Lonmin Drops Most in a Year as Output Falls at Biggest Shaft

JOHANNESBURG (Capital Markets in Africa) – Lonmin Plc, the world’s third-largest platinum miner, plunged the most in more than 12 months after stoppages at its biggest shaft caused output to slide.

Lonmin dropped as much as 19 percent in London on Thursday, the largest intraday decline since Dec. 18, 2015, and traded at 143.5 pence as of 1:32 p.m. local time. It was the worst performer on the FTSE SmallCap Index.

Fiscal first-quarter ore production at the K3 shaft in South Africa tumbled 14 percent from a year earlier to 590,000 tons, the Johannesburg-based company said in a statement, attributing the “disappointing” performance to safety shutdowns and a company-wide reorganization introduced last year. Total output of platinum group metals fell 6.1 percent. 

With the highest costs of the three top platinum producers, Lonmin is restructuring — including cutting jobs and reducing spending — to stay profitable after shareholders rescued the company with a $400 million share sale in 2015. With platinum prices down 40 percent in five years, it has moved away from older, high-cost shafts toward newer operations, but the consequences for workers at sites such as K3 have fueled discontent.

“The relationship between operational management and unions at this shaft is not working as effectively as we expected,” Lonmin said. “The yielding of results from the implementation of business-improvement initiatives at this shaft is taking longer than we would have liked to see.”

Refined platinum production totaled 137,123 ounces in the three months through December, 20 percent lower than a year earlier. Platinum sales were 134,954 ounces, down 10 percent.

Lonmin “appears to be struggling with a plethora of challenges,” Jeremy Wrathall, a London-based analyst at Investec Plc, wrote in a note to clients. “In effect, Lonmin continues to need a much stronger PGM pricing environment.”

The company maintained its full-year cost and production targets, while saying it will review capital expenditure.


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