Strike-hit Lonmin sets investment hurdles in bid to return to profit
[LONDON] South Africa's Lonmin, battered by a five-month strike this year, will invest only in projects providing a return above 15 per cent, it said on Monday, casting doubt over the future of some of its mines as it battles to return to profit.
Platinum miner Lonmin, which also announced the results of a turnaround review on Monday, reported it slid to a pre-tax loss of US$326 million in the year to the end of September, broadly in line with analyst forecasts but compared to a profit of US$140 million a year ago.
Five analysts polled by Reuters had forecast losses in a range of US$257 million to US$565 million.
Lonmin, outlining the results of its review, said it would target savings and operational improvements, and cast doubt on the future of "higher cost and more vulnerable" shafts like its Hossy operation as it targets higher returns from its projects. "The additional capital required to develop the Hossy shaft to the level where we would see costs come down significantly is currently unaffordable and must rank behind other projects in attractiveness," the company said in a statement.
It did not say whether the shaft would be shut down.
Along with its peers in South Africa Impala and Amplats, Lonmin, the world's third-largest platinum producer, has been battered by labour unrest over wages, rising costs and weak platinum prices.
It was the worst-affected among the three by the platinum mining strike ended in June, South Africa's longest and costliest, as unlike the others, it has most of its operations in the strike-hit area.
Lonmin estimated it lost almost 400,000 ounces of platinum sales because of the strike this year, worth almost US$500 million at current prices. Its share price has lost about 40 per cent of it value this year, underperforming its peers'.
Lonmin said on Oct 8 that it had returned to full production earlier than forecast after the strike, exceeding 2013 output levels in both August and September.
REUTERS
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