Lonmin Regulatory News (LMI)

LEI No: 213800FGJZ2WAC6Y2L94

REGULATORY RELEASE

 27 July 2018

Third Quarter 2018 Production Report and Business Update

Lonmin Plc ("Lonmin" or "the Company"), one of the world's largest primary platinum producers, today announces its production results for the quarter ended 30 June 2018 (unaudited) and a business update.

Third Quarter Key Features

· 12 months fatality free.

· YTD LTIFR to 30 June 2018 improved by 16% and TIFR improved by 9%.

· Significant reduction in Section 54 safety stoppages on the back of improving safety indicators.

· 2.6 million total tonnes mined during the third quarter, decreased by 3.1% year on year, partly reflecting a planned reduction from the Generation 1 shafts, arising from the closure of some Generation 1 shafts, in line with our strategy to reduce high cost production.

· Concentrator recoveries continue to be excellent, improving to 87.4% from 86.8% in the comparable quarter last year.

· PGM sales increased by 2.0% to 352,128 ounces for the quarter and Platinum sales of 176,121 decreased by 2.3%. The smelters are running normally and we are on track with the planned release of stock that was previously locked up in the smelter. We maintain our full-year sales guidance of 650,000 to 680,000 Platinum ounces.

· Average Rand full basket price up 13.1% on the prior year period, at R13,017 per PGM ounce.

· Unit costs reduced by 11.5% to R11,781 per PGM ounce in the third quarter and were R12,538 per PGM ounce for the nine months to 30 June 2018, allowing us to maintain our guidance for unit costs, at the upper end of the R12,000-R12,500 per PGM ounce range for the full year.

· Gross cash of $173 million at 30 June 2018, up from $167 million as at the end of the second quarter.

· Net cash improved to $23 million (gross cash of $173 million less the drawn term loan of $150 million) at 30 June, up from $17 million (gross cash of $167 million less the drawn term loan of $150 million) at the end of the second quarter.

· The Competition and Markets Authority of the UK unconditionally cleared the proposed acquisition of Lonmin by Sibanye-Stillwater (the "Offer") on 28 June 2018 which is on target to close in the second half of this year.

Third Quarter Production Overview

Safety

· Lonmin is now 12 months fatality free since 29 June 2017. Our safety strategy is centred on the belief that Zero Harm is achievable and that important contributions are required from all stakeholders to achieve this. Lonmin is grateful for the collaboration between its management, employees, unions and the Rustenburg DMR Inspectorate.

· All our Generation 2 shafts are currently on millionaire status (fatality free shifts), notably Saffy shaft is on 6.0 million fatality free shifts (four years).

· Year on year, the 12 month rolling Lost Time Injury Frequency Rate ("LTIFR") has improved by 17.9% to 3.95 and the 12 month rolling Total Injury Frequency Rate ("TIFR") improved 15% to 9.88.

· We believe that this good performance is as a result of our continual engagement with our employees, unions and the Inspectorate and the proactive shaft by shaft cross-site audits, which verify levels of compliance with Lonmin Life Rules. These audits are not only assisting the organisation to proactively manage the risks and hazards, but provide useful benchmarking and knowledge sharing between the operations, maintain the heightened focus on positively influencing employee behaviour, and ensure learnings from serious injuries and fatalities from the industry are implemented.

· All Generation 2 shafts have received the International Standard for Occupational Health and Safety (OHSAS) 18001 certification for the first time. The OHSAS 18001 is a significant milestone for Lonmin and for each shaft to obtain such certification, further shows Lonmin's sound health and safety performance and stewardship.

Mining Operations

The Marikana mining operations (including Pandora) produced 2.6 million tonnes during the third quarter, a decrease of 3.1% or 83,000 tonnes on the prior year period, which reflected a planned decrease in production from the Generation 1 shafts, arising from the closure of some Generation 1 shafts, in line with our strategy to reduce high cost production in a low price environment.

Generation 2 shafts

Production for the nine months to 30 June 2018 is up 2.8% to 5.5 million tonnes. Tonnes mined from our core Generation 2 shafts (K3, Rowland, Saffy and E3) were 2.0 million tonnes, a decrease of 3.0% on the prior year period.

