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Q2 Production Report

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RNS Number : 0668F
Lonmin PLC
15 May 2017
 

  

LEI No: 213800FGJZ2WAC6Y2L94

 

 

REGULATORY RELEASE

 

 

15 May 2017

 

Second Quarter 2017 Production Report

 

Lonmin Plc ("Lonmin" or "the Company"), today announces its unaudited production results for the three months to 31 March 2017. Lonmin also publishes today, in a separate announcement, its Interim Results for the half year ended 31 March 2017.

 

Overview

 

·     The 12 month rolling LTIFR to 31 March improved by 2.2% to 4.88 from 4.99 at 31 December 2016. Regrettably two colleagues were fatally injured in the period.

·     Tonnes mined from our Generation 2 shafts were 1.9 million tonnes, a decrease of 2.8% or 55,000 tonnes on the comparative period, as K3's underperformance predominantly weighed down the overall performance. Our Generation 1 shafts produced 0.5 million tonnes, a decrease of 21.8% or 133,000 tonnes on the comparative period, in line with our plan to close high cost areas, in response to the oversupplied market, as seen from lower prices. Newman shaft was closed during the period. 

·     The poor mining performance from Q1 2017 continued into January 2017, with mining production of 584,000 tonnes for the month. The March production of 978,000 tonnes illustrates the mining improvement from the poor performance in the first four months to 31 January 2017.

·     K3 produced 276,000 tonnes in March 2017, the highest monthly mining production for the last 29 months, on the back of addressing the management/union impasse and change in management, compared to 126,000 tonnes in January 2016.

·     Saffy shaft produced 213,000 tonnes in March 2017, an all-time record for the life of the shaft.

 

 

 

 

 

Actual

Actual

Actual

3 months

3 month

 

Tonnes mined

 

 

January

February

March

to 31 Mar

to 31 Mar

 

 

 

 

2017

2017

2017

2017

2016

 

 

K3 Shaft

kt

126

181

276

583

634

 

 

Rowland Shaft

kt

113

155

185

452

420

 

 

Saffy Shaft

kt

112

173

213

498

493

 

 

4B Shaft

kt

97

112

137

346

388

 

Generation 2

 

kt

447

621

810

1 879

1 934

 

Generation 1

 

kt

137

173

168

477

610

 

 

Opencast

kt

 0

0

0

3

 

Lonmin (100%)

Total Tonnes Mined (100%)

kt

584

794

978

2 356

2 547

 

Cost of production per PGM ounce

15 979

11 800

9 695

11 836

10 390

 

·     Production improvement has been maintained through April notwithstanding the Easter break, although this will need to be sustained.

·     Tonnes lost due to Section 54 safety stoppages at 137,000 tonnes were higher than the prior year period of 37,000 tonnes, on the back of the fatality at K3 in February, where 117,000 tonnes were lost to Section 54 stoppages. 

·     Unit cost for the quarter was R11,836 per PGM ounce, 13.9% higher than the comparative prior year period, reflecting the weak mining performance in January 2017. The importance and impact of good mining production on unit cost is significant, as illustrated by the unit cost of R9,695 per PGM ounce for the month of March 2017, on the back of the strong mining production in March 2017.

·     Refined Platinum production of 164,138 ounces was down 7.5% on prior year period, reflecting the weak mining performance. Refined Platinum production benefited from the smelter clean-up project, which released a further 10,295 Platinum ounces during this quarter.

·     Platinum sales of 172,042 ounces were down 18.6% on the comparative prior year period.

·     Average Rand full basket price (including base metals) up 1.9% on Q2 2016, at R11,250 per PGM ounce.

 

Mining Operations

 

The Marikana mining operations including Pandora (100%) produced 2.4 million tonnes during the quarter, down 7.5% or 191,000 tonnes, on the comparative period. This decline is primarily the result of the removal of high cost Generation 1 production (133,000 tonnes), in line with our Business Plan strategy to remove high cost ounces, and due to the weak mining performance experienced at K3 (51,000 tonnes), arising from the management/union impasse, in the first four months to 31 January 2017.

