which ranges from early childhood development programmes up to supporting tertiary students both academically and in life skills; and

· Local economic development to assist in basic necessity projects such as water, sanitation and roads. The local economic development programmes are implemented in partnership with the local municipalities, namely Madibeng local municipality and Rustenburg local municipality.

Preferential Procurement

Lonmin's preferential procurement strategy requires procurement adjudication to favourably weighted suppliers with broad-based black economic empowerment (B-BBEE) credentials, female representation, youth and, where possible, local community (GLC) companies. Certain procurement areas are ring-fenced for GLC and B-BBEE suppliers only.

The Mining Charter II set targets of procuring 70% of services, 50% of consumable goods and 40% of capital goods from HDSA owned suppliers. Lonmin recognises the importance of actively involving citizens who were previously excluded from the mainstream of the economy and has far exceeded these procurement targets.

Identifying suitable black youth and women-owned suppliers/manufacturers is our preferential procurement challenge going forward. We are working to address this issue through various enterprise development initiatives and projects. Following the release of Mining Charter III on the 27 September 2018, Lonmin is aligning all procurement activities to at least comply with the targets within the next five years.

Bapo ba Mogale Procurement

Lonmin has complied with and exceeded its procurement undertakings of R200 million given to the Bapo ba Mogale in terms of the 2014 BEE Transaction. Governance within the Bapo ba Mogale entities that managing these remains work in progress.

Community Trusts

2014 saw the establishment of two separate Community Trusts as shareholders in the operating assets. Each trust holds 0.9% of the ordinary shares in Western Platinum Limited and Eastern Platinum Limited, and is entitled to dividend payments. These have been mandated for upliftment projects in the respective communities. To the extent that no dividend is payable in a particular year, each community trust is entitled to a minimum annual payment of R5 million escalating in line with consumer price inflation each year. All payments to the trusts are up to date. Since inception, a total of R30 million has been disbursed to each trust. The Trustees for both Trusts are controlled by community members who work with the community to identify poverty alleviation projects which the trust funds.

Community education and skills development

The Lonmin community education programme provides support to 22,500 school going learners in the Greater Lonmin Community ("GLC") in a value chain of the key areas of education: infrastructure development; learner support; parent support; school nutrition and sports; arts and culture. Community skills development programmes include engineering and artisan training; portable skills; adult education and training; mining- related skills, mine technical skills, process technical skills, early childhood development training and community study assistance.

Community healthcare

Lonmin provide holistic healthcare to employees and the broader community comprising awareness, promotion, prevention and infrastructure development.

Infrastructure development

Lonmin's infrastructure development includes bulk water infrastructure, road upgrades, waste removal and lighting to improve public safety. We continue to work with all tiers of government to ensure coordination and alignment in the provision of social infrastructure.

Enterprise development

Lonmin is the anchor supporter of the Black Umbrellas' Mooinooi incubator established to scout, train, mentor and assist local entrepreneurs and emerging black businesses with support services that enable them to flourish.

Accommodation and Living Conditions

Lonmin's Employee Accommodation and Living Conditions Strategy aims to address the housing requirements of employees, contractors and the broader community, and to integrate plans for schools, clinics, transport hubs and other municipal infrastructure. Collaborative partnerships with Government are central to the strategy.

Lonmin acknowledges that living conditions have a direct influence on its employees' and their families' general wellbeing and ability to focus and perform in their working environments.

Lonmin committed R500 million towards employee housing and living conditions for the period 2014 to 2018. Over and above this commitment, Lonmin incurs a cost of R475 million per annum in living-out allowances to category 4 to 9 employees and an operating cost for its current rental stock of R57 million per annum..

A further R420 million has been committed towards the new Employee Accommodation and Living Conditions SLP commitments (2019 - 2023) despite the current financial challenges facing the industry.

Stakeholder engagement

Relationships with local communities that surround our operations have improved, largely attributed to more structured and meaningful engagement.

The Company has implemented a Grievance Handling Mechanism, The Buang Le Rona Grievance Mechanism to ensure that community grievances are received and responded to in a timely manner and are tracked so that results can be analysed. This initiative provides all our operations with information about stakeholder issues and concerns and also serves as an early warning mechanism to address issues timely and effectively.

FINANCIAL REVIEW

Overview

The full Dollar PGM basket price achieved in 2018 was 20% higher than 2017. Whilst the platinum price was on average 7% lower than 2017 the prices for the other PGMs increased significantly. The average palladium price achieved was 22% higher and the average Rhodium price achieved was 117% higher than 2017.

