TIDMLMI
RNS Number : 9007C
Lonmin PLC
21 October 2015
Lonmin Plc
4 Grosvenor Place
London SW1X 7YL
United Kingdom
T: +44 (0)20 7201 6000
F: +44 (0)20 7201 6100
www.lonmin.com
REGULATORY RELEASE
21 October 2015
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN WHOLE OR IN PART, INTO OR WITHIN THE UNITED STATES,
AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH
RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS
ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS.
Update on year end trading, Business Plan and funding
strategy
1. Summary
Lonmin Plc ("Lonmin" or, together with its subsidiaries, the
"Group"), a primary platinum producer, announces a trading update
for the year ended 30 September 2015, Lonmin's business plan (the
"Business Plan") and the Board's funding strategy.
Lonmin is taking action to mitigate the effects of the current
low PGM pricing environment. The Board is pleased to announce that,
on an unaudited basis, the unit cost of production of approximately
ZAR10,339 per PGM ounce is expected to be achieved for the year
ended 30 September 2015, well within the original guidance of
ZAR10,800 per PGM ounce. Capital expenditure for the year has also
been tightly controlled. On an unaudited basis, Lonmin's capital
expenditure for the year ended 30 September 2015 was US$136
million, compared with its original guidance of US$250 million. On
an unaudited basis, net debt as at 30 September 2015 amounted to
US$185 million, compared to US$282 million as at 31 March 2015.
The Board and executive management have reviewed the Group's
business and capital structure and developed the Business Plan in
order to be able to deal effectively with the effects of a
continuation of the current low PGM pricing environment.
The Business Plan will accelerate the implementation of Lonmin's
published strategy to control costs, reduce capital expenditure and
enable decisive measures to be taken. The Business Plan aims to
achieve positive cash flow after capital expenditure in the current
low PGM pricing environment while preserving the ability of the
Group to increase its production as and when PGM prices
improve.
The Board intends to raise approximately US$400 million in gross
proceeds through a rights issue (the "Proposed Rights Issue"), and,
at the same time, enter into amended debt facilities (the "Amended
Debt Facilities") with its lending banks for a total of US$370
million, maturing in May 2020, conditional on credit committee
approvals, on full documentation being agreed, on the Group raising
a further US$400 million in new equity funding and other customary
provisions. The Amended Debt Facilities will replace the existing
debt facilities commitments which as at 30 September 2015 were
approximately US$543 million and which are maturing in May and June
2016 (the "Existing Debt Facilities").
Key terms have been agreed in principle commercially with the
Group's lending banks to provide the Amended Debt Facilities of
US$370 million maturing in May 2020, conditional on credit
committee approvals, on full documentation being agreed, on the
Group raising a further US$400 million in new equity funding and
other customary provisions.
The Board believes that the Proposed Rights Issue and the
Amended Debt Facilities taken together will strengthen the business
and provide the Group with sufficient resources for working capital
and capital expenditure to sustain the business in an ongoing low
PGM pricing environment.
The Board intends to announce on 9 November 2015 the full terms
of the Proposed Rights Issue to provide the new equity funding
required of US$400 million and to publish a prospectus and the
audited results for the Group for the year ended 30 September 2015.
The Proposed Rights Issue is expected to be underwritten on 9
November 2015, inter-conditional with the Amended Debt Facilities.
In order to be able to close the Proposed Rights Issue before the
end of the year, the Board intends to give notice to shareholders
on 2 November 2015 of a general meeting expected to be held on 19
November 2015, at which resolutions will be proposed which, if
passed by the shareholders, will enable the Proposed Rights Issue
to proceed.
The Public Investment Corporation, which holds approximately
seven per cent. of the issued share capital of Lonmin, has
indicated to the Board its intention to take up its entitlement in
full in the Proposed Rights Issue and, subject to satisfactory
investment committee approvals and documentation, to sub underwrite
a material portion of the Proposed Rights Issue in excess of its
entitlement.
