Lonmin pulls back on spending plans, warns weak prices will persist
LONMIN, battling turbulence in the platinum sector, has slashed its spending plans and decided to hold back efforts to ramp up key shafts, warning that a period of poor demand and weak prices could persist for longer than it had previously expected.
The miner has cut 2012 spending by $20m, to $430m, and has slashed annual capital spend for its 2013 and 2014 financial years to just $250m, deferring spending on its key Hossy, K4 and Saffy shafts. It had hoped to ramp up those growth shafts swiftly, to lower the overall cost of producing an ounce of metal.
Lonmin's capital expenditure blueprint had included $450m a year until 2015 to boost production to 950000 ounces a year, from 750000oz targeted for 2012.
The miner, which saw third-quarter platinum sales dip just over 6%, said it was keeping its 2012 sales target but said its 2013 target would now be flat at 750000 platinum ounces.
Lonmin, which analysts say has one of the weaker balance sheets in the troubled industry, said it could also tap debt markets, adding it had begun a "thorough review of our growth strategy, future production profile and consequent capital investment programme".
"This review is ongoing and we are examining all cash-conservation and cost-saving measures available to us," it said.
Lonmin saw pretax profit tumble in the first half, as miners across the South African platinum sector grapple with rising costs, weak European demand that weighed on prices, government-imposed safety stoppages and militant unions.
Anglo American Platinum, the world's largest platinum producer, said earlier this week that earnings fell almost 80% in the six months to the end of June. The miner replaced its CE last week.
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