Lonmin Posts First Profit in Four Years Leading into Sibanye Takeover

- November 29th, 2018

Lonmin achieved its first annual operating profit in four years on the heels of a takeover by Sibanye-Stillwater.

Platinum miner Lonmin (LSE:LMI) achieved its first annual operating profit in four years thanks to cost-cuts that proved to be successful, the company announced on Thursday (November 29).

The positive results come on the heels of a takeover by Sibanye-Stillwater (NYSE:SBGL,JSE:SGL) that is expected to take place next week, as per Lonmin’s comments.

“We have kept our commitments and delivered a strong performance across the business, closing with an improved net cash position of $114 million, up from $103 million last year,” said Ben Magara, CEO of Lonmin.

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“Market conditions have remained challenging but we have maintained our focus on strict management of controllable factors, cutting costs and driving efficiencies. We have an enviable mine-to-market business with strong assets,” he added.

Overall, the miner reported that its revenue was up 6.3 percent year-on-year to US$1.3-billion with an operating profit amounting to US$101-million. This time last year the company reported an operating profit loss of US$1-billion.

Magara also noted that Generation 2 shaft production increased by 1.6 percent to 7.6-million tonnes, while the company continued to reduce high-cost production from Generation 1 shafts.

Normalised costs only increased by 1.3 percent.

The London-listed miner had been cutting spending and laying off employees in a last ditch effort to get out from underneath soaring costs and subdued platinum prices.

Additionally, Lonmin needed to retain a positive cash balance in order for the Sibanye takeover to be approved.

Sibanye originally proposed the acquisition of Lonmin in mid-December of last year and once the merger is finalized, it will become the second-largest platinum miner in the world.

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The proposed deal has faced much lashback from the Association of Mineworkers and Construction Union, with the group going to the South African Competition Tribunal in mid-November in an attempt to stop Sibanye from purchasing Lonmin, claiming drastic job cuts as the reason.

Lonmin CFO Barrie van der Merwe addressed the issue, stating, “[t]he chances that the company runs out of cash in the next 18 months is a reality.”

The acquisition was officially approved last Wednesday (November 21).

As of 3:19 p.m. EST on Thursday (November 29), Lonmin was up 4 percent, trading at GBX 44.72.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.  

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