Lonmin's reduced production profile due to the low PGM pricing
environment may lead to job losses in line with the reduced
production profile. In this regard, the Public Investment
Corporation and Lonmin will work together and collaborate with
government and unions on alternatives to minimise the impact of job
losses at Lonmin by finding alternative economic participation for
some of the retrenched employees, for example through agricultural
projects in labour sending areas.
2. Trading update for the year ended 30 September 2015
On an unaudited basis, Lonmin's sales of platinum exceeded its
guidance for the year ended 30 September 2015, achieving sales of
751,560 platinum ounces compared to forecast guidance of 730,000
platinum ounces. The Group achieved mined production of
approximately 704,000 platinum ounces, after taking into account
approximately 48,000 platinum ounces of production lost as a result
of section 54 safety stoppages. Total platinum metal in concentrate
for the year ended 30 September 2015 was 740,315 saleable platinum
ounces.
Lonmin took early decisive action to reduce costs and capital
expenditure to preserve cash. As a result, on an unaudited basis,
the unit cost of production of approximately ZAR10,339 per PGM
ounce is expected to be achieved for the year ended 30 September
2015, well within the original guidance of ZAR10,800 per PGM ounce
despite the section 54 safety stoppages. On an unaudited basis,
capital expenditure for the year ended 30 September 2015 was US$136
million, compared to original guidance of US$250 million. The
US$/ZAR exchange rate further benefited the capital expenditure
reduction.
On an unaudited basis, net debt as at 30 September 2015 amounted
to US$185 million compared to US$282 million as at 31 March 2015
and US$29 million as at 30 September 2014.
The restructuring programme started with the freezing of general
recruitment and natural attrition to reduce workforce levels. In
addition, over 1,550 employees had left the Group through voluntary
separations and early retirement by 16 October 2015. In total,
approximately 6,000 employees, including contractors, are affected
by the right-sizing of the Group and the restructuring programme is
expected to be completed by the end of September 2016. Full
provision as a Special cost is expected to be made in the 2015
accounts for the estimated one-off retrenchment and associated
restructuring costs of approximately ZAR0.8 billion, on an
unaudited basis, in respect of the affected employees.
Good progress is being made with the section 189 consultation
process. In the interest of ensuring timely consultations, Lonmin
is running two concurrent consultation processes; one with the
Association of Mineworkers and Construction Union (AMCU), the
majority union, and a second process with the other unions and
non-unionised employees. Both processes are being facilitated by
the Commission for Conciliation, Mediation and Arbitration (CCMA).
The consultation period has been extended by mutual agreement of
all relevant stakeholders to enable full exploration of all
alternatives to forced retrenchments.
Lonmin expects to announce its fourth quarter production report
on 2 November 2015 and its full year audited results for the year
ended 30 September 2015 on 9 November 2015.
3. The Business Plan
The Board and executive management have undertaken a detailed
review of the Group's business and capital structure and set out
the Business Plan to manage the effects of the continuing low PGM
pricing environment and to ensure that Lonmin is prudently
structured to withstand the current weak PGM market and safeguard
the long-term interests of the shareholders, employees and other
key stakeholders.
The Business Plan has been developed to reduce fixed cost
expenses, remove high-cost PGM production ounces and reduce capital
expenditure to the minimum required for the safe and efficient
running of the Group's operations, while preserving the ability of
the Group to increase its production when PGM prices improve. The
Group aims to continue to preserve cash with the objective of
achieving a cash flow positive position after capital expenditure
despite the current low PGM pricing environment. The key elements
of the Business Plan are:
-- Reducing capital expenditure - Comprehensive assessment of
capital projects has been undertaken with the aim of limiting
capital expenditure to levels required to satisfy regulatory and
safety standards and essential sustaining capital expenditure in
the continuing shafts and for a limited number of development
projects. Capital portfolio optimisation tools have been utilised
with the aim of ensuring that capital expenditure is invested only
in the most valuable development projects available to the Group.
The Group expects to limit its capital expenditure to approximately
US$132 million, US$110 million and US$188 million for the years
ending 30 September 2016, 2017 and 2018, respectively.
