Lonmin forecasts sales fall, ends M&R labour contract at Marikana
PLATINUM miner Lonmin has forecast a fall in sales for the year to end-September and given notice to terminate its contract with Murray & Roberts, which supplies 1,200 staff at Lonmin’s K4 shaft at the Marikana mine near Rustenburg, with effect from October 17.
While it cited the six-week illegal strike at Marikana for the drop in expected full-year sales to between 685,000 and 700,000 saleable ounces of platinum, from 721,000oz sold in the financial 2011, the termination of the M&R contract is part of a decision announced on July 26 to defer some capital expenditure at the K4, Hossy and Saffy shafts.
"This sales guidance reflects the company’s inability to mine in recent weeks because of the illegal strike, and the serious and organised violence and intimidation aimed at blockading the company’s processing plants at the mine," the company said.
Lonmin said mining activity at Marikana remained minimal, although all shafts were operational.
The world’s third-largest platinum miner also said unit costs would come in higher than the guidance of 8.5% for the full year.
Lonmin said on Monday that as part of its ongoing capital expenditure review, it would be moving its K4 shaft onto care and maintenance.
A further announcement on the broader implications of this decision would be made in due course, it said.
Murray & Roberts said the workers’ future was its "biggest concern".
"Murray & Roberts Cementation will be able to offer limited opportunities to these affected employees in its existing operations and will be following a section 189A process of the Labour Relations Act with employee representatives on the way forward," spokesman Ed Jardim said. "It’s very difficult to provide details of this process at this stage."
In announcing its spending review in July, Lonmin said it would cut planned annual spending of $450m back to $250m for the next two years.
That meant scaling back its production target as well, from the 950,000oz it envisaged producing by 2015. It said it would produce 750,000oz for the next few years. The 950,000oz target was part of a plan to bring down unit costs.
"If we can’t achieve that unit cost reduction through growth we’ll have to achieve it through cost savings and efficiencies, which is a lot more difficult," CEO Ian Farmer said at the time.
"We’ve specifically made sure we’ve reduced some of our capital projects to idling speed rather than close them. That allows us to accelerate off a moving base rather than a static one, which allows us more flexibility and a quicker response."
Lonmin is not the only platinum miner to announce cost-cutting measures this year as the sector struggles with rising costs, falling demand and prices, and labour woes.
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