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  • JSE-listed companies: Lonmin

LONMIN, the world’s third-largest platinum miner, will lay off 5,077 employees by the end of this month as it strives to lower its costs in a market where the dollar price for platinum group metals (PGMs) are at a decade low.

In July last year Lonmin said it was shutting three shafts and would keep its new K4 shaft on care and maintenance instead of putting the finishing touches to it and bringing it into production.

As part of its plans to reduce production by 100,000oz to 650,000oz of platinum next year and the year after, it would have to lay off 6,000 employees.

On Thursday, Lonmin said in its December quarter production update it had achieved 84% of that target through voluntary severances and early retirement of 2,880 of its own employees, and a reduction of 2,197 contractors. It paid redundancy costs of $13m in the quarter and it saved R194m in labour costs.

“Our business plan assumes that a low pricing environment will persist in the short-to medium term and we are managing our business on that basis,” the company said.

Lonmin conducted a hugely dilutive rights issue at the end of last year to raise nearly $400m to recapitalise its business and to pay down debt, incurring investor wrath for asking shareholders to prop it up for the fourth time since 2009.

It issued shares worth $396m at the end of last year. Net proceeds flowing from the rights issue were $373m, which was lower than the $381m Lonmin had led investors to expect. It said this was because of an exchange rate difference resulting in an unexpected reduction of $7m and $1m in expenses.

Analysts on Thursday raised concern that the company was still burning cash in the first quarter of its financial year.

Lonmin failed to achieve its R10,400/oz cash costs it forecast when telling the market about its restructuring and recovery plans, a target that was greeted with scepticism by analysts.

The rand price for the basket of metals Lonmin produced was 5.5% lower, falling to an average R10,859 per PGM ounce. Lonmin’s unit costs for the quarter, however, increased 5.5% to R10,949 per PGM ounce and Lonmin blamed the traditional year-end spike in costs.

“Unit costs in the first quarter are seasonally high due to the distorting impact of the holiday period in December and unit costs are expected to reduce over the course of the year in line with guidance of R10,400 per PGM ounce for the full year,” Lonmin said.