· K3 produced 740,000 tonnes for the quarter, 1% above the planned production for the quarter. Production for the nine months to 30 June 2018 is up 5.1% compared to the prior year period, to 2.1 million tonnes. The production for the quarter was down 8.1% on the prior year period, as the development crews which had moved to stoping in the prior year (as part of the turnaround strategy following the shaft's lacklustre production in the first 4 months of FY2017, returned to their development area.

· Saffy shaft produced 583,000 tonnes for the quarter, an increase of 1.0% on the prior year period, demonstrating the continued steady state performance. Production for the nine months to 30 June 2018 is up 2.0% compared to the prior year period, to 1.6 million tonnes.

· Rowland shaft produced 494,000 tonnes for the quarter, a decrease of 6.6% on the prior year period, as mining levels reach the extremities of Rowland's lease area and the reducing immediately available ore reserves ("IAOR") at the operation and the resultant limited mining flexibility impacted negatively on output. Production for the nine months to 30 June 2018 is down 3.2% compared to the prior year period, to 1.4 million tonnes. This is being mitigated through an aggressive development strategy focused on ore resource blocks that have been recently transferred to Rowland Shaft from neighbouring K3 and K4 shafts. Focus also remains on releasing backlog sweepings. The first two raise lines are scheduled to hole in August 2018. The shaft's future flexibility to continue to operate at optimal levels post the current financial year will be compromised in the event third party funding for its MK2 extension project is not secured. Lonmin is progressing discussions to secure partial third party funding for this project.

· The combined E3 unit (E3 plus Pandora) produced 172,000 tonnes for the quarter, an increase of 26.4% on the prior year period. Production for the nine months to 30 June 2018 is up 15.3% compared to the prior year period, to 0.5 million tonnes.

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 551,000 tonnes continues to decline, as we optimise on remaining ore reserves in these shafts, and was 9.4% lower than the prior year period. The decrease is also due to E2, which produced until Q3 2017, now being on care and maintenance. E2 shaft was put on care and maintenance in November 2017.

As W1 and E1 are mining remnant areas, these shafts are at the end of their resource lives and contractors operate them and are responsible for all the costs associated with such shafts. Lonmin pays a predetermined rate per tonne, which is reducing in line with Lonmin's cost cutting measures. We thus retain the flexibility to cease production if and when unprofitable.

Hossy shaft was scheduled to be put on care and maintenance, but it continues to demonstrate potential to contribute to the business. Based on this and the planned IAOR, we continue to operate Hossy.

Ore reserves

Operational flexibility was preserved with the IAOR position of 20 months average production at the end of Q3 2018, versus 20 months average production at the end of Q3 2017.

The Rowland available ore reserve has been maintained at 11.5 months since 31 March 2018. While this remains a concern, the IAOR position is forecast to improve over the next 6 to 12 months as the re-allocated ore resource blocks mentioned earlier are developed and converted to IAOR.

Production Losses

We are encouraged that tonnes lost due to Section 54 safety stoppages for the quarter were significantly lower at 3,000 tonnes compared to the prior year period of 44,000 tonnes. This emphasised our improving safety performance and our continued proactive engagement with all stakeholders including unions, employees, the DMR Inspectorate and communities.

Process Operations

Concentrator production - Mining

Total tonnes milled from mining operations in the quarter were 2.4 million tonnes whilst metals-in-Concentrate produced from mining operations was down 6.1% (excluding Pandora) compared to Q3 2017 with 153,152 Platinum ounces.

Underground milled head grade at 4.55 grammes per tonne (5PGE+Au) decreased marginally by 0.5% when compared to the 4.58 grammes per tonne achieved in the prior year period.

Concentrator recoveries from underground mining for the quarter continue to be excellent at 87.4% (86.8% achieved in the prior year period).

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

The BTT project was successfully hot commissioned on 14 February. Total tonnes milled from the BTT project were 796,000 tonnes for the quarter, with a head grade of 1.06 grammes per tonne and a recovery rate of 23.2%, producing Metals-In-Concentrate of 3,025 Platinum ounces and 5,987 PGM ounces. We expect the current level of performance to improve as the project continues to stabilise.

Processing

Number Two furnace was on a planned shut-down from 3 April and has since been started up and came back online on 5 May 2018. As a result we were able to start releasing some of the smelter lock-up towards the end of the quarter. The smelters continue to run normally and we are on track with the planned release of stock that was previously locked up in the smelter.

