Lonmin Regulatory News (LMI)

LEI No: 213800FGJZ2WAC6Y2L94

REGULATORY RELEASE

17 July 2017

Third Quarter 2017 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 2017 (unaudited) and a business update.

Third Quarter Highlights

· It is with great regret that we have to report 2 fatalities in a period when the 12 month rolling Safety Lost Time Injury Frequency Rate ("LTIFR") had in fact improved by 2.0% quarter on quarter.

· The mining performance improvement since March 2017 has been sustained into Q3 2017. Total tonnes mined increased by 3.8% to 2.7 million tonnes compared with Q3 2016, up 13.2% on Q2 2017.

· Tonnes mined from our Generation 2 shafts, which generate 84% of our production, increased by 9.0% to 2.2 million tonnes compared with the prior year period and increased by 18.6% against Q2 2017.

· Concentrator recoveries continue to be excellent at 86.8%.

· Sales of 180,348 Platinum ounces increased by 10.8% on prior year period. We are maintaining our full-year sales guidance of 650,000 ounces to 680,000 ounces.

· Average Rand full basket price down 3.0% on the prior year period, at R11,506 per PGM ounce.

· As a result of the much improved mining performance, unit costs reduced by 4.7% quarter-on-quarter to R11,278 per PGM ounce (6E basis), and increased 6.4% year-on-year, slightly above inflation.

· We were at the lower end of the revised unit cost guidance of between R11,300 and R11,800 per PGM ounce.

· Gross cash improved to $236 million at 30 June 2017 from $225 million as at the end of the second quarter.

· Net Cash improved to $86 million (gross cash of $236 million less the drawn term loan of $150 million) at 30 June, up from $75 million (gross cash of $225 million less the drawn term loan of $150 million) at the end of the second quarter.

Ben Magara, Chief Executive Officer, said: "We had a pleasing operational performance all round and continue with our decisive work and aim to be at least cash neutral even at current low PGM prices and a strong Rand. I am pleased that with the right team in place, our mining turnaround has been sustained. I am grateful to our employees who have worked hard to produce the results we are seeing. We continue to find levers to pull, in this "lower prices for longer" environment and to make the improvement of our performance a priority. I am particularly pleased that our net cash has improved. Despite the difficult global macro-economics and the complex and challenging socio political operating environment, we are still able to find common ground for Lonmin to deliver this sustained improved performance."

Third Quarter Production Overview

Safety

· Regrettably, two colleagues were fatally injured during the period. As reported at the Interims, Mr Simon Sibitane, a locomotive operator at 4B on 11 May and Mr Mangi Bunga, a Team Leader rail and Haulage Maintenance at 4B on 29 June, died following a tramming incident. The five fatalities experienced during the first nine months are unacceptable. We will be holding a safety workshop with stakeholders this month as we continue to work with all stakeholders to identify and implement sustainable remedies.

· The 12 month rolling LTIFR to 30 June improved by 2.0% to 4.80 per million man hours from 4.88 at 31 March 2017.

· The 12 month rolling Total Injury Frequency Rate improved 3.0% to 11.62 at 30 June 2017, from 12.03 at 31 March 2017.

Mining Operations

The Marikana mining operations (including Pandora) produced 2.7 million tonnes during the third quarter, an increase of 3.8% or 97,000 tonnes on the prior year period, reflecting a strong performance from our core Generation 2 shafts in spite of the planned decrease in production from the Generation 1 shafts in line with our strategy to reduce high cost production in a low price environment.

Generation 2 shafts

Tonnes mined from our core Generation 2 shafts (K3, Rowland, Saffy and 4B) were 2.2 million tonnes, an increase of 9.0% on the prior year period and accounted for 84% of total tonnes mined, emphasizing our continued focus on improving production at these shafts, which are important for Lonmin's future.

· K3 produced 806,000 tonnes, an increase of 22.0% on the prior year period and a quarter on quarter increase of 38.3%. The production of 290,000 tonnes at K3 for the month of May was the highest since July 2013.

· Saffy shaft produced 580,000 tonnes, an increase of 12.0% on the prior year period and a quarter on quarter increase of 16.4%.

