Lonmin’s Marikana
platinum mine
 
Johannesburg, South Africa — 03 April 2012 – Newly-elected Lonmin plc CEO Ben Magara will lead the company in an effort to restore output for the world’s third-largest platinum producer, and to repair its reputation after last year’s six-week strike at the company’s main mine led to at least 44 deaths.

But instead, reports Bloomberg News, he may be forced to close shafts and cut staff. Magara, whose appointment was announced yesterday, will take the helm at Lonmin on July 1 as it grapples with higher wages, inflation-busting power costs and social-spending commitments.

Platinum producers in South Africa are taking steps to boost earnings 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 expansion plans and renegotiate debts as stagnating prices capped profit from the Marikana mine, which accounts for 96% of the company’s production.

“Even with a new CEO in place, the challenges are significant,” Ben Davis, an analyst at Liberum Capital Limited, said in a note to clients. “Coupled with Lonmin’s lack of operational diversification “’ one major asset at Marikana “’ Lonmin is most likely to underperform in the coming months.”

“The company, which said in February that it would cut about 150 management positions, could shut its Westerns 1 and Easterns 1 assets, or put its Hossy and Saffy shafts on hold,” Davis added.

In December, the company raised US$792 million selling stock to existing shareholders, using the proceeds to meet pledges to creditors as it resumed operations. Its share price has plunged 48% in 12 months, while the price of the metal has dropped 4.6%.

Lonmin “’ which has 27,800 full-time employees and several thousand contractors “’ expects to produce 660,000 ounces of platinum in the year through September, and will spend about US$175 million in the process.

Source: Bloomberg News. For more information, click here.