REG - Lonmin PLC - Q1 Production Report & IMS

Thu Jan 26, 2012 2:00am EST

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RNS Number : 1969W
Lonmin PLC
26 January 2012
 



 

26 January 2012

 

Lonmin Plc

 

Q1 2012 Production Report

& Interim Management Statement

 

Lonmin Plc ("Lonmin" or the "Company") today announces its production report for the quarter to 31 December 2011 (unaudited)and Interim Management Statement for the period from 1 October 2011 to today's date.

 

Overview

 

Platinum metal in concentrate and refined Platinum production increased by 3.5% and 24.3% respectively on a year on year basis. These results benefited from a healthy opening ore stock position at the end of September 2011 and consistent metallurgical recovery rates. Our mining performance in the first quarter of 2012 was however severely impacted by the increase in the Section 54 safety stoppages from the Department of Mineral Resources (DMR) that were experienced industry wide. Whilst total tonnes mined reduced by 110,000 tonnes on an underlying year on year basis, the impact of the Section 54 stoppages resulted in 177,000 tonnes of lost production.

 

We regretfully report that Mr Albino Moises Cuna was fatally injured on 9 December at E2 Shaft while clearing a blocked ore chute. Until that date, Lonmin had been fatality free since 12 April, reflecting a 6 million fatality free shift period of 8 months. Our Lost Time Injury Frequency Rate (LTIFR) for the quarter was 4.67 incidents per million man hours versus 4.71 for Q4 2011 and 4.92 for Q1 2011.

 

Mining Division

 

Our underground operations at Marikana produced 2.7 million tonnes during the first quarter of the 2012 financial year, a decrease of 50,000 tonnes or 1.8% on Q1 2011. Our overall focus during the quarter was on safely improving our production and moving down the cost curve. Our efforts however have been significantly affected by the increased frequency and wide range of Section 54 safety reviews and stoppages that have been experienced across all our operations when compared to the prior year period. In addition the number of days it has taken to have a Section 54 lifted has increased from an average of 2 to 5 days. A summary of the direct impact on production of Section 54 stoppages is detailed below.

 

 

 

Looking specifically at how our four mining divisions contributed to the quarter's total production over and above the impact of Section 54 stoppages set out above, total tonnes mined at Karee were up 104,000 tonnes, representing a 9.4% increase from the prior year period. This increase was however offset by a decrease in production at Westerns of 110,000 tonnes equivalent to 12.7% on the prior year as the planned decline at Newman continued. In addition production at Easterns decreased by 38,000 tonnes or 12.2% as a result of the fatality at E2, and illegal social unrest around the Easterns operations. Production at Middelkraal was broadly flat when compared to the prior year period as the influence of poor ground conditions on two sections of Saffy hampered the anticipated ramp up of production at Saffy.  The total impact of the Section 54 shut downs was 177,000 tonnes in lost production across all the operations (including joint ventures) compared to the prior year period losses of 21,000 tonnes. An additional 30,000 tonnes of production was lost as a result of the Company's support of the National Union of Mineworkers (NUM) industry safety march on 4 October and the community and social labour unrest we experienced in December which continued into the new calendar year.

 

Production at our Merensky opencast operations in the period was 118,000 tonnes, a decrease of 75,000 tonnes when compared to Q1 2011. This reflects continued slowdown in production of higher cost tonnes in order to optimise the grade which has improved by 48% when compared to prior year period, whilst Pandora production increased by 15,000 tonnes to 54,000 tonnes in line with its expected ramp up.

 

Process Division

 

Total tonnes milled in the quarter were flat at 3.0 million from the prior year as the increase in underground tonnes milled of 132,000 tonnes or 4.7% was more than offset by a 157,000 tonnes reduction in opencast tonnes.

 

Underground milled head grade was 4.50 grammes per tonne (5PGE+Au), down 0.05 grammes per tonne or 1.2% compared to the prior year period, reflecting the continued gradual increase in Merensky at our operations. The overall milled head grade was 4.47 grammes per tonne, an improvement of 2.2% when compared to the prior year period. This was due to the combination of higher grade and lower proportion of opencast ore when compared to the prior year.

 

Underground and overall concentrator recoveries were both 85.3%, an improvement of 0.1 and 0.3 percentage points respectively when compared with the prior year period and reflects the effectiveness of the mining approach on opencast.

 

Platinum in concentrate from the Marikana operations was 178,131 saleable ounces, a 1.3% increase over the prior year period. In total the concentrators produced 186,725 saleable ounces of Platinum in the quarter, a 3.5% increase from the prior year period. This reflects the higher proportion of Merensky ore in the mix which contained a higher percentage of Platinum.

