Platinum producer Lonmin is raising around £160m through a placing to help Shanduka Resources acquire a majority stake in Lonmin's Black Economic Empowerment partner Incwala Resources. Shanduka should be able to provide useful commercial contacts as well as bring stability to Incwala.
In the first half strong platinum prices helped push earnings above analyst forecasts and returned Lonmin back to profitability. Production from the core underground mine at Marikana fell marginally although management continues to target 700,000 ounces of platinum output for the year. Lonmin suffered another shutdown at its Number One furnace, although the impact on production was minimised by immediately switching to the back-up Pyromet furnaces. Given the regularity of such furnace shutdowns, the company is spending $40m (£27m) to build an additional Pyromet back-up furnace.
Lonmin's smelter problems are the result of the high chrome content of its platinum concentrates, but the company is now selling the chrome to realise value from these by-products. Platinum production should be enhanced by re-opening the (lower chrome content) Merensky open pit, and the continued ramp-up of two new shafts at Marikana.
Broker Evolution Securities is expecting a full-year pre-tax loss of $26.8m and a loss per share of 13.3¢.
| LONMIN (LMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,788p | MARKET VALUE: | £3.45bn | |
| TOUCH: | 1,786-1,789p | 12-MONTH HIGH: | 2,198p | LOW: 950p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 1,278¢* | NET DEBT: | 9% | |
| Half-year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 436 | -196 | -67.9 | nil |
| 2010 | 661 | 77 | 15.5 | nil |
| % change | +52 | - | - | - |
*Includes intangible assets of $1.1bn, or 564¢ a share £1=$1.50 | ||||
