TIDMLMI
RNS Number : 9746E
Lonmin PLC
09 November 2015
REGULATORY RELEASE
NOT FOR RELEASE, PUBLICATION, FORWARDING OR DISTRIBUTION,
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR WITHIN THE
UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION
WHERE TO DO SO WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICES
PART OF THIS ANNOUNCEMENT.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND DOES NOT CONSTITUTE A
PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. NOTHING HEREIN SHALL
CONSTITUTE AN OFFERING OF ANY SECURITIES. ANY DECISION TO PURCHASE,
SUBSCRIBE FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY
OF THE COMPANY'S SECURITIES MUST BE MADE ONLY ON THE BASIS OF
INFORMATION IN THE PROSPECTUS TO BE PUBLISHED BY THE COMPANY IN DUE
COURSE.
9 November 2015
2015 Final Results Announcement
Lonmin Plc, ("Lonmin" or "the Group"), one of the world's
largest primary Platinum producers, today publishes its Final
Results for the year ended 30 September 2015.
-- Safety
o Regrettably three fatalities in the second half of the year
after 18 months fatality-free
o Lost Time Injury Frequency Rate (LTIFR) increase to 5.41 from
3.34
-- Operational achievements
o Saffy shaft ramped up to steady state full production as
planned
o Platinum sales of 751,560 ounces - the highest since 2007 and
above market guidance of 730,000 ounces
o Platinum metal-in-concentrate for the year was 740,315
saleable ounces
o Mined production of 704,776 Platinum ounces - impacted by a
loss of 48,000 ounces due to Section 54 safety stoppages
o Operational flexibility maintained with available ore reserves
at an average of 22 months production
o Outstanding instantaneous recovery rates improved to 87.2%
-- Business Plan
o Business Plan developed to address low PGM pricing and retain
flexibility
o Right sizing now 50% complete within six months with 3,136
workers exited (2,120 employees and 1,016 contractors)
-- Financial Results - Decisive action taken on operational and cost savings
o Cost of production per PGM ounce reduced to R10,339 per PGM
ounce - lower than guidance of R10,800
o Tightly controlled capital expenditure of $136 million - lower
than original guidance of $250 million
o Net debt of $185 million with available committed facilities
of $543 million (net debt of $29 million in 2014)
o Net assets attributable to equity shareholders valued at $1.6
billion after impairment charge of $1.8 billion
o Underlying loss before tax $143 million ($46 million profit in
2014)
o Underlying loss per share of 16.2 cents versus earnings 5.4
cents in prior year
-- Guidance for 2016 to 2018
o Platinum sales of c.700,000 ounces for 2016, and c.650,000 for
each of 2017 and 2018
o Reduction in the size of the Group's workforce and overheads
planned to deliver 2016 cost reduction of c.R0.7 billion and c.R1.6
billion for 2017 (in real terms)
o Unit costs to be broadly flat on 2015 in nominal terms at
c.R10,400 for three more years to 2018
o Capital expenditure limited to c.$132 million for 2016, $110
million for 2017 and $188 million for 2018, of which $43 million
third party funding to be used of the Bulk Tailings Treatment
plant
-- Strengthening of Balance Sheet
o The Rights Issue is expected to raise approximately $407
million (in gross proceeds)
o Conditional amended banking facilities agreed with all
existing lenders for $370 million
Lonmin Chief Executive Officer Ben Magara said:
"2015 has been a tough year for Lonmin given the adverse pricing
environment and the imminent maturity of our debt facilities in mid
2016. However, we have worked hard with all stakeholders and have
reduced costs and started to restructure the Group to focus our
efforts on the four Generation 2 shafts, which is expected to
account for 90% of our production. Our priority is to run the
business with a focus on cash generation and profitable ounces. We
are repositioning Lonmin and aiming for the business to generate
positive free cash flow after capital expenditure in this current
low environment. In addition, we remain confident of the long-term
market fundamentals for Platinum and its associated group of metals
even though our Business Plan is designed to ensure Lonmin is
resilient in this low price environment. I am pleased that we have
secured $370 million of bank facilities from all ten of our
existing lending banks which is conditional on the $407 million
Rights Issue. It is encouraging that our Rights Issue has been
fully underwritten and we hope shareholders vote positively on 19
November 2015. We firmly believe that the Rights Issue is in the
best interest of our shareholders."
FINANCIAL HIGHLIGHTS
30 September 30 September
2015 2014
---------------------------------- ------------- -------------
Revenue $1,293m $965m
Underlying (i) operating (loss)
/ profit ($134)m $52m
Operating loss (ii) $(2,018)m $(255)m
Underlying (i) (loss) / profit
before taxation ($143)m $46m
Loss before taxation $(2,262)m $(326)m
Underlying (i) (loss) / earnings
per share (16.2)c 5.4c
Loss per share (285.5)c (33.0)c
Trading cash outflow per share
(iii) (2.1)c (20.4)c
Free cash outflow per share
(iv) (28.7)c (43.2)c
Net debt as defined by the
Group (v) $(185)m $(29)m
Interest cover (times) (vi) 7.9x 4.0x
Gearing (vii) 9.9% 0.6%
Footnotes:
i Underlying results are based on reported results
excluding the effect of special items as disclosed
in note 3 to the financial statements.
ii Operating (loss) / profit is defined as revenue
less operating expenses before impairment of
available for sale financial assets, finance
income and expenses and before share of (loss)
/ profit of equity accounted investments.
iii Trading cash flow is defined as cash flow from
operating activities.
iv Free cash flow is defined as trading cash flow
less capital expenditure on property, plant
and equipment and intangibles, proceeds from
disposal of assets held for sale and dividends
paid to non-controlling interests.
v Net (debt) as defined by the Group comprises
cash and cash equivalents, bank overdrafts
repayable on demand and interest bearing loans
and borrowings less unamortised bank fees,
unless the unamortised bank fees relate to
undrawn facilities in which case they are treated
as other receivables.
vi Interest cover is calculated on the underlying
operating (loss) / profit divided by the underlying
net bank interest payable excluding exchange
differences.
vii Gearing is calculated as the net debt attributable
to the Group divided by the total of the net
debt attributable to the Group and equity shareholders'
funds.
ENQUIRIES
Investors / Analysts:
Lonmin
Tanya Chikanza (Head of +27 11 218 8300 / +44
Investor Relations) 20 7201 6007
Media:
Cardew Group
Anthony Cardew / James +44 20 7930
Clark 0777
+27 72 644
Sue Vey 9777
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, 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
IMPORTANT NOTICES
This announcement, and the information referred to in it, is an
advertisement and not a prospectus and any decision to purchase,
otherwise acquire, subscribe for, sell or otherwise dispose of any
securities in Lonmin plc (the "Company") ("Securities") should only
be made on the basis of information contained in or incorporated by
reference into a prospectus. This announcement cannot be relied
upon for any investment contract or decision.
This announcement is not intended to and does not constitute or
form part of any offer or invitation to purchase or subscribe for,
or any solicitation to purchase or subscribe for, Securities in any
jurisdiction.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
The information contained in this announcement is not for
release, publication or distribution to persons in the United
States of America, Australia, Canada or Japan or any other
jurisdiction where to do so would be unlawful (an "Excluded
Territory") and should not be distributed, forwarded to or
transmitted in or into any jurisdiction where to do so might
constitute a violation of the securities laws or regulations of
such jurisdiction. There will be no public offer of Securities in
the United States of America or any Excluded Territory. The
distribution of this announcement and/or the Prospectus and/or the
Securities into jurisdictions other than the United Kingdom may be
restricted by law, and, therefore, persons into whose possession
this announcement and/or the information contained herein and/or
the Prospectus and/or a Provisional Allotment Letter and/or a Form
of Instruction comes should inform themselves about and observe any
such restrictions. Any failure to comply with any such restrictions
may constitute a violation of the securities laws of such
jurisdiction.
The Securities have not been and will not be registered under
the U.S. Securities Act of 1933, as amended (the "U.S. Securities
Act"), or under any securities laws of any state or other
jurisdiction of the United States and may not be offered, sold,
pledged, taken up, exercised, resold, renounced, transferred or
delivered, directly or indirectly, within the United States except
pursuant to an applicable exemption from, or in a transaction not
subject to, the registration requirements of the U.S. Securities
Act and in compliance with any applicable securities laws of any
state or other jurisdiction of the United States. The Securities
have not been approved or disapproved by the United States
Securities Exchange Commission, any state securities commission in
the United States or any other U.S. regulatory authority, nor have
any of the foregoing authorities passed upon or endorsed the merits
of the proposed rights issue or the accuracy or adequacy of the
Prospectus. Any representation to the contrary is a criminal
offence in the United States.
Accordingly, subject to certain exceptions, the proposed rights
issue is not being made in the United States of America and neither
this announcement, the prospectus to be published in due course,
the Letters of Allocation nor the Provisional Allotment Letters
constitute or will constitute an offer, or an invitation to apply
for, or an offer or an invitation to subscribe for or acquire any
Securities in the United States. Subject to certain limited
exceptions, Provisional Allotment Letters will not be sent to, and
Nil Paid Rights will not be credited to the CREST account of, any
qualifying shareholder with a registered address in or that is
located in the United States of America.
This communication is for distribution only to, and directed
only at, persons in member states of the European Economic Area who
are "qualified investors" within the meaning of Article 2(1)(e) of
the Prospectus Directive (as amended by Directive 2010/73/EU)
("Qualified Investors"). For the purposes of this provision, the
expression "Prospectus Directive" means Directive 2003/71/EC and
includes any relevant implementing measure in each member state of
the European Economic Area which has implemented the Prospectus
Directive. In addition, in the United Kingdom, this communication
is for distribution only to, and is directed only at, Qualified
Investors who (i) have professional experience in matters relating
to investments who fall within the definition of "investment
professionals" in Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005, as amended (the
"Order"), or (ii) are persons falling within Article 49(2)(a) to
(d) of the Order, or (iii) are persons to whom it may otherwise
lawfully be communicated (all such persons together being referred
to as "relevant persons"). Any investment or investment activity to
which this communication relates is available only to and will only
be engaged in with such persons. This communication must not be
acted on or relied on (i) in the United Kingdom, by persons who are
not relevant persons, and (ii) in any member state of the European
Economic Area (including the United Kingdom), by persons who are
not Qualified Investors.
The information contained in this announcement is for background
purposes only and does not purport to be full or complete. No
reliance may be placed for any purpose on the information contained
in this announcement or its accuracy or completeness. The
information in this announcement is subject to change. Nothing in
this announcement should be interpreted as a term or condition of
the Company's proposed rights issue.
A copy of the prospectus containing details of the proposed
rights issue when published will be available from the registered
office of the Company and on the Company's website at
www.lonmin.com provided that the prospectus will not, subject to
certain exceptions, be available (whether through the website or
otherwise) to shareholders in the United States or any Excluded
Territories.
Neither the content of the Company's website nor any website
accessible by hyperlinks on the Company's website is incorporated
in, or forms part of, this announcement.
This announcement does not constitute a recommendation
concerning any investor's options with respect to the proposed
rights issue. The price and value of securities can go down as well
as up. Past performance is not a guide to future performance. The
contents of this announcement are not to be construed as legal,
business, financial or tax advice. Each shareholder or prospective
investor should consult his, her or its own legal adviser, business
adviser, financial adviser or tax adviser for legal, financial,
business or tax advice.
No person has been authorised to give any information or to make
any representations other than those contained in this announcement
and, if given or made, such information or representations must not
be relied on as having been authorised by the Company, any of the
Banks or any other person. Subject to the Listing Rules, the
Prospectus Rules and the Disclosure and Transparency Rules, the
issue of this announcement shall not, in any circumstances, create
any implication that there has been no change in the affairs of the
Company's group since the date of this announcement or that the
information in it is correct as at any subsequent date.
This announcement has been prepared for the purposes of
complying with applicable law and regulation in the United Kingdom
and the information disclosed may not be the same as that which
would have been disclosed if this announcement had been prepared in
accordance with the laws and regulations of any jurisdiction
outside of the United Kingdom.
This announcement, and the information referred to in it,
includes forward-looking statements. All statements other than
statements of historical fact included in this announcement and the
information referred to in it, including without limitation those
regarding Lonmin's plans, objectives and expected performance, are
forward-looking statements. Lonmin has based these forward-looking
statements on its current expectations and projections about future
events, including numerous assumptions regarding its present and
future business strategies, operations, and the environment in
which it will operate in the future. Forward-looking statements
generally can be identified by the use of forward-looking
terminology such as "may", "will", "could", "would", "expect",
"intend", "estimate", "anticipate", "believe", "plan", "aim" or
"continue", or, in each case, their negative, or other variations
or comparable terminology. Such forward-looking statements involve
known and unknown risks, uncertainties, assumptions and other
factors related to Lonmin, including, among other factors: (1)
material adverse changes in economic conditions generally or in
relevant markets or industries in particular; (2) fluctuations in
demand and pricing in the mineral resource industry and
fluctuations in exchange rates; (3) future regulatory and
legislative actions and conditions affecting Lonmin's operating
areas; (4) obtaining and retaining skilled workers and key
executives; and (5) acts of war and terrorism. By their nature,
forward-looking statements involve risks, uncertainties and
assumptions and many relate to factors which are beyond Lonmin's
control, such as future market conditions and the behaviour of
other market participants. Actual results may differ materially
from those expressed in forward-looking statements. Given these
risks, uncertainties, and assumptions, you are cautioned not to put
undue reliance on any forward-looking statements. In addition, the
inclusion of such forward-looking statements should under no
circumstances be regarded as a representation by Lonmin that Lonmin
will achieve any results set out in such statements or that the
underlying assumptions used will in fact be the case. Other than as
required by applicable law or the applicable rules of any exchange
on which Lonmin's securities may be listed, Lonmin has no intention
or obligation to update or revise any forward-looking statements
included in this announcement after the publication of this
announcement.
CONTENTS
This document contains the following sections:
-- Chief Executive Officer's Review;
-- Operational Review;
-- Market Review;
-- Mineral Resources & Mineral Reserves
-- Financial Review;
-- Responsibility Statement of the Directors;
-- Operating Statistics - 5 Year Review; and
-- Financial Statements
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
A year ago we outlined our strategy, based on operational
excellence, robust cost control, solidifying relationships with
stakeholders and mining for value. We have seen solid delivery in
these areas, but the macroeconomics have seen the benefits of that
work eroded and our share price placed under immense pressure.
Operational
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Operationally, we have delivered on our promises and I am
pleased with that progress. We took decisive action to mitigate the
effects of the low pricing environment and costs of production per
PGM ounce for 2015 were R10,339, well within our guidance of
R10,800. Capital expenditure was tightly controlled and minimised
to $136 million, compared to our original guidance of $250 million.
Our strategy, and hard work across the business, combined are aimed
to deliver well.
Saffy shaft reached steady state as promised and we exceeded our
sales guidance to the market achieving sales of 751,560 Platinum
ounces. Our mined production of 704,776 Platinum ounces was
impacted by an increase in frequency and duration of Section 54
safety stoppages, resulting in lost Platinum metal production
amounting to 48,000 ounces. Our immediately available ore reserves
continue to offer operational and strategic flexibility. Despite an
outage at our smelters in December, we delivered strong processing
recoveries. We are working hard with government and our unions to
reduce the level of Section 54 safety stoppages we saw in the year.
We believe that transparency and dialogue are key and we are
encouraged by the collaboration and progress that we have made in
this area.
We achieved R526 million of net benefits during 2015 as we
realised significant cost reductions from the review of the
operating model and the total cost of ownership programmes. This
was partially offset by the limited progress on productivity and
efficiency enhancement which have been hampered by the high level
of Section 54 safety stoppages that we, and the whole industry,
experienced during the year. Productivity, though, is an
industry-wide issue which has its roots in wider social issues and
will require a holistic approach from everyone involved.
I said a year ago that my aim was to build a Lonmin that is
flexible and sustainable through the cycle. There is no doubt that
this year has been one of the toughest and, whilst we expect things
to remain challenging in the medium term, we believe the long-term
PGM fundamentals are sound.
Strategic Decisions
Your Board and management team resolved to build resilience into
the business, taking firm action to reduce Lonmin's cost base and
conserve cash so that the Company remains sustainable and viable.
Our intent was to reposition your Company so that it weathers the
low pricing environment we face; to safeguard the long-term
interests of our shareholders, employees and all key stakeholders;
and to be well positioned to exploit improvements in the market
when they come. We have also implemented plans to strengthen our
balance sheet, with the support of you, our shareholders and
lenders, to allow us to navigate our way to better times ahead,
today we expect to publish our Prospectus for a $407 million Rights
Issue and entering into conditional Amended Facilities Agreements
with our existing lenders.
The reduction in profitability due to low PGM prices and the
maturing of our debt facilities in 2016 led us to accelerate the
execution of our published strategy. It was necessary for us to
take some tough decisions as we sought to respond to the conditions
we faced by continuing to manage the elements within our control.
We concluded that we needed to remove high cost ounces, reduce
production and overhead costs as well as minimising capital
expenditure. The decision to right size our business was not taken
lightly as it will impact 6,000 employees and contractors, but the
reality is that it is essential to protect the business, and the
jobs of many thousands more who work for your Company.
Our conclusion, that it was necessary to reduce high cost
production in an oversupplied market, resulted in the orderly
closure of Hossy and Newman shafts. This will be achieved by
stopping development and capital work. Instead, only the
immediately available ore reserves will be utilised, reducing the
overall costs of production and enhancing cash generation and
profitability as the shafts are closed. In addition, 1B shaft of
the 1B/4B shaft complex was closed and put on care and maintenance
in October 2015.
We have re-examined the Generation 1 shafts, some of which are
currently managed by contractors, namely W1 and E1. We are
renegotiating the ore purchase agreements to include more
favourable terms, which if concluded and subject to a favourable
outcome of the S189 consultation process, will allow mining to
continue at these shafts for the 2016 financial year. Going forward
we will focus on our Generation 2 large, long-life shafts, K3,
Rowland, Saffy and 4B which combined will represent 90% of
production.
I remain confident that our initiatives around employee
wellness, financial literacy and counselling as well as the
technical solutions around de-bottlenecking logistics will continue
to bear fruit. Like most things, it is a journey, and one we cannot
give up if we are to succeed for you, our shareholders and indeed
all our stakeholders.
It's important to remember that when market conditions improve,
your Company has strong assets and projects: our large, long-life
and low-cost K4 project, the Rowland MK2 resource, opening up
further levels at Saffy shaft, Pandora E3 deepening project and E4
Pandora Deep which is perhaps the shallowest remaining PGM deposit
anywhere in the Western Limb Bushveld Igneous Complex.
People
We have overseen robust action in cutting costs, reducing
numbers, streamlining, and taking sensible decisions on pay freezes
and waiving bonuses. The right sizing of the business is now 50%
complete. As at 6 November, 3,136 colleagues of the 6,000 affected
positions have left the Company; 2,120 employees through a
voluntary process and 1,016 contractors, all within six months. In
addition we started a Section 189 consultation process to engage on
the implementation of the agreed avoidance measures which include
redeployment and re-skilling and further voluntary separations. Our
relationship charter established between the Group and AMCU allowed
us to have a robust process around that. Unions work to look after
their members, as they should, but the progressive way this process
has unfolded would have been unthinkable two years ago. We hope
that this will continue in to the next round of wage
negotiations.
Safety
As a miner myself, safety is my number one priority and Lonmin's
performance in this area has been the achievement in which I take
the greatest pride. After 18-months without a fatality though, this
year has seen us lose three colleagues; Bonisile Mapango, Mark
Potgieter and Silva Cossa. Their loss, for which I offer my deepest
condolences on behalf of the Company, has led us to re-examine all
areas of safety. We never rest in this, and I believe we will
achieve Zero Harm. Under my stewardship that remains an absolute
and realistic ambition.
Strategic Priorities
In 2013 we began a fundamental review of our business.
Throughout and after the subsequent five month strike in 2014 we
took the opportunity to refine our plans. This has developed into
the strategy we have today.
The sustained low PGM pricing environment we experienced in 2015
and which we anticipate to prevail in the short to medium term was
a major challenge to the sector, and to Lonmin in particular given
the Group's maturing debt facilities in 2016. We took the
opportunity to re-examine our strategy set against these new
pressures.
In essence we found that our wider strategic approach remained
correct, but we needed to take robust and decisive action to
further protect the business in the short and medium term and embed
sustainability.
Fundamentally this resulted in us developing a comprehensive
response which has seen us accelerate the move to reshape and
re-size the business for the low-price environment, reducing fixed
cost expenses, removing high cost ounces, reducing headcount and
capital expenditure to the minimum required for the safe and
efficient running of the Group's operations, while preserving the
ability of the Group to increase its production when PGM prices
improve. We are able to do this because our operations and capital
expenditure is scalable. Our existing strategy was built to ensure
flexibility in these areas and that has proved vital in recent
months. We say more about this below.
Our overarching strategy comprises the following four
pillars:
-- Operational Excellence
-- Enhancing Balance Sheet Strength
-- Our People and Relationships
-- Our Corporate Citizenship Agenda
1. Operational Excellence
1.1 Safety
Safety comes first in everything we do.
After an industry record of 18 months fatality free, Lonmin
sadly lost three employees to fatal accidents during the second
half of 2015 financial year.
We strive to be the industry leader in safety and we believe
that "Zero Harm" is both achievable and realistic. This starts with
the safety, health and wellbeing of our employees and extends to
everything we do including minimising the environmental impact of
our operations. We believe that integrating our operational and
sustainability strategies will enable us to deliver on our goal of
Zero Harm.
1.2 Priorities
Our highest short-term priority is the performance of our
excellent Marikana operations which we believe are some of the best
in the industry, in terms of quality, safety and efficiency. We
believe we are an industry leader in UG2 mining and processing
technology, an increasingly important factor of the ore mix mined
in the industry.
Within our mining operations, our shafts are split into three
categories, namely Generation 1, Generation 2 and Generation 3
shafts. The Generation 1 shafts - Newman, E1, E2, E3 and W1 are
smaller, older shafts in the latter stages of their operational
life. The Generation 2 shafts, K3, Rowland, 4B/1B, Saffy and Hossy
are the larger, newer, shafts. Saffy was the last to ramp up and
did so successfully, reaching steady state in 2015 ahead of
schedule.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Our Generation 3 vertical shaft, K4, had reached the early
stages of ramp up prior to being placed on care and maintenance in
September 2012. We believe that K4 is one of the Group's best
projects in South Africa as it continues to offer the best
brownfield replacement and growth optionality for the Group. We
plan to reopen the shaft when market conditions improve.
