LONMIN HAS underlined the challenges facing platinum miners, as stoppages held back production in the six months to March and falling prices compounded the pain for the London-listed group.
Ian Farmer, Lonmin’s chief executive, pointed to a seemingly “unrelenting depressed pricing environment” as well as increases in the miner’s costs as Lonmin reported platinum sales of 318,402 ounces, flat on the fiscal first half of last year.
Profit before tax fell to $18 million in the six months to March from $159 million the year before.
However, the group – one of the world’s three biggest platinum producers by sales – maintained its guidance for costs and production for the full year, adding that the impact of safety stoppages in South Africa had lessened during the second quarter.
With cost inflation biting throughout the mining industry, Lonmin said its unit costs in rand had risen 10.9 per cent in the first half, against a full-year target of 8.5 per cent. Meanwhile, the miner lost about 464,000 tonnes of production through so-called “section 54” stoppages, approaching three times the lost output in the first half of 2011.
The South African government – through section 54 – can order the compulsory shutdown of part or all of mines to investigate safety concerns, a measure that has been widely used in the platinum mining industry, where very deep mines mean fatalities are not uncommon.
Industrial demand for the metal has suffered on the back of the euro zone’s ailing economic outlook.
Weak car sales – a key market for platinum, given its use in catalytic converters – has depressed demand, while analysts at Credit Suisse said this month that supply should pick up after a seasonally weak first three months of the year and as safety stoppages diminished. Platinum prices are down about 18 per cent over the past year.
Credit Suisse argued that Lonmin could scale back its capital expenditure plans given the outlook, after the company’s management last year outlined a $2 billion spending plan over five years which aims to take the miner’s production from 750,000 ounces to 950,000 ounces. – Copyright The Financial Times Limited 2012