(MORE TO FOLLOW) Dow Jones Newswires
October 21, 2015 02:00 ET (06:00 GMT)
-- Removing high cost production: Following a shaft-by-shaft
analysis, Lonmin decided to reduce high cost production ounces to
improve the Group's profitability and cash flows. The Group plans
to carry out the orderly closure and placement on care and
maintenance of two shafts, Newman and Hossy, by stopping
development and capital work and only mining immediately available
ore reserves. The Group also plans to close and place on care and
maintenance the 1B shaft as soon as possible. Following
renegotiation of ore purchase agreements between the Group and
contractor management on more favourable terms, and subject to a
favourable outcome of the section 189 consultation process, mining
at E1 and W1 shafts will continue for the year ending 30 September
2016, and these shafts will not be placed on care and maintenance
as previously announced in July 2015. Lonmin plans to reassess the
viability of continuing to mine these shafts at the end of
September 2016. In addition, the Group is in negotiations with
third parties regarding the funding and commissioning of a bulk
tailings treatment project. The K4 shaft will remain on care and
maintenance for the time being. As a result, Lonmin expects that
the sales profile for the Group will be approximately 700,000
platinum ounces for the year ending 30 September 2016, with
approximately 650,000 platinum ounces for each of the years ending
30 September 2017 and 2018.
-- Protecting jobs in the low PGM price environment: Lonmin
employed some 38,000 people, including contractors, as at 30
September 2014 and through the Chamber of Mines is a signatory to
the Mining Leadership Declaration agreement to ameliorate job
losses. It is the Board's objective to protect the majority of
those jobs over the long term by ensuring that the Group can deal
effectively with the sustained low PGM pricing environment. As part
of right-sizing the business in line with the reduced production
profile as a consequence of the continuing low pricing environment,
approximately 6,000 employees and contractors are affected. The
Group aims to complete the process by the end of September
2016.
-- Reducing overhead and support service structures: New
measures identified as part of the Business Plan for overhead and
support services will remove associated overhead costs, including
the decommissioning of a concentrator and the revision of all
incentive schemes to encourage production efficiencies and to
ensure that bonus and incentives schemes are self-funding. Annual
bonuses to management level employees for the year ended 30
September 2015 have been waived. In addition, no salary increases
have been granted to management for the year ending 30 September
2016. Marketing and promotional expenses, as well as discretionary
spending on training, are being reduced.
The Board believes that the implementation of the Business Plan
will result in a cost reduction of approximately ZAR0.7 billion in
financial year 2016 (against the annual cost base for the year
ended 30 September 2015, unaudited) and a further cost reduction of
approximately ZAR1.6 billion in financial year 2017 (against the
forecast annual cost base for the year ended 30 September 2016).
The Group aims to keep its unit costs per PGM ounce in nominal
terms broadly flat in line with the year ended 30 September 2015,
for the years ending 30 September 2016, 2017 and 2018.
4. Funding Strategy
The Board has also reviewed the funding requirements of the
Group.
Key terms have been agreed in principle commercially with the
Group's lending banks to provide Amended Debt Facilities of US$370
million maturing in May 2020, conditional on credit committee
approvals, on full documentation being agreed, on the Group raising
a further US$400 million in new equity funding and other customary
provisions.
The Board intends to announce full terms of an underwritten
Proposed Rights Issue to raise US$400 million and to publish a
prospectus in relation to the Proposed Rights Issue at the time of
publication of the Group's audited results on 9 November 2015. The
Proposed Rights Issue will be conditional on inter alia shareholder
approval and other customary provisions. In order to be able to
close the Proposed Rights Issue by the end of 2015, the Board
intends to give notice to shareholders on 2 November 2015 of a
general meeting expected to be held on 19 November 2015, at which
resolutions will be proposed which, if passed by shareholders, will
enable the Proposed Rights Issue to proceed. The net proceeds of
the Proposed Rights Issue will strengthen the Group's balance sheet
and be deployed towards funding capital expenditure, right-sizing
the business to reduce costs and working capital.
The Board will keep shareholders and the market updated with
progress in due course.
