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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lonmin Plc | LSE:LMI | London | Ordinary Share | GB00BYSRJ698 | ORD USD0.0001 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 75.60 | 73.70 | 74.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMLMI
RNS Number : 5053E
Lonmin PLC
13 May 2013
REGULATORY RELEASE
13 May 2013
2013 Interim Results
Lonmin Plc, (Lonmin or the Company), the world's third largest primary Platinum producer, today publishes its Interim Results for the period ended 31 March 2013.
Key Features
Safety is our number one priority:
o LTIFR of 3.66 incidents per million man hours compared to 4.69 in the prior year period
o Marikana operations - 6 million Fatality Free Shifts
o 1B/4B - 7 million Fatality Free Shifts
o Our record safety performance was negatively impacted by two fatalities at the start of H2 2013
Substantially exceeded Renewal Plan:
o Platinum sales of 326,142 ounces - up 2.4% on the prior year period
o Basket price (incl. by-product revenue) up 1.7% to US$1,252 per PGM ounce
o Rand unit cost contained at R8,648 per PGM ounce, up 5.8% on prior year period
o Underlying EBIT US$93 million, up from US$14 million in the prior year period
o Net cash - US$194 million vs. Net Debt US$421 million at September 2012
Strong half year operational performance:
o Tonnes produced at 5.7 million, down 1.8%
o Ore reserve position at 3.4 million centares, up 9.3%
o Saleable metal in concentrate, flat on prior year period
o Underground head grade increased to 4.63g/t from 4.48g/t
o Overall concentrator recoveries improved from 85.5% in prior year to 86.8%
o Incident at Number Two furnace mitigated through reduced scope of Number One furnace rebuild
Market outlook:
o Rising costs force South African producer cuts
o Deficits in 2013 as South African supply shrinks
o Continuing deficits in 2014 to 2018
o Prices expected to rise on falling inventories
Guidance:
o Increasing guidance for Platinum metals in concentrate production from 680,000 ounces to in excess of 700,000 ounces
o Maintaining our sales guidance of 660,000 saleable Platinum ounces - near term smelter capacity constraints
o Unit cost per PGM ounce reduced from previous guidance of a 10% increase to below 8%
o Capex guidance of US$175 million maintained
Simon Scott, Acting Chief Executive Officer, said: "We are pleased to have maintained the momentum of the safe re-start and ramping up of production at our operations to deliver a strong operational and financial performance in the first half of our financial year. The successful refinancing of the business, the return to profitability during the period under review and the revised growth strategy and streamlined capital investment programme have allowed us to de-risk the balance sheet and it is pleasing to note that the business has generated positive free cash flows in Quarter Two. We expect to continue to build operational momentum in the second half of the financial year and we are increasing our metals in concentrate guidance from 680,000 ounces of Platinum to in excess of 700,000 saleable Platinum ounces."
Financial Highlights
Hot Features
Premium
6 months to 6 months to
31 March 2013 31 March 2012
---------------------------------------------------- --------------- ---------------
Revenue $735m $751m
Underlying (i) operating profit $93m $14m
Operating profit (ii) $90m $14m
Underlying (i) profit before taxation $89m $6m
Profit before taxation $54m $18m
Underlying (i) earnings / (loss) per share (iii) 12.3c (3.7)c
Earnings / (loss) per share (iii) 13.3c (6.3)c
Trading cash (outflow) / inflow per share (iii,iv) (17.2)c 28.9c
Free cash outflow per share (iii,v) (31.9)c (22.9)c
Net cash / (debt) as defined by the Group (vi) $194m $(356)m
Interest cover (times) (vii) 9.1x 8.4x
Gearing (viii) - 11%
Footnotes:
i Underlying results and earnings / (loss) per share are based on reported
results and earnings / (loss) per share excluding the effect of special
items as disclosed in note 3 to the interim statements.
ii Operating profit is defined as revenue less operating expenses before impairment
of available for sale financial assets, finance income and expenses and
before share of profit of equity accounted investments.
iii During the six months to March 2013 the Group undertook a Rights Issue
of shares. As a result the March 2012 loss per share (LPS) and cash flows
per share have been adjusted to reflect the bonus element of the Rights
Issue as disclosed in note 6.
