Despite an improved mining performance, reduced unit costs and increased net cash, platinum producer Lonmin remains concerned by the persistent adverse macro-economic conditions and inflationary cost pressures impacting the local platinum industry. The company will be taking further cost cutting measures aimed at generating sufficient cash to support a sustainable business, Lonmin said in a statement.
In line with preserving value for shareholders, Lonmin’s Operational Review is focused on improving the cash produced by the business, both from its operations and through releasing capital from those activities where the company is currently bearing the cost of excess capacity and unrealised development potential.
The Operational Review includes initiatives to generate cash through the monetisation of select Lonmin assets and to preserve cash by reducing fixed costs. Lonmin plans to implement the following:
- Pursue options to maximize cash from Lonmin’s high quality downstream processing operations, for example, through the sale of excess processing capacity of up to 500,000 platinum ounces per annum.
- Lonmin will review its major development capital requirements and will consider selling for cash or introducing joint venture partners into Limpopo and Akanani together with exploring options to introduce funding partners into K4.
- Despite consistent strong performance from Rowland, Lonmin’s current capital position makes it challenging to fund the MK2 project and the company will explore options to introduce funding partners and preserve around five thousand jobs.
- The reduction in annual overhead costs by a minimum of R500m by the end of the year ending 30 September 2018. The substantial majority of overhead reductions will come from non-production central functions as the company seeks to right‐size its overheads to its operations.
Lonmin has also announce the approval by the DMR of its S11 application to acquire the Pandora JV from Anglo Platinum which will defer R2.6 billion of capital expenditure and contribute to the sustainability of the business by potentially preserving jobs at E3 shaft. Lonmin has already received approval from the competition tribunal and is in the process of obtaining lender consent.