Profitability and returns are crucial. The Group is highly
geared to the PGM pricing environment and the Rand/US exchange
rate. We mine for value, not for volume. Where volume might help
deliver value in the future, we aim to have the flexibility to
increase production with minimal expenditure, but given the present
PGM market, we believe that the priority in the short-term is
prioritising efficiency and cash.
Within the constraints of market conditions, we strive to ensure
that our newer assets reach the most efficient and profitable
points they can in terms of safety, costs, production and
productivity as the older shafts reach the end of their lives.
1.3 Actions
1.3.1 Marikana Asset Flexibility and our New Business Plan
The Board and executive management, are attendant to the low
pricing environment and carried out a comprehensive review of the
Group's business and capital structure.
The resultant plan ensures sustainability through the difficult
headwinds we face, reshaping and resizing the business both to give
the flexibility to respond to more attractive market conditions in
the future, and in recognition of the fact that we believe the PGM
industry will look significantly different in the medium and
long-term.
The result is a Business Plan which accelerates the
implementation of the Group's published strategy of ultimately
operating only our large, long-life and low-cost shafts, and is
focused on factors that are within the Group's control, whilst
seeking to preserve the integrity of the Group's operations.
Overall, the Business Plan focuses on:
-- removing high-cost PGM production ounces and, importantly,
eliminating associated fixed and variable costs;
-- reducing fixed cost expenses by right sizing the Group's
workforce and reducing overhead costs and support service
structures;
-- reducing capital expenditure to the minimum required to
sustain the efficient running of the Group's operations while
satisfying regulatory and safety standards and limiting the number
of development projects for the continuing shafts;
-- maintaining operational and strategic flexibility through
sufficient immediately available ore reserves;
-- creating, preserving and enhancing long-term equity value by
retaining long-term expansion opportunities;
-- continuing to improve relationships with key stakeholders.
Lonmin's sustainability depends on creating shared value for all so
that each stakeholder sees Lonmin as a net positive contributor to
their wellbeing and development; and
-- each stakeholder taking some short-term pain for long-term
value protection and employment.
The Group's Business Plan aims to continue to preserve cash with
the objective of achieving a cash flow positive position after
capital expenditure despite the current low PGM pricing
environment.
As described below, the Business Plan aims to keep unit costs
per PGM ounce in nominal terms broadly flat in line with the year
ended 30 September 2015 at around R10,400 per PGM ounce, for three
further years ending 30 September 2016, 2017 and 2018.
The key elements of the Business Plan are:
a) Removing high cost production
Following a shaft-by-shaft analysis, Lonmin has decided to
reduce high cost production ounces to improve the Group's
profitability and cash flows. Specifically, the following actions
are being taken.
Generation 2 shafts
-- Planned orderly closure and placement on care and maintenance
of the Hossy shaft: There has been significant improvement over the
last twelve months at the Hossy shaft in productivity and in the
relationship between management and employees. However, the Hossy
shaft remains the Group's highest cost Generation 2 shaft and
Lonmin has concluded that in the prevailing low PGM pricing
environment the shaft has no prospect of self-funding its direct
mining and processing costs and direct capital expenditure. The
Directors plan to implement the closure and placement on care and
maintenance of the Hossy shaft in an orderly manner over the next
two financial years, allowing the Group to continue to extract the
immediately available ore reserves that have been built up at the
shaft during its turnaround.
-- Closure and placement on care and maintenance of the 1B
shaft: All ore reserve development capital has been stopped.
Overall, the 4B/1B combined shaft complex has remained profitable
despite the weak PGM pricing environment. However, the 1B part of
the complex has produced high cost ounces and Lonmin expects that
its closure and placement on care and maintenance will result in
improved performance metrics as direct and associated costs are
removed. The shaft was placed on care and maintenance in October
2015.
Generation 1 shafts
-- Planned orderly closure and placement on care and maintenance
of the Newman shaft: Whilst the Newman shaft has remained
profitable despite the low PGM pricing environment, the shaft is
nearing the end of its life and the capital expenditure required to
extend its life ranks below other projects in the Group's capital
allocation programme. Lonmin plans to implement the closure and
placement on care and maintenance of the Newman shaft in an orderly
manner over the next financial year, allowing the Group to continue
to use immediately available ore reserves at the shaft, whilst
limiting capital expenditure to essential levels.
-- Ongoing assessment of certain Generation 1 shafts: As part of
the response to prolonged weakness in PGM prices, the Group
previously announced plans to put on care and maintenance two of
its Generation 1 shafts, namely, the E1 and W1 shafts, which are
managed by contractors. These shafts were operating only at
break-even levels and not generating significant cash.
Subsequently, the Group engaged with the contractor managing these
shafts and the contractor developed a plan that Lonmin believes
will allow the shafts to be cash generative. In light of this
development, the Group plans to renegotiate the ore purchase
agreement with the contractor to include more favourable terms
which, subject to a favourable outcome of the section 189
consultation process, Lonmin believes will allow mining at these
shafts to continue for the year ending 30 September 2016. Lonmin
will reassess the viability of continuing to mine these shafts at
the end of the year ending 30 September 2016.
Lonmin expects the implementation of the Business Plan to result
in a reduction of approximately 100,000 Platinum ounces in the
Group's normalised annual production over the next two financial
years as high-cost production at certain shafts is wound down, with
a concomitant reduction in staffing and overhead levels. Lonmin
expects that the sales profile for the Group will be approximately
700,000 Platinum ounces for the year ending 30 September 2016 and
approximately 650,000 Platinum ounces for each of the years ending
30 September 2017 and 2018.
b) Removing fixed costs
(i) Reducing the size of the Group's workforce to protect the
business in the low PGM price environment: The Group announced a
retrenchment programme and has embarked on a Section 189
consultation process with relevant stakeholders. By 6 November
2015, approximately 3,136 people had left the Group; 2,120
employees through the voluntary separation programme that was
launched in May 2015, and 1,016 contractors. In total,
approximately 6,000 employees, including contractors, are affected
and the process is expected to be completed by 30 September 2016,
and the Directors expect additional employees and contractors to
leave the Group by 30 September 2017 in connection with the planned
closure and placement on care and maintenance of shafts. Combined
this should result in a large reduction in overheads.
The Group continues to work closely with key stakeholders,
particularly its unions and the South African government, in
connection with the workforce reductions. The relationship charter
established between the Group and AMCU during 2014 has been a
useful reference point in the Section 189 consultation process. In
the interests of ensuring timely consultations, the Group has
undertaken two Section 189 consultation processes in parallel -one
with AMCU, the Group's majority union, and another with the other
unions and non-unionised employees. Both processes are being
facilitated by the South African Commission for Conciliation,
Mediation and Arbitration. The consultation period was extended by
mutual agreement of all relevant stakeholders to enable full
exploration of all alternatives to forced retrenchments. The formal
consultation process with the Unions ended on 22 October 2015, and
the Group is now in the process of finalising the voluntary
separations and redeployment. In the event that there is an
insufficient number of voluntary separations and redeployment,
forced retrenchment may occur, and any forced retrenchment is
expected to be phased over a period of time.
The Group employed approximately 35,669 people, including
contractors, as at 30 September 2015 and through the South African
Chamber of Mines is a signatory to the Mining Leadership
Declaration Agreement. In this agreement, the tripartite committed
to limit job losses and also to minimise production disruptions. It
is Lonmin's objective to protect the majority of those jobs over
the long-term by ensuring that the Group can deal effectively with
the ongoing sustained low pricing PGM environment.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
(ii) Reducing overhead and support service structures: New
measures identified as part of the Business Plan for overhead and
support services will remove associated overhead costs, at least in
line with the reduction in the size of the Group's operations. The
closure and placement on care and maintenance of the shafts
outlined below will result in the removal of associated overhead
costs, including the decommissioning of a concentrator and the
revision of all incentive schemes to encourage production
efficiencies and to ensure that bonus and incentives schemes are
self-funding. Annual bonuses to management level employees for the
year ended 30 September 2015 have been waived. In addition, no
salary increases have been granted to management for the year
ending 30 September 2016. Marketing and promotional expenses, as
well as discretionary spending on training, are being reduced with
discussions taking place with Platinum Guild International and
World Platinum Investment Council to reduce financial commitments
by at least 20%.
c) Reducing capital expenditure
A comprehensive assessment of capital projects has been
undertaken resulting in the planned capital expenditure for the
next two financial years being limited to:
-- capital expenditure sufficient to keep the Group's existing
assets in operation and to comply with legislative, Safety, Health
and Environment and social responsibility requirements;
-- ore reserve development capital expenditure sufficient to
ensure that immediately available ore reserves continue to be
available to support planned production; especially in Generation 2
shafts, and
-- expansion capital expenditure for a limited number of
development projects.
Capital portfolio optimisation tools have been used with the aim
of ensuring that capital expenditure is invested only in the early
cash generative and most valuable ore reserve development and
expansion projects. Although certain ore reserve development and
expansion projects have been deferred, thereby reducing the
discounted value of certain of the Group's shafts and their
associated projected revenue streams, Lonmin believes that this is
a necessary measure in order to improve the Group's cash flows and
liquidity in the short-term.
The Group expects to limit its total capital expenditure to
approximately $132 million and $110 million for the years ending 30
September 2016 and 2017, respectively. Based on current
information, the Group anticipates that its capital expenditure for
the year ending 30 September 2018 will increase to approximately
$188 million, as the Group's investments in stay-in-business and
ore reserve development capital expenditure are expected to
increase.
A large portion of the planned ore reserve development capital
expenditure is for the further deepening of the existing,
profitable K3 shaft as well as the development of the Middelkraal
MK2 resource that the Group plans to extract via its existing,
profitable Rowland shaft to partly offset the expected reduction in
Rowland shaft's production profile in 2019. Lonmin believes that a
continued investment in these projects will enable the hoisting
capacity of these shafts to be fully used for an extended period
and to maintain their low unit costs.
We aim continue to maintain the resilience of our processing
plants and concentrators to achieve the high levels of PGM
recoveries we achieve. Our smelter complex, which is comprised of
the two large furnaces and the three pyromet furnaces provides us
with the flexibility required in this industry and offers
opportunistic third party concentrate purchases or toll
treatments.
The Group's planned capital expenditure also includes expansion
capital expenditure for the bulk tailings treatment (BTT) project
which was deferred earlier in the year. The BTT project entails the
re-mining of a tailings dam to extract chrome and contained PGMs.
The BTT project is expected to be mined by a contractor over a
seven-year period with the first tonnes expected in the latter half
of the year ending 30 September 2017. The chrome is expected to be
recovered in a new chrome spiral plant and the contained PGMs are
expected to be recovered in the Group's Number One furnace. The
Group is in the process of securing third party funding for the
conversion of the concentrator and the establishment of the slurry
pipeline that will be required. Approximately $29 million and $14
million are included for the BTT project in the total planned
capital expenditure for the years ending 30 September 2016 and
2017, respectively.
The Business Plan accelerates our core strategy of focusing on
the larger Generation 2 shafts which is working well in terms of
saving costs and improving efficiencies and operational
performance. Ongoing elements of that strategy remain in place.
Core shafts on target
We are accelerating improvement initiatives through theory of
constraints at our big, long-life and low cost shafts of the future
to increase and sustain shaft hoisting performance and improve
capital efficiency. K3, 4B and Rowland shafts are benefitting from
this as highlighted above.
Saffy shaft's ramp up profile was delivered in line with
promises despite the strike. We have driven the strong ramp up of
the shaft while maintaining 18 months of available ore reserve to
support the required extraction rate, putting stoping crews in
place ahead of schedule and improving crew efficiencies. We changed
the top operational management team and also deployed a highly
skilled business improvement team to identify and eliminate
bottlenecks and improved infrastructure to support planned
production levels and, crucially, we are taking the lessons we have
learnt from these successes and applying them at other shafts we
think can benefit.
Maintaining flexibility
We intend to maintain a clear strategic focus, on the Group's
mineral resources and mining and processing infrastructure at
Marikana, which has seen considerable investment in recent years,
with approximately $388 million of capital expenditure incurred in
the last three years. The expenditure of recent years has resulted
in an improvement in the rate of ore reserve development and, as at
30 September 2015, the Group had immediately available ore reserves
equating to approximately 22 months of mining under normal
operating and market conditions, which provides the Group with
operational and strategic flexibility with particular focus on the
Generation 2 shafts.
Preserving longer term optionality
In the longer term, the Directors believe that the Group has a
number of attractive brownfield expansion opportunities that can be
developed when the PGM pricing environment improves, including the
K4 project and the Pandora E3 and E4 deepening projects. As at 30
September 2015, these projects had in aggregate 30.5 million ounces
of mineral resources of platinum, palladium, rhodium and gold,
including 18.7 million ounces of platinum resources.
1.3.2 Value Benefits
Over the past 18 months, we have looked hard at our Marikana
operations, reviewing assets, practices, systems and operating
models.
We launched a comprehensive review of our assets to address
asset utilisation, reduce the total cost of ownership, improve
capital efficiency and productivity and therefore profitability and
cash flow with the aim that Lonmin improves the quality and
consistency of its earnings and reduces cost per ounce in the
medium term, whilst prudently managing risk through all cycles and
improve its relative cost position on the industry cost curve.
In 2014 we announced that we aimed to achieve greater than R2
billion of value benefits over three years to 2017 through a review
of our operating model, improving productivity and efficiencies and
further optimization of our process operations. We've achieved
significant success, achieving net benefits of R526 million in
2015. Cost savings from the total cost of ownership programme,
headcount reduction combined with stringent cost control measures
totalled R800 million. Furthermore R102 million of value was
generated from the permanent release of pipeline stock. These
benefits were partly offset by lower productivity which is
estimated to have cost R376 million partly a consequence of an
increased level of Section 54 safety stoppages. This demonstrates
the focused cost management actions the Group has been undertaking.
We continue to look for ways of enhancing productivity and
efficiencies by innovatively changing our work practices and
enhancing the way we work. This is a journey and an industry-wide
issue. Lonmin remains focused on doing more and we have seen how
striving to make these savings has been an excellent way for our
employees, management and unions to collaborate.
2015
Rm
Review of operating model 600
Total cost of ownership 200
Permanent pipeline stock
release 102
Productivity (376)
Net value benefit 526
------
The Group has already started to benefit from the implementation
of the Business Plan initiatives. We believe that the
implementation of the Business Plan, including the reduction in the
size of the Group's workforce and in overhead costs and support
service structures detailed above, will result in a cost reduction
of approximately R0.7 billion in real terms in the year ending 30
September 2016 (against the annual cost base for the year ended 30
September 2015) and a further cost reduction of approximately R1.6
billion in real terms in the year ending 30 September 2017 (against
the forecast annual cost base for the year ending 30 September
2016), thereby potentially improving the Group's relative cost per
PGM ounce produced in comparison with some competitors. The Group's
unit cost per PGM ounce produced was R10,339 per PGM ounce for the
year ended 30 September 2015 and the Group aims to keep its unit
costs in nominal terms broadly flat for the years ending 30
September 2016, 2017 and 2018. An independent report currently
forecasts
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
that for 2015 the Group's position on the South Africa PGM
industry cost curve (net total cash costs per 3PGE + Au ounce)
should improve to the second quartile. Such an improvement in the
effectiveness of the Group's operations will help improve the
Group's ability to operate in a low PGM pricing environment and
will position the Group to benefit from any recovery in PGM prices
in the medium to long term.
2. Enhance Balance Sheet Strength
Our philosophy of preserving a conservative balance sheet with
access to sufficient funds to finance both ongoing operations and
prudent and efficient capital expenditure was severely tested by
the sustained deterioration of PGM prices, and the strike of 2014,
coupled with our need to renegotiate bank debt facilities against
this acutely difficult backdrop.
We examined multiple options around refinancing as our success
in delivering solid and steady operational results in all quarters
was undermined by PGM prices. We concluded that amending our debt
facilities and launching a $407 million Rights Issue in November
2015 was in the best interest of Lonmin's shareholders.
We are grateful for the continued support of our shareholders
and banks through what has been an exceptionally challenging period
for the Group.
3. Our People and Relationships
Building on our relationships with our employees and unions
The unprecedented five month long strike in 2014 refocused our
energy on rebuilding relations with employees and their
representative trade unions.
We believe the priority we put on this made us industry leaders,
and the outstanding ramp up we saw in the wake of the strike was
the first solid evidence of this.
In the months since we made a priority of further solidifying
and growing those relationships - particularly with our unions.
Given the significant changes to employee numbers which became
necessary in 2015, the fact we have been able to manage that
process without disruption and with tough but mutually-respectful
and productive negotiations with unions, has shown the hard work of
the last two years in this area is reaping dividends.
We are continuing with our efforts to communicate directly with
employees and to reclaim our role as the primary source of
communication. We believe that this direct engagement with
employees through the existing line management structures and the
periodic communication forums forms part of the way we work and the
basis of creating empowered, high performance teams. Through the
leadership development and team effectiveness training programmes,
we continue to develop our managers' capacity to manage this new
form of direct engagement. Following the BEE transaction we
completed in December 2014, the Group's employees hold a 3.8%
equity interest in the principal operating companies in South
Africa, through an employee profit share scheme. We believe this
aligns more closely the interests of employees and
shareholders.
Management and unions also engage at regular meetings of the
Future Forum that was established in December 2014 as required by
the MPRDA, which aims to establish a joint working relationship
between the mine, workforce representatives, government and
community representatives. We have been encouraged by the robust
but constructive engagements with unions. We believe that if we
continue to deepen our relationships with our employees and their
union representatives that the wage negotiations in 2016 will take
place on a much stronger platform of respect and trust than in the
past.
In addition we initiated a relationship building programme. This
programme has culminated in the Relationship Charter, which
outlines our aspirations of the nature of relationship that will be
built with the unions and measures that are being implemented to
give effect to the Charter. The Charter presents a real opportunity
to strengthen relations with trade unions inter alia through
constructive and regular engagements (using our union engagement
structures such as the Future Forum).
We believe we have a lean, focused management team
We have implemented the changes of personnel and structures in
our top team which we talked about last year and seen immediate
positive impact. Our management structure is now flatter, and our
operational structure reconfigured to increase cohesion, execution
and accountability. The operating philosophy promotes operational
excellence, knowledge sharing, collaboration and consistency. We
believe that the Group has experienced major benefits of this,
which are seen both in the effective, holistic oversight management
has of the business, and in the empowering of key operational staff
to bring their experience and skills to bear quickly.
The new structure enables us to utilise the skilled resources we
have across the mining and processing operations and develop a
common culture. This provides for our employees' growth and
development with great benefits to Lonmin. Our new approach is also
improving our ability to attract, develop and retain the best
talent and, crucially, the entire new structure is forensically
focused on delivery.
Management has begun to drive through the strategic actions and
we are seeing encouraging results.
4. Our Corporate Citizenship Agenda
4.1 Stakeholder Engagement
The importance of genuine and robust stakeholder engagement and
relationship building has become increasingly apparent over the
past decade, given the need to understand stakeholder expectations
and communicate on key issues transparently, consistently and in a
timely manner. We have identified and prioritised our stakeholder
groups and individuals and allocated relationship "owners" to each
grouping. Our aim is to develop and protect Lonmin's relationships
with all stakeholders who have a significant ability to impact
Lonmin's operations and investment case. The renewed focus and
energy on stakeholder engagement acknowledges the role of
partnerships in confronting the challenges plaguing the industry.
Functional partnerships between Government, organised labour and
community leaders are essential if we are to create the necessary
environment for a sustainable future and realise the true meaning
of "shared value for all".
4.2 Social Licence to Operate
Maintaining our social licence to operate through securing the
trust and acceptance of communities and stakeholders is material as
they host our operations. This is achieved through:
-- Stakeholder engagement to ensure social expectations are
understood and managed;
-- Community investment initiatives to address social
issues;
-- Transformation initiatives to meet the government's social
and economic development goals;
-- Ethical business practices that include a commitment to
upholding human rights; and
-- Corporate and community partnerships.
This is very much work in process and is based on an
acknowledgement that trust must be restored and communities
healed.
4.3 Greater Lonmin Community and Government
Alongside the Group's legal and regulatory obligations, Lonmin
believes that it is necessary to earn its social licence to operate
from the people and communities which host its operations. The
Group refers to the people who live in the areas immediately
adjacent to its operations and refers to them collectively as the
GLC. The Group has therefore, over the years, engaged with and
invested in its local communities. Lonmin considers spend in social
initiatives as an investment and a business imperative for
sustainability.
The Group's New Order Mining Rights include detailed obligations
set out in social and labour plans agreed with the South African
Department of Mineral Resources. The Group is also required to
achieve a compliance level of at least 26 per cent. of ownership by
HDSAs under the Mining Charter and to comply with certain
obligatory targets under the Mining Charter.
For over 20 years, the Group paid royalties into a trust fund
for the benefit of the Bapo Community. The royalty stream was
subsequently converted into equity ownership as part of the three
BEE transactions which were completed in December 2014. In
connection with the Bapo Community BEE transactions, the Bapo
Community was also granted the opportunity to participate in the
Group's procurement and business value-chain activities. The Bapo
Community therefore forms an integral part of the Group's HDSA
ownership profile which is an important aspect of maintaining the
Group's mining licences and building sustainable relationships with
the communities that host its operations.
Lonmin believes in developing leadership in the communities in
which it operates. For example, the Group has invested in local
schools, in the belief that education has the power to transform
lives and also the money earned by those who attend the schools
will ultimately flow through to the benefit of other community
members. The Group also has an active bursary programme supporting
students at university and is proud that approximately 50% of the
students it supports and sponsors have been drawn from the GLC.
Our community investment focus also ties into the impact we have
on our labour-sending areas as well as the local communities who
host our operations. The long-term feasibility of mining operations
relies upon the wellbeing of all these communities. Conversely, our
business has a finite life span and we are responsible for the
continued sustainability of these communities. Through education,
health and infrastructure programmes we aim to address the
challenges faced in the GLC, which were partially created from the
legacy of migrant labour to the mines and the historical
inequalities of economic opportunity. Our programmes provide us
with a pipeline of skilled local employees and increased
procurement from the local community.