iv Trading cash flow is defined as cash flow from operating activities.
v Free cash flow is defined as trading cash flow less capital expenditure
on property, plant and equipment and intangibles, proceeds from disposal
of assets held for sale and dividends paid to non-controlling interests.
vi Net cash / (debt) as defined by the Group comprises cash and cash equivalents,
bank overdrafts repayable on demand and interest bearing loans and borrowings
less unamortised bank fees, unless the unamortised bank fees relate to
undrawn facilities in which case they are treated as other receivables.
vii Interest cover is calculated for the twelve month periods to 31 March 2013
and 31 March 2012 on the underlying operating profit divided by the underlying
net bank interest payable excluding exchange differences.
viii Gearing is calculated as the net debt attributable to the Group divided
by the total of the net debt attributable to the Group and equity shareholders'
funds.
ENQUIRIES
Investors / Analysts:
Lonmin
+27 11 218 8358
Tanya Chikanza (Head of Investor /
Relations) +44 20 7201 6007
Ruli Diseko (Investor Relations
Manager) +27 11 218 8300
Media:
Cardew Group
James Clark / Alexandra Stoneham +44 20 7930 0777 Sue Vey +27 72 644 9777
Brunswick - Johannesburg
+27 11 502 7400
/
Tshepo Mophiring +27 82 887 4124
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 Complex in South Africa, where nearly 80% 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 Process Division produces refined PGMs for delivery to customers. Underpinning the operations is the Shared Services function which provides high quality levels of support and infrastructure across the operations.
For further information please visit our website: http://www.lonmin.com
Chief Executive Officer's Review
1. Introduction
I am pleased to report that we substantially exceeded our Renewal Plan to deliver a strong operational and financial performance in the first half of the 2013 financial year. The results reflect the successful execution of the operational plans we put in place for the safe re-start and ramping up of production following the labour unrest that preceded the period.
The six month period to 31 March 2013 which we are reporting on was marked by remarkable resilience and cohesiveness by the management team and all our employees.
-- We achieved industry safety records by setting new levels of safety across the whole Marikana operations. Our Lost Time Injury Frequency Rate (LTIFR) continued to improve, reaching 3.66 per million man hours worked. Regrettably, notwithstanding our industry leading performance in this area, two fatalities occurred at the start of the second half of the financial year;
-- We successfully delivered against our forecast of ramp up production established at the beginning of the financial year, and replenished our metal pipeline. We have delivered 366,059 ounces of Platinum in concentrate and achieved Platinum sales of 326,142 ounces during this period;
-- The combination of better than expected production volumes, a marginally better PGM price environment, a favourable ZAR/USD exchange rate and effective cost containment has resulted in operating profit of $90 million in the half year compared to $14 million in the prior period and profit before tax of $54 million compared to $18 million in 2012;
-- We successfully raised $767 million net of costs and foreign exchange movements from the Rights Issue, enabling us to de-risk the balance sheet. We used the proceeds to settle the bank debt as well as reduce the overall facilities from around $915 million to $615 million, based on 31 March 2013 exchange rates;
-- The combination of the Rights Issue and a good first half performance has resulted in a net cash balance of $194 million as at 31 March 2013. This is a significant shift from the net debt position Lonmin had at 30 September 2012 of $421 million. It is particularly pleasing to note that the business generated positive free cash flows after capex of $116.2 million in Quarter Two; and
-- Unit costs were well contained, increasing by 5.8% to R8, 648 per PGM ounce produced when compared against the prior year period and $73 million was spent on capital.
2. Safety
Regrettably since the end of the half year, we have had two fatalities resulting from fall of ground incidents at our Rowland and K3 shafts respectively. We extend our deepest condolences to the families of Mr David Macamo and Mr Elson Ngomane. The safety of our employees is our first consideration in all that we do and we continue to emphasise the importance of applying safe working methods throughout our operations.
Notwithstanding the two fatalities referred to above, our safety record during the first half year was again encouraging. We are pleased the Marikana operations achieved new industry safety records which included 6 million Fatality Free Shifts (FFS) and 17 million Fall of Ground Fatality Free shifts on 12 April and 19 April respectively, whilst the IB/4B and K3 shafts within our Karee Mining Division achieved 7 million FFS and 4 million FFS respectively. Our LTIFR at 3.66 per million man hours worked showed an improvement when compared to the prior year period of 4.69 per million man hours worked. The procedures we developed for a safe and sustainable start up during the ramp up period have been commended by the Regulator and are now being used as a standard across the industry.
