Rising costs and their impact on the net present value of the business prompted beleaguered mineral resources group Lonmin (LMI) to take a $146m (£113m) impairment charge in the six months to March 2017. Even without this, operating losses more than doubled to $35m, and while debt covenants remain secure, the tangible net worth of the group fell to $1.43bn, nearer to the $1.1bn minimum covenant level.
This shouldn't be a concern, but Lonmin continues to struggle in a market where platinum prices remain weak and where unit cost guidance for the full year has been revised up from R10,800-R11,300 to R11,300-R11,800. This is a worry because the average selling price of the platinum-group (PGM) metals was lower than this at R10,852.
Unit costs for the first six months were R12,059 per PGM ounce, up 13 per cent from a year earlier, but improved mining production brought this back to R9,695 for March. Total tonnes mined fell 7.6 per cent to 387,000, mainly as a result of reduced output from the high-cost Generation 1 shafts. And while safety stoppages reduced tonnage lost by 17 per cent at 194,000 tonnes, management-induced safety stoppages accounted for 324,000 lost tonnes, up sharply from 241,000 in the previous first half.
LONMIN (LMI) | ||||
---|---|---|---|---|
ORD PRICE: | 109.75p | MARKET VALUE: | £310m | |
TOUCH: | 109.25-110p | 12-MONTH HIGH: | 253p | LOW: 81p |
DIVIDEND YIELD: | nil | PE RATIO: | NA | |
NET ASSET VALUE: | 456¢ | NET CASH: | $75m |
Half-year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
---|---|---|---|---|
2015 | 515 | -21 | -1.8 | nil |
2016 | 486 | -199 | -64.4 | nil |
% change | -6 | - | - | - |
Ex-div: na Payment: na £1=$1.293 |