Total saleable refined Platinum production at 176,626 ounces was 2.0% lower than the prior year period. Total saleable PGMs produced were 351,458 ounces, a decrease of 2.3% on the prior year period.

There was no release of Platinum ounces from the smelter clean-up project during this period, compared to the 8,942 Platinum ounces released in Q3 2017. It is expected that circa 6,000 Platinum ounces and 12,000 PGM ounces will be released from the smelter clean-up project during the next quarter, Q4.

Sales & Pricing

Platinum sales for the quarter were 176,121 ounces, a decrease of 2.3% compared with Q3 2017, in line with the decrease in production. PGM sales were 352,128 ounces, up 2.0% on Q3 2017 sales, due to the higher proportion of Ruthenium and Iridium sold, with Ruthenium up 41.5% to 53,501 ounces and Iridium up 21.9% to 9,993 ounces.

Platinum sales for the nine months to 30 June 2018 were 463,870 ounces and we are maintaining our sales guidance for the year of 650,000 to 680,000 ounces.

The US Dollar basket price (including base metal revenue) at $1,013 per ounce during the quarter was up 14.9% on Q3 2017 while the corresponding Rand basket price (R13, 017 per ounce) was 13.1% higher than the comparative prior year period. The average Rand to US Dollar exchange rate was 4.1% stronger at R12.65 compared to R13.19 in the prior year period.

Unit costs

Unit costs for the quarter were R11, 781 per PGM ounce, a decrease of 11.5% on the R13, 308 per PGM ounce from the previous quarter and a year-on-year increase of 4.5%. Unit costs for the nine months to 30 June 2018 were R12, 538 per PGM ounce, allowing us to maintain our guidance for unit costs, at the upper end of the R12, 000-R12, 500 per PGM ounce range for the full year, as previously stated in the interim results.

Outlook and Guidance

We are maintaining our sales guidance of between 650,000 and 680,000 Platinum ounces, as we are on track with the planned release of stock that was previously locked up in the smelter and absent any unexpected interruptions to the smooth running of production operations.

Unit cost guidance for the full year is being maintained at the upper end of the range of between R12, 000 and R12, 500 per PGM ounce.

We are also maintaining our revised capital expenditure guidance for the current year to between R1.2 billion and R1.3 billion.

Disposal of the 50% interest in Petrozim

We entered into a conditional Sale of Shares Agreement to sell the 50% interest in Petrozim Line (Private) Limited ("Petrozim") for a gross cash consideration of USD14,750,000 to the National Oil Infrastructure Company of Zimbabwe (Private) Limited ("NOIC") (the "Transaction"). In addition, Lonmin will receive USD8, 000,000 in the form of special dividends from Petrozim. The Transaction forms part of Lonmin's ongoing programme to dispose of non-core assets. The purchase price and special dividends will be paid in cash on completion of the Transaction and will be used to improve the Company's liquidity.

The closing of the Transaction is subject to various conditions precedent including approvals from the Zimbabwean Competition Commission and the Zimbabwe Revenue Authority, in addition to the consent of Lonmin's lending banks. Subject to fulfilment of the conditions precedent, the Transaction is expected to complete in Q4 of FY2018.

Update on All-share offer by Sibanye Stillwater

The Competition and Markets Authority (CMA) unconditionally cleared the All-share Offer for Lonmin by Sibanye-Stillwater (the Offer) on 28 June 2018. The CMA is the UK authority responsible for investigating any merger that could restrict competition.

The CMA's clearance takes us one step closer to completion of the Offer. The Offer remains subject to the satisfaction or (where applicable) waiver of the outstanding conditions set out in Appendix I to the announcement of the Offer on 14 December 2017. Such conditions include, amongst others, the approval by the South African competition authorities and the approvals of Lonmin and Sibanye-Stillwater shareholders and the courts of England and Wales.

Lonmin remains fully committed to the Offer and continues to engage constructively with Sibanye Stillwater, the South African competition authorities and other stakeholders with a view to obtaining clearance in South Africa. The Offer is expected to close by the end of this year.

- ENDS -

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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 located.

The Company creates value through mining, refining and marketing PGMs and has a vertically integrated operational structure - from mine to market. Underpinning the operations is the 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