Lonmin (LMI) may have posted an operating loss in the six months to March 2016, but several details in the freshly refinanced platinum miner's half-year results sent the market into a buying frenzy, leading to a 20 per cent jump in the shares. Not only did the group book a cash profit of $36m (£25m) - against a cash loss of $6m a year ago - but two-thirds of the ZAR700m (£31m) full-year cost savings target have now already been tackled.
Part of that cost reduction has come from 5,433 lay-offs as of March, and two further higher-cost mines at Marikana - Newman and Hossy - have been earmarked for closure in 2016 and 2017, respectively, at a loss of 2,600 more jobs. The company is heading for a further test in workforce relations in July, when wage negotiations and benefits will be conducted against a backdrop of local government elections. Chief executive Ben Magara is "cautiously optimistic" that he can head off industrial action, although he is reliant on unions and employees recognising the "economic realities the company has gone through".
That difficult period, which precipitated December's highly dilutive rights issue, has at least improved the balance sheet. 'Total liquidity', which Lonmin defines as gross cash of $264m plus undrawn debt facilities of $210m, provides some support for the stretched working capital position, although only enough for JPMorgan Cazenove to forecast adjusted earnings at break-even level in the year to September, against a loss of 16¢ in 2015.
LONMIN (LMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 195p | MARKET VALUE: | £549m | |
| TOUCH: | 194-195p | 12-MONTH HIGH: | 1,784p | LOW: 36p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 672¢ | NET CASH: | $114m | |
| Half-year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 508 | -118 | -165 | nil |
| 2016 | 515 | -21.0 | -1.8 | nil |
| % change | +1 | - | - | - |
Ex-div: na Payment: na £1 = $1.43 | ||||
