On Thursday platinum major Lonmin provided an update on the action it has already taken to deliver its programme of shaft closures and workforce reduction announced on 24 July. This includes reducing its employee headcount by 1 400 to date.
The programme is planned to further reduce Lonmin’s cost base and underpin the company’s ability to sustain a depressed platinum pricing environment over an extended period of time.
Lonmin’s stoppage of high-cost production and the potential reduction of the workforce by a total of 6 000 is intended to reduce costs and capital expenditure. Over the next two years 100 000 ounces of high-cost production will have been eliminated – but in the meantime the available resources of Hossy will be mined for value.
By the end of 2017 production will have reduced by 100 000 ozpa. Management has the target of cutting fixed and overhead costs at the same time.
Progress so far:
- 1 400 employees have left the business.
- The Section 189 consultation process on the remainder of the significant downsizing is proceeding on schedule.
- Labour relations continue on a positive and realistic basis.
- Against a cost guidance of R10 800/oz (PGM), at the end of July year-to-date underlying cash costs on an unaudited basis were R10 499/oz, emphasizing the focused management attention.
- Underlying cash costs for the full year are expected to remain below the cost guidance of R10 800/oz.
The board and management have set the clear objective of containing capital expenditure while cash-harvesting immediately available ore reserves from the Hossy and Newman shafts.
To support the board and executive management in delivering these objectives, Lonmin has appointed Ron Series, a leading finance specialist, as advisor.
Lonmin Chief Executive Ben Magara says: “We welcome the support Ron will provide with his specialist skills and his wealth of experience. This will enable our executive team to focus on running the business, cutting costs and ensuring the most efficient running of our operations.”
South African born, Series has extensive international experience of developing businesses and building value. He has an excellent financial background and has successfully worked with shareholders, banks and other significant stakeholders in public and private companies.
Lonmin’s objective is to maximise cash in the short-term and preserve long-term value for shareholders and all stakeholders and ensure the business is put in the right position to take full advantage of any improvement in PGM prices from the currently depressed levels.