3. Production Performance
Introduction
Our production performance in the first half of the 2013 financial year has substantially exceeded our planned ramp up. We mined 5.7 million attributable tonnes, realised 366,059 ounces of Platinum in concentrate and sold 326,142 ounces of Platinum. Momentum was quickly established, with close to normal levels of attendance across the operations. The results and momentum established in the first three months of the financial year were however tempered by higher than anticipated Section 54 stoppages and management induced safety stoppages towards the end of the half year as well as intermittent labour disruptions. We continue to operate ahead of our Renewal Plan but slightly below the levels we consider ultimately acceptable.
Mining Division
The results of the successful ramp up were evident in the performance of our Mining Division. Total tonnes mined during the half year of 5.7 million tonnes, showed a decrease of 1.8% when compared to the 2012 half year production of 5.8 million tonnes. This is a commendable achievement given that mining operations had been suspended for six weeks by the strike when operations resumed in October 2012. Our Line of Sight programme is fully operational and our team effectiveness training to improve efficiencies is being implemented across the different shafts.
Total Marikana underground tonnes mined were 5.3 million, a decrease of 3.7% when compared to the first half of 2012. Karee's contribution of 2.4 million tonnes was 1.5% less than the prior year period as the outperformance by K3, our biggest shaft which maintained the momentum it established at the beginning of the ramp up, was offset by the loss in production from K4. This shaft was placed on care and maintenance in September 2012, having produced 47,000 tonnes in the first six months of last year.
Production at Middelkraal, comprising the Hossy and Saffy shafts, was up 52,000 tonnes representing a 5.4% increase from the prior year period as both shafts continued to increase production albeit at a lower than anticipated rate. The rate of production at these important shafts was impacted by Section 54 safety stoppages and management induced safety stoppages in the second half of the period under review as well as by the structural legacy issues which are a function of the change in the mining method from mechanised to conventional mining. Westerns' production decreased by 92,000 tonnes or 6.1% due to the planned depletion of ore reserves at Newman shaft. In addition, Rowland faced some infrastructural challenges around hoisting logistics as well as ore reserve availability. A pilot project around debottlenecking has commenced to address the hoisting constraints. Production at Easterns fell by 23.2% when compared with the prior year as E1 and E3 shafts approach the end of their life.
Underground production at Pandora, the joint venture which is managed by Lonmin, continues to increase at a steady rate and contributed 112,000 attributable tonnes, an increase of 6.9% when compared against the prior half year period. Lonmin purchases 100% of the ore from the joint venture and this ore contributed 19,095 saleable Platinum ounces and 36,360 saleable PGM ounces of metal in concentrate, a 22.3% and 22.8% increase respectively from the prior year period.
Our opencast Merensky operations delivered a total of 288,000 tonnes, an increase of 91,000 tonnes or 46.6% over the prior year period.
Ore reserve development
We have maintained our reserve position since the beginning of the current financial year and our immediately available ore reserves at Marikana at the end of the period were 3.4 million centares. This healthy level of reserves represents an average of 18 months of current production and supports our strategy as part of the Renewal Plan, of continuing to ensure we have sufficient immediately available ore reserves at Marikana. We continue to focus on ore reserve development across the operations.
Process Division
Concentrators
The concentrators had an equally good performance. They started up ten days after the mining operations in order to build required minimum stock levels whilst the Number One concentrator was taken down at the beginning of the financial year for a planned capacity upgrade. As a result total tonnes milled were 5.7 million, or 4.7% less than the prior year. This plant is expected to be back online in the fourth quarter of the 2013 financial year and it is anticipated that we will build up some stocks.