 

As a result of the poor Q1 2017 performance, which continued into January 2017, a number of initiatives were implemented to address mining production and the union relationship at K3 shaft. Significant progress was made in this area, which consequently resulted in production increasing to 794,000 tonnes in February 2017, up from the 584,000 tonnes in January. March production stood at 978,000 tonnes, the highest monthly mining production for the last 18 months and the highest March production since 2012. This was achieved despite the planned reduction in high cost Generation 1 production.

 

Generation 2

Tonnes mined from our Generation 2 shafts were 1.9 million tonnes, a decrease of 2.8% on the comparative period in the prior year, as K3's underperformance up to January predominantly weighed down the overall performance.

·     K3, our biggest shaft, produced 583,000 tonnes, a decrease of 8.0% or 51,000 tonnes on the comparative prior year period. The union relationship issues experienced in the four months to 31 January 2017 have been resolved and the shaft produced 276,000 tonnes in March 2017, the highest monthly mining production for the last 29 months, compared to 126,000 tonnes in January 2017.

·     Rowland shaft produced 452,000 tonnes, an increase of 7.6% on the comparative prior year period.

·     Saffy shaft produced 498,000 tonnes, an increase of 1.1% on the comparative prior year period, demonstrating that the shaft is maintaining its steady state performance. Saffy experienced a grouting problem through to January 2017, which resulted in production of only 112,000 tonnes in January. Pleasingly, Saffy shaft produced 213,000 tonnes for the month of March 2017, an all-time record for the life of the shaft.

·     4B produced 346,000 tonnes, a decrease of 10.7% on the comparative prior year period as a result of worse than planned geological conditions.

 

Generation 1

The performance at the Generation 1 shafts is in line with our plan and we are executing successfully the strategy to reduce high cost production in a low price environment. Tonnes mined from our Generation 1 shafts (1 B, Hossy, Newman, W1, E1, E2, E3 and Pandora (100%)) were 0.5 million tonnes, a decrease of 21.8%, on the comparative prior year period, reflecting the planned decline in production. Most of these shafts are run by contractors, which provide better flexibility to retain or close them.

 

A thorough technical assessment was conducted at the Newman shaft following the recent fatality. As a result the shaft is currently under review whilst on care and maintenance. Hossy shaft remains on track for planned care and maintenance closure by the end of the year.

 

Production Losses

The K3 and Newman fatalities resulted in an increase in tonnes lost to Section 54 stoppages in the second quarter. Tonnes lost due to Section 54 safety stoppages at 137,000 tonnes were higher than the comparative prior year period of 37,000 tonnes, with most of stoppages at K3 shaft where 117,000 tonnes were lost to Section 54 stoppages. 

 

The increase in management induced safety stoppages (MISS) illustrate our non-negotiable stance on safety. Tonnes lost due to MISS for the quarter increased to 40,000 tonnes compared to none in the comparative prior year period. Most of these stoppages were at K3, with 36,000 tonnes lost to MISS.

 

 

Q2 2017

Tonnes

Q2 2016

Tonnes

Section 54 safety stoppages

137,000

37,000

Management induced safety stoppages and other

40,000

-

Total tonnes lost

177,000

37,000

 

Ore Reserves

We closely monitor our Immediately Available Ore Reserve position, in order to protect our operational flexibility. As at 31 March 2017, the ore reserve position of the Marikana mining operations represents an average of 20.6 months production, well above the industry benchmark of around 15 months.

 

As part of the drive to increase mining production, following the Q1 2017 Production Report, some non-critical development crews were moved to provide additional stoping and vamping crews in our core Generation 2 shafts. However, following the closure of Newman, contractor crews from this shaft are being moved to stoping and vamping to Generation 2 shafts, which is allowing the development crews to move back to development and retain Lonmin's operational flexibility.