The Group also donated 50 hectares of its property to the South
African Government for the building of accommodation for local
community members and employees and has made significant progress
including the building of infill apartments.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Lonmin is supportive of and commits to participate in the South
African government's National Development Plan (NDP). The NDP's
priorities include raising employment through faster economic
growth and improving the quality of education, skills development
and innovation. The global economy is in a down cycle and to ensure
sustainability of its business, Lonmin has had to take rough action
and sadly 6,000 jobs are affected in the short-term. The long-term
fundamentals of PGM's remain attractive and Lonmin's sustainability
is important in order to create more jobs when the global economy
recovers.
4.4 Farlam Commission
The publication of Judge Farlam's report has reminded us of the
vital importance of shared value, not that a reminder was needed.
The Judge highlighted that Lonmin could have done more but he did
not conclude that Lonmin broke any laws.
We have given the Farlam Report our detailed considered review
and have begun implementing its recommendations. Details of these
will be included in our Sustainable Development Report which will
be available on Lonmin's website: www.lonmin.com
4.6 BEE Equity Ownership
In November 2014, Lonmin successfully completed three BEE
transactions which cumulatively give the Group an additional 8%
equity empowerment. Lonmin accordingly achieved the target of 26%
BEE ownership by 31 December 2014 as required by the Mining
Charter. These transactions support the improvement and development
of local communities and align the interests of communities,
employees and shareholders.
4.7 Living Conditions
This year we have seen infill hostel construction move ahead on
plan, delivered 50 hectares of land for a joint partnership project
with government to provide new homes and signed a historic
transaction with the Bapo Community near our mines which sees them
benefit further from our future profitability and gives them a
stake in our future success.
Acknowledgements
During the course of the year the Board welcomed Varda Shine,
who joined as an Independent Non-Executive Director. Gary Nagle and
Paul Smith were Glencore's representatives on the Board and
consequently resigned when their company ceased to be a
shareholder. Meanwhile Karen de Segundo, a Non-Executive Director,
retired as she had planned to do. Ben Moolman was appointed Chief
Operating Officer in March, following the departure of Johan
Viljoen, and appointed to the Board as an Executive Director in
June. Ron Series also joined us in August as Chief Restructuring
Advisor to drive long-term capital requirements.
We thank Gary, Paul, Karen and Johan for their contribution to
the Company over their many years with us and wish them all the
very best in their future endeavours.
Conclusion
In conclusion, this year has been tough but our strategy is
delivering results operationally and we have taken robust measures
to ensure our sustainability through these challenging times. We
have taken to refinancing the business and address balance sheet
concerns which were thrown into sharp focus by the combination of
maturing debt facilities and low prices. This will stand us in good
stead in the years ahead as the long-term PGM market remains
attractive due to more stringent emissions legislation, growing
jewellery demand and the adoption of fuel cells as a real source of
power.
Guidance
Going forward the remaining shafts will allow for a more
sustainable and agile business. We expect that the sales profile
will be approximately 700,000 Platinum ounces in 2016, stabilising
to approximately 650,000 for 2017 and 2018 and capital expenditure
is anticipated to be limited to approximately $132 million and $110
million for 2016 and 2017 respectively. We anticipate that capital
expenditure for 2018 will increase to approximately $188 million as
the Group's investment in stay-in-business and replacement ore
reserve development capital expenditure is expected to
increase.
In addition, our actions are anticipated to reduce the cost base
of financial year 2016 by R0.7 billion in FY15 real terms when
compared to the current year and a further R1.6 billion in 2017
when compared against 2016, in FY15 real terms. We aim to keep unit
costs per PGM ounce in nominal terms broadly flat in line with the
year ended 30 September 2015 at around R10,400 per PMG ounce, for
three further years ending 30 September 2016, 2017 and 2018.
Thank You
Finally, to my fellow colleagues, this has been another tough
year for all of us, but I know each and every one of you has
continued to make a significant contribution. I thank you for your
hard work and dedication. Also, our banking syndicate, our core
advisors and customers, I thank you for your continued support.
Brian and the Board, your resilience and resolve have been
invaluable and I thank you too.
As shareholders, I know you have felt first-hand the challenges
of the business over the last few years and I thank you for your
loyalty and support as we work through these.
Yours faithfully
Ben Magara
Chief Executive Officer
9 November 2015
OPERATIONAL REVIEW
Safety
Our safety strategy is centred on the belief that zero harm is
achievable in mining. We record our safety performance according to
injury rates and fatality rates and how they impact on human life
and production, as these are the ultimate indicators of the success
or failure of our strategies, practices and systems.
It is particularly disappointing, therefore, that our safety
record deteriorated in 2015, with the LTIFR increasing to 5.41 per
million man hours worked from 3.34 in 2014.
In addition, it is with deep regret that after 18 months
fatality free Lonmin lost three employees to fatal accidents during
the second half of the year, despite our continued efforts to
promote a safe working environment. There were two fatalities in
separate incidences at Hossy shaft resulting in the deaths of Mr
Silva Cossa, a mine overseer assistant on 19 May and Mr Mark
Potgieter, a Sandvik Mining contractor on 22 July. Mr Bonisile
Mapango, a winch driver at E3 shaft passed away on 31 July.
Subsequent to the year end, Zilindile Ndumela, a locomotive driver
at Rowland shaft was fatally injured on 26 October. We extend our
heartfelt condolences to the families, friends and colleagues of
all the deceased.
All incidents, but especially the deaths of Mr Cossa, Mr
Potgieter, Mr Mapango and Mr Ndumela, remind us of the inherent
risks associated with mining and that we must never become
complacent in our approach to safety. The deterioration in our
performance, which has been evident since the five month strike in
2014, indicates the real impact that breaks in operational
continuity have on employee focus. It is imperative that we
redouble our efforts if we are to achieve zero harm, which we
believe is attainable, and prevent similar incidents from occurring
again in the future.
We know from experience that improving safety gets incrementally
harder as you move from changing systems and equipment to changing
behaviours, however the safety of our employees is paramount and
our approach has to be robust if we are to ensure that people
remain safe above and below ground, at home and at work. We
continue our pro-active safety management procedures, nurturing a
culture focused on safety and, importantly, in order to enhance
safety and production performance, a programme is being developed
to empower front line supervisors. This is planned for
implementation in 2016.
Mining Division
With the five month stoppage dominating the 2014 financial year,
year on year comparisons are inappropriate. As such, the commentary
below also includes comparisons to the financial year 2013.
Overview
Tonnes mined at 11.3 million were 77.9% higher than the strike
impacted prior year but 6.3% lower than 2013. This was due to the
planned decline of the Generation 1 shafts in end of lifecycle
management and the depleting opencast operations.
Production from our Generation 2 shafts was flat on 2013 as the
ramp-up at Saffy shaft (up 52.9%) and improvements at Rowland (up
5.1%) following the successful implementation of the Theory of
constraints in 2014, were offset by the significantly increased
Section 54 safety shut downs at K3 and Hossy shafts.
2015 was impacted by an increase in the frequency and duration
of Section 54 safety stoppages but we are encouraged by interaction
at industry level to tackle these issues and our internal focus on
the Group's safety performance. Tonnes lost, mainly due to
increased Section 54 safety stoppages and management induced safety
stoppages, at 0.9 million tonnes were lower than the strike
impacted prior year but were 0.3 million tonnes higher than 2013.
In total, 899,000 tonnes were lost during the year, of which
770,000 tonnes related to Section 54 safety stoppages, 102,000
tonnes to management induced safety stoppages (MISS) and 27,000 due
to labour issues. This compares to a total of 6,747,000 tonnes lost
in the prior year of which 6,382,000 were lost due to industrial
action, 282,000 tonnes were due to Section 54 safety stoppages and
83,000 tonnes were due to MISS.
Marikana Ore Reserves
The ore reserve position of the Marikana mining operations at
4.1 million square metres represented an average of 22 months
production.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
At the Generation 2 shafts the increase in the ore reserve
position at K3 shaft was driven by development on the UG2 reef.
Rowland shaft increased the ore reserve position on the UG2 reef as
a result of excellent development achievements and the Merensky
reef where capital was invested to develop an additional half
level. Saffy shaft further increased the ore reserve position
during 2015 due to the completion of the capital development on
levels 19 and 20. The ore reserve position at Saffy shaft is now
sufficient to sustain steady state and production, and the rate of
development is planned to reduce to a level where the ore reserve
position is maintained into the future. The ore reserve at the
4B/1B shaft was maintained at a healthy level and at Hossy shaft
the increase was a result of capital invested to extend the on reef
access development deeper to 14 and 15 levels before the decision
was taken to orderly shut this shaft down.
The increase in ore reserve position at the Generation 1 shafts
can be attributed to an increase in ore reserve at E2 shaft, where
on reef development below level 10 has resulted in additional ore
reserve becoming available.
Productivity
Productivity measured as square meters per mining employee at
our Generation 2 shafts was significantly higher than the strike
impacted prior year and slightly down on 2013.
Significant improvements in productivity were made at Saffy
shaft, which has been ramping up to full production, and at Rowland
where the implementation of the Theory of Constraints management
philosophy was first trialled. These improvements are the result of
the integration of this management philosophy into the shafts
culture more widely, together with the implementation of other
improvement initiatives supported by the Business Support
Office.
These improvements have offset declines in productivity at K3,
4B/1B and Hossy. Production performance at K3 was negatively
impacted by the high frequency and lengthy duration of DMR safety
stoppages during the second and third quarter of the year. This was
further exacerbated by poor employee work attendance. Hossy shaft
experienced two fatal accidents within a two month period during
the third quarter and this resulted in lengthy DMR safety
stoppages, which severely impacted production.
Business Improvement Initiatives
A number of business improvement initiatives, supported by the
Business Support Office and aimed at increasing productivity and
improving performance, are currently being implemented.
After the successful pilot programme conducted at Rowland shaft,
the Theory of Constraints management philosophy is being rolled out
to other operations under the guidance of knowledgeable personnel
within the Business Support Office. Good progress has been made at
Saffy shaft during the year and programmes have recently been
initiated at 4B shaft and K3 shaft. The roll out at these shafts
will continue into 2016.
Improved stope crew output was targeted as an objective during
the 2015 financial year and the main initiative that was
implemented to drive this was to improve the performance of the
population of stoping crews that made up the bottom 20% at each of
the Generation 2 shafts. This initiative was implemented with the
assistance of experienced on the job training personnel within the
Business Support Office. Good progress has been made during the
year, with the average performance of the worst performing 20%
population being improved from 150 square meters per crew per month
at the beginning of the financial year, to just over 200 square
meters at the end of the financial year. This programme will
continue during 2016 with the objective of improving the
performance of this bottom 20% of crews to an average of 220 square
meters per crew per month by the end of the financial year.
An improved stoping crew bonus system has been designed and is
planned for implementation early in the 2016 financial year. The
rate earned per production unit has been increased in the improved
bonus system and the rate improvement has been geared to favour
higher performers. It is anticipated that this will incentivise
crews and lead to a much improved performance once it is
implemented.
One of the major causes of lost production during 2015 was
employee absenteeism. A programme is being developed to better
understand the drivers of this behaviour and then to develop and
implement a plan to address the underlying causes in order to
improve attendance and thereby production performance.
In order to enhance safety and production performance, a
programme is being developed to empower front line supervisors.
This is planned for implementation in 2016.
Overview of Marikana Mines
Generation 2 shafts
Our Generation 2 shafts represent around c.80% of total
production.
K3 shaft
K3, our largest shaft produced 2.7 million tonnes. This was 0.4
million tonnes lower than 2013 of which 0.2 million tonnes was due
to an increase in tonnes lost due to Section 54 safety stoppages.
Poor employee attendance was also a major contributor to production
losses.
Rowland shaft
Rowland increased production on 2013 by 5.1% reflecting the
positive impact of management actions and the Theory of Constraints
projects successfully completed at this shaft which were aimed at
de-bottlenecking operations.
Saffy shaft
Saffy shaft recorded an increase of 52.9% on 2013 demonstrating
the continued good progress that we have made with our promised
ramp up. Saffy is reaching steady state production and mined a
record 187,621 tonnes in July. The ore reserve position was
improved further during the year and the full complement of stoping
crews has been deployed at the operation. The focus has now shifted
to improving the performance of the stoping crews and the
introduction of the Theory of Constraints management philosophy to
de-bottleneck targeted areas and sustain output at more than 90% of
shaft capacity.
4B/1B shaft
4B/1B produced 1.6 million tonnes which was 0.2 million tonnes
lower than 2013 of which 0.1 million tonnes was due to an increase
in tonnes lost due to safety stoppages. In addition, the aging
mechanized equipment at 1B shaft has become less reliable and
availabilities have dropped off significantly, adversely impacting
stoping output at the shaft. The sharp drop off in metal prices
during the year coupled with underperformance triggered a review of
the future viability of 1B shaft. The review concluded that the
shaft was not financially viable at current prices and performance
levels and a decision was taken to place the 1B portion of the mine
on care and maintenance as of the end of the 2015 financial
year.
Hossy shaft
Hossy saw a decrease in production of 0.1 million tonnes driven
by safety shut downs following the fatalities in May and July. A
review of the performance of Hossy shaft was conducted in July and
it was concluded that the high shaft costs, driven by poor
mechanised equipment efficiencies, could not be sustained in the
current low metal price environment. As a result, a decision was
taken to place the shaft on orderly closure. All development was
therefore stopped at the end of the 2015 financial year and the ore
reserve that remains will be stoped out over the next 18 months
where after the shaft will be placed on care and maintenance.
Generation 1 shafts
Our Generation 1 shafts are reaching their end of lives and, as
expected, productivity has declined.
Newman shaft
Newman shaft produced 0.8 million tonnes which was a decrease of
19.2% on 2013 as this shaft is nearing the end of its life. Newman
has been in planned decline for a while and it is envisaged that
the shaft will be mined out by the end of the 2016 financial year
at which time it will be placed on care and maintenance.
Pandora Joint Venture
Pandora production (100%) at 0.5 million tonnes was 4.8% lower
than 2013 due mainly to 0.1 million tonnes lost due to Section 54
stoppages.
Western 1, East 1 and East 2 shafts
W1, East 1, East 2 are also shafts at the end of their lives and
together produced 0.7 million tonnes compared with 1.0 million
tonnes in 2013. These shafts will continue to be managed by
contractors and run for cash. W1 and E1 have been included in the
Business Plan for the 2016 financial year only and their viability
will be re-assessed at the end of the financial year. E2 is planned
to complete mining at the end of the 2017 financial year.
K4 shaft
Activity at K4 shaft was limited during the year with production
of 48,571 tonnes. Given the current economic climate and our
rationed capital expenditure plans, we have re-considered our
strategy of conducting early mining in preparation of a full ramp
up at K4 and the shaft has been placed on care and maintenance once
more.
Opencast
Production from our depleting Merensky opencast operations of
229,930 tonnes was 103,000 tonnes, or 31.0%, lower than 2014 as the
operations reach the end of their life. Opencast operations
operated throughout the strike in the prior year period, albeit at
a reduced level of output. Mining ceased at the end of the 2015
financial year and all that remains to be done is the filling of
the final void and final rehabilitation of the area that is planned
for completion at the end of the second quarter of the 2016
financial year.
Process Operations
Concentrating
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Total tonnes milled in the year at 11.8 million tonnes were 0.5
million tonnes higher than tonnes mined due to the healthy stock
piles ahead of the concentrators which were drawn down due to the
impact of section 54 safety stoppages on the mining production.
Tonnes milled in 2015 were 5.7 million tonnes higher than the
strike impacted prior year, as the concentrating operations were
also impacted by the strike action and shut down. Compared to 2013
tonnes milled were flat despite only utilising six out of our seven
Marikina concentrators as part of our measures to reduce costs,
demonstrating our ability to scale our operations as required. The
impact of electricity constraints during the year was 0.1 million
tonnes as the Group's strategy is to manage electricity constraints
via the concentrators, minimising the impact on the mining
operations and smelters.
Underground milled head grade was 4.51 grammes per tonne, an
increase of 0.7% compared to 2014 due to stockpile movements at a
higher grade. Overall the milled head grade was 4.47 grammes per
tonne, up 1.8% on 2014 due to the increase in underground grade and
a decrease in lower grade opencast ore in the mix.
Underground and overall concentrator recoveries for the year at
86.8% and 86.7% respectively continue to be strong.
Together, this resulted in Platinum-in-concentrate for the year
of 740,315 saleable ounces, which was 94.6% higher than the strike
impacted prior year and 1.4% lower than 2013.
Smelting
As reported earlier in the year, the Number One furnace was
safely stopped in early December 2014 following the detection of a
leak. The repairs to the furnace crucible and the additional
maintenance work that was brought forward was completed within the
scheduled three months and first matte was successfully tapped on 9
March 2015. The Number Two furnace was also safely stopped at the
end of December 2014 following condition monitoring and the
detection of electrode breaks. The repairs to this furnace were
made successfully and the first matte tap was in January 2015. The
three smaller Pyromet furnaces were restarted in early December
2014 to increase smelting capacity during this time. These furnaces
will continue to provide smelting capacity throughout the year as
the Number Two furnace was taken down on 26 September 2015, as
planned, for the scheduled rebuild and to implement design upgrades
on the roof and off-gas system. The build-up of concentrate was
processed during the second half of the year demonstrating the
benefit of the additional smelting capacity available due to the
commissioning of the Number Two furnace in 2012.
Base Metals and Precious Metal Refineries
Both the Base Metal Refinery (BMR) and the Precious Metal
Refinery (PMR) delivered an outstanding performance. Platinum
ounces produced of 759,695 were the highest since 2007 and were up
74.2% on the strike impacted prior year and 7.1% on 2013. PGMs
produced of 1,447,364 ounces were the highest since 2011 and were
up 64.1% on the strike impacted prior year and 8.3% higher than
2013.
The instantaneous recovery rate achieved in 2015 of 87.2% was
outstanding and represents a 1.0 percentage point increase on 2014
and a 2.2 percentage point increase on 2013. The continuous year on
year improvement is a result of extensive optimisation and
improvement plans across our processing operations that continue to
yield positive results.
Other Assets
Limpopo
The deadline for Shanduka to exercise its option over Limpopo is
30 April 2016. However, the pending finalisation of the Pembani and
Shanduka merger will most likely result in a re-assessment of the
project and a potential re-negotiation around the current
transaction completion date.
Akanani
Akanani offers the prospect of a large, long-life, low cost and
highly mechanised mine which gives us optionality in the
long-term.
Exploration International
North America
Lonmin is exploring for PGM deposits around the Sudbury Basin in
Ontario, Canada in joint ventures with Vale S.A. and Wallbridge
Mining Company Limited. Resource drilling is continuing on the Vale
JV Denison property targeting shallow PGM-bearing deposits. Lonmin
has recently secured the rights to explore the Parkin properties as
part of the North Range Joint Venture with Wallbridge and
exploration will continue on these and several other properties
around the Sudbury Basin in 2016.
Europe
Lonmin signed a joint venture with Koza UK Ltd on two of our
Northern Ireland licences for gold, silver and base metals.
Geochemical and geophysical surveys with preliminary drilling were
carried out on targets. PGM targets were assessed with preliminary
drilling on two licence areas not covered by the joint venture and
analysis is ongoing.
Exploration - South Africa
Our Vlakfontein prospecting right was not renewed and
accordingly all exploration activities on the property have now
ceased. Lonmin has a joint venture with Boynton in the eastern
Bushveld but is involved in arbitration proceedings against Boynton
on the basis that they failed to comply with a warranty to deliver
an unencumbered asset to the joint venture. Boynton has appealed
the initial Judgement given in Lonmin's favour. The appeal will be
heard in November 2015.
Capital Expenditure
Capital expenditure for 2015 was tightly controlled and scaled
back from our original guidance of $250 million to $136 million in
light of the persisting low PGM prices. Capital spend was minimised
whilst ensuring compliance to regulatory and safety standards to
ensure safe and efficient operations. Essential sustaining capital
was spent at the continuing shafts to maximise shaft capacity and
reduce unit costs. At the concentrators the majority of the Bulk
Tailings Treatment plant was deferred and all other non-critical
expenditure was cut back or deferred. The weaker ZAR/US$ exchange
rate also assisted the reduction by around $30 million.
2014 - Act 2015 - Act 2016 - Est 2017 - Est 2018 - Est
------------- ------------ ----------- ----------- -----------
$m $m $m $m $m
---------------------------- ------------- ------------ ----------- ----------- -----------
K3 19 19 16 6 3
Saffy 10 8 1 2 24
Rowland 9 18 3 5 11
Rowland MK2 - - 15 27 29
K4 8 19 - - -
Hossy 7 7 - - -
Other mining 10 12 25 25 40
------------- ------------ ----------- ----------- -----------
Total Mining operations 64 84 60 64 107
Concentrators 12 17 44 18 15
Smelting & Refining 9 27 21 19 52
------------- ------------ ----------- ----------- -----------
Total process operations 21 43 64 37 67
Hostel / Infill Apartments 5 7 5 6 5
Other 2 2 3 2 9
Total 93 136 132 110 188
---------------------------- ------------- ------------ ----------- ----------- -----------
Comprehensive assessment of capital projects has been undertaken
with the aim of limiting capital expenditure to levels required to
satisfy regulatory and safety standards and essential sustaining
capital expenditure in the continuing shafts and for a limited
number of development projects. Capital portfolio optimisation
tools have been utilised with the aim of ensuring that capital
expenditure is invested only in the most cash generative
development projects available to the Group. The Group expects to
limit its capital expenditure in 2016 - 2018.
Future K3 project capital is planned to be spent on ore reserve
development to access an additional two levels (25 and 26) and at
Saffy capital is anticipated to be spent to access additional
levels (21-28) via a sub-decline. Extraction of the Rowland MK2 UG2
resource via the existing Rowland shaft infrastructure is
anticipated to result in production from this area from 2018
onwards. Concentrator capital includes the Bulk Tailings Treatment
project which allows for the re-mining of the Eastern Tailings Dam
1. This was partially deferred from 2015 and going forward is
anticipated to be financed by third party funding. Sustaining
capital across the operations is anticipated to revert to normal
levels in 2018.
Capital available for employee accommodation is lower than the
Group's Social and Labour Plan commitment to spend R500 million
between 2015 and 2019.