PGM volumes sold were 4% lower than 2017 driven by the planned reduction of high cost production from the Generation 1 shafts.

Cost in Rand terms increased by R1,381 million or 9% driven largely by structural changes to the business. These accounted for R1,125 million of the increase and are detailed later in this review. On a comparable basis, costs increased by R256 million or 2%, which was well below South African CPI at 4.9%. The Rand was on average 2% stronger against the Dollar and the increase in costs in Dollar terms was 12% or $129 million.

The cost of production per PGM ounce at R12,307 was 5% higher than 2017 as the 7% wage increase and other cost escalations were partly offset by the benefit of the reduction in high cost production. Further details on unit costs can be found in the Operating Statistics section of the Report.

The operating profit for 2018 was $101 million compared to the prior year operating loss of $1,079 million which included an impairment charge of $1,053 million. The depreciation charge was $52 million lower year on year due to the impact of the impairment in 2017 on the carrying amount of assets. Earnings before interest, tax, depreciation and amortisation (EBITDA) for 2018 was $115 million, an increase of $75 million on 2017 as the increase in Dollar metal prices more than offset the strength of the Rand against the Dollar and cost escalations. Profit before tax was $68 million (2017 - loss before tax of $1,170 million) and earnings per share was 14.9 cents (2017 - loss per share of 352.7 cents).

The cash flow from operations for the year was $110 million, an increase of $57 million on 2017 driven by the improved profitability. Capital expenditure in the year was $73 million, a decrease of $27 million on 2017 due to limiting capital expenditure to the minimum required to uphold safety compliance; critical production by maintaining a healthy ore reserve position; and our license to operate.

Net cash at 30 September 2018 was $114 million being gross cash of $264 million offset by the drawn term loan of $150 million. Net cash was $11 million higher than 30 September 2017 and $97 million higher than March 2018. The $47 million of metal-in-process that was locked up at the smelter in the first half of the year was released fully during the second half as planned.

Subsequent to the year end, in October 2018, Lonmin entered into a $200 million financing facility with Pangaea Investment Management Limited (PIM), a wholly owned investment subsidiary of Jiangxi Copper Corporation (JCC) to be amortised over the next three years (the New Facility). A condition of the New Facility was that the pre-existing facilities were cancelled to enable PIM to become the senior lender. The pre-existing term loan of $150 million was settled and all other pre-existing undrawn/draw-stopped facilities with both the South African and US Dollar lender groups were cancelled. The pre-existing facilities were due to expire in May 2019. All ancillary facilities of the pre-existing facilities needed to be cancelled which included financial guarantees and other trading and hedging facilities. Most of the DMR rehabilitation guarantees previously provided by the South African lenders were cancelled and replaced with an insurance product. The New Facility enhances Lonmin's liquidity as it requires only partial settlement of between $60 million and $80 million upon completion of the Transaction with Sibanye-Stillwater compared to the term loan of $150 million which required full settlement upon completion. In the unlikely event that the Transaction does not close, no partial settlement is required and the three-year facility remains in place.

The refinancing and increased Rand basket price has improved the Group's liquidity. Whilst we believe that it is likely that the Transaction will complete, some level of uncertainty exists over its completion. This combined with the need for an alternative solution to the adverse longer-term challenges faced by the Lonmin Group if the deal does not complete represent a material uncertainty that may cast significant doubt on the Group's and parent Company's ability to continue as a going concern over period in excess of 12 months. This is disclosed in note 1 to the financial statements and the external auditors in their audit report draw attention to this disclosure. The Directors consider that it remains appropriate to prepare the accounts on a going concern basis.

Income Statement

Revenue

Total revenue for the year of $1,345 million reflects an increase of $179 million compared to 2017. The PGM basket price achieved increased by 20% compared to the 2017 resulting in an increase in revenue of $165 million.

The PGM sales volume for 2018 was 4% lower compared to 2017, which had a negative impact on revenue of $46 million. This was mainly attributable to the planned decrease in production from the Generation 1 shafts.

The mix of metals sold increased revenue by $15 million. Base metal revenue increased by $45 million of which $40 million was revenue from the new K3 chrome plant contract. Previously the revenue from this plant had been recognised after deducting expenditure in accordance with the old contract. The accounting treatment in both cases was determined by the contract terms.

