Embattled Lonmin Cuts Sales Forecast

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VENTURES AFRICA – British platinum producer Lonmin Plc has cut its full-year sales forecast as it counted the losses caused by a five week strike at its Marikana mine in South Africa.

Lonmin said in a statement released today that it now expects to sell between 685,000 ounces and 700,000 ounces of platinum for the year ending September 30. The firm’s annual target was to sell 750,000 ounces.

“Lonmin announces that as a result of the on-going illegal strike at its Marikana operations ….it now expects sales for the full year ending 30 September 2012 to be in the range of between 685,000 and 700,000 saleable ounces of Platinum. Unit costs will also be negatively impacted and as a result we expect the guidance of an 8.5 percent increase in unit costs for the full year to be exceeded,” said Lonmin.

Lonmin, which is the world’s third-biggest platinum producer, is losing 2,500 ounces of platinum every day.

The company has halted production at its Marikana mine for over a month after 3,000 rock drill operators went on strike on August 10. The illegal and violent strike has so far claimed 45 lives. Police shot and killed 34 of the miners on August 16.

The sales guidance released by Lonmin reflects the company’s inability to mine in recent weeks because of the strike.

Lonmin’s attempt to have its 28,000 workforce back at work hit a snag last week, after striking workers rejected its pay offer of 900 rand ($112.50) wage increase to 5,500 rand ($688) for entry-level workers. Lonmin insists the 12, 500 rand ($1,500) workers are demanding is unaffordable. Talks between Lonmin and workers unions resumed today.

“Our view is that negotiations are the best way to achieve a sustainable return to work. Clearly however, there will be consequences to jobs if there is a continuing delay in returning to production. The situation is delicate but we have limited options in terms of managing the trade-off between lost production, higher wages and business rationalisation, including a significant reduction in jobs,” said Lonmin acting chief executive Simon Scott.

Scott further reiterated the firm’s earlier threat on reduction of jobs.

“There are already jobs that are at risk because of the current economic climate. The unprotected strike has already added pressure to some of our higher cost shafts. A prolonged delay in production will only force further difficult management decisions.” said Scott.

The firm today gave notice to terminate its contract with Murray and Roberts – a contractor which supplies about 1,200 staff at its K4 shaft with effect from October 17 as part of the firms on-going capital expenditure review. In July, Lonmin announced some capital expenditure at the K4, Hossy and Saffy shafts was being deferred so as to reduce annual capital expenditure in the 2013 and 2014 financial years to $250 million per annum.

Lonmin said mining activity at Marikana is minimal, although all shafts are operational adding that violence and intimidation have prevented many of its employees from returning to work.

The Marikana mine accounts for about 96 percent of Lonmin’s output.

Meanwhile, UK headquartered Anglo American Platinum, says it will reopen its Rustenburg platinum operations tomorrow. The company which produces around 40 percent of global platinum output suspended operations at Rustenburg last week after its employees went on strike.

“The situation in Rustenburg remains calm and our current intention is to resume operations on Tuesday morning, which will provide time for the government to implement further security measures.” said Anglo American Platinum.

The strikes and violence at some of the world’s leading platinum producers in South Africa, has pushed the metals’ price up by nearly 20 percent in the last one month due to supply fears.