“Ramp up to full production has started and we are making good and steady progress in terms of our plans to return to full production,” commented Ben Magara, chief executive of the South African based platinum miner,[DATA LON:Lonmin plc], on its production results for the three months ended 30 June 2014 and interim management statement for the 1 April 2014 to date.
He stated that around 90 per cent of employees have returned to work with a ramp up to full production in motion at all shafts.
The latest wage agreement however will result in Lonmin’s labour costs increasing by 12.9 per cent for 2014, 8.8 per cent for 2015 and 8.2 per cent for 2016.
The company stated that the main focus to ensure safe resumption of production was to carry out medical examinations and safety inductions on all employees. Since the end of the strike with a wage agreement signed on the 24 June 2014, all medical examinations have been performed at Lonmin’s health centres.
“Whilst the majority of employees passed their medical tests, a higher than normal failure rate of around 8 per cent was noted, resulting mainly from untreated chronic illnesses and nutrition concerns during the strike period,” said the company.
“Most of these employees have regained fitness since they re-started treatment and their wellness improved as a result of food parcels and nutritional supplements provided by Lonmin.”
On the other hand, idle production during the five-month strike and security costs has amounted to 322 million US dollars. The company expects these costs to increase with the ramp up in the fourth quarter.
(READ MORE: Lonmin sees 43% production decrease due to strikes)
The company suffered a loss of 3.1 million tonnes in production on all mining operations, an estimated 192,700 saleable platinum ounces.
Its Marikana underground mining operations took a major knock with production falling 92.3 per cent to 0.2 million tonnes, a decrease of 2.5 million tonnes from the prior year.
(READ MORE: Platinum firm Lonmin says "bleeding" from S.Africa strike)
Production at Lonmin’s Merensky operation also fell by 38.2 per cent at 78,000 tonnes while Pandora’s output decreased by a staggering 89.2 per cent to 132,000 tonnes.
Net cash as at 30 June 2014 was nil, comprising of gross debt of 586 million US dollars, compared to 71 million US dollars cash position at the end of 31 March 2014.
Magara stated that they will therefore require increased working capital during the ramping up process.
“Our existing banking facilities are more than adequate to cover the costs of the strike and the ramp up. We are also assessing our medium to long-term options around improving the productivity and profitability of our business including cost reduction,” he said.
(READ MORE: Lonmin may need capital injection as South African strike continues )
For the 2014 financial year, the company expects the production of saleable platinum metal in concentrate to be around 340,000 ounces with platinum sales at 420,000 ounces from this production. Rebuilding its depleted pipeline of stock is expected to start in 2015.
“Our immediate focus is on ensuring a safe and productive ramp up. I am pleased with the enthusiasm in our management and all employees to the re-building of our relationships and operational credibility,” said Magara.