Costs

In Rand terms South African operating costs for 2018 at R16.2 billion were 9% or R1.4 billion higher than 2017. The impact of the stronger Rand against the Dollar meant that, in Dollar terms, costs increased by 12% to $1,238 million. There were structural changes to the business during the year which accounted for R1.1 billion or 8% of the cost increase. The table below analyses the cost increase between those that are comparable year on year and those that are not.

Mining costs (excluding bulk tailings, E3 shaft and Pandora ore purchases) increased by R285 million or 3% year-on-year, well below the wage increase of 7%. Concentrating costs (excluding bulk tailings were R74 million or 4% lower than the prior year. Smelting and refining costs were R145 million or 9% higher than the prior year driven by escalation, the running of the higher cost pyromet furnaces during the outage at the Number One furnace and lower grade material due to the impact of the bulk tailings stream and an increase in the allocation of the Group's security costs.

E3 shaft costs increased by R519 million firstly due to the acquisition of the remaining 50% of Pandora in December 2017 which resulted in an increase in mining costs reported at E3 shaft. Previously these costs were part of the Pandora joint venture's operating expenditure. Secondly costs increased due to a 14% increase in tonnes mined by the combined E3 shaft (E3 and Pandora) on a like-for-like basis. These additional costs were offset by a reduction of R339 million in ore-purchases from the joint venture which ended in December 2017.

The bulk tailings re-treatment plant was commissioned and commenced ramp up in February 2018. The newly recognised costs associated with this amounted to R220 million.

An improved commercial contract for the K3 chrome plant commenced in September 2017. This was structured in a different manner to the previous contract with the costs included in Lonmin's cost base. Previously the costs had been deducted from revenue in accordance with the contract terms. As a result operating costs of R279 million were recognised in 2018 compared to R4 million in 2017.

Concentrate purchases increased by R347 million year-on-year driven by increased volumes following the commencement of a new concentrate purchase agreement in H2 2017.

The cost of voluntary separation packages (VSPs) associated with the section 189 process amounted to R176 million in 2018 (2017 - R4 million). Transaction costs relating to the Operational Review and refinancing; the Transaction with Sibanye-Stillwater to date; and the acquisition of Pandora amounted to R131 million in 2018 (2017 - R14 million). The rehabilitation provision reduced largely due to the revised timing of rehabilitation the opencast pits at Karee which has moved from 2020 to 2025.

UK costs at $21 million were $7 million higher than the prior year due to $11 million transaction and refinancing costs incurred in 2018.

EBITDA

The $75 million increase in EBITDA year on year is analysed below:

Exchange rate impacts

The Rand was on average 2% stronger against the US Dollar during the year averaging R13.07/$ in 2018 compared to an average of R13.37/$ in 2017. The Rand was volatile during the year and ranged between ZAR:USD 11.54 and 15.43 (2017 a range of 12.42 to 14.47). The spot rate on the balance sheet date weakened by 4% from 13.55 at 30 September 2017 to 14.14 at 30 September 2018. The overall impact of exchange rates movements on cost of sales was a negative $23 million.

Metal stock movement

Excluding the impact of exchange rate movements the increase in metal stock of $29 million comprised an increase in metal stock of $27 million in 2018 compared with a decrease of $2 million in 2017. The increase in the value of inventory in 2018 was driven by escalation whereas in 2017 the escalation was offset by a decrease in volumes held.

Depreciation and amortisation

Depreciation and amortisation decreased by $52 million year on year driven by the material impairment of assets in 2017.

Foreign exchange arising on the acquisition of Pandora

The stepped acquisition of Pandora from 50% to 100% resulted in a $24 million cumulative exchange loss on the translation of the Pandora JV balance sheet from Rand to Dollar. In prior periods the Rand strengthened significantly and this loss was previously recognised in the consolidated statement of comprehensive income. On acquiring control of this asset the original 50% held was deemed as sold, prior to the acquisition of 100%, and the $24 million loss was recognised in the income statement in accordance with IFRS.

Net finance costs

Net finance expenses for the year of $30 million were lower than 2017 by $58 million driven largely by a decrease in the carrying value of the Phembani loan in the prior year following impairment.

The net bank interest charge for the year was $7 million (2017 - $5 million). Bank fees for the year amounted to $3 million some $4 million lower than the prior year due to a decrease in commitment fees on the draw-stopped rolling credit facilities (RCFs). Exchange losses on net cash in 2018 amounted to $9 million (2017 - gain of $3 million) as the Rand weakened by 4% between 30 September 2017 and 30 September 2018 on a spot basis which impacted the translation of Rand balances compared with a strengthening of 1% of the Rand in the prior year.

