Lonmin sees full-year cash costs below guidance - CNBC Africa

Lonmin sees full-year cash costs below guidance

Southern Africa

by Reuters 0

Lonmin Plc said on Thursday it expected full-year underlying cash costs to stay below its guidance. PHOTO: REUTERS/Siphiwe Sibeko

South Africa-focused platinum producer Lonmin Plc said on Thursday it expected full-year underlying cash costs to stay below its guidance, indicating that its deep cost-cutting measures were beginning to bear fruit.

The London-listed company remains at risk from platinum prices falling to lows not seen since the 2008 financial crash, while power and labour costs in South Africa have risen sharply.

Lonmin said its unaudited cash costs were at 10,499 rand ($806) per PGM ounce at the end of July on a year-to-date basis and are expected to remain below its guidance of full-year costs of 10,800 rand per ounce.

Shares rose to trade up almost 6 percent before falling back. They were up 2.3 percent at 0915 GMT.

"Some good progress from Lonmin, but risks remain with the company sitting at the upper middle of the cost curve meaning it will still have its work cut out to keep its head above water through the current cycle of low prices, in our view, plus a fairly ugly balance sheet in need of repair," Numis analysts said in a note.

Lonmin in May posted an interim pretax loss of $118 million, down from a $278 million loss a year earlier, when it was battered by industrial action.

The company was hit harder than other producers by the platinum mining strike in 2014, South Africa's longest and costliest, as unlike its peers, virtually all its operations are concentrated in the strike-affected Rustenburg area.

To try to turn around its fortunes, the miner announced a plan in July to close or mothball several mine shafts, putting 6,000 jobs at risk. But it faces pressure from the government and labour unions to maintain jobs. ID:nL5N10G0XB]

Lonmin said on Thursday 1,400 employees had so far left the company through voluntary redundancies.

The government was in talks with mining companies and unions over planned job cuts as President Jacob Zuma's government frets over high unemployment ahead of key local elections next year.

The parties have committed to a broad plan to stem job losses, including boosting platinum by promoting the metal as a central bank reserve asset, according to a draft agreement seen by Reuters on Wednesday.

Other firms planning job cuts include Glencore, Kumba Iron Ore and Sibanye Gold.

Lonmin on Thursday said it expected to eliminate more than 100,000 ounces of high-cost production over the next two years. It added that production would be reduced by 100,000 ounces per year by the end of 2017.

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