· Rowland shaft produced 528,000 tonnes, an increase of 20.8% on the prior year period and a quarter on quarter increase of 16.8%. This was the shaft's best quarterly production since the fourth quarter of the 2011 financial year and the best Q3 output in the last eight years.

· 4B produced 314,000 tonnes, a decrease of 26.5% on the prior year period, impacted by safety stoppages associated with the two fatalities.

Despite the poor start to the financial year, tonnes mined from the Generation 2 shafts for the nine months to 30 June of 5.9 million tonnes are now in line with the prior year. This gratifying result illustrates the extent of the momentum the mining team has established in the last five months, following the weak first four months. Traditionally, the fourth quarter is our strongest in terms of production and we anticipate this momentum to continue absent any unforeseen interruptions to the mining production run.

As previously announced, we're on track with our plan for development crews deployed to stopping areas to revert to their own working areas by the end of the financial year.

Generation 1 shafts

In line with the Group's rationalisation of high cost areas, production from our Generation 1 shafts (Hossy, Newman, W1, E1, E2, E3 and Pandora (100%)) at 431,000 tonnes was 18.1% lower than the prior year period. Some of these shafts are managed as a coherent unit and are run by contractors, providing better flexibility to retain or stop them, depending on their profit contribution to the Company.

The combined E3 unit (E3 plus the Pandora JV) only produced 6,000 tonnes or 4% less in Q3 FY17 when compared to Q3 FY16, despite losing around 35,000 tonnes during May, when community protests disrupted production around the unit, as explained later in this report.

Ore reserves

Operational flexibility was preserved with the immediately available ore reserve position of 3.3 million square metres at the end of Q3 2017, or 20 months average production versus 3.9 million square metres at the end of Q3 2016.

Production Losses

Production lost due to Section 54 safety stoppages in the quarter totalled only 44,000 tonnes. This was 199,000 tonnes better than the prior year period.

Process Operations

Milling production in the quarter of 2.7 million tonnes was in line with tonnes mined of 2.7 million tonnes, and 7% higher than the 2.5 million milled in the prior year period, as a result of the improved mining performance. Metal-in-Concentrate produced was up 4.1% compared to Q3 2016 with 171,381 Platinum ounces and 329,336 PGM ounces.

Underground milled head grade at 4.58 grammes per tonne (5PGE+Au) decreased by 2.3% when compared to the 4.69 grammes per tonne achieved in the prior year period. The overall milled head grade was 4.58 grammes per tonne, down 2.2% on the prior year period of 4.68 grammes per tonne. The main reason that the overall grade is down is because of the change in the ore type mix. During the quarter, the Merensky proportion of tonnes milled was 3.0% more than the proportion milled during Q3 2016 (29% vs 26%). There was also a slight drop in the UG2 grades during the quarter as a result of increased dilution from leader seams at K3 UG2 for the period.

Concentrator recoveries for the quarter continue to be excellent at 86.8%.

Total refined Platinum production at 180,323 ounces was 3.9% higher than the prior year period. Total PGMs produced were 359,680 ounces, an increase of 3.1% on the prior year period. Refined Platinum production continued to benefit from the smelter clean-up project, which released 8,942 Platinum ounces during the quarter, compared to 8,865 ounces in the prior year period.

Sales & Pricing

Platinum sales for the quarter were 180,348 ounces, an increase of 10.8% compared with Q3 2016, mainly as a result of the improved mining performance. PGM sales were 345,354 ounces, up 9.6% on Q3 2016 sales.

Platinum sales for the nine months to 30 June 2017 were 487,343 ounces and we are maintaining our sales guidance for the year of 650,000 ounces to 680,000 ounces.

The US Dollar basket price (including base metal revenue) at $882 per ounce during the quarter was up 10.8% on Q3 2016 while the corresponding Rand basket price (R11,506 per ounce) was 3.0% lower than the prior year period. The average Rand to US Dollar exchange rate was 12.0% stronger at R13.19 compared to R14.99 in the prior year period.

Unit costs

Unit costs for the quarter were R11,278 per PGM ounce, a decrease of 4.7% on Q2 as a result of the improved mining performance. This is at the lower end of our revised guidance of between R11,300-R11,800. The year-on-year increase of 6.4% is slightly above inflation.