The loan to Phembani is secured on the Phembani's shareholding in Incwala, whose only asset of value is its underlying investment in WPL, EPL and Akanani and was impaired by $109 million to $nil at 30 September 2017 due to the decline in the valuation of the Marikana operations. The gross loan of $433 million (excluding impairments in prior years) accrued interest in the year amounting to $29 million (2017 - $26 million) and attracted an exchange loss for the year of $12 million (2017 - a gain of $14 million) due to the weakening of Sterling against the US Dollar. The loan was impaired by $17 million in the year to offset interest accrued and exchange gains in 2018 and bring the carrying value back to nil.

Share of profit / (loss) of equity accounted investment

In 2018 the share of profit from equity accounted investments related to Petrozim Line (Private) Limited (Petrozim). In June 2018 the Group entered into agreement to sell its 50% interest in Petrozim for $21 million net of tax. This comprised gross cash consideration of $14.75 million and special dividends of $8 million. The Group's share of profits from this joint venture to date had been impaired due to uncertainty over receiving distributions from Zimbabwe. Impairments were reversed during the period up to the net amount to be received.

In 2017 the share of loss of equity accounted investments of $3 million related to the Pandora JV which was fully acquired in December 2017.

Taxation

The tax charge for 2018 was $6 million (2017 - a credit of $18 million) and comprised a current tax charge of $5 million (2017 - $15 million) and a deferred tax charge $1 million (2017 - a credit of $33 million).

Cash Generation and Net Cash

The following table summarises the main components of the cash flow during the year:

Cash flow from operations in 2018 at $110 million represented an increase of $57 million compared with 2017 driven by the increase in profitability. The final $7 million tranche of third party funding for the bulk tailings re-treatment plant (BTT) was received in the year (2017 - $34 million funding received). The BTT funding was accounted for as deferred revenue.

The cash out flow on net interest and finance costs decreased by $2 million partly due to a decrease of commitment fees on the undrawn and draw-stopped RCFs. Tax paid in the year of $10 million was $2 million higher than the prior year as the parent company Lonmin Plc had no carried forward assessed trading losses remaining to offset tax payable.

Trading cash flow for the year amounted to $90 million which was $57 million higher than 2017.

Capital expenditure at $73 million was $27 million lower than the prior year in-line with our strategy of limiting capital expenditure. 

The Company continued to divest non-core assets during the year with the conditional sale of the 50% investment in Petrozim. $7 million of proceeds were received in the financial year (included in the table above). The sale of shares in Wallbridge Mining Company Limited was agreed in September 2018 and the cash consideration of $3 million was received in October 2018.

The acquisition of the remaining 50% of Pandora was completed in the year. The upfront payment made was $4 million. A deferred cash payment of 20% of the distributable free cash flows generated by the Pandora E3 operations is payable on an annual basis for a period of six years, subject to a minimum deferred consideration of R400 million. The completion of the Pandora transaction unlocks significant synergies including allowing Lonmin to extend mining at Saffy shaft without having to spend R2.6 billion of capital expenditure, of which R1.6 billion would have been required over the next four years.

The improvement in profitability in 2018 was driven by higher Rhodium and Palladium prices which offset both the weaker Platinum price and cost increases. Whilst the Rand weakened against the Dollar in Q4 2018, costs rose year-on-year due to South African CPI of 4.9% and above inflationary wage increases. Financial performance in 2019 will be highly geared to the PGM prices, Rand:Dollar exchange rates, the upcoming wage negotiations as well as operational performance.

Barrie van der Merwe

Chief Financial Officer

MARKET REVIEW AND OUTLOOK

Market Overview 2018

During the financial year the platinum market remained depressed, while Palladium improved strongly. The Rhodium price continued to advance strongly, owing to strong buying in China and a decline in supply from South Africa. Given South Africa's dominance in Rhodium and other precious metals supply, mine cuts have reduced primary production capacity by over 30% since 2008.

Platinum's contribution to Lonmin's PGM basket revenues reduced from 58% to 45%, while Palladium improved to 23% and Rhodium increased to 16% of the total revenue basket.

Demand in 2018 (calendar year)

Supply in 2018 (calendar year)

Source: SFA (Oxford) estimates. Note: Table figures may not be totally correctly owing to independent rounding

Market Outlook 2019

Platinum

Mine depletion is expected to start to impact output from 2020. Gross demand is also estimated to be higher but the market remains in large surplus. Mine depletion will start to impact Platinum output significantly from 2020. For 2019, output will remain at current levels, based on forecasts supplied by the PGM mining industry. In 2019 we see gross demand increasing marginally which suggests that the Platinum market will continue to remain in surplus in the near term.

