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Platinum miner Lonmin (LSE:LMI) watched its share price gain 19.4 pence to 347.50 this morning, a leap of 5.91%, following the release of its impressive, 38-page final report for the year ending 30 September 2013.
Financial Focal Points
Although Lonmin’s total revenue declined to $1.52 billion from $1.61 billion in 2012, the company’s focus on increasing operating efficiency delivered significant increases in all levels of profitability. Underlying profit came in at nearly $100 million over 2012 at $164 million (2012:$67 million). Operating profit was up nearly $850 million from last year’s $702 million loss to $147 million. Net pre-tax profit grew from a $698 million lost in 2012 to $140 million in the black for 2012. The company’s cash position moved from $421 million of debt to $201 million in cash and cash equivalents.
First Executive Priorities
Having been CEO for only the last three months of Lonmin’s fiscal year, Ben Magara, informed shareholders of his activities during that time, but gave due credit to CFO Simon Scott who was interim CEO until Mr. Magara’s appointment. Magara said that his first priority had been to “meet as many employees and stakeholders as possible to begin the task of winning back hearts and minds in the wake of last year’s events at Marikana.” To this end, his visits to the company’s operations in Africa included face-to-face meetings with the families who had lost loved ones in the 2012 violence at Marikana. I probably need not point out, but I will, that this is a highly unusual executive act.
Magara made a significant strong statement, indicating his perspective on how he will lead Lonmin, when he said, “Our stakeholder relationships are business critical. I reject any contention that these are “soft” issues, set against the “hard” issues of operations and finances.” That singular statement ought to raise investor eyebrows more than any financial results, because honest commitment to that statement will eventually drive positive results.
Magara’s second priority was to reconfigure the executive team so that he has the right people on the bus, so to speak. His decisiveness is also indicative of a leader who is determined to succeed.
Four Management Pillars
Financial analysis aside. Charting aside. There are certain intangibles that point to a fruitful future. In Lonmin’s case it is Mr. Magara’s four management pillars upon which he will build and lead the company. In summary, those pillars are
- Rebuilding trust by regaining the confidence of Lonmin’s employees by building “a more content and dedicated workforce.”
- Enhancing value through operational credibility and excellence. This will be addressed largely by “focusing on fewer projects at a time.”
- Driving operational efficiency through a program of value optimization. Magara said that “We will continue to maximize the conservation and generation of cash and maintain our relentless focus on overheads and fixed costs.”
- Increasing emphasis on the social, sustainable, and health issues in and around the mining operations, especially with respect to the mining communities themselves and the living conditions afforded to the miners and their families.
Effective change always starts at the top. Sustainable change is always driven from the top. The most important information in Lonmin’s report may not be the current results, but the changes that are being driven from the top. If there is a mining stock worth watching, Lonmin has become at the very least a leading candidate.
