Lonmin acts to offset 2 more years of weak platinum price

May 11, 2015 8:04 AM

By Silvia Antonioli

Miners are seen underground at Lonmin Plc's Karee mine in Marikana, Rustenburg 100 km (62 miles) northwest of Johannesburg, March 5, 2013. REUTERS/Siphiwe Sibeko

LONDON (Reuters) - Platinum producer Lonmin is taking steps to cope with what it says could be at least two more years of depressed platinum prices after reporting another loss in the first half of its financial year.

To try to turn around its fortunes, the world's third largest platinum miner last week announced last week a plan to cut 3,500 jobs to reduce costs following a devastating strike at its mines in South Africa last year.

On Monday it said it would target employees from its unsuccessful mechanisation programme, while others could leave because of medical incapacity.

The producer said it was also trimming capital spending and delaying the development of the K4 shaft at its Marikana mine in South Africa, as it focuses on conserving cash.

"This isn't something anyone takes with pleasure and we don't take it lightly but we need to react to the persistently low prices," Chief Executive Ben Magara said.

"We have not shied away from taking the tough decisions," he added on a call with journalists.

Magara said he was encouraged by talks held with unions on job cuts, adding such discussions would not have been possible a year ago when relationships with labour were particularly tense.

NUM, generally seen as a moderate union, said on Friday that it was shocked by the plan and that it would fight back. Majority union AMCU, generally more militant, was not available to comment.

London-listed Lonmin posted an interim pretax loss of $118 million, down from a $278 million loss a year earlier, when it was battered by the industrial action.

South Africa's longest and costliest mining strike cut global production and dragged Lonmin into the red but failed to lift platinum prices.

The white metal has lost about 20 percent in the last year alone and its recovery prospects have been tarnished by large stocks, increased recycling and slower demand growth from the automotive industry.

Lonmin has also come under pressure from Glencore's plan to dispose of its 23.9 percent stake by distributing shares to its shareholders.

"People don't hold the Glencore stock for exposure to Lonmin so inevitably there will be some selling pressure," said Liberum analyst Ben Davis.

Lonmin however maintained its platinum sales forecast of 750,000 ounce even though it was hit by technical problems at both its furnaces which reduced its refined output earlier this year as it expects to make up the lost ground in the second half.