Shares in South Africa-focused platinum miner Lonmin rallied strongly on full-year results, up almost 10 per cent on the day. Unpicking stock-specific factors from mining sector buzz, however, it is hard to see why. The platinum price was up again, but Lonmin made clear that the significant price increase the white metal has enjoyed year-to-date has been completely wiped out by the impact of the rand's strength (against the US dollar) on its operating costs. The company warns this will probably continue, exacerbated by above-inflation pay settlements for a disgruntled workforce.
Lonmin was loss-making in the financial year even at the cash level, reporting cash losses of £48m and, were it not for a working capital gain, it would have suffered an operating cash outflow, too. The company warns that cash earnings will remain "low and difficult to predict", so it has persuaded banks to both refinance a chunk of previously looming debt and suspend various cash earnings-related covenants for the next year.
Lonmin has almost $500m of undrawn credit available, but is planning $270m of capital spend through the coming year and around $300m-$350m per year from 2011 if it is to ramp up production beyond the 700,000 saleable ounces it is anticipating for 2010 to its 850,000 ounce target by 2013.
Evolution Securities anticipates an underlying loss per share of 13.3¢ for the current financial year (a loss per share of 59.2¢ in 2009).
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| LONMIN (LMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,690p | MARKET VALUE: | £3.26bn | |
| TOUCH: | 1,690-1,692p | 12-MONTH HIGH: | 1,885p | LOW: 512p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 1,252¢ * | NET DEBT: | 4% | |
| Year to 30 Sep | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | 1.13 | 319 | 103 | 62.0 |
| 2006 | 1.86 | 633 | 202 | 92.0 |
| 2007 | 1.94 | 705 | 189 | 106.0 |
| 2008 ** | 2.23 | 779 | 278 | 56.3 |
| 2009 | 1.06 | -272 | -164 | nil |
| % change | -52 | - | - | -100 |
*Includes intangible assets of $1,077m, or 558¢ per share **Restated post-rights issue £1=$1.68 | ||||