Automotive demand is expected to be marginally lower in 2019. The decline in diesel share in Western Europe is likely to continue, but at a slower pace than in 2018. Heavy-duty vehicles, offer some upside for autocatalyst Platinum use, as more vehicles are needed to meet expanding freight volumes and tightening emissions standards, especially in Asia.

The hydrogen economy, using Platinum catalysts in fuel cells, is developing rapidly. While the volumes of Platinum required are still low, this sector has very promising growth prospects, driven by the need to decarbonise transport to reduce emissions.

Of note too are the significant numbers of PGM catalysed electrolysers that are expected to be commissioned around the world in 2019 to build the hydrogen fuelling infrastructure to meet the needs of fuel-cell-powered buses and trucks.

Global demand for jewellery is estimated to grow next year as demand in China stabilises and growth continues in all other regions.

Industrial demand is projected to expand boosted by growth in net use in petroleum refining and other end users.

Palladium

Palladium demand is dominated by its use in gasoline autocatalysts. The two largest markets, China and the US, have seen light vehicle sales stall in 2018, but moderate growth is expected to return in 2019.

A combination of increased vehicle production (China) and tighter emissions standards and bigger vehicles (US) should lift demand for Palladium keeping the market in deficit.

Sales Prices

During the financial year the average Rhodium price continued to advance strongly, more than doubling from $915/oz to $1,988/oz, owing to strong buying in China and a decline in supply from South Africa. Given South Africa's dominance in Rhodium supply, mine cuts have reduced primary production capacity by over 30% since 2008. The average Platinum price slipped by 7% to $890/oz, while Palladium climbed by 22% to $986/oz.

The Rand was slightly stronger against the US dollar during FY2018 than in FY2017, averaging 13.07.

Lonmin Beneficiation

Thakadu Nickel Purification Plant

Thakadu Battery Materials (Pty) Ltd (Thakadu) is in the process of constructing a R250million nickel purification plant at Lonmin's base metal refinery. The plant will convert Lonmin's existing crude nickel sulphate into high quality battery-grade nickel sulphate, which can be sold at a premium and thus create value for both Thakadu and Lonmin. The plant is able to produce 25,000 tonnes per year of high-purity nickel sulphate.

All major equipment has been ordered and key contracts have been awarded by Thakadu. Commissioning of the plant is scheduled for 2019. The plant is expected to create over 60 permanent jobs once in operation.

PMR Beneficiation - 3D Printing

The Lonmin beneficiation strategy includes the additive manufacturing or 3D printing using pure Platinum powder. The project was developed from concept by the Lonmin marketing and process technology teams. The Platinum powder used in 3D printing has very particular specifications and the powder was developed in-house by Lonmin employees. A 3D printer is housed at Lonmin's Precious Metal Refinery and is unique in that it is the first to be used for 3D printing using pure Platinum metal. Commissioning and optimisation of the 3D printer is ongoing, with assistance from members of Platforum, which is a collaboration between South Africa's Central University of Technology, Northwest University of Technology, Vaal University of Technology and Lonmin. This vehicle aims to provide prototype facilities to budding entrepreneurs to produce products containing PGMs via additive manufacturing or 3D printing.

MINERAL RESOURCE AND MINERAL RESERVE STATEMENT

2018 Mineral Resources

Main features of the Lonmin mineral resources as at 30 September 2018:

Attributable mineral resources were 160.8 Moz of 3PGE+Au in 2018, a decrease of 17.5 Moz from 2017.

Revisions to the South African mineral resource estimates were confined to the Marikana and Pandora properties. The Akanani and Limpopo mineral resources were unchanged during 2018.

The changes to the Marikana and Pandora mineral resource this year include:

Inclusions - Leading to an increase in mineral resources:

· As at 1 December 2017, Lonmin completed the acquisition of the Pandora JV and now owns 100% of Pandora. The Pandora mineral resources were previously reported at 41% attributable. Full ownership of Pandora, at 82% attributable, contributes an additional 11.6 Moz of 3PGE+Au in UG2 mineral resource.