Community relationships

We experienced some community unrest during May. We are working with community leaders and have enlisted assistance from labour and other key stakeholders to assist us to create a stable operating environment. Contractors have also been engaged, where possible, to make opportunities for job creation for community members. Generally the community relations around the operations are improving.

Pandora update

We are making good progress with obtaining the necessary consents for the Pandora acquisitions and have now received approval from the Competition Authorities. As previously reported, we have submitted the requisite application for Section 11 consent to the Department of Mineral Resources prior to the release of the Mining Charter III and await approval. The transaction also remains subject to consent from our lending banks. We expect the transaction to complete by the end of the calendar year. On completion of these transactions, Lonmin will own 100% of Pandora. Full ownership of Pandora allows us to extend the mining at Saffy shaft further on strike east and west of the shaft, which will enable the deferment of the deepening of the shaft. The acquisition allows us to defer over R2.6 billion of allocated capital expenditure required for the further deepening of Saffy shaft, of which R1.6 billion will be over the next four years.

Outlook and Guidance

We are maintaining our sales guidance of between 650,000 Platinum ounces to 680,000 Platinum ounces, absent any unexpected interruptions to the smooth running of mining production. We believe this is achievable based on the sustained good operational results we have seen these past five months, combined with the fact that the fourth quarter of our financial year is traditionally our strongest. Safety remains a cause for concern, and we remain focused on addressing the root causes of safety incidents.

We anticipate achieving the revised unit cost guidance for FY17 of between R11,300 and R11,800 per PGM ounce.

We continue with our strategy of minimising capital expenditure but we are ensuring that the Immediately Available Ore Reserve position is maintained at the level necessary to support planned production at the Generation 2 shafts and minimise the near term impact on production. As in previous years, capital expenditure is weighted towards the second half of the financial year. We are maintaining our revised capital expenditure guidance for the current year to between R1.4 billion and R1.5 billion of which R917 million has been spent to date.

Board changes

As planned and previously announced in January 2017, Jim Sutcliffe will step down as a Non-executive Director and the Senior Independent Director of the Company on 31 July 2017, having served almost 10 years on the Board.

Jonathan Leslie, who has been an independent Non-executive Director on the Board since 2009, will succeed Mr Sutcliffe as the Senior Independent Director from 1 August 2017.

Brian Beamish, Chairman of Lonmin said "Jim has made a significant and valuable contribution to the Board. His insights, experience and guidance will be missed. I also want to congratulate Jonathan on his appointment as Senior Independent Director. I have no doubt his wealth of experience and knowledge will be beneficial in this new role."

The Company also announces the appointment of Gillian Fairfield as an independent Non-executive Director of the Company, with effect from 1 August 2017.

Ms Fairfield is a leading corporate lawyer with over 20 years' experience in corporate law, cross-border M&A and corporate finance. Ms Fairfield was awarded "Client Partner of the Year" in the British Legal Awards 2016 and was featured in the Legal 500 and cited as a leading practitioner in Chambers on a number of occasions.

Until May 2017, Ms Fairfield was a lawyer at Herbert Smith Freehills LLP for 13 years, of which 9 were as a corporate partner. Herbert Smith Freehills is one of the Company's legal advisers and Ms Fairfield has acted as a relationship partner to the Company. Prior to Herbert Smith Freehills, Ms Fairfield was an associate solicitor at Freshfields LLP for 5 years.

In accordance with the Listing Rules, Lonmin confirms that there are no additional matters that would require disclosure under LR 9.6.13 R (1) to (6). Ms Fairfield does not have any direct beneficial interests in Lonmin ordinary shares of $0.0001 each.

Brian Beamish, Chairman of Lonmin, said: "I am delighted to welcome Gillian to our Board. She brings with her extensive legal, governance and transactional experience and, combined with her knowledge of Lonmin and the mining industry, she will, I am sure, make a vital contribution to the Company and the Board."

- ENDS -

ENQUIRIES

Investors / Analysts:

Lonmin

Tanya Chikanza (Head of Investor Relations) +27 11 218 8358 /+44 20 3908 1073

Andrew Mari (Investor Relations Manager) +27 11 218 8420

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 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