- ENDS -
ENQUIRIES
Investors / Analysts:
Lonmin
Tanya Chikanza (Head of Investor +44 20 7201 6007
Relations) +27 11 218 8358
Media:
Cardew Group
Anthony Cardew / James Clark +44 20 7930 0777
Sue Vey +27 60 523 7953
Notes to editors
Lonmin, which is listed on both the London Stock Exchange and
the Johannesburg Stock Exchange, is one of the world's largest
primary producers of PGMs. These metals are essential for many
industrial applications, especially catalytic converters for
internal combustion engine emissions, as well as their widespread
use in jewellery.
Lonmin's operations are situated in the Bushveld Igneous Complex
in South Africa, where more than 70% of known global PGM resources
are found.
The Company creates value for shareholders through mining,
refining and marketing PGMs and has a vertically integrated
operational structure - from mine to market. Lonmin's mining
operations extract ore from which the processing operations produce
refined PGMs for delivery to customers. Underpinning the operations
is the shared services function which provides support and
infrastructure across the operations.
For further information please visit our website:
http://www.Lonmin.com
This announcement includes forward-looking statements. All
statements other than statements of historical fact included in
this announcement, including without limitation those regarding
Lonmin's plans, objectives and expected performance, are
forward-looking statements. Lonmin has based these forward-looking
statements on its current expectations and projections about future
events, including numerous assumptions regarding its present and
future business strategies, operations, and the environment in
which it will operate in the future. Forward-looking statements
generally can be identified by the use of forward-looking
terminology such as "may", "will", "could", "would", "expect",
"intend", "estimate", "anticipate", "believe", "plan", "aim" or
"continue", or, in each case, their negative, or other variations
or comparable terminology. Such forward-looking statements involve
known and unknown risks, uncertainties, assumptions and other
factors related to Lonmin, including, among other factors: (1)
material adverse changes in economic conditions generally or in
relevant markets or industries in particular; (2) fluctuations in
demand and pricing in the mineral resource industry and
fluctuations in exchange rates; (3) future regulatory and
legislative actions and conditions affecting Lonmin's operating
areas; (4) obtaining and retaining skilled workers and key
executives; and (5) acts of war and terrorism. By their nature,
forward-looking statements involve risks, uncertainties and
assumptions and many relate to factors which are beyond Lonmin's
control, such as future market conditions and the behaviour of
other market participants. Actual results may differ materially
from those expressed in forward-looking statements. Given these
risks, uncertainties, and assumptions, you are cautioned not to put
undue reliance on any forward-looking statements. In addition, the
inclusion of such forward-looking statements should under no
circumstances be regarded as a representation by Lonmin that Lonmin
will achieve any results set out in such statements or that the
underlying assumptions used will in fact be the case. Other than as
required by applicable law or the applicable rules of any exchange
on which Lonmin's securities (the "Securities") may be listed,
Lonmin has no intention or obligation to update or revise any
forward-looking statements included in this announcement after the
publication of this announcement.
This announcement is an advertisement and not a prospectus. It
does not constitute, or form part of, an offer to sell or a
solicitation of any offer to buy the securities of the Company and
investors should not subscribe for or purchase any shares referred
to in this announcement except on the basis of information in the
prospectus to be published by the Company in due course in
connection with the Proposed Rights Issue, and any supplement or
amendment thereto (the "Prospectus"). Copies of the Prospectus
will, following publication, be available from the Company's
registered office.
This announcement is not an offer to sell or a solicitation of
any offer to buy any Securities in the United States, Australia,
Canada, Japan or in any other jurisdiction where such offer or sale
would be unlawful or to any person to whom it would be unlawful to
make such offer or solicitation.
The Securities have not been and will not be registered under
the US Securities Act of 1933 (the "Securities Act"), or with any
securities regulatory authority of any State or other jurisdiction
of the United States, and may not be offered, sold, resold,
pledged, taken up, exercised, renounced or otherwise delivered,
distributed or transferred, directly or indirectly, into or within
the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and in compliance with any applicable securities
laws of any State or other jurisdiction of the United States. No
public offering of the Securities is being made in the United
States.
(MORE TO FOLLOW) Dow Jones Newswires
October 21, 2015 02:00 ET (06:00 GMT)
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