Exclusions - Leading to a decrease in mineral resources:

· The Schaapkraal prospecting right covered the western down-dip area at Marikana and expired in April 2018. An application for a new renewal of the prospecting right has been submitted to the DMR and the decision to grant Lonmin the prospecting right is pending. Due to this, the Schaapkraal prospecting right area has been removed out of the Marikana total attributable mineral resource and mineral reserve while we await the grant of the new prospecting right. On the grant of the new prospecting right, these mineral resources and mineral reserves will be included back into the total Marikana figure. The removal of the Schaapkraal prospecting right areas from the UG2 and Merensky mineral resources causes an overall drop in the 4E grade of 3.4%. This is due to the removal of high grade Merensky mineral resources in the K5 and K6 project areas (6.7% drop in overall Merensky grade) and similarly higher grade UG2 mineral resources in the K5 project area (2.5% drop in overall UG2 grade).

· The mineral resources at Marikana (excluding tailings) decreased by 5.8 Moz 3PGE+Au in 2018. This is attributed to the net effect of a decrease in the Merensky mineral resources (10.9 Moz) and an increase of the UG2 mineral resources (5.1 Moz).

o The Merensky Measured and Indicated mineral resources decreased by 1.5 Moz, the nett effect of re-evaluation after consideration of depletions and the removal of 1.5 Moz from the Schaapkraal prospecting right. The Merensky Inferred mineral resources decreased by 9.4 Moz, due to re- evaluation and the removal of 9.5 Moz from the Schaapkraal prospecting right.

o The UG2 Measured and Indicated mineral resources increased by 15.5 Moz due to the nett effect of consideration of depletions, the removal of 3.8 Moz from the Schaapkraal prospecting right and the addition of 10.3 Moz from Pandora. The UG2 Inferred mineral resource decreased by 10.4 Moz due to reassessment of mineral resource confidence, the removal of 13.1 Moz from the Schaapkraal prospecting right and the addition of 1.3 Moz from Pandora.

The remining of the Marikana Tailings commenced in February 2018 and as at 30 September 2018 the mineral resource has been depleted by 0.1 Moz.

The changes to the international mineral resource this year include:

Inclusions - Leading to an increase in mineral resources:

· During 2018, Lonmin explored Sudbury for PGMs with joint venture partners Wallbridge Mining and Vale. Subsequently, the joint venture with Vale was terminated in July 2018. In exchange for relinquishing Lonmin's rights to 50% participation on five of the Vale Joint Venture properties, Lonmin was granted 100% of the mineral rights for all metals and minerals on the portion of Denison that includes the Denison 109 FW mineral resource, the 9400 Zone PGM-Ni-Cu mineralisation and Ni-Cu massive sulphide remnants on the old Crean Hill Mine.

2018 Mineral Reserves

Main features of the Lonmin mineral reserves as at 30 September 2018:

Mineral reserves for 2018 are broadly in line with the 2017 Reserves Statement with only a minor decrease in Total mineral reserves bottom-line to 31.2 Moz (from 31.8 Moz in 2017).

Minor year on year variances in mineral reserves are to be expected as a result of depletions during the year as well as changes in mine design and modifying factors. Material changes were mainly be due to reclassification of ore reserves or changes in the long term commodity price outlook. Remining of the Marikana Tailings commenced in February 2018 and as at 30 September 2018, 0.07 Moz of the mineral reserve has been depleted.

The minor decrease in total mineral reserves this year hides the fact that a number of changes in the detail by shaft simply nets off to a small decrease in reserves.

Some of these changes included this year:

Inclusions - Leading to an increase in reserves:

· Increase in Marikana reserves due to "transfer in" from Pandora due to the purchase, with these reserves now stated at 82% attributable (41% in 2017);

· Resultant increase in scheduling in Pandora ground, impacting Saffy and East 3 (both shaft boundaries extended deeper into Pandora ground);

· MK2 Merensky mining brought in to reserves at Rowland for the first time;

· Net effect of changes is an increase in the UG2 reserves by 12.0Mt.

Exclusions - Leading to a decrease in reserves:

· Removal of certain projects that form part of the life of mine plan, but no longer fulfils the SAMREC requirement of being the subject of a recent pre-feasibility study (PFS) (Newman Merensky & Rowland/MK2 sub-incline UG2 & K4 sub-inclines);

· Schaapkraal removed from resource and therefore reserves, impacting the K4 sub-incline which was previously also not subject of a PFS, but formed part of the life of mine plan;

· Net effect of changes is a decrease of 15.6Mt in the Merensky reserve.

No mineral reserves continue to be declared for Limpopo, and there were no revisions thereof in 2018.

Operating statistics 5 year review

Operating statistics 5 year review

Operating statistics 5 year review