Lonmin aims for 850,000 oz output by 2013
LONDON (Reuters) - Lonmin Plc (LMI.L), the world's third biggest platinum producer, swung to an annual loss on weak prices and lower output, but said it planned to boost output by a fifth by 2013 as prices climb on shortages.
Its shares gained as the company said it aimed for refined platinum production to rise gradually to 850,000 ounces by 2013 from 700,000 ounces in the current financial year to end September to meet a supply deficit.
"We're working on the basis that we'll see a gradual recovery during 2010, with supply shortages expected from 2011 onwards," Chief Executive Ian Farmer told Reuters on Monday.
"I think we'll see a gradual firming of the revenue basket (in 2010), and that may come through as a slight firming of prices and that also may come from a slight weakening of the exchange rate." Lonmin shares in London, which have rebounded by nearly 90 percent this year on a recovery in platinum prices, jumped 6 percent to 1,687 pence by 9:15 a.m., outperforming a 3.6 percent rise in the UK mining index as metals prices rallied.
The group, whose mines are located in South Africa, said it would not pay a final dividend.
"Lonmin remains exposed to still potentially weak markets, the strength of the rand and cost increases ... Against this backdrop, and given the strong lead given by the passing of the dividend, we retain our (sell) stance," said analyst Charles Kernot at Evolution Securities.
PAYS OUT ON GUARANTEES
Lonmin, listed in London and Johannesburg, posted an underlying loss per share of 59 cents for the fiscal year, compared with earnings per share of 336 cents last year.
The group posted a one-off charge of $182 million (109 million pounds) for restructuring, impairments and finance costs, bringing its total loss per share to 164 cents.
Lonmin, which said cash flows remained under pressure, paid out $39 million in October under loan guarantees for a black investor group that bought a stake in South Africa's Incwala, spun out from Lonmin, Farmer told Reuters.
Lonmin may have to pay out a further $20 million in December, but negotiations with banks to find a solution were continuing after the investor group defaulted on its debt.
Lonmin said on September 30 that it might be called on to pay out around a total of $125 million in guarantees for shareholders of Incwala, which Lonmin helped set up five years ago under a plan to involve more blacks in South Africa's mainstream economy. Lonmin, which has struggled with operational problems, released production data on October 22 showing a 6 percent fall in refined platinum sales to 682,955 ounces.
At the time, it forecast platinum sales of 700,000 ounces in the current 2010 fiscal year and said precious metals miners in the country were likely to face continued challenges.
Farmer said repairs for the troubled No. 1 furnace had been completed ahead of schedule and the first pouring of matte took place last week.
The price of platinum -- mainly used in jewellery and in catalysts to clean pollution from vehicle exhausts -- has recovered by about 50 percent to $1,400 per ounce this year, but is still well below the peak of $2,290 touched in 2008.
(Reporting by Eric Onstad, editing by Will Waterman)