 

Processing Operations

 

Milling production in the quarter of 2.2 million tonnes was affected by lower than planned ore availability from the mining operations and was 7.1% lower than in the comparative prior year period.

 

Underground milled head grade at 4.56 grammes per tonnes (5PGE+Au) decreased by 2.5% when compared to the 4.68 grammes per tonne achieved in the comparative prior year period and the overall milled head grade at 4.55 grammes per tonne, was down 2.3% on the comparative prior year period, due to milling more Merensky than planned and shortage of underground ore to mill, which affected plant stability.

 

Concentrator recoveries in the quarter remained excellent at 86.2%, marginally down from 86.7% on the comparative prior year period.

 

Platinum production (Metals-in-Concentrate) was 138,041 ounces, which was 10.6% lower than the comparative prior year period and PGM production (Metals-in-Concentrate) was 265,546 ounces, which was 10.4% lower than the comparative prior year period.

 

Total refined Platinum production of 164,138 ounces in the first quarter, was 7.5% lower than the comparative prior year period. Refined Platinum production did however benefit from the smelter clean-up project, which released a further 10,295 Platinum ounces during the quarter.  Total PGMs produced were 305,331 ounces, a decrease of 9.2% on the comparative prior year period.

 

Sales and Pricing

 

Platinum sales for the quarter were 172,042 ounces, 18.6% lower than the comparative prior year period sales of 211,462 ounces as a result of poor mining performance. PGM sales were 319,896 ounces, down 21.7% on the comparative prior year period sales of 408,793.

 

The US Dollar basket price (including base metal revenue) at $850 per ounce during the quarter was up 19.2% on Q2 2016 while the corresponding Rand basket price of R11,250 per ounce was 1.9% higher than Q2 2016.

 

The average Rand to US Dollar exchange rate was 16.4% stronger at 13.22 compared to 15.81 in Q2 2016.

 

- ENDS -

 

ENQUIRIES

 

Investors / Analysts:

Tanya Chikanza (Head of Investor Relations)                 +27 11 218 8358 / +44 203 908 1073

Andrew Mari (Investor Relations Manager)                    +27 11 218 8420

 

Media:

Wendy Tlou (Head of Communications)                          +27 83 358 0049

Anthony Cardew / Emma Crawshaw, Cardew Group  +44 207 930 0777

 

Notes to editors

 

Lonmin, which is listed on both the London Stock Exchange and the Johannesburg Stock Exchange, is one of the world's largest primary producers of PGMs. These metals are essential for many industrial applications, especially catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery.

 

Lonmin's operations are situated in the Bushveld Igneous Complex in South Africa, where more than 70% of known global PGM resources are found.

 

The Company creates value for shareholders through mining, refining and marketing PGMs and has a vertically integrated operational structure - from mine to market. Underpinning the operations is the Shared Services function which provides high quality levels of support and infrastructure across the operations.

 

For further information, please visit our website: http://www.lonmin.com

 

 

 

 

 

 

 

 

3 months

3 months

 

 

 

 

 

 

to 31 Mar

to 31 Mar

 

 

 

 

 

 

2017

2016

Tonnes mined1

Generation 2

K3 Shaft

kt

583

634

 

 

 

 

Rowland Shaft

kt

452

420

 

 

 

 

Saffy Shaft

kt

498

493

 

 

 

 

4B Shaft

kt

346

388

 

 

 

 

Generation 2

kt

1 879

1 934

 

 

 

Generation 1

Hossy Shaft

kt

159

175

 

 

 

 

Newman Shaft

kt

27

113

 

 

 

 

W1 Shaft

kt

33

41

 

 

 

 

East 1 Shaft

kt

44

40

 

 

 

 

East 2 Shaft

kt

65

77

 

 

 

 

East 3 Shaft

kt

22

17

 

 

 

 

Pandora (100%)2

kt

127

147

 

 

 

 

Generation 1

kt

477

610

 

 