People
Employee Relations
The employee relations environment at Lonmin has stabilised over
the last 12 months, evidenced by the successful completion of the
voluntary separation programme (VSP) and the Section 189
consultations in October 2015. While the environment has remained
stable, more work is required and is being done to strengthen
relations with our employees and the unions to mitigate any
possible risk of operational disruptions. Our view and commitment
remains to be a multi union environment where all employees have a
voice through their union of choice.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
The limited organisational rights agreements we have with our
minority unions, UASA and Solidarity, are based, on the same
agreement that was concluded with AMCU while it was a minority
union and amongst other things entitle the minority unions to stop
order deduction facilities, access to the workplace and two
full-time union representatives.
Our focus in the first half of 2015 was on a rigorous process of
rebuilding relations with AMCU after last year's five-month long
strike. This included the creation of a Relationship Charter that
maps out the legal aspects of the Company's relationship with the
majority union as well as aspirations, expectations,
accountabilities and commitments from both parties to enable the
relationship. A series of workshops were conducted across all
leadership, union and management levels to deepen understanding and
strengthen relationships. Union engagement structures have been
institutionalised and regular meetings are held with management to
update unions on the status of the business. Training is provided
to shop stewards on legislative matters, business skills and the
requirements of their roles and responsibilities.
Joint task teams between management and the union was set up to
ensure progress is made on the non-financial needs that were raised
during negotiations in 2014, but that were not finalised at the
time of the wage agreements. These include broader stakeholder
engagement in line with the generic processes of consultation and
social dialogue, and will cover among other things, productivity
improvements, housing and living conditions, employee indebtedness,
skills development, and shareholding and profit sharing. Management
and unions (excluding the majority union) also engage at regular
meetings of the Future Forum that was established in December 2014
as required by the MPRDA, which aims to establish a joint working
relationship between the mine, workforce representatives,
government and community representatives. We have been encouraged
by the robust but constructive engagements with unions. We believe
that if we continue to deepen our relationships with our employees
and their union representatives that the wage negotiations in 2016
will take place on a much stronger platform of respect and trust
than in the past.
Workforce Profile
As at the end September, our total workforce was 35,669,
compared to 38,292 in September 2014, of which 26,968 were
permanent employees and 8,701 were contractors. 84% of the overall
workforce is South African, with 16% still being migrant. 8.8% of
our permanent employees are women. Our management headcount as at
30 September 2015 was 475 compared to 516 at 30 September 2014.
Employment Equity
Lonmin embraces transformation as a business imperative. We are
committed to playing our part in addressing historic inequalities
and creating the conditions in which current and future generations
can succeed in creating a shared purpose. The Mining Charter
requires a focus on increasing the number of historically
disadvantaged South Africans (HDSAs) in management and the number
of women in mining.
Community Relations and Our Corporate Citizenship Agenda
Community Value Proposition (CVP)
The CVP project, now in its second year, has enabled the Company
to deliver focused social investment that is impactful and
sustainable. Our investment includes community education and skills
development, community healthcare, infrastructure development and
enterprise development.
Our Corporate Citizenship Agenda
We engage in a range of activities aimed at uplifting our
communities. These include education, health and social
infrastructure projects.
Social and Labour Plan (SLP)
Our commitment to corporate citizenship defines our duty to
contribute to the wellbeing and development of the communities that
host, and are affected by, our operations. This duty is formalised
in the Social and Labour Plans obligations under the terms of our
mining rights, and such plans are submitted for approval on a five
year basis. Despite numerous challenges confronted during 2015, we
remain committed to delivering on the commitments of our Social
Labour Plans, which are focused on accelerating transformation and
implementing measures to significantly improve the living
conditions of our employees, host communities and major labour
sending communities.
However, given the current economic climate, subdued market
conditions and consequential downscaling of the organisation,
Lonmin has commenced with the review of the current SLPs. Of
particular focus is the remaining three year period: 2016 - 2018.
The intended outcome of the review is to align the SLPs to the
Company's new reality by way of revising our commitments via a
Section 102 application to the regulator (DMR) as per the Mineral
and Petroleum Resources Development Act.
BEE Equity Ownership
The Company's HDSA ownership in its prospecting and mining
ventures is now 26% as required under the Mining Charter. The three
BEE transactions involved to increase this ownership from the
previous 18% were designed to support the improvement and
development of local communities and align the interests of
communities, employees and shareholders:
Bapo transaction
The Bapo Ba-Mogale Traditional Community is a key shareholder in
Lonmin. The intention of the BEE deal with the community is to
share the value created by the Company and to assist in building
our host community. The value that accrues to the Bapo community
should make a real difference to their lives and help to improve
living conditions and provide Lonmin with a stable and peaceful
operating environment, which is important to successfully operating
the business.
The Bapo Transaction involved a royalty for equity swap and the
sale of the Bapo 7.5% stake in the Pandora Joint Venture to a
Lonmin subsidiary. This transaction provided the Bapo Community
with equity participation of circa 2.25% at Plc level and a
deferred royalty payment of R20 million per annum payable by
Lonplats (Eastern and Western Platinum combined) in each of the ve
years following completion of the transaction. The BEE
accreditation arising from this royalty for equity swap transaction
amounted to 2.4%.
The transaction includes a commitment from Lonmin to provide
procurement opportunities to members of the Bapo community of at
least R200 million over an initial 18-month period. The first such
contract was finalised in March 2015 involving the supply of
equipment to move ore between shafts. Some 200 Bapo community
members received training to fulfil this contract. A further stock
pile management and movement contract was finalised in September
2015. These contracts will bring additional benefits to the
community through job creation and other multiplier effects. Other
long-term opportunities are currently being identified that will
not only achieve the committed amount during the stipulated period
but also bring additional benefits to the community through job
creation and other multiplier effects.
Employee Profit Share Scheme (EPSS)
The EPSS was implemented in 2014 and aims to provide our
employees with economic partnership and ownership whilst
simultaneously sharing the responsibilities and involvement that
this ownership brings. The implementation of this EPSS enabled
Lonmin to receive an HDSA equity accreditation of 3.8%.
Community trusts
2014 saw the establishment of two separate community trusts.
Each trust holds 0.9% of the ordinary shares in Lonplats, and is
entitled to dividend payments which have been mandated for
upliftment projects in the respective communities. To the extent
that no dividend is payable in a particular year, each community
trust will be entitled to a minimum annual payment of R5 million
escalating in line with CPI each year. While these transactions
have been successfully concluded, there has been a challenge to the
transaction by a faction within the Bapo community. Lonmin
continues to engage with all stakeholders to resolve the issues of
concern.
Farlam Commission of Inquiry Report
The release of the Marikana Commission of Inquiry: Report on
matters of public, national and international concern arising out
of the tragic incidents in Marikana in the North West Province (the
Farlam Report) to the broader public in June 2015 was a vital step
towards achieving healing. The Farlam Report is of huge
significance for all South Africans and Lonmin is grateful for the
enormous effort by so many people which made the report
possible.
We can never forget that 44 people, mostly Lonmin colleagues,
died in August 2012, in the period leading up to, during and after
the week that changed our lives. This report is about them, their
families and the people of Lonmin whose lives were touched by those
events.
Lonmin gave its full support to the Commission which we believe
was essential if South Africa is to build sustainable peace. This
was not an easy process, requiring intensive introspection.
Immediately after the report was released we undertook as a Company
to consider its findings in detail and Lonmin has taken these
lessons on board and the implementation of which is underway.
MARKET REVIEW
Overview
During the year under review, the platinum price has fallen
unsustainably and the metal is now oversold. The deficit market of
2014 is now shifting back towards balance as the recovery of supply
closes the gap to demand.
Autocatalyst demand is growing, particularly in Western Europe
with the introduction of Euro 6 emissions legislation for all
vehicles in 2015. Platinum demand was supported by buying on price
dips in late 2014 and early 2015.
After significant growth, Chinese jewellery demand is forecast
to fall by 7% this year. Sales have been affected by the falling
local stock market, fewer weddings and lower platinum jewellery
marketing expenditure. Fabricators did not use the weaker price
environment as an opportunity to stock up throughout the year.
However, the strongest buying was evident in September, giving
leave for cautious optimism for a recovery as retailers
destock.
Sales
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
In 2015 Lonmin sold 751,560 ounces of Platinum into the market.
Platinum sales contributed 64% of our turnover. Palladium was the
second highest contributor to the revenue basket with the 347,942
ounces, sold constituting 19% of Lonmin's income. Combined sales of
Rhodium, Ruthenium and Iridium contributed a further 9% and Gold
and Base Metals made up the balance.
PGM Prices
During the financial year platinum underperformed both palladium
and gold. The recovery of platinum supply, combined with downgrades
to global growth and the softening in jewellery sales were primary
reasons for platinum's underperformance.
At the start of the 2015 financial year, the platinum spot price
traded at $1,274/oz but ended the year at $904/oz, a drop of 29%.
Compared to 2014, average prices were down 20% at $1,134/oz for the
year.
Rhodium performance also impacted the PGM basket, with excess
selling resulting in a 38% decline during the financial year to end
$760/oz.
Palladium outperformed on a relative basis, but was hit by news
of slowing growth in China impacting car sales and therefore
palladium demand. Prices were down 6% compared to the previous year
and fell 13% during the course of 2015. The announcement of
stimulus measures by China and the possibility of increased
gasoline vehicle sales owing to the VW scandal saw prices recover
from below $600/oz to close to $700/oz by financial year end.
Market Outlook 2016
Reporting of how the VW diesel crisis might effect PGMs has been
varied. The story broke in the US and added to the negative view of
diesels that has prevailed in Europe for much of the past year.
However, the crisis highlights the need for tightened and
harmonised legislation worldwide which would require more platinum
demand.
The diesel market is vital for platinum, but less so for
palladium and rhodium. The platinum used in heavy duty diesels is
largely 'captive demand', as diesel powertrains are expected to be
the dominant choice for the foreseeable future. The risk applies
only to light duty vehicles, where gasoline vehicles with much
lower platinum content are a ready substitute. Nonetheless, diesel
remains essential to meet stringent CO(2) targets in Europe.
Furthermore, outside Europe the fundamentals remain in place for
growing platinum autocatalyst demand, as half of the world's
vehicles still do not comply with the latest emissions legislation,
which would benefit demand for platinum.
Supply in 2015
The global primary supply forecast is 5.8 Moz for 2015, a 17%
recovery on 2014, but continuing the downward production trend
since 2006. South African supply is forecast to increase by 32%
y-o-y to 4.1 Moz, while output from Zimbabwe drops 10% y-o-y to 363
koz and price-induced guidance revisions in North America may
result in a 4% decrease in production.
The basket price has fallen below the 50(th) centile of the cost
curve of production; an unsustainable level. In 2015, around 4% of
global primary supply has been closed or deferred, with substantial
capital expenditure postponed. So far, producers have cut CAPEX and
announced delays to shafts and some closures.
Forced closures of mines or shafts may be inevitable across the
industry in 2016, as minor adjustments to supply will not be enough
to rebalance the market if current low prices were to prevail.
Demand in 2015
Autocatalysts remain the main end use for platinum, palladium
and rhodium, driven by tightening emissions legislation and rising
vehicle ownership around the world. Total autocatalyst demand
(diesel + gasoline + non-road) is just ahead of jewellery, but
jewellery in 2015 is expected to surpass diesel autocatalyst
demand.
MINERAL RESOURCES AND MINERAL RESERVES
2015 Mineral Resources
Main features of the Lonmin Mineral Resources as at 30 September
2015:
-- Attributable Mineral Resources were 182.9 million ounces of
3PGE+Au in 2015, an increase of 3.8 million ounces from 2014.
-- Revisions to the South African Mineral Resource estimates
were confined to the Marikana, Pandora and Akanani properties. The
Mineral Resources at Marikana (excluding tailings) decreased by
0.48 million ounces 3PGE+Au in 2015. This is attributed to the net
effect of an increase in the Merensky Mineral Resources (0.09
million ounces) being offset by a decrease of the UG2 Mineral
Resources (0.57 million ounces). The Merensky Measured and
Indicated Mineral Resources decreased by 0.32 million ounces
whereas Inferred Mineral Resources increased by 0.41 million
ounces, due to re-evaluation after consideration of depletions. The
decrease in UG2 Mineral Resources of 0.57 million ounces is the net
result of mining depletion (0.96 million ounces), an increase of
0.68 million ounces from additions and reassessment of geological
losses, and a decrease of 0.29 million ounces as a result of
orebody re-evaluation.
-- The Pandora Mineral Resource increased by 1.7 million ounces
of 3PGE+Au, the result of Lonmin's increase in the attributable
proportion from 34.85% to 41.00% which was offset by mining
depletion.
-- The Akanani Mineral Resources increased by 2.6 million ounces
of 3PGE+Au in 2015, the result of re-evaluation of the geological
structure and grade estimates.
-- The Marikana Tailings, Limpopo and Loskop Mineral Resources
were unchanged during 2015.
-- Revisions to the non-South African platinum Mineral Resources
have been reported for the Denison 109 Footwall deposit in Canada.
Changes to the Mineral Resource classification were made by
converting 35,000 ounces of attributable 2PGE+Au metal from the
Inferred to the Indicated confidence category.
-- The Mineral Resources for the Bumbo base metal and gold in
Kenya have been reported unchanged in 2015.
2015 Mineral Reserves
Main features of the Lonmin Mineral Reserves as at 30 September
2015:
-- Attributable Mineral Reserves were 36.3 million ounces of
3PGE+Au in 2015, a decrease of 6.1 million ounces from 2014. The
change is attributed to depletions at Marikana and the removal of
the Mineral Reserves at Limpopo.
-- The Marikana attributable Mineral Reserves for 2015 are 34.7
million ounces of 3PGE+Au, a decrease of 0.8 million ounces with a
corresponding decrease of 13.7 million tonnes ore material.
-- The Proved Mineral Reserve category increased by 0.4 million
ounces of 3PGE+Au. The net effect is attributed to conversions from
the Probable to the Proved confidence category. The increase in the
Saffy shaft primary reef development had a notable influence in the
Proved Mineral Reserve category.
-- The latest version of the Lonmin Long Term Plan (LTP) was
approved in July 2015 and thus applied in determining the Mineral
Reserves for reporting in 2015. This LTP accounted for capital
deferrals and curtailments where relevant.
-- A decision to curtail the Hossy shaft operations due to
economic considerations has led to the downgrading of c.3.8 million
tonnes of ore material in 2015 of the deeper section of the Hossy
Sub Incline Mineral Reserve that was reported in 2014. Study work
is ongoing to assess feasibility for future classification.
-- Limpopo has been on care and maintenance since 2009. The
reporting of Mineral Reserves in prior years was pending the
outcome of study work. The current depressed economic conditions
have resulted in no progression of the study, and consequently, the
entire Mineral Reserves of 5.32 million ounces of 3PGE+Au contained
in 51.7 million tonnes of ore material has been removed in 2015.
Inclusion of future Mineral Reserves will depend on the progression
of the mining study and favourable commodity prices.
-- The Pandora attributable Mineral Reserve increased by 0.1
million ounces to a total of 0.9 million ounces 3PGE+Au. This is
due to the increase in the attributable portion to Lonmin Plc from
34.85 to 41.00%.
PGE Mineral Resources (Total Measured, Indicated &
Inferred)1, 4, 5
30-Sep-2015 30-Sep-2014
----------------- ------------------------------- -------------------------------
3PGE+Au 3PGE+Au
----------------- ------------------------------- -------------------------------
Area Mt g/t Moz Pt Mt g/t Moz Pt
Moz Moz
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Marikana 742.2 4.92 117.4 70.6 751.9 4.87 117.8 71.0
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Limpopo(2) 128.8 4.07 16.8 8.4 128.8 4.07 16.8 8.4
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Limpopo Baobab
shaft 46.1 3.91 5.8 3.0 46.1 3.91 5.8 3.0
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Akanani 233.1 3.90 29.2 12.0 216.0 3.84 26.7 10.9
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Pandora JV 77.3 4.65 11.5 7.0 65.8 4.65 9.8 6.0
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Loskop JV(3) 10.1 4.04 1.3 0.8 10.1 4.04 1.3 0.8
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Sudbury PGM
JV(3) 0.2 5.86 0.04 0.02 0.4 6.30 0.07 0.04
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Tailings Dam(3) 22.5 1.10 0.80 0.5 22.5 1.10 0.8 0.5
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Total Resource 1,260.2 4.51 182.9 102.3 1,241.4 4.49 179.1 100.5
----------------- -------- ----- ------ ------ -------- ----- ------ ------
Notes:
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
1) All figures are reported on a Lonmin Plc attributable basis,
the relative proportions of ownership per project.
2) Limpopo(2) excludes Baobab shaft.
3) Loskop and Sudbury PGM JV exclude Rh, due to insufficient
assays, and therefore 2PGE+Au are reported. Tailings Dam exclude
Au, due to assay values below laboratory detection limit, and
therefore are reported as 3PGE.
4) Resources are reported inclusive of Reserves.
5) Quantities and grades have been rounded to one or two decimal
places, therefore minor computational errors may occur.
PGE Mineral Reserves (Total Proved & Probable)1, 3
30-Sep-2015 30-Sep-2014
----------------- --------------------------- ---------------------------
3PGE+Au 3PGE+Au
----------------- --------------------------- ---------------------------
Area Mt g/t Moz Pt Mt g/t Moz Pt
Moz Moz
----------------- ------ ----- ----- ----- ------ ----- ----- -----
Marikana 263.8 4.10 34.7 21.2 277.5 3.98 35.5 21.7
----------------- ------ ----- ----- ----- ------ ----- ----- -----
Limpopo(2) 0.0 - 0.0 0.0 42.4 3.20 4.4 2.2
----------------- ------ ----- ----- ----- ------ ----- ----- -----
Limpopo Baobab
shaft 0.0 - 0.0 0.0 9.4 3.16 1.0 0.5
----------------- ------ ----- ----- ----- ------ ----- ----- -----
Pandora JV 6.6 4.09 0.9 0.5 6.0 4.11 0.79 0.5
----------------- ------ ----- ----- ----- ------ ----- ----- -----
Tailings Dam(4) 21.1 1.10 0.7 0.5 21.1 1.10 0.7 0.5
----------------- ------ ----- ----- ----- ------ ----- ----- -----
Total Reserve 291.5 3.87 36.3 22.2 356.4 3.70 42.4 25.3
----------------- ------ ----- ----- ----- ------ ----- ----- -----
Notes:
1) All figures are reported on a Lonmin Plc attributable basis,
the relative proportions of ownership are per project.
2) Limpopo excludes Baobab shaft.
3) Tailings Dam exclude Au, due to assay values below laboratory
detection limit, and therefore are reported as 3PGE.
4) Quantities and grades have been rounded to one or two decimal
places, therefore minor computational errors may occur.
FINANCIAL REVIEW
Overview
The 2015 financial year was underpinned by a solid operational
performance which saw the Group achieve the highest platinum sales
in eight years. This was achieved despite the impact of Section 54
safety stoppage challenges and the shutdowns in our smelter complex
during the first half of the year. The financial benefit of this
strong performance was, however, significantly diluted by the
sustained low PGM price environment which has persisted throughout
the financial year, putting immense pressure on the Group's
profitability and cash flows.
The significant increase in sales volume when compared to the
strike-impacted 2014 financial year was therefore somewhat offset
by the impact of the decline in PGM prices. The focus on cost
containment in the low PGM price environment continued during the
year. The cost of production per PGM ounce reduced year on year by
23.6% to R10,339 compared to R13,538 for the strike-impacted prior
year. When comparing the 2015 cost of production per PGM ounce to
2013, the unit cost reflects a compounded annual increase of only
6.1% despite above inflation wage increases as well as an increase
in production losses associated with safety stoppages. The Group's
continued focus on cash conservation measures and robust cost
control system is evident in the reported unit cost for the year,
especially the reduction in the unit cost for the fourth quarter to
R9,841 per PGM ounce. Our net debt position at 30 September 2015
amounted to $185 million, well within the available debt facilities
of $543 million.
We, the Board and executive management have reviewed the Group's
business and capital structure and developed the Business Plan in
order to be able to deal effectively with the impacts of a
continuation of current low PGM prices. Key elements of the
Business Plan are the reduction of fixed cost expenses, removal of
high cost production and the minimising of capital expenditure
while preserving the ability of the business to increase production
when PGM prices improve. The restructuring costs associated with
the implementation of the Business Plan which largely consist of
retrenchment costs have been separately disclosed as special costs
in the 2015 financial year.
The reduced production profile and revised PGM price outlook in
the Business Plan have resulted in the downward revision of
estimated future cash flows from the Marikana operations resulting
in the value in use declining below the carrying amount of the
non-financial assets of the operations. As a result a special
impairment charge of $1,465 million is reflected in the financial
statements. Furthermore, similar impairment assessments on our
Limpopo and Akanani assets have resulted in full impairment of
these assets, with a further special impairment charge of $346
million being reflected in the financial statements.
The Board's review of the Group's capital structure has resulted
in significant steps being taken to strengthen our financial
position. The announcement of our results coincides with the launch
of a Rights Issue seeking to raise $407 million in gross proceeds,
before deducting share issue costs and foreign exchange charges. In
addition, the terms of our debt facilities will be revised, subject
to a successful Rights Issue. Details of the Rights Issue are
included in our Rights Issue Prospectus and proposed amendments to
debt facilities are included below.
Income Statement
The $186 million movement between the underlying operating loss
of $134 million for the year ended 30 September 2015 and the
underlying operating profit of $52 million for the year ended 30
September 2014 is analysed as follows:
$m
Year to 30 September 2014 reported
operating loss (255)
Year to 30 September 2014 special
items 307
--------
Year to 30 September 2014 underlying
operating profit 52
--------
PGM volume 541
PGM price (259)
PGM mix 24
Base metals 22
--------
Revenue changes 328
Cost changes (net of positive foreign
exchange impact of $117 million) (514)
Year to 30 September 2015 underlying
operating loss (134)
Year to 30 September 2015 special
items (1,884)
--------
Year to 30 September 2015 reported
operating loss (2,018)
--------
Revenue
Total revenue for the year ended 30 September 2015 was $1,293
million, an increase of $328 million or 34%, compared to prior year
revenue of $965 million.
There was an increase in sales volumes compared to the strike
impacted prior year. The impact of this volume increase was an
increase in revenue of $541 million.
PGM prices continued to decline during the year under review.
