In a year in which its South African operations were blighted by industrial action and mine fatalities,
Lonmin had expected to cash in on rising platinum prices by ramping up production through this year, but its plans were compromised by an illegal industrial stoppage in May, together with production outages following the deaths of six employees. Year-on-year production of platinum group metals (PGMs) increased by 8 per cent to 1.3 million ounces.
Platinum sales rose by 6 per cent to 720,783 ounces and palladium, which is used in catalytic converters, saw sales rise 18 per cent. This was notable given the fall away in demand from Japanese automotive manufacturers in the aftermath of the March earthquake.
Escalating power costs and wage settlements continued to place pressure on operating margins throughout the year, while Lonmin's management identified the rising tide of "resource nationalism" in South Africa as another potential risk factor.
Prior to these results, Evolution had forecast EPS of 74.4p for 2012 (92.5p in 2011).
|ORD PRICE:||1,077p||MARKET VALUE:||£2.2bn|
|TOUCH:||1,076-1,078p||12-MONTH HIGH:||2,009p||LOW: 948p|
|DIVIDEND YIELD:||1%||PE RATIO:||13|
|NET ASSET VALUE:||1,445¢*||NET DEBT:||7%|
Lonmin now expects demand in 2012 to be softer than previously anticipated, and prices for PGMs fell away sharply in October. At 1,077p, the shares trade at a frothy forward multiple of 14, making them no better than fairly priced.
Last IC view: High enough, 1,571p, 10 May 2011