 

Total refined production for the quarter was 113,950 ounces of saleable Platinum, an increase from the prior year of 24.3%. The significant increase in saleable Platinum against the prior year reflects the normalisation of the operations following the rebuild and modification of the Number One furnace which occurred in the prior year period. Total Platinum Group Metals (PGMs) production for the quarter was 245,950 ounces of PGMs, an increase of 2.3% from the prior year respectively.

 

Sales & Pricing

 

Platinum sales at 92,863 ounces were 39.8% higher than the prior year period as a result of increased production and stock movement in the quarter. In addition bad weather affected customer deliveries and impacted sales in the prior year period. Total PGMs sales increased by 2.9% to 189,590 ounces.

 

Chrome sales have more than doubled when compared to the prior year period as production at the chrome plants gains momentum.

 

The US dollar basket price at $1,136 during the first quarter was 3.3% less than the prior year quarter. The corresponding Rand basket price was 14.4% higher than the prior year period.

 

Wage Settlements

 

As announced on 5 December 2011, we reached a two year wage agreement with our unions which resulted in an overall aggregated wage increase of around 8.5 % for each of year 1 and year 2. The increase is effective from 1 October 2011 and is in line with industry wage settlements.

 

Joint Venture Earn In

 

In December 2011, Lonmin achieved its sole funded exploration 'earn-in' milestone of $32 million on the Vale Joint Venture (JV), giving Lonmin the exclusive right to a 50% interest in any PGM deposit on a JV property on which a development decision is made. Vale and Lonmin will now jointly fund the agreed 2012 PGM exploration programme on an equal basis, including the Denison open pit feasibility studies.



Outlook

 

Safety remains our priority and we continue to work cooperatively with the DMR and our Union representative bodies in this area. During the first quarter of our financial year our industry has been subject to an uncharacteristically high level of safety inspections from the DMR, with a resultant increase in Section 54 notices. This has had an adverse effect on production and in our opinion increases safety risk as operating momentum is interrupted. However, we have highlighted to the DMR the need to work together to establish a more appropriate mechanism that enables safety improvement without increasing the risk to safe and sustainable operations.

 

Our production performance to date still supports our sales guidance for the current year of 750,000 ounces of Platinum. We also maintain our guidance for unit costs to increase by the aggregate wage settlement of 8.5% agreed with our unions.  However Platinum sales and unit costs will be adversely impacted should the current trend of production losses from safety persist.

 

 

- ENDS -

 

 

ENQUIRIES:

Investors / Analysts:

Tanya Chikanza                                                                                                             +44 (0) 207 201 6007

Head of Investor Relations

 

Media:

Cardew Group                                                                                                                +44 (0) 207 930 0777

James Clark/Emma Crawshaw                                                                                       

Inzalo Communications                                                                                                  +27 (0) 11 646 9992

Gillian Findlay/Bridget von Holdt

 



 

 







3 months

3 months







to 31 Dec

to 31 Dec







2011

2010

LTIFR





4.67

4.92

Tonnes mined

Marikana

Karee1

kt


1 211

1 107


Westerns1

kt


761

872


Middelkraal1

kt


476

482


Easterns1

kt


272

310


Underground

kt


2 720

2 770


Opencast

kt


118

193


Total

kt


2 838

2 963

Pandora attributable2

kt


54

39

Lonmin Platinum

Underground

kt


2 774

2 809


Opencast

kt


118

193


Total

kt


2 892

3 002




% UG2

%


70.7%

72.2%









Tonnes milled3

Marikana

Underground

kt


2 820

2 740


Opencast

kt


77

234


Total

kt


2 897

2 973

Pandora4

kt


126

75

Lonmin Platinum

Underground

kt


2 946

2 815

Head grade5

g/t


4.50

4.55

Recovery rate6

%


85.3%

85.1%

Opencast

kt


77

234


Head grade5

g/t


3.33

2.24


Recovery rate6

%


85.7%

80.7%

Total

kt


3 023

3 048



Head grade5

g/t


4.47

4.38



Recovery rate6

%


85.3%

85.0%



 