The impact on the Group's average prices achieved on the key metals
sold is shown below:
Year ended 30
September
2015 2014
$/oz $/oz
Platinum 1,095 1,403
Palladium 718 775
Rhodium 998 1,050
------- -------
PGM basket (excluding by-product
revenue) 849 1,013
------- -------
The US Dollar PGM basket price (excluding base metals) was 16%
lower compared to the 2014 average price. This resulted in a $259
million reduction in revenue. However, the Rand basket price
(excluding by-products) reduced only by 4% as a result of the
relatively weaker Rand.
The mix of metals sold resulted in a positive impact of $24
million mainly due to the higher proportion of platinum sold
compared to other refined metals. Base metal revenue increased by
$22 million primarily as a result of the increase in volumes
sold.
Operating costs
Total underlying operating costs for the year increased by $514
million primarily as a result of the increase in production levels
compared to the strike-impacted prior year. This increase was
partially offset by the positive foreign exchange movements on the
back of the weaker Rand during this period. A track of these
changes is shown in the table below.
$m
Year ended 30 September 2014 - underlying
cost 913
Increase / (decrease):
------
Marikana underground mining 286
Marikana opencast mining (13)
Limpopo mining (1)
Concentrating, smelting and refining 87
Overheads 15
Idle fixed production costs excluded
from underlying costs in 2014 289
------
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Operating costs 662
Ore, concentrate and other purchases 16
Metal stock movement (62)
Foreign exchange (117)
Depreciation and amortisation 14
------
Cost changes (net of the positive
foreign exchange impact) 514
Year ended 30 September 2015 - underlying
costs 1,427
------
Marikana underground mining costs increased by $286 million, or
47%, primarily as a result of the increase in volumes produced
during the year compared to the strike impacted prior year. The
Marikana opencast mining costs reduced by $13 million or 62% due to
the decrease in production as this operation depleted and mining
ceased at the end of September 2015.
Concentrating, smelting and refining costs increased by $87
million or 41% compared to the strike-impacted prior year, mainly
due to the increase in ounces milled and refined during the period
as well as cost escalations.
Idle production costs incurred during the strike in the prior
year were classified as special.
Ore, concentrate and other purchases increased by $16 million or
43% as the volume produced in the prior year was impacted by the
strike action. The increase in volumes purchased in 2015 was
partially offset by a decline in metal prices.
The decrease of $62 million in metal stock is mainly due to the
$69 million write down of stock to net realisable value as result
of the decline in PGM prices. The $62 million comprises a $17
million stock decrease in 2015 which was offset by a $79 million
stock decrease in 2014.
During the year, the Rand weakened against the US Dollar
averaging ZAR12.01 to US$1 compared to an average of ZAR10.55 to
US$1 in the 2014 financial year resulting in a $117 million
positive impact on operating costs.
Depreciation is calculated on a unit of production basis,
spreading costs in relation to proven and probable reserves. Due to
increased production levels, depreciation and amortisation also
increased by $14 million compared to the 2014 financial year.
Cost of Production per PGM Ounce
The cost of production per PGM ounce for the 2015 financial year
decreased by 23.6% to R10,339 compared to R13,538 for the year
ended 30 September 2014. The prior year was impacted by the five
month strike, and therefore included idle production costs. When
comparing the 2015 cost of production to the 2013 financial year,
the unit cost reflects a compounded annual increase of only 6.1%
per annum despite above inflation wage increases being granted as
well as an increase in production losses associated with safety
stoppages. The Group's continued focus on cash conservation
measures and robust cost control system is evident in the reported
unit cost for the year, especially the reduction in the unit cost
for the fourth quarter to R9,841 per PGM ounce.
Further details of unit costs can be found in the Operating
Statistics.
Special Operating Costs
Special operating costs for the year ended 30 September 2015 are
made up as follows:
Year ended 30 September
2015 2014
$m $m
Impairment of non-financial
assets 1,811 -
Restructuring costs 59 -
BEE transaction 14 -
Strike related costs
* Idle fixed production costs - 287
* Contractors' claims - 3
* Security costs - 10
* Other strike related costs - 7
---------------------------- ---------
1,884 307
---------------------------- ---------
The reduced production profile and revised PGM price outlook in
the Business Plan have resulted in the downward revision of
estimated future cash flows from the Marikana operations resulting
in their value in use declining below the carrying amount of the
non-financial assets of the operations of $3,100 million. The
recoverable amount of the Marikana CGU was $1,635 million. As a
result, a special impairment charge of $1,465 million is reflected
in the financial statements. Furthermore, similar impairment
assessments on our Limpopo and Akanani assets which had carrying
amounts of $127 million and $219 million respectively, have
resulted in full impairment of these assets with a further special
impairment charge of $346 million being reflected in the financial
statements which brings the total impairment of non-financial
assets to $1,811 million. Refer to note 10 for details.
The restructuring costs of $59 million incurred during the
period include retrenchment costs of $56 million, and consulting
and advisory fees of $3 million incurred in relation to the
restructuring. BEE transaction costs amounted to $14 million with
$13 million being the lock-in premium paid to the Bapo. Legal and
consulting costs incurred on this transaction amounted to $1
million.
Idle production overheads incurred during the strike period in
2014 for which there was no associated production output, as well
as costs arising directly as a result of the strike action were
classified as special items. The total of these strike related
costs amounted to $307 million. The major portion of the costs
comprised idle fixed production costs incurred during the strike
period which totalled $287 million. The cost of additional security
amounted to $10 million. Costs relating to contractors not being
able to fulfil their obligations as a result of the disruption
amounted to $3 million. Other costs included legal, communication,
medical and various other start-up costs.
Net Finance Costs
Year ended 30
September
2015 2014
$m $m
Net bank interest and fees (25) (25)
Capitalised interest payable
and fees 19 13
Foreign exchange gains on
net (debt)/cash 12 10
Dividends received from investment 1 10
Unwinding of discount on provision (10) (10)
Other (1) -
------ -----
Underlying net finance costs (4) (2)
HDSA receivable (235) (62)
Net finance costs (239) (64)
------ -----
Total net finance costs increased by $175 million to $239
million for the year ended 30 September 2015 compared to $64
million incurred in the prior year. The most significant component
of total net finance costs for the 2015 and 2014 financial years
was the impairment of the HDSA receivable of $227 million and $80
million respectively.
Net bank interest and fees incurred in the 2015 financial year
remained flat at $25 million compared to the prior year. Interest
capitalised in 2015 was higher than the prior year as interest
incurred during the strike period in the prior year did not qualify
for capitalisation.
Dividends received relate to dividends from our investment in
Petrozim Line (Private) Limited.
The Historically Disadvantaged South Africans (HDSA) receivable,
being the Sterling loan to Shanduka Resources (Proprietary) Limited
(Shanduka) decreased by $235 million during the year as a result of
an impairment charge of $227 million and foreign exchange losses of
$28 million which were partially offset by interest accrued of $20
million. The impairment charge of $227 million in the current year
which brings the total accumulated impairment on the receivable to
$307 million is as a result of the value of the security for the
loan falling below the carrying amount of the receivable primarily
due to the decline in long term PGM price assumptions applied in
the valuation models of the Marikana CGU and Akanani CGU. The
receivable is secured on the HDSA's shareholding in Incwala, whose
only asset of value is its underlying investment in WPL, EPL and
Akanani. The value of the security is driven by the values of WPL,
EPL and Akanani. The movement of $62 million in the prior year
comprised an impairment charge of $80 million which was partially
offset by interest accrued of $18 million. The balance of the
receivable at 30 September 2015 was $102 million (2014 - $337
million).
Taxation
Reported tax for the current financial year was a credit of $363
million compared to a credit of $123 million in the 2014 period.
The tax credit of $363 million includes special exchange gains on
the retranslation of Rand denominated deferred tax liabilities of
$48 million and the tax impact of special items of $280
million.
Our philosophy on taxation is to comply with the tax legislation
of all the countries in which we operate by paying all taxes due
and payable in those countries in terms of the applicable tax laws.
Transactions entered into by the Group are structured to follow
bona fide business rationale and tax principles. We recognise that
in order to be a sustainable and responsible business, the Group
must have appropriate tax policies that are adhered to and managed
properly. We seek to maintain a proactive and cooperative
relationship with local tax authorities in all our business and tax
transactions and conduct all such transactions in a transparent
manner.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
With the Group's primary operations being in South Africa, the
tax liability follows such activity which has the effect that the
majority of the Group's taxes are paid in that country. Following
the financial crisis of 2008, the events at Marikana of 2012, the
five month industry-wide strike and more recently the decline in
metal prices, all of which have adversely impacted profitability,
the level of corporate tax has reduced. However, the Group
continues to pay significant amounts in respect of other forms of
tax including:
-- Employee taxes
-- Customs and excise duties
-- Value Added Tax
-- State royalties
Our philosophy on transfer pricing is that related party
transactions should be charged at arm's length prices. Transfer
pricing studies were performed by transfer pricing specialists on
all our related party transactions and such transactions were found
to be within acceptable norms compared to comparable transactions
in similar companies. Lonmin inherited a number of companies in tax
haven jurisdictions from previous unbundling and acquisition
transactions. These companies are dormant entities and therefore do
not receive any income. Furthermore, Lonmin does not pay any of its
income to any of the dormant tax haven companies in these inherited
structures.
Cash Generation and Net Debt
The following table summarises the main components of the cash
flow during the period:
Year ended 30
September
2015 2014
$m $m
Operating loss (2,018) (255)
Depreciation, amortisation
and impairment 1 966 142
Changes in working capital 63 18
Other non-cash movements 4 (5)
Cash flow generated from
/(utilised in) operations 15 (100)
Interest and finance costs (24) (16)
Tax paid (3) -
------------------------------- -------- -----------------------
Trading cash outflow (12) (116)
Capital expenditure (136) (93)
Dividends paid to minority
shareholders (19) (37)
--------------------------------- -------- -----------------------
Free cash outflow (167) (246)
Contribution to joint venture (7) (1)
Issue of other ordinary
share capital 3 1
Cash outflow (171) (246)
Opening net (debt)/cash (29) 201
Foreign exchange 17 13
Unamortised fees (2) 3
--------------------------------- -------- -----------------------
Closing net debt (185) (29)
--------------------------------- -------- -----------------------
Trading cash flow (cents
per share) (2.1)c (20.4)c
--------------------------------- -------- -----------------------
Free cash flow (cents per
share) (28.7)c (43.2)c
--------------------------------- -------- -----------------------
Cash flow generated by operations in the year ended 30 September
2015 increased by $115 million from an outflow of $100 million in
the prior year to an inflow of $15 million in the year under
review. The cash outflow for the 2014 financial year was largely
driven by lower sales volumes. The net inflow in the current year
was mainly a result of positive movements in working capital on the
back of a reduction in our closing stocks compared to the prior
year. The increase in sales volumes in the year under review which
was partly offset by the impact of the lower PGM prices also had a
positive impact on the cash flow generated by operations.
Trading cash outflow for the year decreased by $104 million to
$12 million compared to the prior year trading cash outflow of $116
million. The cash outflow on interest and finance costs increased
by $8 million largely due to the timing of payments over the two
periods under review. The trading cash outflow per share was 2.1
cents at 30 September 2015 compared to a cash outflow of 20.4 cents
in the prior year.
Capital expenditure at $136 million was $43 million (or 46%)
higher than the prior year spend. The Group's capital investment
programme was severely impacted in the prior year as a result of
the strike. The current year spend was lower than the guidance of
$250 million as a result of the ongoing cost containment.
An advance dividend payment of $19 million was paid by WPL, a
subsidiary of Lonmin Plc, to Incwala Platinum (Proprietary) Limited
during 2015. This brings the accumulated advanced dividends paid to
Incwala to $135 million (R1,309 million) as at 30 September 2015.
The amount paid to Incwala will be recovered by reducing future
dividends that would otherwise be payable to all shareholders.
Contributions to the Pandora Joint Venture during the year under
review amounted to $7 million.
Key Financial Risks
The Group faces many risks in the operation of its business. The
Group's strategy takes into account known risks, but risks will
exist of which we are currently unaware. The financial review
focuses on financial risk management.
Financial Risk Management
The main financial risks faced by the Group relate to the
availability of funds to meet business needs (liquidity risk), the
risk of default by counterparties to financial transactions (credit
risk) and fluctuations in interest, foreign exchange rates and
commodity prices (market risk). Factors which are outside the
control of management which can have a significant impact on the
business remain, specifically, the fluctuations in the Rand/US
Dollar exchange rate and PGM commodity prices.
These are the critical factors to consider when addressing the
issue of whether the Group is a Going Concern.
Liquidity Risk
The policy on liquidity is to ensure that the Group has
sufficient funds to facilitate all ongoing operations. The Group
funds its operations through a mixture of equity funding and
borrowings. The Group's philosophy is to maintain an appropriately
low level of financial gearing given the exposure of the business
to fluctuations in PGM commodity prices and the Rand / US Dollar
exchange rate. We ordinarily seek to fund capital requirements from
equity.
As part of the annual budgeting and long-term planning process,
the Group's cash flow forecast is reviewed and approved by the
Board. The cash flow forecast is amended on an ongoing basis for
any significant changes in the key assumptions identified during
the year.
Where funding requirements are identified from the cash flow
forecast, appropriate measures are taken to ensure these
requirements can be satisfied. Factors taken into consideration
are:
-- the size and nature of the requirement;
-- preferred sources of finance applying key criteria of cost,
commitment, availability, security / covenant conditions;
-- recommended counterparties, fees and market conditions; and
-- covenants, guarantees and other financial commitments.
As mentioned above in the Overview section, the Board and
executive management have reviewed the Group's business and capital
structure and developed the Business Plan in order to be able to
deal effectively with the impacts of a continuation of the current
low price environment.
Consequently, the announcement of these results coincides with
the launch of a Rights Issue which is conditional on, amongst other
things, shareholder approval. The Group proposes to raise
approximately $407 million, before deducting share issue costs and
foreign exchange charges, as well as amend the existing debt
facilities.
The amended debt facility agreements which were entered into on
9 November 2015 will become effective only once the Underwriting
Agreement in respect of the Rights Issue has become wholly
unconditional and the satisfaction of customary conditions
precedent.
Following the amendment, the Group's debt facilities going
forward are summarised as follows:
-- Secured revolving credit facilities totalling $75 million and
a $150 million term loan, at a Lonmin Plc Level, which mature in
May 2020 (assuming Lonmin exercises its option to extend the term
up until this date)
-- Secured revolving credit facility totalling R1,980 million,
at a Western Platinum Limited level, which matures in May 2020
(assuming Lonmin exercises its option to extend the term up until
this date).
The following covenants apply to these facilities:
-- The consolidated tangible net worth of the Group on or after
31 March 2016 will not be at any time less than US$1,100
million.
-- The consolidated debt of the Group on or after 31 March 2016
will not at any time exceed an amount equal to 35% of consolidated
tangible net worth of the Group
-- the liquidity for the Group will not, for any week from 1
January 2016, be less than $20,000,000;
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
-- The capital expenditure of the Group (excluding any Bulk
Tailings Agreement) shall not exceed the limits set out in the
table below. The Company shall also have the option to carry
forward or back up to 10% of the limits set out in the table
below.
Financial Year Capex Limit
----------------------------------------------- -----------------
1 October 2015 - 30 September 2016 (inclusive) ZAR1,338 million
1 October 2016 - 30 September 2017 (inclusive) ZAR1,242 million
1 October 2017 - 30 September 2018 (inclusive) ZAR2,511 million
1 October 2018 - 30 September 2019 (inclusive) ZAR3,194 million
1 October 2019 - 31 May 2020 (inclusive) ZAR4,049 million
There is also additional limit on capital expenditure in
relation to any Bulk Tailings Agreement as set out below:
Financial Year Bulk Tailings Capex Limit
----------------------------------------------- --------------------------
1 October 2015 - 30 September 2016 (inclusive) ZAR370 million
1 October 2016 - 30 September 2017 (inclusive) ZAR182 million
The limit on capital expenditure in relation to any Bulk
Tailings Agreement after 30 September 2017 will be zero.
In addition to the above, the Group's existing lenders agreed on
26 October 2015 to suspend the testing of the tangible net worth
covenants under the existing facilities until the amended
facilities agreements become effective, failing which, the
covenants would be tested under the existing facilities.
Credit Risk
Banking Counterparties
Banking counterparty credit risk is managed by spreading
financial transactions across an approved list of counterparties of
high credit quality. Banking counterparties are approved by the
Board and consist of the ten banks that participate in Lonmin's
bank debt facilities. These counter-parties comprise: BNP Paribas
S.A., Citibank, N.A., London Branch, HSBC Bank Plc, J.P. Morgan
Chase N.A., London Branch, Lloyds Bank Plc, The Royal Bank of
Scotland Plc., and Standard Chartered Bank.
Trade Receivables
The Group is exposed to significant trade receivable credit risk
through the sale of PGMs to a limited group of customers.
This risk is managed as follows:
-- age analysis is performed on trade receivable balances and reviewed on a monthly basis;
-- credit ratings are obtained on any new customers and the
credit ratings of existing customers are monitored on an ongoing
basis;
-- credit limits are set for customers; and
-- trigger points and escalation procedures are clearly defined.
It should be noted that a significant portion of Lonmin's
revenue is from two key customers. However, both of these customers
have strong investment grade ratings and their payment terms are
very short, thereby reducing trade receivable credit risk
significantly.
HDSA Receivables
HDSA receivables are secured on the HDSA's shareholding in
Incwala Resources (Pty) Limited. Refer to notes 8 in the financial
statements for details on the valuation of this security and the
resulting impairment charge.
Interest Rate Risk
Although the Group is in a net debt position, this risk is not
considered to be high at this point in time. The interest position
is kept under constant review in conjunction with the liquidity
policy outlined above and the future funding requirements of the
business.
Foreign Currency Risk
The Group's operations are predominantly based in South Africa
and the majority of the revenue stream is in US Dollars. However,
the bulk of the Group's operating costs and taxes are paid in
Rands. Most of the cash received in South Africa is in US Dollars.
Most of the Group's funding sources are in US Dollars.
The Group's reporting currency is the US Dollar and the share
capital of the Company is based in US Dollars.
During the year under review Lonmin did not undertake any
foreign currency hedging.
Commodity Price Risk
Our policy is not to hedge commodity price exposure on PGMs,
excluding gold, and therefore any change in prices will have a
direct effect on the Group's trading results.
For base metals and gold, hedging is undertaken where the Board
determines that it is in the Group's interest to hedge a proportion
of future cash flows. The policy allows Lonmin to hedge up to a
maximum of 75% of the future cash flows from the sale of these
products looking forward over the next 12 to 24 months. The Group
did not undertake any hedging of base metals under this authority
in the period under review and no forward contracts were in place
in respect of base metals at the end of the period.
In respect of gold, Lonmin entered into a prepaid sale of 75% of
its current gold production for the next 54 months in March 2012.
In terms of this contract Lonmin will deliver 70,700 ounces of gold
over the period with delivery on a quarterly basis and in return
received an upfront payment of $107 million. The upfront receipt
was accounted for as deferred revenue on our balance sheet and is
being released to profit and loss as deliveries take place at an
average price of $1,510/oz delivered.
Contingent Liabilities
The Group provided third party guarantees of $7 million (2014 -
$9 million) to Eskom as security to cover estimated electricity
consumption for three months. The Group also provided guarantees to
the Department of Mineral Resources for an amount of $45 million
(2014 - $55 million). At 30 September 2015, total guarantees
amounted to $53 million (2014 - $65 million) which included $1
million provided to various other third parties.
