Operational excellence a priority: Lonmin chief - CNBC Africa

Operational excellence a priority: Lonmin chief

Earnings

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Magara says Lonmin's highest short-term priority is its Marikana operations. PHOTO: Professional Jeweller

The primary platinum group metals (PGM) producer also cited enhanced balance sheet strength, the company’s people and relationships and its corporate citizenship agenda as other key areas.

“In 2013 we began a fundamental review of our business. Throughout and after the subsequent five month strike in 2014 we took the opportunity to adapt our thinking,” Magara said.

(READ MORE: Amcu signs wage agreements with platinum producers)

“This has developed into the strategy, which takes into account the board initiatives laid out in early 2013 around social and community issues as well as operational ones and comprises the four pillars.”

Magara further stated that [DATA LON:Lonmin]’s highest short-term priority, in terms of operational excellence, is its Marikana operations.

“As we told the market we would at this time last year, we launched a comprehensive review of our assets and operations. This aims to ensure that Lonmin becomes a superior low cost PGM operator in the medium term, whilst prudently managing risk through all cycles,” he said.

“We concluded that our Marikana portfolio utilisation can be further optimised. We are actively pursuing a process of allocating capital to projects that we believe will provide no less than 15 per cent returns and we are reducing capital expenditure in line with cash generation.”

The miner did however report a loss for the year ending 30 September 2014 of 203 million dollars from a profit of 198 million dollars for the same period in 2013.

(WATCH VIDEO: Lonmin lost third of annual production due to mining strike)

Lonmin also reported an underlying profit before tax of 46 million dollars in the 2014 year from 158 million dollars in 2013 and underlying earnings per share of 5.4 cents versus 20.5 cents in the prior year.

Magara stated that Lonmin expects to maintain sales of around 750,000 platinum ounces in the medium term.

“This will be supported by capital expenditure of between 250 million dollars and 350 million dollars per annum. We will continue to manage a balance between capital investment and maintaining a sound balance sheet,” he said.

“Consequently, capital spend in any year will be subject to prevailing market conditions. Despite the significant inflationary pressures we face, we would expect to contain increases in unit costs to below wage inflation.”

He added that the long term fundamentals of the PGM market remain solid and that Lonmin is well positioned for improvement when it comes.

(READ MORE: Lonmin begins its post-strike rebuilding process)

“We have put a bold cost reduction and productivity improvement programme in place to ensure the business is sustainable through all cycles and profitable in the near term. We will mine for value, not just for volume," Magara said.

“We will continue to rebuild our relationships with our employees and develop our relationship with all the unions that represent our employees, building on the Relationship Charter we agreed [to] in early August this year.”

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