Johannesburg, South Africa — 13 May 2013 – Lonmin plc “’ the third-largest platinum producer “’ has raised its full-year forecast for output after a return to profit in the first half in the wake of an increase in sales.
The company plans to produce more than 700,000oz of platinum metals in concentrate this year, it said in a statement quoted by Bloomberg News. That’s more than the 680,000oz it announced on 31 January. Platinum sales climbed 2.4% to 326,142oz in the six months through March from a year ago. Lonmin produced 366,059oz of platinum in concentrate, 0.6% less than a year earlier.
Platinum producers in South Africa are taking steps to boost profit after pay strikes in 2012 cut output and raised costs. At stake for Lonmin is its recovery from a US$698 million annual loss, which led it to cut spending and renegotiate debts as stagnating prices capped profit. The company will soon start wage talks with unions, with pay increases set for 1 October, acting CEO Simon Scott said.
If there’s a substantial increase in the cost base, where margins aren’t significant, “the result of that will be further shrinkage of the industry,” Scott added.
Platinum producers are seeking to centralise wage talks through the Chamber of Mines, as is done in the gold and coal industries. The Association of Mineworkers and Construction Union (AMCU), which is now the biggest representative of employees in the industry, doesn’t want to participate in centralised talks.
“The introduction of centralised wage bargaining in the platinum industry is unlikely this year,” Scott said. “That’s not to say it won’t ever be on the table. It makes a whole lot of sense.”
Lonmin’s profit of 13.3 cents a share in the six months through March compared with a loss of 6.3 cents in the year-earlier period. The median estimate in a Bloomberg survey of five analysts was for a loss of 4 cents. Costs rose 5.8% to US$951 per platinum-group metal ounce. Platinum prices rose 2.7% to an average US$1,615.02 an ounce in the period from a year earlier.
The stock surged as much as 8%, the biggest intraday gain since April 19, and traded 5.9% higher at 295.10 pence by 10:54 a.m. in London.
“In general the industry is in a very tough place,” Scott said. Lonmin expects a platinum deficit of about 200,000oz in 2013 because of last year’s disruptions. This may deepen in subsequent years as supply constraints persist, the company said.
“South African platinum supply dropped by almost 400,000oz in 2012, and is expected to grow by only 2 to 3% per annum over the next few years,” Lonmin continued.
“While recycling is expected to partially fill that gap, with anticipated growth of perhaps up to 5 to 10% per year, it may still not be sufficient to make up for the primary supply losses.”
Source: Bloomberg News. For more information, click here.