Simon Scott
Chief Financial Officer
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
ANNUAL REPORT AND ACCOUNTS
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the management report required by DTR 4.1.8R (contained in
the Strategic Report and the Directors' Report) includes a fair
review of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
Brian Beamish Simon Scott
Chairman Chief Financial Officer
9 November 2015
Operating statistics
5 year review
Units 2015 2014 2013 2012 2011
-------------- ----------------- ---------------- ------- ---------- -------- ---------- ---------- ----------
Tonnes Generation
mined (1) 2 K3 shaft kt 2,713 1,484 3,101 2,646 2,750
Rowland
shaft kt 1,872 1,005 1,781 1,599 2,082
-------- ---------- ---------- ----------
Saffy shaft kt 1,758 782 1,150 898 1,110
-------- ---------- ---------- ----------
4B/1B shaft kt 1,628 891 1,845 1,622 1,643
-------- ---------- ---------- ----------
Hossy shaft kt 953 609 1,051 864 793
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Generation
2 kt 8,923 4,771 8,928 7,628 8,379
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Generation
1 Newman shaft kt 765 428 948 919 1,197
-----------------
W1 shaft kt 180 102 170 126 154
East 1 shaft kt 148 104 390 496 536
East 2 shaft kt 390 279 426 397 484
East 3 shaft kt 68 28 94 104 153
Pandora
(100%) (2) kt 544 299 571 435 394
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Generation
1 kt 2,095 1,240 2,599 2,476 2,920
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
K4 shaft kt 49 - 4 117 45
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Total
Underground kt 11,067 6,012 11,531 10,221 11,344
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Opencast kt 230 333 528 443 601
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Total
Underground
& Opencast kt 11,297 6,345 12,058 10,663 11,944
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Limpopo
(3) Underground kt - 6 - - -
-------------- ----------------- ---------------- ------- ---------- -------- ---------- ---------- ----------
Lonmin Total Tonnes
(100%) mined kt 11,297 6,351 12,058 10,663 11,994
% tonnes
mined from
UG2 reef
(100%) % 75.1 74.1 73.9 71.7 73.2
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Lonmin Underground
(attributable) & Opencast kt 11,016 6,180 11,730 10,413 11,718
----------------- ---------------- ---------------------- ---------- -------- ---------- ---------- ----------
Lonmin
Ounces excluding
mined (4) Pandora Platinum oz 668,319 371,651 717,882 635,346 695,474
Pandora
(100%) Platinum oz 36,458 20,327 40,917 30,714 25,342
Limpopo Platinum oz - 255 - - -
----------------- ---------------- ------- ---------- -------- ---------- ---------- ----------
Lonmin Platinum oz 704,776 392,233 758,799 666,060 720,816
Lonmin
excluding
Pandora Total PGMs oz 1,280,964 707,913 1,340,678 1,174,776 1,306,082
Pandora
(100%) Total PGMs oz 71,861 40,044 78,353 58,300 48,420
Limpopo Total PGMs oz - 572 - - -
---------------- ------- ---------- -------- ---------- ---------- ----------
Lonmin Total PGMs oz 1,352,825 748,529 1,419,032 1,233,076 1,354,501
----------------- ---------------- ---------------------- ---------- -------- ---------- ---------- ----------
Tonnes
milled
(5) Marikana Underground kt 10,930 5,389 10,854 9,936 10,896
Opencast kt 318 422 393 450 748
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Total kt 11,248 5,810 11,248 10,386 11,643
Pandora
(100%)
(6) Underground kt 562 281 574 432 394
----------------- ---------------- ---------------------- ---------- -------- ---------- ---------- ----------
Limpopo
(7) Underground kt - 27 - - -
----------------- ---------------- ------- ---------- -------- ---------- ---------- ----------
Lonmin
Platinum Underground kt 11,491 5,696 11,428 10,367 11,290
Opencast kt 318 422 393 450 748
Total kt 11,810 6,118 11,822 10,817 12,037
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Milled
head Lonmin Underground g/t 4.51 4.48 4.60 4.56 4.54
grade (8) Platinum Opencast g/t 3.08 3.20 2.92 3.01 2.23
Total g/t 4.47 4.39 4.54 4.49 4.40
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Concentrator Lonmin Underground % 86.8 87.0 87.0 86.1 85.4
recovery
rate (9) PPlatinum Opencast % 85.1 84.5 85.3 85.9 81.6
Total % 86.7 86.9 87.0 86.1 85.3
---------------- ---------------------------------------- ---------- -------- ---------- ---------- ----------
Operating statistics
5 year review
Units 2015 2014 2013 2012 2011
----------------------- ----------- ------- ---------- -------- ---------- ---------- ----------
Metals-in-concentrate
(10) Platinum oz 696,489 355,926 706,012 646,393 694,149
Marikana Palladium oz 323,177 164,960 323,622 295,409 324,655
Gold oz 16,503 9,879 17,664 16,925 17,471
Rhodium oz 101,435 49,908 95,241 83,144 91,659
Ruthenium oz 165,689 81,693 144,304 127,269 144,369
Iridium oz 32,416 16,143 33,059 27,610 31,294
Total
PGMs oz 1,335,710 678,508 1,319,902 1,196,750 1,303,597
----------- ------------------------------- ---------- -------- ---------- ---------- ----------
Limpopo Platinum oz - 1,121 - - -
Palladium oz - 974 - - -
Gold oz - 93 - - -
Rhodium oz - 114 - - -
Ruthenium oz - 161 - - -
Iridium oz - 44 - - -
Total
PGMs oz - 2,508 - - -
----------------------- ----------- ------- ---------- -------- ---------- ---------- ----------
Pandora Platinum oz 37,553 18,913 41,117 30,625 25,241
Palladium oz 17,496 8,960 19,190 14,261 11,847
Gold oz 131 54 315 228 179
Rhodium oz 6,383 3,226 6,563 4,743 3,865
Ruthenium oz 10,466 5,168 9,764 7,135 6,070
Iridium oz 1,988 916 1,773 1,195 996
Total
PGMs oz 74,019 37,237 78,721 58,188 48,199
----------- ------------------------------- ---------- -------- ---------- ---------- ----------
Lonmin Platinum
before Platinum oz 734,042 375,960 747,129 677,019 719,390
Concentrate
Purchases Palladium oz 340,673 174,894 342,812 309,670 336,502
Gold oz 16,635 10,026 17,979 17,153 17,650
Rhodium oz 107,818 53,248 101,803 87,886 95,524
Ruthenium oz 176,156 87,022 154,067 134,404 150,439
Iridium oz 34,405 17,103 34,832 28,805 32,290
Total
PGMs oz 1,409,729 718,253 1,398,623 1,254,938 1,351,796
----------- ------------------------------- ---------- -------- ---------- ---------- ----------
Concentrate
purchases Platinum oz 6,273 4,398 3,813 2,802 -
Palladium oz 1,869 1,242 1,132 973 -
Gold oz 18 14 14 10 -
Rhodium oz 816 531 421 329 -
Ruthenium oz 1,079 546 428 404 -
Iridium oz 338 224 172 129 -
Total
PGMs oz 10,394 6,955 5,980 4,647 -
----------- ------------------------------- ---------- -------- ---------- ---------- ----------
Lonmin Platinum Platinum oz 740,315 380,359 750,942 679,821 719,390
Palladium oz 342,542 176,136 343,944 310,643 336,502
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Gold oz 16,653 10,040 17,993 17,163 17,650
Rhodium oz 108,634 53,779 102,225 88,216 95,524
Ruthenium oz 177,235 87,567 154,495 134,808 150,439
Iridium oz 34,743 17,327 35,004 28,934 32,290
Total
PGMs oz 1,420,122 725,208 1,404,603 1,259,585 1,351,796
Nickel
(11) mt 3,669 2,092 3,743 3,489 3,537
Copper
(11) mt 2,250 1,314 2,340 2,226 2,223
----------- ------------------------------- ---------- -------- ---------- ---------- ----------
Operating statistics
5 year review
Units 2015 2014 2013 2012 2011
-------------------- ----------- ------- ---------- -------- ---------- ---------- ----------
Refined production Platinum oz 759,005 431,683 707,665 648,414 686,877
Lonmin refined
metal Palladium oz 350,040 208,756 319,841 310,558 323,907
production Gold oz 18,232 12,299 18,676 18,398 18,013
Rhodium oz 102,372 76,940 79,124 110,896 86,702
Ruthenium oz 181,803 107,166 171,052 153,394 164,374
Iridium oz 32,180 27,991 28,068 32,844 26,337
Total
PGMs oz 1,443,633 864,835 1,324,426 1,274,503 1,306,210
----------- ---------------------------- ---------- -------- ---------- ---------- ----------
Toll refined
metal Platinum oz 689 4,501 1,364 38,958 44,396
production Palladium oz 280 1,765 662 21,043 49,119
Gold oz 14 116 289 729 2,879
Rhodium oz 95 1,546 1,837 4,717 14,402
Ruthenium oz 2,093 7,417 6,519 7,907 24,408
Iridium oz 560 1,914 1,012 1,944 5,249
Total
PGMs oz 3,731 17,259 11,683 75,299 140,453
----------- ---------------------------- ---------- -------- ---------- ---------- ----------
Total refined
PGMs Platinum oz 759,695 436,184 709,029 687,372 731,273
Palladium oz 350,320 210,521 320,503 331,601 373,026
Gold oz 18,246 12,415 18,965 19,128 20,892
Rhodium oz 102,467 78,486 80,961 115,613 101,103
Ruthenium oz 183,896 114,583 177,571 161,300 188,782
Iridium oz 32,740 29,905 29,081 34,788 31,586
Total
PGMs oz 1,447,364 882,094 1,336,109 1,349,802 1,446,662
Nickel
Base metals (12) mt 3,720 2,387 3,532 3,786 4,188
Copper
(12) mt 2,276 1,480 2,168 2,153 2,454
----------- ---------------------------- ---------- -------- ---------- ---------- ----------
Sales Platinum oz 751,560 441,684 695,803 701,831 720,783
Refined metal
sales Palladium oz 347,942 212,500 313,030 335,849 372,284
Gold oz 19,199 13,100 18,423 19,273 19,417
Rhodium oz 92,520 81,120 77,625 119,054 102,653
Ruthenium oz 192,549 121,904 168,266 170,751 187,189
Iridium oz 30,114 29,778 28,828 37,187 33,603
Total
PGMs oz 1,433,883 900,087 1,301,973 1,383,945 1,435,929
Nickel
(12) mt 3,656 2,251 3,586 3,843 4,180
Copper
(12) mt 2,131 1,448 2,130 2,197 2,448
Chrome
(12) mt 1,440,901 747,881 1,388,761 1,209,643 730,278
----------- ---------------------------- ---------- -------- ---------- ---------- ----------
Operating statistics
5 year review
Units 2015 2014 2013 2012 2011
--------- ------------------- ------- ------- ------- ------- ------- -------
Average
prices Platinum $/oz 1,095 1,403 1,517 1,517 1,769
Palladium $/oz 718 775 715 630 752
Gold $/oz 1,487 1,509 1,508 1,597 1,405
Rhodium $/oz 998 1,050 1,097 1,274 2,145
Ruthenium $/oz 45 57 74 103 168
Iridium $/oz 524 521 946 1,042 938
Basket price
of PGMs (13) $/oz 849 1,013 1,100 1,095 1,299
Full Basket price
of PGMs (14) $/oz 902 1,072 1,167 1,163 1,389
Basket price
of PGMs (13) R/oz 10,207 10,654 10,291 8,807 9,109
Full Basket price
of PGMs (14) R/oz 10,829 11,277 10,921 9,304 9,716
Nickel (12) $/MT 10,512 13,053 12,772 14,330 21,009
Copper (12) $/MT 5,584 6,810 7,113 7,201 8,612
Chrome (12) $/MT 17 18 19 20 27
------------------- ----------------- ------- ------- ------- ------- -------
Footnotes:
1 Reporting of shafts are in line with our operating strategy
for Generation 1 and Generation 2 shafts.
2 Pandora underground and opencast 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 Limpopo underground tonnes mined represents low grade
development tonnes mined whilst on care and maintenance.
4 Ounces mined have been calculated at achieved concentrator
recoveries and as from 2014 with Lonmin standard downstream
processing recoveries to present produced saleable ounces.
5 Tonnes milled exclude slag milling.
6 Lonmin purchases 100% of the ore produced by the Pandora
joint venture for onward processing which is included
in downstream operating statistics.
7 Limpopo tonnes milled represent low grade development
tonnes milled.
8 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).
9 Recovery rate in the concentrators is the total content
produced divided by the total content milled (excluding
slag).
10 As from 2014, metals-in-concentrate have been calculated
at Lonmin standard downstream processing recoveries to
present produced saleable ounces.
11 Corresponds to contained base metals in concentrate.
12 Nickel is produced and sold as nickel sulphate crystals
or solutions 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.
13 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 to each sales transaction.
14 As per footnote 13 but including revenue from base metals.
Operating statistics
5 year review
Units 2015 2014 2013 2012 2011
---------------- ----------------------- ------- --------- -------- --------- --------- ---------
Capital Rm 1,641 992 1,500 3,296 2,907
Expenditure
(1) $m 136 93 159 408 410
----------------------------------------- ------ --------- -------- --------- --------- ---------
Employees
and Employees as
contractors at 30 September # 26,968 28,276 28,379 28,230 27,796
Contractors as
at 30 September # 8,701 10,016 10,042 8,293 9,564
----------------------- ------------------------ --------- -------- --------- --------- ---------
Exchange Average rate
rates for period (2) R/$ 12.01 10.55 9.24 8.05 6.95
GBP/$ 0.65 0.60 0.64 0.63 0.62
Closing rate R/$ 13.83 11.29 9.99 8.30 8.05
GBP/$ 0.66 0.62 0.62 0.62 0.64
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
------------------------------------------------ --------- -------- --------- --------- ---------
Underlying
cost Mining $m (785) (622) (919) (877) (995)
of sales Concentrating $m (145) (107) (159) (168) (187)
Smelting and
PGM operations refining (3) $m (120) (106) (133) (147) (172)
segment Shared services $m (71) (74) (101) (100) (97)
Management and
marketing services $m (25) (24) (26) (35) (32)
Ore, concentrate
and other purchases $m (48) (38) (64) (48) (46)
Limpopo mining $m (2) (3) (7) (9) (7)
Special item
adjustment $m - 287 - 121 -
ESOP and community
trusts donations $m (1) - - - -
Royalties $m (9) (5) (6) (8) (12)
Shared based
payments $m (14) (15) (13) (12) (13)
Inventory movement $m (84) (79) 203 (140) (12)
FX and Group
Charges $m 51 25 44 14 5
------------------------ --------- -------- --------- --------- ---------
Total PGM operations
segment $m (1,253) (761) (1,181) (1,412) (1,567)
------------------------ --------- -------- --------- --------- ---------
Evaluation -
excluding FX $m - - 1 2 -
Exploration -
excluding FX $m (7) (6) (4) (5) (1)
Corporate - excluding
FX $m (2) (2) (10) (4) 4
FX $m (10) (1) (4) (2) 6
------------------------ --------- -------- --------- --------- ---------
Total underlying
cost of sales $m (1,272) (771) (1,199) (1,421) (1,559)
------------------------ --------- -------- --------- --------- ---------
Mining Rm (9,414) (6,556) (8,545) (7,079) (7,002)
Concentrating Rm (1,731) (1,121) (1,469) (1,346) (1,297)
Smelting and
refining (3) Rm (1,426) (1,119) (1,235) (1,183) (1,203)
Shared services Rm (810) (786) (928) (805) (679)
Management and
marketing services Rm (294) (256) (243) (287) (217)
Ore, concentrate
and other purchases Rm (574) (402) (597) (385) (318)
Limpopo mining Rm (25) (31) (61) (76) (50)
Special item
adjustment Rm - 3,028 - 966 -
ESOP and community
trusts donations $m (10) - - - -
Royalties Rm (103) (52) (55) (68) (82)
Shared based
payments Rm (164) (148) (121) (99) (87)
Inventory movement Rm 6 (480) 2,145 (842) (119)
FX and Group
Charges Rm (2,659) (1,117) (1,247) (218) (517)
------------------------ --------- -------- --------- --------- ---------
Rm (17,203) (9,040) (12,356) (11,424) (11,572)
------------------------------------------------ --------- -------- --------- --------- ---------
Operating statistics
5 year review
Units 2015 2014 2013 2012 2011
-------------------- ------------------------ -------- ---------- --------- ---------- ---------- ----------
Cost of production Mining Rm (9,414) (6,556) (8,545) (7,079) (7,002)
(PGM operations Concentrating Rm (1,731) (1,121) (1,469) (1,346) (1,297)
segment) Smelting and
(4) refining (3) Rm (1,426) (1,119) (1,235) (1,183) (1,203)
Cost Shared services Rm (810) (786) (928) (805) (679)
Management and
marketing services Rm (294) (256) (243) (287) (217)
---------- --------- ---------- ---------- ----------
Rm (13,674) (9,838) (12,420) (10,701) (10,399)
---------- --------- ---------- ---------- ----------
Mined ounces
PGM Saleable excluding ore
ounces purchases oz 1,280,964 707,913 1,340,678 1,174,776 1,306,082
Metals-in-concentrate
before concentrate
purchases oz 1,409,729 715,746 1,398,623 1,254,938 1,351,796
Refined ounces oz 1,447,364 882,094 1,336,109 1,349,802 1,446,662
Metals-in-concentrate
including concentrate
purchases oz 1,420,122 722,701 1,404,603 1,259,585 1,351,796
Cost of production Mining R/oz (7,349) (9,261) (6,373) (6,026) (5,361)
Concentrating R/oz (1,228) (1,567) (1,051) (1,073) (960)
Smelting and
refining (3) R/oz (985) (1,269) (925) (877) (832)
Shared services R/oz (570) (1,087) (661) (639) (503)
Management and
marketing services R/oz (207) (355) (173) (228) (161)
---------- --------- ---------- ---------- ----------
R/oz (10,339) (13,538) (9,182) (8,843) (7,815)
---------- --------- ---------- ---------- ----------
% increase
in cost Mining % 20.6% (45.3) (5.8) (12.4) (15.4)
of production Concentrating % 21.6% (49.2) 2.1 (11.8) (10.6)
Smelting and
refining (3) % 22.4% (37.3) (5.4) (5.4) 5.8
Shared services % 47.5% (64.5) (3.3) (27.2) (12.8)
Management and
marketing services % 41.7% (104.9) 24.1 (41.9) 7.0
---------- --------- ---------- ---------- ----------
% 23.6% (47.4) (3.8) (13.1) (11.4)
---------- --------- ---------- ---------- ----------
Footnotes:
1 Capital expenditure is the aggregate of the purchase
of property, plant and equipment and intangible assets
(includes capital accruals and excludes capitalised interest).
2 Exchange rates are calculated using the market average
daily closing rate over the course of the period.
3 Comprises of Smelting and Refining costs as well as direct
Process Operations shared costs.
4 It should be noted that with the implementation of the
revised operating model in 2014 and 2015 the cost allocation
between business units has been changed and, therefore,
whilst the total is on a like-for-like basis, individual
line items are not totally comparable.
FINANCIAL STATEMENTS
Consolidated income statement
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
for the year ended 30 September
Special Special
2015 items 2015 2014 items 2014
Underlying (note Underlying (note
(i) 3) Total (i) 3) Total
Note $m $m $m $m $m $m
------------------------------------------ ------ ------------- -------- --------- ------------ -------- --------
Revenue 2 1,293 - 1,293 965 - 965
========================================== ====== ============= ======== ========= ============ ======== ========
(LBITDA) / EBITDA
(ii) 21 (73) (52) 194 (307) (113)
Depreciation, amortisation
and impairment 10 (155) (1,811) (1,966) (142) - (142)
------------------------------------------ ------ ------------- -------- --------- ------------ -------- --------
Operating (loss)
/ profit (iii) (134) (1,884) (2,018) 52 (307) (255)
Impairment of available
for sale financial
assets 8 - - - - (1) (1)
Finance income 4 16 20 36 26 18 44
Finance expenses 4 (20) (255) (275) (28) (80) (108)
Share of loss of
equity accounted
investments (5) - (5) (4) (2) (6)
------------------------------------------ ------ ------------- -------- --------- ------------ -------- --------
(Loss) / profit
before taxation (143) (2,119) (2,262) 46 (372) (326)
Income tax credit
(iv) 5 35 328 363 (5) 128 123
------------------------------------------ ------ ------------- -------- --------- ------------ -------- --------
(Loss) / profit
for the year (108) (1,791) (1,899) 41 (244) (203)
========================================== ====== ============= ======== ========= ============ ======== ========
Attributable to:
* Equity shareholders of Lonmin Plc
(94) (1,567) (1,661) 31 (219) (188)
* Non-controlling interests (14) (224) (238) 10 (25) (15)
------------------------------------------ ------ ------------- -------- --------- ------------ -------- --------
Loss per share 6 (285.5)c (33.0)c
------------------------------------------ ------ ------------- -------- --------- ------------ -------- --------
Diluted loss per
share (v) 6 (285.5)c (33.0)c
------------------------------------------ ------ ------------- -------- --------- ------------ -------- --------
Consolidated statement of comprehensive income
for the year ended 30 September
2015 2014
Total Total
Note $m $m
---------------------------------------------- ------- -------- -------
Loss for the year (1,899) (203)
Items that may be reclassified subsequently
to the income statement
- Change in fair value of available for sale
financial assets 8 (4) (1)
- Foreign exchange loss on retranslation
of equity accounted investments (8) (3)
---------------------------------------------- ------- -------- -------
Total other comprehensive expenses for the
period (12) (4)
============================================== ======= ======== =======
Total comprehensive loss for the period (1,911) (207)
============================================== ======= ======== =======
Attributable to:
* Equity shareholders of Lonmin Plc
(1,672) (192)
* Non-controlling interests (239) (15)
---------------------------------------------- ------- -------- -------
(1,911) (207)
============================================== ======= ======== =======
Footnotes:
i Underlying results are based on reported results excluding
the effect of special items as defined in note 3.
ii (LBITDA) / EBITDA is operating (loss) / profit before
depreciation, amortisation and impairment of goodwill,
intangibles and property, plant and equipment.
iii Operating (loss) / profit is defined as revenue less
operating expenses before impairment of available for
sale financial assets, finance income and expenses and
share of (loss) / profit of equity accounted investments.
iv The income tax credit substantially relates to overseas
taxation and includes net exchange gains of $48 million
(2014 - $42 million) as disclosed in note 5.
v Diluted (loss) / earnings per share is based on the weighted
average number of ordinary shares in issue adjusted by
dilutive outstanding share options.
Consolidated statement of financial position
as at 30 September
2015 2014
Note $m $m
------------------------------------------- ------ ------ ------
Non-current assets
Goodwill 10 - 40
Intangible assets 10 94 457
Property, plant and equipment 10 1,477 2,882
Equity accounted investments 26 28
Royalty prepayment 38 -
Other financial assets 8 19 27
------------------------------------------- ------ ------ ------
1,654 3,434
------------------------------------------- ------ ------ ------
Current assets
Inventories 281 373
Trade and other receivables 71 76
Tax recoverable 1 2
Other financial assets 8 102 337
Cash and cash equivalents 9 320 143
------------------------------------------- ------ ------ ------
775 931
------------------------------------------- ------ ------ ------
Current liabilities
Trade and other payables (208) (244)
Provisions (39) -
Interest bearing loans and borrowings 9 (505) (86)
Deferred revenue (23) (27)
(775) (357)
------------------------------------------- ------ ------ ------
Net current assets - 574
------------------------------------------- ------ ------ ------
Non-current liabilities
Interest bearing loans and borrowings 9 - (86)
Deferred tax liabilities (9) (376)
Deferred royalty payment (3) -
Deferred revenue - (23)
Provisions (122) (141)
------------------------------------------- ------ ------ ------
(134) (626)
------------------------------------------- ------ ------ ------
Net assets 1,520 3,382
=========================================== ====== ====== ======
Capital and reserves
Share capital 586 570
Share premium 1,448 1,411
Other reserves 88 88
(Accumulated loss) / retained earnings (493) 1,164
------------------------------------------- ------ ------ ------
Attributable to equity shareholders
of Lonmin Plc 1,629 3,233
Attributable to non-controlling interests (109) 149
------------------------------------------- ------ ------ ------
Total equity 1,520 3,382
=========================================== ====== ====== ======
The financial statements of Lonmin Plc, registered number
103002, were approved by the Board of Directors on
9 November 2015 and were signed on its behalf by:
Brian Beamish Chairman
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Simon Scott Chief Financial Officer
Consolidated statement of changes in equity
for the year ended 30 September
Equity interest
-------------------------------------------------------
Called
up Share
share premium Other Retained Non-controlling Total
reserves earnings interests
capital account (i) (ii) Total (iii) equity
$m $m $m $m $m $m $m
----------------------------------------------------------- --------- --------- ----------- ----------- ------- ---------------- ---------
At 1 October 2013 569 1,411 88 1,341 3,409 201 3,610
Loss for the year - - - (188) (188) (15) (203)
Total other comprehensive
expenses: - - - (4) (4) - (4)
--------- --------- ----------- ----------- ------- ---------------- ---------
* Changes in settled cash flow hedges released to the
income statement - - - (1) (1) - (1)
* Foreign exchange loss on retranslation of equity
accounted investments - - - (3) (3) - (3)
Transactions with
owners, recognised
directly in equity: 1 - - 15 16 (37) (21)
--------- --------- ----------- ----------- ------- ---------------- ---------
* Share-based payments - - - 15 15 - 15
* Shares issued on exercise of share options 1 - - - 1 - 1
* Dividends (refer to note 7) - - - - - (37) (37)
At 30 September 2014 570 1,411 88 1,164 3,233 149 3,382
=========================================================== ========= ========= =========== =========== ======= ================ =========
Equity interest
---------------------------------------------------------
Retained
Called
up Share earnings/
share premium Other (Accumu- Non-controlling Total
lated
reserves loss) interests
capital account (i) (ii) Total (iii) equity
$m $m $m $m $m $m $m
------------------------------------------------------------- --------- --------- ----------- ------------ -------- ---------------- ---------
At 1 October 2014 570 1,411 88 1,164 3,233 149 3,382
Loss for the year - - - (1,661) (1,661) (238) (1,899)
Total other comprehensive
expenses: - - - (11) (11) (1) (12)
--------- --------- ----------- ------------ -------- ---------------- ---------
* Change in fair value of available for sale financial
assets - - - (4) (4) - (4)
* Foreign exchange loss on retranslation of equity
accounted investments - - - (7) (7) (1) (8)
Transactions with
owners, recognised
directly in equity: 16 37 - 15 68 (19) 49
--------- --------- ----------- ------------ -------- ---------------- ---------
* Share-based payments - - - 15 15 - 15
* Shares issued on exercise of share options (iv) 3 - - - 3 - 3
* Share capital and share premium recognised on the BEE
transaction (v) 13 37 - - 50 - 50
* Dividends (refer to note 7) - - - - - (19) (19)
At 30 September 2015 586 1,448 88 (493) 1,629 (109) 1,520
============================================================= ========= ========= =========== ============ ======== ================ =========
Footnotes:
i Other reserves at 30 September 2015 represent the capital
redemption reserve of $88 million (2014 - $88 million).
ii (Accumulated loss) / retained earnings include a $17
million debit of accumulated exchange on retranslation
of equity accounted investments (2014 - $9 million debit)
and $nil of accumulated credits in respect of fair value
movements on available for sale financial assets (2014
- $4 million accumulated credits).
iii Non-controlling interests represent a 13.76% shareholding
in each of Eastern Platinum Limited, Western Platinum
Limited and Messina Limited and a 19.87% effective shareholding
in Akanani Mining (Proprietary) Limited.
iv During the year 3,120,687 share options were exercised
(2014 - 1,206,465) on which $3 million of cash was received
(2014 - $1 million).
v In December 2014, Lonmin concluded a series of shareholding
agreements with the Bapo ba Mogale Traditional Community
(the Bapo) which enabled Lonmin to meet its BEE equity
ownership target as required under the Mining Charter.