3 months

3 months







to 31 Dec

to 31 Dec







2011

2010

Metals in concentrate7

Marikana

Platinum

oz


178 131

175 769


Palladium

oz


81 041

82 759


Gold

oz


4 664

4 459


Rhodium

oz


22 463

23 352


Ruthenium

oz


35 349

36 357


Iridium

oz


7 739

7 997

Total PGMs

oz


329 387

330 694


Nickel8

MT


966

884

Copper8

MT


624

570

Pandora4

Platinum

oz


8 595

4 665


Palladium

oz


3 993

2 177


Gold

oz


65

32


Rhodium

oz


1 310

714


Ruthenium

oz


2 012

1 114


Iridium

oz


345

183


Total PGMs

oz


16 321

8 886


Nickel8

MT


13

8


Copper8

MT


7

4

Lonmin Platinum

Platinum

oz


186 725

180 433

Palladium

oz


85 035

84 936

Gold

oz


4 730

4 491


Rhodium

oz


23 773

24 066


Ruthenium

oz


37 361

37 472


Iridium

oz


8 084

8 180

Total PGMs

oz


345 708

339 579


Nickel8

MT


978

892


Copper8

MT


631

574



 














3 months

3 months







to 31 Dec

to 31 Dec







2011

2010

Refined production

Lonmin refined metal
production

Platinum

oz


112 220

81 982

Palladium

oz


58 818

42 744



Gold

oz


3 663

2 545



Rhodium

oz


20 037

14 279



Ruthenium

oz


31 965

20 877



Iridium

oz


9 320

4 643



Total PGMs

oz


236 022

167 070



Toll refined metal production

Platinum

oz


1 730

9 700



Palladium

oz


4 124

35 545



Gold

oz


202

2 028



Rhodium

oz


1 580

10 179



Ruthenium

oz


1 704

13 064



Iridium

oz


588

2 780



Total PGMs

oz


9 928

73 295



Total refined PGMs

Platinum

oz


113 950

91 682



Palladium

oz


62 942

78 289



Gold

oz


3 865

4 573



Rhodium

oz


21 616

24 459



Ruthenium

oz


33 668

33 941



Iridium

oz


9 908

7 424



Total PGMs

oz


245 950

240 366



Base metals

Nickel9

MT


730

923



Copper9

MT


366

488



 







3 months

3 months







to 31 Dec

to 31 Dec







2011

2010

Sales

Refined metal sales

Platinum

oz


92 863

66 426

Palladium

oz


39 492

58 205

Gold

oz


3 618

3 276

Rhodium

oz


18 235

21 395

Ruthenium

oz


24 684

30 163

Iridium

oz


10 698

4 853

Total PGMs

oz


189 590

184 317


Nickel9

MT


791

893


Copper9

MT


321

389




Chrome9

MT


261 205

113 108









Average prices

Platinum


$/oz


1 532

1 750

Palladium


$/oz


627

683

Gold


$/oz


1 668

1 080

Rhodium


$/oz


1 549

2 276

Ruthenium


$/oz


121

163

Iridium


$/oz


1 041

732

$ basket price excl. by-product revenue11

$/oz


1 136

1 175

R basket price excl. by-product revenue11

R/oz


9 204

8 046

R basket price incl. by-product revenue12

R/oz


9 935

9 008

Nickel9


$/MT


15 287

20 750

Copper9


$/MT


6 874

7 983



Chrome9


$/MT


19

26









Exchange Rates

Average rate for period13


R/$


8.09

6.88

Closing rate


R/$


8.07

6.61









Notes:







1

Karee includes the shafts K3, 1B and 4B and K4. Westerns comprises Rowland, Newman and ore purchases from W1. Middelkraal represents Hossy and Saffy. Easterns includes E1, E2 and E3.

2

Pandora attributable tonnes mined includes Lonmin's share (42.5%) of the total tonnes mined on the Pandora joint venture.

3

Tonnes milled exclude slag milling.

4

Lonmin purchases 100% of the ore produced by the Pandora joint venture for onward processing which is included in downstream operating statistics.

5

Head grade is the grammes per tonne (5PGE + Au) value contained in the tonnes milled and fed into the concentrator from the mines (excludes slag milled).

6

Recovery rate in the concentrators is the total content produced divided by the total content milled (excluding slag).

7

Metals in concentrate include metal derived from slag processing and have been calculated at industry standard downstream processing losses to present produced saleable ounces.

8

Corresponds to contained base metals in concentrate.

9

Nickel is produced and sold as nickel sulphate crystals or solution and the volumes shown correspond to contained metal. Copper is produced as refined product but typically at LME grade C. Chrome is produced in the form of chromite concentrate and volumes shown are in the form of chromite.

10

Concentrate and other sales have been adjusted to a saleable ounce basis using industry standard recovery rates.

11

Basket price of PGMs is based on the revenue generated in Rand and Dollar from the actual PGMs (5PGE + Au) sold in the period based on the appropriate Rand / Dollar exchange rate applicable for each sales transaction.

12

As per note 11 but including revenue from base metals.

13

Exchange rates are calculated using the market average daily closing rate over the course of the period.

 


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