 

 

Total Underground

kt

2 356

2 544

 

 

 

 

Opencast

kt

 

3

 

 

 

Lonmin (100%)

Total Tonnes Mined (100%)

kt

2 356

2 547

 

 

 

 

% tonnes mined from UG2 reef (100%)

%

73.4%

76.5%

 

 

 

Lonmin (attributable)

Underground & Opencast

kt

2 293

2 473

Ounces mined3

Lonmin excluding Pandora

Pt Ounces

oz

139 269

153 708

 

 

 

Pandora (100%)

Pt Ounces

oz

8 581

10 139

 

 

 

Lonmin

Pt Ounces

oz

147 850

163 848

 

 

 

Lonmin excluding Pandora

PGM Ounces

oz

267 498

294 341

 

 

 

Pandora (100%)

PGM Ounces

oz

16 980

19 867

 

 

 

Lonmin

PGM Ounces

oz

284 478

314 208

Tonnes milled4

Marikana

Underground

kt

2 034

2 201

 

 

 

 

Opencast

kt

38

19

 

 

 

 

Total

kt

2 071

2 220

 

 

 

Pandora5

Underground

kt

127

147

 

 

 

Lonmin Platinum

Underground

kt

2 161

2 347

 

 

 

Milled head grade6

g/t

4.56

4.68

 

 

 

Recovery rate7

%

86.5%

86.7%

 

 

 

Opencast

kt

38

19

 

 

 

 

Milled head grade6

g/t

4.41

2.86

 

 

 

 

Recovery rate7

%

70.1%

83.4%

 

 

 

 

Total

kt

2 198

2 366

 

 

 

 

Milled head grade6

g/t

4.55

4.66

 

 

 

 

Recovery rate7

%

86.2%

86.7%

 

 

 

 

 

 

 

 

3 months

3 months

 

 

 

 

 

 

to 31 Mar

to 31 Mar

 

 

 

 

 

 

2017

2016

Metals-in- concentrate8

Marikana

Platinum

oz

129 460

143 246

 

Palladium

oz

60 206

66 190

 

Gold

oz

3 220

3 505

 

Rhodium

oz

18 456

20 737

 

Ruthenium

oz

30 786

33 971

 

Iridium

oz

6 437

6 827

 

Total PGMs

oz

248 566

274 476

 

Nickel9

MT

666

683

 

Copper9

MT

419

425

Pandora

Platinum

oz

8 581

10 139

 

Palladium

oz

4 037

4 716

 

Gold

oz

61

31

 

Rhodium

oz

1 436

1 662

 

Ruthenium

oz

2 373

2 757

 

Iridium

oz

492

561

 

Total PGMs

oz

16 980

19 867

 

Nickel9

MT

19

36

 

Copper9

MT

8

10

Concentrate purchases

Platinum

oz

 

1 105

 

Palladium

oz

 

435

 

Gold

oz

 

5

 

Rhodium

oz

 

153

 

Ruthenium

oz

 

259

 

Iridium

oz

 

61

 

Total PGMs

oz

0

2 018

 

Nickel9

MT

 

1

 

Copper9

MT

 

0

Lonmin Platinum

Platinum

oz

138 041

154 491

Palladium

oz

64 243

71 342

 

Gold

oz

3 281

3 541

 

Rhodium

oz

19 892

22 552

 

Ruthenium

oz

33 158

36 986

 

Iridium

oz

6 930

7 449

 

Total PGMs

oz

265 546

296 361

 

Nickel9

MT

684

720

 

Copper9

MT

427

435

 

 

 

 

 

 

 

 

3 months

3 months

 

 

 

 

 

 

to 31 Mar

to 31 Mar

 

 

 

 

 

 

2017

2016

Refined production

Lonmin refined metal production

Platinum

oz

164 136

175 833

Palladium

oz

71 409

77 316

 

 

 

Gold

oz

4 488

4 669

 

 

 

Rhodium

oz

20 947

23 467

 