Consolidated statement of cash flows
for the year ended 30 September
2015 2014
Note $m $m
----------------------------------------------- ------ -------- ------
Loss for the year (1,899) (203)
Taxation 5 (363) (123)
Share of loss of equity accounted investments 5 6
Finance income 4 (36) (44)
Finance expenses 4 275 108
Impairment of available for sale financial
assets - 1
Non-cash movement on deferred revenue (27) (20)
Depreciation, amortisation and impairment 1,966 142
Change in inventories 92 76
Change in trade and other receivables 6 7
Change in trade and other payables (38) (51)
Change in provisions 3 (14)
Share-based payments 15 15
Loss on disposal of property, plant 3 -
and equipment
BEE charge 13 -
Cash inflow / (outflow) from operations 15 (100)
Interest received 3 15
Interest and bank fees paid (27) (31)
Tax paid (3) -
----------------------------------------------- ------ -------- ------
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Cash outflow from operating activities (12) (116)
----------------------------------------------- ------ -------- ------
Cash flow from investing activities
Contribution to joint venture (7) (1)
Purchase of property, plant and equipment (134) (91)
Purchase of intangible assets (2) (2)
Cash used in investing activities (143) (94)
----------------------------------------------- ------ -------- ------
Cash flow from financing activities
Dividends paid to non-controlling interests 7 (19) (37)
Proceeds from current borrowings 9 391 605
Repayment of current borrowings 9 (60) (518)
Proceeds from non-current borrowings 9 - 88
Issue of other ordinary share capital 3 1
Cash inflow from financing activities 315 139
----------------------------------------------- ------ -------- ------
Increase / (decrease) in cash and cash
equivalents 9 160 (71)
Opening cash and cash equivalents 9 143 201
Effect of foreign exchange rate changes 9 17 13
----------------------------------------------- ------ -------- ------
Closing cash and cash equivalents 9 320 143
=============================================== ====== ======== ======
Notes to the accounts
1. Statement on accounting policies
Basis of preparation
The financial information presented has been prepared on the
basis of International Financial Reporting Standards (IFRSs) as
adopted by the EU.
Going concern
In determining the appropriate basis of preparation of the
financial statements, the Directors are required to consider
whether the Group can continue in operational existence for the
foreseeable future.
The financial performance of the Group is dependent upon the
wider economic environment in which the Group operates. Factors
exist which are outside the control of management which can have a
significant impact on the business, specifically, volatility in the
Rand / US Dollar exchange rate and PGM commodity prices. Despite
the operational and cost containment achievements of the Group over
the last 12 months, the declining PGM price environment has put the
Group's cash flows and profitability under pressure. The Directors
have determined that the Group needs to take further decisive
measures to improve its ability to operate in the current PGM
pricing environment and to enable the Group to benefit from any
recovery in PGM prices in the medium to long term. The Board and
executive management have reviewed the Group's business and capital
structure and developed the Business Plan in order to be able to
deal effectively with the effects of a continuation of the current
low PGM price environment. Key elements of the business plan are
the reduction of fixed cost expenses, removal of high cost
production and the minimising of capital expenditure while
preserving the ability of the business to increase production when
PGM markets improve.
The Board's review of the Group's capital structure has resulted
in significant steps being taken to strengthen our financial
position. As noted in note 11, the Company entered into an
agreement with J.P Morgan Securities plc, HSBC Bank plc and The
Standard Bank of South Africa Limited to fully underwrite
approximately $407 million of the planned Rights Issue (before
issuance costs and other charges). In conjunction with the planned
Rights Issue, the Company has negotiated certain amendments to the
terms of the Group's existing debt facilities which are detailed in
note 11. The Amended Facilities will only come into effect upon the
underwriting agreement in respect of the Rights Issue going
unconditional and the satisfaction of customary conditions
precedent.
The Directors have prepared cash flow forecasts for a period in
excess of 12 months. Various scenarios have been considered to test
the group's resilience against operational risks including:
-- Adverse movements in the rand/dollar exchange rate and PGM
commodity prices or a combination thereof;
-- Failure to meet forecast production targets.
The Directors have concluded that the Group's new capital
structure, after a successful Rights Issue and debt facilities
amendments, provides sufficient headroom to cushion against
downside operational risks and reduces the risk of breaching new
debt covenants under the Amended Facilities.
The planned Rights Issue is conditional upon the Resolution
being passed by the Company's shareholders at the General Meeting
on the 19 November 2015, on Admission of the New Shares to the
premium listing segment of the Official List, Admission of the Nil
Paid Rights to trading on the LSE, Admission of the Letters of
Allocation and New Shares to trading on the JSE and on the
Underwriting Agreement becoming unconditional. Therefore, if the
Resolution is not passed by the Company's shareholders at the
General Meeting on the 19 November 2015, or any of these events do
not occur, the planned Rights Issue will not proceed. If the
planned Rights Issue does not proceed the Amended Facilities will
not come into effect.
Although the Group would have some options available to it that,
in the event that the Proposed Rights Issue is not completed and
the Amended Facilities Agreements do not come into effect, might
potentially reduce the risk that the Group would be unable to meet
its obligations as they fall due, no assurance can be given that
any such options would be successful, particularly given the
limited time that would be available to the Group. Such options
might include:
-- seeking to agree with the Group's existing lenders or other
parties an alternative refinancing of the Existing Facilities;
and
-- seeking to dispose of some or all of the Group's assets or a
merger or acquisition transaction involving the Company (although
there is no certainty that such sales or transactions could be
realised in the available timeframe on acceptable terms, or at
all).
As these actions require the participation, agreement or
approval of external parties, the Directors are not confident that
any such alternative courses of action could be achieved in the
limited time available, or that they ultimately would be
successful. Accordingly, the Directors believe that the successful
completion of the planned Rights Issue and implementation of the
Amended Facilities Agreements represents the best option available
to the Company. The need for shareholder approval of the planned
Rights Issue therefore represents a material uncertainty that may
cast significant doubt about the Group's and Company's ability to
continue as a going concern such that the they may be unable to
realise their assets and discharge their liabilities in the normal
course of business.
Nevertheless, based on the Group's expectation that the
conditions of the planned Rights Issue will be met, in addition to
the Group's current trading and forecasts, the Directors believe
that the Group will be able to comply with its financial covenants
under the Amended Facilities, and be able to meet its obligations
as they fall due, and accordingly have formed a judgment that it is
appropriate to prepare the financial statements on a going concern
basis. Therefore, these financial statements do not include any
adjustments that would result if the going concern basis on
preparation is inappropriate.
New standards and amendments in the year
The following revised IFRS's have been adopted in these
financial statements. The application of these IFRS's did not have
any material impact on the amounts reported for the current and
prior years:
-- IFRS 10, IFRS 11 and amendments to IAS 28 regarding
Consolidated Financial Statements, Joint Arrangements and
Investments in Associates and Joint Ventures did not have a
material impact on the amounts reported for the current and prior
years. IFRS 12 - Disclosure of Interests in Other Entities did have
a disclosure impact on the Group's financial statements.
-- IAS 32 - Offsetting financial assets and financial
liabilities. The amendments clarify when an entity can offset
financial assets and financial liabilities.
-- IAS 39 - Financial Instruments: Recognition and Measurement
requires an entity to discontinue hedge accounting if the
derivative hedging instrument is novated to a clearing
counterparty, unless the hedging instrument is being replaced as
part of the entity's original documented hedging strategy.
-- IFRC 21 - Levies. Levies have become more common in recent
years, with governments in a number of jurisdictions introducing
levies to raise additional income. IFRIC 21 provides guidance on
accounting for levies in accordance with IAS 37 Provisions,
Contingent Liabilities and Assets.
There were no other new standards, interpretations or amendments
to standards issued and effective for the year which materially
impacted the Group's financial statements.
2. Segmental analysis
The Group distinguishes among three reportable operating
segments being the Platinum Group Metals (PGM) Operations segment,
the Evaluation segment and the Exploration segment.
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
The PGM Operations segment comprises the activities involved in
the mining and processing of PGMs, together with associated base
metals, which are carried out entirely in South Africa. These
operations are integrated and designed to support the process for
extracting and refining PGMs from underground. PGMs move through
each stage of the process and undergo successive levels of
refinement which result in fully refined metals. The Chief
Executive Officer, who performs the role of Chief Operating
Decision Maker (CODM), views the PGM Operations segment as a single
whole for the purposes of financial performance monitoring and
assessment and does not make resource allocations based on margin,
costs or cash flows incurred at each separate stage of the process.
In addition, the CODM makes his decisions for running the business
on a day to day basis using the physical operating statistics
generated by the business as these summarise the operating
performance of the entire segment.
The Evaluation segment covers the evaluation through
pre-feasibility of the economic viability of newly discovered PGM
deposits. Currently all of the evaluation projects are based in
South Africa.
The Exploration segment covers the activities involved in the
discovery or identification of new PGM deposits. This activity
occurs on a worldwide basis.
No operating segments have been aggregated. Operating segments
have consistently adopted the consolidated basis of accounting and
there are no differences in measurement applied. The Other segment
covers mainly the results and investment activities of the
corporate Head Office. The only intersegment transactions involve
the provision of funding between segments and any associated
interest.
Year ended 30 September 2015
------------------------------------------------------------------------------
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
--------------------- ------------ ------------- -------------- -------- ------------- --------
Revenue (external
sales by product):
Platinum 823 - - - - 823
Palladium 250 - - - - 250
Rhodium 92 - - - - 92
Gold 29 - - - - 29
Ruthenium 8 - - - - 8
Iridium 16 - - - - 16
--------------------- ------------ ------------- -------------- -------- ------------- --------
PGMs 1,218 - - - - 1,218
Nickel 39 - - - - 39
Copper 12 - - - - 12
Chrome 24 - - - - 24
--------------------- ------------ ------------- -------------- -------- ------------- --------
1,293 - - - - 1,293
===================== ============ ============= ============== ======== ============= ========
Year ended 30 September 2015
------------------------------------------------------------------------------
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
---------------------------- ------------ ------------- -------------- -------- ------------- --------
Underlying (i) :
EBITDA / (LBITDA)
(ii) 40 7 (5) (21) - 21
Depreciation, amortisation
and impairment (155) - - - - (155)
---------------------------- ------------ ------------- -------------- -------- ------------- --------
Operating (loss)
/ profit (ii) (115) 7 (5) (21) - (134)
Finance income 17 - - 13 (14) 16
Finance expenses (48) - - 14 14 (20)
Share of loss of
equity accounted
investments (5) - - - - (5)
---------------------------- ------------ ------------- -------------- -------- ------------- --------
(Loss) / profit
before taxation (151) 7 (5) 6 - (143)
Income tax credit 34 - - 1 - 35
---------------------------- ------------ ------------- -------------- -------- ------------- --------
Underlying (loss)
/ profit after taxation (117) 7 (5) 7 - (108)
Special items after
tax (note 3) (iii) (1,380) (173) - (238) - (1,791)
---------------------------- ------------ ------------- -------------- -------- ------------- --------
Loss after taxation (1,497) (166) (5) (231) - (1,899)
============================ ============ ============= ============== ======== ============= ========
Total assets (iv) 2,117 60 3 1,724 (1,475) 2,429
Total liabilities (1,800) (134) (56) (394) 1,475 (909)
---------------------------- ------------ ------------- -------------- -------- ------------- --------
Net assets / (liabilities) 317 (74) (53) 1,330 - 1,520
============================ ============ ============= ============== ======== ============= ========
Share of net assets
of equity accounted
investments 26 - - - - 26
Additions to property,
plant, equipment
and intangibles 159 2 - - - 161
Material non - cash
items - share-based
payments 14 - - 1 - 15
---------------------------- ------------ ------------- -------------- -------- ------------- --------
Year ended 30 September 2014
------------------------------------------------------------------------------
PGM Inter-
Operations Evaluation Exploration segment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
--------------------- ------------ ------------- -------------- -------- ------------- --------
Revenue (external
sales by product):
Platinum 620 - - - - 620
Palladium 165 - - - - 165
Rhodium 85 - - - - 85
Gold 21 - - - - 21
Ruthenium 7 - - - - 7
Iridium 15 - - - - 15
--------------------- ------------ ------------- -------------- -------- ------------- --------
PGMs 913 - - - - 913
Nickel 29 - - - - 29
Copper 10 - - - - 10
Chrome 13 - - - - 13
--------------------- ------------ ------------- -------------- -------- ------------- --------
965 - - - - 965
===================== ============ ============= ============== ======== ============= ========
Underlying (i) :
EBITDA / (LBITDA)
(ii) 204 5 (6) (9) - 194
Depreciation, amortisation
and impairment (142) - - - - (142)
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
---------------------------- -------- ------ ----- ------ -------- ------
Operating profit
/ (loss) (ii) 62 5 (6) (9) - 52
Finance income 15 - - 21 (10) 26
Finance expenses (19) - - (19) 10 (28)
Share of loss of
equity accounted
investments (4) - - - - (4)
---------------------------- -------- ------ ----- ------ -------- ------
Profit / (loss)
before taxation 54 5 (6) (7) - 46
Income tax expense (5) - - - - (5)
---------------------------- -------- ------ ----- ------ -------- ------
Underlying profit
/ (loss) after taxation 49 5 (6) (7) - 41
Special items after
tax (note 3) (iii) (181) - - (63) - (244)
---------------------------- -------- ------ ----- ------ -------- ------
(Loss) / profit
after taxation (132) 5 (6) (70) - (203)
============================ ======== ====== ===== ====== ======== ======
Total assets (iv) 3,767 277 1 1,546 (1,226) 4,365
Total liabilities (1,940) (185) (48) (36) 1,226 (983)
---------------------------- -------- ------ ----- ------ -------- ------
Net assets 1,827 92 (47) 1,510 - 3,382
============================ ======== ====== ===== ====== ======== ======
Share of net assets
of equity accounted
investments 28 - - - - 28
Additions to property,
plant, equipment
and intangibles 109 2 - - - 111
Material non-cash
items - share-based
payments 14 - - 1 - 15
---------------------------- -------- ------ ----- ------ -------- ------
Notes to the accounts (continued)
2. Segmental analysis (continued)
Revenue by destination is analysed by geographical area
below:
---------------------------------------------------------------
Year ended Year ended
30 September 30 September
2015 2014
$m $m
-------------------- -------------------- -------------------
The Americas 260 118
Asia 240 247
Europe 559 426
South Africa 234 174
-------------------- -------------------- -------------------
1,293 965
==================== ==================== ===================
The Group's revenue is all derived from the PGM Operations
segment. This segment has two major customers who contributed 58%
($505 million) and 16% ($204 million) of revenue in the 2015
financial year (2014 - 60% ($580 million) and 25% ($241
million)).
Metal sales prices are based on market prices which are
denominated in US Dollars. The majority of sales are also invoiced
in US Dollars with the exception of certain sales in South Africa
which are invoiced in South African Rand based on exchange rates
determined in accordance with the contractual arrangements.
Non-current assets, (excluding financial instruments), of $1,635
million (2014 - $3,407 million) are all situated in South
Africa.
Footnotes:
i Underlying results are based on reported results excluding
the effect of special items as defined in note 3.
ii EBITDA / (LBITDA) and operating (loss) / profit are
the key profit measures used by management.
iii The impairment of the HDSA receivable to the value of
$227 million (2014 - $80 million) and of non- financial
assets of $1,811 million (2014 - $nil) are shown as
special items in the segmental analysis. The HDSA receivable
forms part of the "Other" segment. The impairment of
non-financial assets are allocated to the PGM Operations
Segment and the Evaluation Segment.
iv The assets under "Other" include the HDSA receivable
of $102 million (2014 - $337 million) and intercompany
receivables of $1,475 million (2014 - $1,226 million).
Available for sale financial assets of $7 million (2014
- $11 million) forms part of the "Other" segment and
the balance of $4 million (2014 - $4 million) forms
part of the PGM Operations Segment.
3. Special Items
'Special items' are those items of financial performance that
the Group believes should be separately disclosed on the face of
the income statement to assist in the understanding of the
financial performance achieved by the Group and for consistency
with prior years.
2015 2014
$m $m
----------------------------------------------- -------- ------
Operating loss: (1,884) (307)
-------- ------
Strike related costs
- Idle fixed production costs - (287)
- Security costs - (10)
- Contractors' claims - (3)
- Other costs - (7)
BEE transaction (i)
- BEE charge (13) -
- Consulting fees (1) -
Restructuring and reorganisation costs (ii) (59) -
Impairment of non-financial assets (iii)
- Impairment of goodwill (40) -
- Impairment of intangibles (358) -
- Impairment of property, plant and equipment (1,413) -
Impairment of available for sale financial
assets - (1)
Share of loss of equity accounted investments - (2)
Net finance expenses: (235) (62)
-------- ------
- Interest accrued from HDSA receivable
(iv) 20 18
- Foreign exchange loss on HDSA receivable (28) -
(iv)
- Impairment of HDSA loan receivable (iv) (227) (80)
Loss on special items before taxation (2,119) (372)
Taxation related to special items (note
5) 328 128
----------------------------------------------- -------- ------
Special loss before non-controlling interest (1,791) (244)
Non-controlling interests 224 25
----------------------------------------------- -------- ------
Special loss for the year attributable to
equity shareholders of Lonmin Plc (1,567) (219)
=============================================== ======== ======
Footnotes:
i In December 2014, Lonmin concluded a series of shareholding
agreements which enabled Lonmin to meet its BEE equity
ownership target of 26% as required under the Mining
Charter. This gave rise to a BEE charge of $13 million
relating to the premium paid for the Bapo baMogale Traditional
Community (The Bapo) to maintain their shareholding
for a period of 10 years. Consulting fees to the amount
of $1 million were also incurred in relation to the
transaction.
ii These costs relate to the one-off redundancy costs ($56
million) and associated restructuring costs ($3 million)
in respect of the restructuring process undertaken as
part of the Business Plan. A total of $39 million remains
outstanding at 30 September 2015 and is included in
current provisions.
iii As explained more fully in note 10, the Group's non-financial
assets were impaired by $1,811 million (2014 - $nil).
iv During the year ended 30 September 2010 the Group provided
financing to assist Lexshell 806 Investments (Proprietary)
Limited, a subsidiary of Shanduka Resources (Proprietary)
Limited (Shanduka) to acquire a majority shareholding
in Incwala, Lonmin's Black Economic Empowerment partner.
This financing gave rise to foreign exchange movements
and the accrual of interest. The loan was impaired by
$227 million as explained in note 8.
4. Net finance expenses
2015 2014
$m $m
---------------------------------------------------- ------ -----
Finance income: 16 26
------ -----
- Interest receivable on cash and cash equivalents 3 6
- Dividend received from investment (i) 1 10
- Foreign exchange gains on net (debt) / cash
(ii) 12 10
------ -----
Finance expenses: (20) (28)
------ -----
- Interest payable on bank loans and overdrafts (20) (19)
- Bank fees (8) (12)
- Capitalised interest (iii) 19 13
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
- Other finance expenses (1) -
- Unwinding of discount on provisions (10) (10)
Special items (note 3): (235) (62)
------ -----
- Interest on HDSA receivable (note 8) 20 18
- Foreign exchange loss on HDSA receivable (28) -
(note 8)
- Impairment of HDSA loan receivable (note
8) (227) (80)
Net finance expenses (239) (64)
==================================================== ====== =====
Footnotes:
i Dividend received relates to dividends accruing from
investment in Petrozim Line (Private) Limited which
were remitted during the year. The investment in Petrozim
Line (Private) Limited has a $nil carrying value as
it has been fully impaired.
ii Net (debt) / cash as defined by the Group comprises
cash and cash equivalents, bank overdrafts repayable
on demand and interest bearing loans and borrowings
less unamortised bank fees, unless the unamortised bank
fees relate to undrawn facilities in which case they
are treated as other receivables.
iii Interest expenses incurred have been capitalised on
a Group basis to the extent that there is an appropriate
qualifying asset. The weighted average interest rate
used by the Group for capitalisation is 3.8% (2014 -
3.0%).
