The miner said that despite its third quarter production results and business update, which reported improved mining performance, the company continues to be concerned by the persistent adverse macroeconomic conditions and inflationary cost pressures confronting the platinum mining industry in South Africa.
“Despite having already taken significant measures to reduce costs, the company will take further measures to ensure that its operations generate sufficient cash to support a sustainable business,” said Lonmin on Monday.
In addition to Lonmin’s efforts to remove high cost production, the miners has also announced the initial conclusions resulting from an on-going review of its operations, which has the primary objective of preserving value for shareholders and safeguarding the long-term interests of employees and all key stakeholders.
“The operational review is focused on optimising 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 unrealized development potential,” said the platinum miner. “The review has been designed to position the company to benefit from any future improvement in the PGM pricing environment.”
Lonmin said it plans to pursue all options to maximise cash from its downstream processing operations, through selling excess processing capacity for up to 500 000 platinum ounces per year.
The company also plans to reduce the annual overhead costs by a minimum of R500 million by the end of the year ending 30 September 2018. The substantial majority of overhead reductions will come from non-production central functions, while the company tries to identify overhead and cost saving strategies.
“It is too early to define the ultimate effect of the operational review on the Company, but the overall aim remains for the business to be cash positive after capital investment,” the miner concluded
Lonmin’s acquisition of Pandora
Meanwhile, the Department of Mineral Resources has approved the miners 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.