 

 

Ruthenium

oz

36 833

42 973

 

 

 

Iridium

oz

7 484

9 505

 

 

 

Total PGMs

oz

305 297

333 762

 

 

 

Toll refined metal production

Platinum

oz

2

1 611

 

 

 

Palladium

oz

6

303

 

 

 

Gold

oz

1

11

 

 

 

Rhodium

oz

9

75

 

 

 

Ruthenium

oz

2

343

 

 

 

Iridium

oz

13

 

 

 

 

Total PGMs

oz

33

2 343

 

Total refined PGMs

Platinum

oz

164 138

177 444

Palladium

oz

71 416

77 618

Gold

oz

4 489

4 680

 

 

 

Rhodium

oz

20 956

23 542

 

 

 

Ruthenium

oz

36 835

43 316

 

 

 

Iridium

oz

7 498

9 505

 

 

 

Total PGMs

oz

305 331

336 105

 

 

 

Base metals

Nickel10

MT

761

753

 

 

 

 

Copper10

MT

492

463

Sales

Refined metal sales

Platinum

oz

172 042

211 462

 

 

 

Palladium

oz

72 455

100 412

 

 

 

Gold

oz

4 456

5 930

 

 

 

Rhodium

oz

24 867

25 966

 

 

 

Ruthenium

oz

38 659

52 937

 

 

 

Iridium

oz

7 417

12 086

 

 

 

Total PGMs

oz

319 896

408 793

 

 

 

 

Nickel10

MT

801

709

 

 

 

 

Copper10

MT

 

672

 

 

 

 

Chrome10

MT

266 159

314 261

Average prices

 

Platinum

 

$/oz

972

918

 

 

 

Palladium

 

$/oz

759

529

 

 

 

Gold

 

$/oz

1 242

1 394

 

 

 

Rhodium

 

$/oz

875

654

 

 

 

$ basket excl. by-product revenue11

$/oz

801

686

 

 

 

$ basket incl. by-product revenue12

$/oz

850

713

 

 

 

R basket excl. by-product revenue11

R/oz

10 587

10 635

 

 

 

R basket incl. by-product revenue12

R/oz

11 250

11 035

 

 

 

Nickel10

 

$/MT

8 241

6 425

 

 

 

Copper10

 

$/MT

 

4 321

 

 

Notes:

1.     Reporting of shafts are in line with our operating strategy for Generation 1 and Generation 2 shafts.

2.     Pandora underground tonnes mined represents 100% of the total tonnes mined on the Pandora joint venture of which 42.5% for October and November 2014 and 50% thereafter is attributable to Lonmin.

3.     Ounces mined have been calculated at achieved concentrator recoveries and with Lonmin standard downstream processing recoveries to present produced saleable ounces.

4.     Tonnes milled excludes slag milling.

5.     Lonmin purchases 100% of the ore produced by the Pandora joint venture for onward processing which is included in downstream operating statistics.

6.     Head grade is the grammes per tonne (5PGE + Au) value contained in the tonnes milled and fed into the concentrator from the mines (excludes slag milled).

7.     Recovery rate in the concentrators is the total content produced divided by the total content milled (excluding slag).

8.     Metals-in-concentrate have been calculated at Lonmin standard downstream processing recoveries to present produced saleable ounces.

9.     Corresponds to contained base metals in concentrate.

10.  Nickel is produced and sold as nickel sulphate crystals or solution and the volumes shown correspond to contained metal. Copper is produced as refined product but typically at LME grade C. Chrome is produced in the form of chromite concentrate and volumes shown are in the form of chromite.

11.  Basket price of PGMs is based on the revenue generated in Rand and Dollar from the actual PGMs (5PGE + Au) sold in the period based on the appropriate Rand / Dollar exchange rate applicable for each sales transaction.

12.  As per note 11 but including revenue from base metals.

13.  Exchange rates are calculated using the market average daily closing rate over the course of the period.


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