5. Taxation
2015 2014
$m $m
--------------------------------------------------- ------ ------
Current tax charge (excluding special items):
United Kingdom tax expense - -
------ ------
Current tax expense at 20.5% (2014 - 22%)
(i) - -
Less amount of the benefit arising from double
tax relief available - -
------ ------
Overseas current tax expense at 28% (2014
- 28%) 4 2
------ ------
Corporate tax expense - current year 4 1
Adjustment in respect of prior years - 1
Deferred tax (credit) / charge (excluding
special items):
Deferred tax expense - UK and overseas (39) 3
------ ------
Origination and reversal of temporary differences (39) 3
Tax credit on special items - UK and overseas
(note 3): (328) (128)
Foreign exchange on deferred taxation (ii) (48) (42)
Tax on special items impacting profit before
tax (280) (86)
------ ------
Actual tax credit (363) (123)
=================================================== ====== ======
Tax (credit) / charge excluding special items
(note 3) (35) 5
=================================================== ====== ======
Effective tax rate 16% 38%
=================================================== ====== ======
Effective tax rate excluding special items
(note 3) 24% 11%
=================================================== ====== ======
A reconciliation of the standard tax credit to the actual tax
credit was as follows:
2015 2015 2014 2014
% $m % $m
------------------------------------------ ----- ------ ----- ------
Tax credit on loss at standard tax
rate 28 (626) 28 (91)
Tax effect of:
- Unutilised losses (iii) (1) 27 (2) 7
- Foreign exchange impacts on taxable
profits 2 (37) 7 (21)
- Disallowed expenditure (15) 316 (6) 19
- Expenses not subject to tax - 5 (2) 5
Foreign exchange revaluation on deferred
tax 2 (48) 13 (42)
------------------------------------------ ----- ------ ----- ------
Actual tax credit 16 (363) 38 (123)
========================================== ===== ====== ===== ======
The Group's primary operations are based in South Africa. The
South African statutory tax rate is 28% (2014 - 28%). Lonmin Plc
operates a branch in South Africa which is also subject to a tax
rate of 28% on branch profits (2014 - 28%). The aggregated standard
tax rate for the Group is 28% (2014 - 28%). The dividend
withholding tax rate is 15% (2014 - 15%). Dividends payable by the
South African companies to Lonmin Plc are subject to a 5%
withholding tax benefitting from double taxation agreements.
Footnotes:
i Effective from 1 April 2015, the United Kingdom tax
rate changed from 21% to 20% and will change from 20%
to 19% from 1 April 2017 and from 19% to 18% from 1
April 2020. This does not materially impact the Group's
recognised deferred tax liabilities.
ii Overseas tax charges are predominantly calculated based
in Rand as required by the local authorities. As these
subsidiaries' functional currency is US Dollar this
leads to a variety of foreign exchange impacts being
the retranslation of current and deferred tax balances
and monetary assets, as well as other translation differences.
The Rand denominated deferred tax balance in US Dollars
at 30 September 2015 is $177 million (30 September 2014
- $268 million).
iii Unutilised losses reflect losses generated in entities
for which no deferred tax is provided as it is not thought
probable that future profits can be generated against
which a deferred tax asset could be offset or previously
unrecognised losses utilised.
6. (Loss) / earnings per share
Loss per share (LPS) has been calculated on the loss
attributable to equity shareholders amounting to $1,661 million
(2014 - loss of $188 million) using a weighted average number of
581,712,484 ordinary shares in issue (2014 - 569,649,750 ordinary
shares).
Diluted loss per share is based on the weighted average number
of ordinary shares in issue adjusted by dilutive outstanding share
options in accordance with IAS 33 - Earnings Per Share. As at 30
September 2015 outstanding share options were anti-dilutive and so
were excluded from diluted loss per share.
2015 2014
------------------------------------ ---------------------------------
Loss
for
Loss for Number Per share the Number Per share
the year of amount year of amount
$m shares cents $m shares cents
-------------------- ---------- ------------ ---------- ------- ------------ ----------
Basic LPS (1,661) 581,712,484 (285.5) (188) 569,649,750 (33.0)
Share option
schemes - - - - - -
-------------------- ---------- ------------ ---------- ------- ------------ ----------
Diluted LPS (1,661) 581,712,484 (285.5) (188) 569,649,750 (33.0)
==================== ========== ============ ========== ======= ============ ==========
2015 2014
Profit
for
Loss for Number Per share the Number Per share
the year of amount year of amount
$m shares cents $m shares cents
-------------------- ---------- ------------ ---------- ------- ------------ ----------
Underlying (LPS)
/ EPS (94) 581,712,484 (16.2) 31 569,649,750 5.4
Share option
schemes - - - - 5,917,508 -
-------------------- ---------- ------------ ---------- ------- ------------ ----------
Diluted Underlying
(LPS) / EPS (94) 581,712,484 (16.2) 31 575,567,258 5.4
==================== ========== ============ ========== ======= ============ ==========
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Underlying earnings per share has been presented as the
Directors consider it important to present the underlying results
of the business. Underlying earnings per share is based on the
earnings attributable to equity shareholders adjusted to exclude
special items (as defined in note 3) as follows:
2015 2014
---------------------------------------
(Loss)
Loss for Per share / profit Per share
the year Number amount for Number amount
$m of cents the of cents
shares year shares
$m
------------------ ----------- ------------ ------------ ---------- ------------ ------------
Basic LPS (1,661) 581,712,484 (285.5) (188) 569,649,750 (33.0)
Special items
(note 3) 1,567 - 269.3 219 - 38.4
------------------ ----------- ------------ ------------ ---------- ------------ ------------
Underlying (LPS)
/ EPS (94) 581,712,484 (16.2) 31 569,649,750 5.4
================== =========== ============ ============ ========== ============ ============
Headline loss and the resultant headline loss per share are
specific disclosures defined and required by the Johannesburg Stock
Exchange. These are calculated as follows:
Year ended Year ended
30 September 30 September
2015
$m 2014
$m
-------------------------------------------- -------------- --------------
Loss attributable to ordinary shareholders
(IAS 33 earnings) (1,661) (188)
Add back loss on disposal of property, 3 -
plant and equipment
Add back impairment of assets (note
3) 1,811 1
Tax related to the above items (261) -
Non-controlling interests (224) -
-------------------------------------------- -------------- --------------
Headline loss (332) (187)
============================================ ============== ==============
2015 2014
------------------------------------
Loss Loss
for Number Per share for Number Per share
the year of amount the year of amount
$m shares cents $m shares cents
------------------ ---------- ------------ ---------- ---------- ------------ ----------
Headline LPS (332) 581,712,484 (57.1) (187) 569,649,750 (32.8)
Share option
schemes - - - - - -
------------------ ---------- ------------ ---------- ---------- ------------ ----------
Diluted Headline
LPS (332) 581,712,484 (57.1) (187) 569,649,750 (32.8)
================== ========== ============ ========== ========== ============ ==========
7. Dividends
No dividends were declared by Lonmin Plc for the financial years
ended 30 September 2015 and 30 September 2014.
A subsidiary of Lonmin Plc, WPL, made advance dividend payments
of $19 million (R228 million) (2014 - $37 million (R408 million))
to Incwala Platinum (Proprietary) Limited (IP). IP is a substantial
shareholder in the Company's principal operating subsidiaries.
Total advance dividends made between 2009 and 2015 amount to R1,309
million ($135 million). IP has authorised WPL to recover these
amounts by reducing future dividends that would otherwise be
payable to all shareholders.
These advance dividends are adjusted for in the non-controlling
interest of the Group.
8. Other financial assets
Restricted Available
cash for sale HDSA receivable Total
$m $m $m $m
------------------------------ ----------- ---------- ---------------- ------
At 1 October 2014 12 15 337 364
Interest accrued 1 - 20 21
Movement in fair value - (4) - (4)
Foreign exchange differences (5) - (28) (33)
Impairment loss - - (227) (227)
------------------------------ ----------- ---------- ---------------- ------
At 30 September 2015 8 11 102 121
------------------------------ ----------- ---------- ---------------- ------
Restricted Available
cash for sale HDSA receivable Total
$m $m $m $m
------------------------------ ----------- ---------- ---------------- ------
At 1 October 2013 14 17 399 430
Interest accrued 1 - 18 19
Movement in fair value - (1) - (1)
Foreign exchange differences (3) - - (3)
Impairment loss - (1) (80) (81)
------------------------------ ----------- ---------- ---------------- ------
At 30 September 2014 12 15 337 364
------------------------------ ----------- ---------- ---------------- ------
2015 2014
$m $m
--- ----- -----
Current assets
Other financial assets 102 337
-------------------------- ---- ----
Non-current assets
Other financial assets 19 27
-------------------------- --- ---
Restricted cash deposits are in respect of mine rehabilitation
obligations.
Available for sale financial assets include listed investments
of $7 million (2014 - $11 million) held at fair value using
the market price on 30 September 2015.
No available for sale financial assets were impaired in
the 2015 financial year (2014 - $1 million).
On 8 July 2010, Lonmin entered into an agreement to provide
financing of GBP200 million to Lexshell 806 Investments
(Proprietary) Limited, a subsidiary of Shanduka Resources
(Proprietary) Limited, to facilitate the acquisition, at
fair value, of 50.03% of shares in Incwala Resources (Proprietary)
Limited from the original HDSA shareholders. The terms
of the financing provided by Lonmin Plc to the Shanduka
subsidiary include the accrual of interest on the HDSA
receivable at a fixed rate based on a principal value of
GBP200 million which is repayable on demand, including
accrued interest.
The Company holds the HDSA receivable at amortised cost.
The receivable is secured on shares in the HDSA borrower,
whose only asset of value is its holding in Incwala Resources
(Pty) Limited (Incwala). Incwala's principal assets are
investments in Western Platinum Limited (WPL), Eastern
Platinum Limited (EPL) and Akanani Mining (Pty) Limited
(Akanani), all subsidiaries of Lonmin Plc. One of the
sources of income to fund the settlement of the receivable
is the dividend flow from these underlying investments.
Given the current state of the PGM industry there have
not been any substantial dividend declared to Incwala
in recent times.
Given the above matters, the Directors have determined
that it is likely that a loss event may have occurred.
Accordingly, an assessment has been performed to determine
the extent of impairment. This assessment has been made
based on the value of the security, which is primarily
driven by the value of Incwala's underlying investments
in WPL, EPL and Akanani. The same valuation models for
the Marikana and Akanani CGU's that were prepared to
assess impairment of non-financial assets were used as
the basis for determining the value of Incwala's investments.
Thus, similar judgements apply around the determination
of key assumptions in those valuation models. Based on
the assessment, the value of the HDSA receivable was
determined to be $102 million (2014 - $337 million) which
resulted in an impairment charge of $227 million (2014
- $80 million).
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Any movements in the key assumptions would affect the value of
the security which would lead to further impairment or reversal of
a previous impairment of the receivable as follows:
Reversal of
impairment
/
Movement in (further impairment)
Assumption assumption of receivable
------------------- -------------- ---------------------
Metal prices +/-5% $29m/($30m)
ZAR:USD exchange
rate -/+5% $22m/($24m)
Discount -/+ 100 basis
rate points $13m/($12m)
Production +/-5% $32m/($65m)
9. Net (debt) / cash as defined by the Group
Transfer
of unmortised
bank fees
to other
receivables
As at $m As at
Foreign
exchange
1 October and non-cash 30 September
Cash
2014 flow movements 2015
$m $m $m $m
--------------------------- ------------ ------- -------------- --------------- --------------
Cash and cash equivalents
(ii) 143 160 17 - 320
Current borrowings (87) (331) (88) - (506)
Non-current borrowings (88) - 88 - -
Unamortised bank
fees (iii) 3 - (2) - 1
------------ ------- -------------- --------------- --------------
Net debt as defined
by the Group (i) (29) (171) 15 - (185)
=========================== ============ ======= ============== =============== ==============
Foreign Transfer
of unmortised
bank fees
to other
receivables
As at exchange $m As at
and
1 October Cash non-cash 30 September
2013 flow movements 2014
$m $m $m $m
--------------------------- ------------ ------- ----------- --------------- ---------------
Cash and cash equivalents 201 (71) 13 - 143
Current borrowings - (87) - - (87)
Non-current borrowings - (88) - - (88)
Unamortised bank
fees (iii) - - - 3 3
--------------------------- ------------ ------- ----------- --------------- ---------------
Net cash / (debt)
as defined by the
Group (i) 201 (246) 13 3 (29)
=========================== ============ ======= =========== =============== ===============
Footnotes:
i Net (debt) / cash as defined by the Group comprises
cash and cash equivalents, bank overdrafts repayable
on demand and interest bearing loans and borrowings
less unamortised bank fees, unless the unamortised bank
fees relate to undrawn facilities in which case they
are treated as other receivables.
ii Current cash and cash equivalents to the value of $6
million will be treated as restricted cash to be utilised
for rehabilitation obligations.
ii As at 30 September 2015 unamortised bank fees of $1
million relating to drawn facilities were offset against
net debt (30 September 2014 - $3 million of unamortised
bank fees relating to undrawn facilities were included
in other receivables).
10. Impairment of non-financial assets
At each financial reporting date, the Group assesses whether
there is any indication that these assets are impaired.
If any such indication exists, the recoverable amount
of the assets is estimated in order to determine the extent
of the impairment (if any). Recoverable amount is the
higher of fair value less costs to sell and value in use.
For impairment assessment, the Group's net assets are
grouped into CGU's being the Marikana CGU, Akanani CGU,
Limpopo CGU and Other. The Marikana and Limpopo CGU's
relate to the PGM segment and the Akanani CGU relates
to the Exploration segment.
The Marikana CGU is located in the Marikana district to
the east of the town of Rustenburg in the North West Province
of South Africa. It contains a number of producing underground
mines, various development properties, concentrators,
tailings storage facilities and smelting and refining
operations.
The Akanani CGU is an exploration asset and is located
on the Northern Limb of the Bushveld Igneous Complex in
the Limpopo Province of South Africa. A pre-feasibility
study was completed in 2012.
The Limpopo CGU is located on the Northern Sector of the
Eastern Limb of the Bushveld Igneous Complex in the Limpopo
Province of South Africa and comprises two resource blocks
(Baobab and Baobab east). The CGU includes mines which
were placed on care and maintenance in 2009 and a concentrator
complex.
For Marikana and Akanani, the recoverable amounts were
calculated using a value in use valuation. The key assumptions
contained within the business forecasts and management's
approach to determine appropriate values in use are set
out below:
Key Assumption Management Approach
----------------------- ---------------------------------------------------
PGM Projections are determined through a combination
of the views of the Directors, market estimates
and forecasts and other sector information.
The Platinum price is projected to be in
the range of $1,050 to $1,535 per ounce
in real terms over the life of the mine.
Palladium and Rhodium prices are expected
to range between $605 and $840 and $855
and $2,245 respectively per ounce in real
terms over the same period.
Production volume Projections are based on the capacity and
expected operational capabilities of the
mines, the grade of the ore, and the efficiencies
of processing and refining operations.
Production costs Projections are based on current cost adjusted
for expected cost changes as well as giving
consideration to specific issues such as
the difficulty in mining particular sections
of the reef and the mining method employed.
Capital expenditure Projections are based on the operational
requirements plan, which sets out the long-term plan
of the business and is approved by the
Board.
Foreign currency Spot rates as at the end of the reporting
exchange rates period are applied.
Reserves and resources Projections are determined through surveys
of the CGU performed by Competent Persons and the
views of the Directors of the Company.
Discount rate The discount rate is based on a Weighted
Average Cost of Capital (WACC) calculation
using the Capital asset pricing model grossed
up to a pre-tax rate. The Group uses external
consultants to calculate an appropriate
WACC.
----------------------- ---------------------------------------------------
For impairment testing management projects cash flows
over the life of the relevant mining operation which is
significantly greater than 5 years. For the Marikana CGU
a life of mine spanning until 2058 was applied. For the
Akanani CGU the life of mine spans until 2049.
The risk-adjusted pre-tax discount rate applied for impairment
testing in the Marikana CGU for 2015 was 15.6% real (2014
- 11.8% real). The rate applied for the exploration and
evaluation asset in the Akanani CGU for 2015 was 17.9%
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
nominal (2014 - 16.5% nominal).
The Limpopo CGU was valued on a fair value less cost to sell
basis. The latest market transactions and resource multiples were
reviewed and given the current PGM environment, it was decided to
impair the Limpopo asset to $nil
For the 2015 financial year, the Group's non-financial
assets were impaired by $1,811 million primarily due to
the reduced production profile and revised PGM price outlook
in the Business Plan which have resulted in the downward
revision of estimated future cash flows from the Marikana
operations. This led to the value in use declining below
the carrying amount of the non-financial assets of the
operations. The impairment charge was allocated to the
different CGU's as follows:
Marikana Akanani Limpopo
CGU CGU CGU Total
Carrying amount pre-impairment:
Goodwill 40 - - 40
Other intangibles 180 219 53 452
Property, plant and equipment 2,816 - 74 2,890
Equity accounted investments 26 - - 26
Royalty prepayment 38 - - 38
------------- ------------------- ----------------- --------
Total 3,100 219 127 3,446
============= =================== ================= ========
Marikana Akanani Limpopo
CGU CGU CGU Total
Recoverable amount:
Goodwill - - - -
Other intangibles 94 - - 94
Property, plant and equipment 1,477 - - 1,477
Equity accounted investments 26 - - 26
Royalty prepayment 38 - - 38
------------- ------------------- ----------------- --------
Total 1,635 - - 1,635
============= =================== ================= ========
Marikana Akanani Limpopo
CGU CGU CGU Total
Impairment:
Goodwill (40) - - (40)
Other intangibles (86) (219) (53) (358)
Property, plant and equipment (1,339) - (74) (1,413)
Equity accounted investments - - - -
Royalty prepayment - - - -
------------- ------------------- ----------------- --------
Total (1,465) (219) (127) (1,811)
============= =================== ================= ========
For the Marikana CGU, the impairment charge was first
allocated to goodwill. The remaining balance of the impairment
charge was allocated pro-rata to the other non-financial
assets, but limited to the assets' recoverable amounts.
In preparing the financial statements, management has
considered whether a reasonably possible change in the
key assumptions on which management has based its determination
of the recoverable amounts of the CGUs would cause the
units' carrying amounts to exceed their recoverable amounts.
A reasonably possible change in any of the assumptions
used to value the Marikana CGU will lead to a reduction
or increase in the impairment charge as follows:
Movement in Reversal of impairment/(Further
Assumption assumption impairment)
------------------------------ --- ----------------- ----------------------------------
Metal prices +/-5% $329m/($336m)
ZAR:USD exchange
rate -/+5% $247m/($279m)
-/+100 basis
Discount rate points $146m/($137m)
Production +/-5% $361m/($361m)
The Akanani CGU was impaired in 2012, and as such a change in
any of the key assumptions would lead to further impairment or
reversal of the previous impairment. Similar impairment assessments
were performed on our Akanani asset. These have resulted in full
impairment of the assets in the Akanani CGU, with a further
impairment charge of $219 million. Reasonably possible movements in
any of the three key assumptions would not result in a reversal of
previous impairment.
11. Events after the financial reporting period
The announcement of these results coincides with the launch of a
Rights Issue which is conditional on, amongst other things,
shareholder approval. The Group proposes to raise approximately
$407 million, before deducting share issue costs and foreign
exchange charges, as well as amend the existing debt
facilities.
The amended debt facility agreements which were entered into on
9 November 2015 will become effective upon the underwriting
agreement in respect of the Rights Issue going unconditional the
satisfaction of customary conditions precedent.
Following the amendment, the Group's debt facilities going
forward are summarised as follows:
-- Revolving credit facilities totalling $75 million and a $150
million term loan, at a Lonmin Plc Level, which mature in May 2020
(assuming Lonmin exercises its option to extend the term up until
this date).
-- Revolving credit facility totalling R1,980 million, at a
Western Platinum Limited level, which matures in May 2020 (assuming
Lonmin exercises its option to extend the term up until this
date).
The following covenants apply to these facilities:
-- The consolidated tangible net worth of the Group on or after
31 March 2016 will not be at any time less than US$1,100
million.
-- The consolidated debt of the Group on or after 31 March 2016
will not at any time exceed an amount equal to 35% of consolidated
tangible net worth of the Group;
-- The liquidity for the Group will not, for any week from 1
January 2016, be less than $20,000,000;
-- The capital expenditure of the Group (excluding any Bulk
Tailings Agreement) shall not exceed the limits set out in the
table below. The Company shall also have the option to carry
forward or back up to 10% of the limits set out in the table
below.
Financial Year Capex Limit
----------------------------------------------- -----------------
1 October 2015 - 30 September 2016 (inclusive) ZAR1,338 million
1 October 2016 - 30 September 2017 (inclusive) ZAR1,242 million
1 October 2017 - 30 September 2018 (inclusive) ZAR2,511 million
1 October 2018 - 30 September 2019 (inclusive) ZAR3,194 million
1 October 2019 - 31 May 2020 (inclusive) ZAR4,049 million
There is also additional limit on capital expenditure in
relation to any Bulk Tailings Agreement as set out below:
Financial Year Bulk Tailings Capex Limit
----------------------------------------------- --------------------------
1 October 2015 - 30 September 2016 (inclusive) ZAR370 million
1 October 2016 - 30 September 2017 (inclusive) ZAR182 million
The limit on capital expenditure in relation to any Bulk
Tailings Agreement after 30 September 2017 will be zero.
In addition to the above, the Group's existing lenders agreed on
26 October 2015 to suspend the testing of the tangible net worth
covenants under the existing facilities until the amended
facilities agreements become effective, failing which, the
covenants would be tested under existing facilities.
12. Statutory Disclosure
(MORE TO FOLLOW) Dow Jones Newswires
November 09, 2015 02:59 ET (07:59 GMT)
Lonmin (LSE:102S)
과거 데이터 주식 차트
부터 5월(5) 2024 으로 6월(6) 2024
Lonmin (LSE:102S)
과거 데이터 주식 차트
부터 6월(6) 2023 으로 6월(6) 2024