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Lonmin's shareholders needed cheering up after 2007's results reported an underlying operating profit fall of 4 per cent in the period - that came despite the all-time high platinum prices, and reflected long running mining and smelting problems. Nevertheless, chief executive Brad Mills said board confidence in longer-term prospects justified a chunky boost in the full-year dividend pay-out. And, coincidentally, upbeat platinum price forecasts from Johnson Matthey probably helped the shares close up 4 per cent on the day.
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Mr Mills reiterated a 900,000oz platinum sales target for 2008, compared to the 793,584oz actually delivered in 2007 which, as recently as May, was forecast at 980,000oz. He also stressed that cash costs per oz sold would continue to rise significantly while lower grades of ore, which hit 2007's metal recoveries, would also remain a factor going into 2008. However, he emphasised that the introduction of new management into both the mining and processing divisions was already helping to put things right and that, longer-term, the focus should be on asset potential - the resource base grew 27 per cent in 2007 and the reserve base grew 9 per cent.
Citigroup anticipates EPS of 342.4¢ for 2008.
| LONMIN (LMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,200p | MARKET VALUE: | £ 4,998m | |
| TOUCH: | 3,200-3,202p | 12-MONTH HIGH: | 4,400p | LOW: 2,721p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 1,260¢* | NET DEBT: | 16% | |
| Year to 30 Sep | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2003 | 0.78 | 291 | 53.0 | 72.0 |
| 2004 | 1.03 | 360 | 38.0 | 72.0 |
| 2005 | 1.13 | 319 | 112.0 | 72.0 |
| 2006 | 1.86 | 633 | 219.5 | 100.0 |
| 2007 | 1.94 | 705 | 205.1 | 115.0 |
| % change | +4 | +11 | -7 | +15 |
Ex-div: 9 Jan Payment: 8 Feb £1=$2.07 *Includes intangible assets of $1.12bn, or 718¢ a share |
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We have long been negative on Lonmin due to its repeated operational shortcomings. And, while the bar for the coming year has now been carefully set very low, continued caution looks wise. High enough.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