Underground milled head grade during the period increased by 3.3% to 4.63 grammes per tonne (5PGE + Au) compared to the prior year period, as a result of an increase in mined grade and ore mix. The opencast milled head grade also continued its upward trend, improving by 1.4% to 2.93 grammes per tonne. Overall, total milled head grade increased by 3.3% from the prior year period to 4.56 grammes per tonne benefitting from a 2.2% increase in mined UG2 and stabilised opencast production and grade. The recovery rates for both underground and opencast continued to improve gaining from the full benefit of the tailings treatment plants. The combination of improved recoveries and grades reduced the impact of capacity constraints and enabled us to yield 366,059 saleable Platinum ounces and 681,010 saleable PGM ounces of total metals in concentrate, which was a relatively flat performance when compared against the prior year but exceeded the Renewal Plan.
Smelters and Refineries
Total refined production for the six months to 31 March 2013 was 326,084 Platinum ounces and 620,282 PGM ounces, an increase of 7.1% and 3.1% respectively over the prior year period. The 2012 half year refined production was temporarily impacted by a smelting stock build up arising from abnormal levels of sulphur in the smelter feeds, which was subsequently reversed. The overall refining recovery rate which measures recoveries across the processing value chain increased from 81.3% in the prior year to a satisfactory 81.9%.
Following the successful start up the Number Two furnace in the second half of the 2012 financial year, the Company now has total installed smelting capacity of 35.5MW whilst the operational requirement at current production run rates is around 22MW. The Number One and Number Two furnaces, operated well throughout the first half of the year. The Number One furnace was shut down for its scheduled maintenance and the planned upgrade of the hearth, barrel and shell in April expected to be completed in approximately three months. This is the first time that the Number One furnace has been shut down, following its successful rebuild and subsequent re-commissioning in December 2010.
Unfortunately, a collapse of the Number Two furnace roof occurred at the end of April which resulted in its shut down. Our preliminary assessments indicate that it will take around 50 days to repair the roof. Pieces of castable refractory in the roof of the furnace failed, impacting on the roof's integrity. The furnace was stopped in a controlled manner and drained. The preliminary investigation has revealed that the reliability of the off-gas system led to an operating environment that caused the refractory roof support to fail. As part of the repairs underway both the off-gas system and the roof design are being reviewed to implement changes to prevent a reoccurrence. In the meantime we have decided to reduce the scope of the rebuild of the Number One furnace and bring it back online as soon as possible, in order to mitigate the operational impact of the unplanned stoppage on Number Two furnace. We are making good progress with the rebuild and expect the Number One to be re-commissioned around mid June 2013.
Whilst the incident at the Number Two furnace is unfortunate, we are now benefitting from previous investment in additional furnace capacity which provides us with welcome flexibility. The benefit of the reduced shut down to the Number One furnace means that risks around significant concentrate stocks, over and above our current storage capacity, as well as significant challenges around capacity to our downstream BMR processing capacity are mitigated. We do however expect that there may be some stock build up in the second half of the year, but will assess the situation at the time.
Platinum sales for the half year at 326,142 ounces were 2.4% higher than the prior year period, whilst the 586,753 PGM ounces achieved during the period, were 3.6% lower than the prior year period.
Production statistics for Quarter Two of the year can be found in a separate announcement published today.
4. Cost management
Gross and Unit costs
Management continued to focus on operational efficiency and containment of operational costs in what remains a challenging environment for the industry. Our gross Rand operating costs increased by around 8% from R5.8 billion to R6.3 billion mainly as a result of wage increases and inflation, offset by stringent cost containment measures and the efficiency improvements from the total cost of ownership project described below. The effect of these factors and improved grades and recoveries resulted in the unit cost increase being limited to 5.8% from R8, 172 to R8, 648 per PGM ounce produced.
Management restructuring
At the end of 2012 we announced two initiatives aimed at cutting costs and increasing efficiencies. We have made significant progress in our review of the operational management structure and are in the process of finalising separation agreements with the affected employees. In doing so, we have been working closely with affected employees and their respective trade unions, where applicable, as required by South African Labour legislation, to consult on ways to minimise the impact of the restructuring.
Approximately 150 managerial positions, representing around 20% of the management complement will become redundant enabling annualised cost savings of around R200 million from the 2014 financial year, and making for a more streamlined and efficient structure. The review and restructuring has been designed in such a way as to minimise risk whilst positioning us to respond promptly to more favourable market conditions as they arise.
Total cost of ownership
Our initiative to deliver R100 million in procurement savings per year by implementing structures, processes and systems to fully benefit from a Total Cost of Ownership approach is progressing well, with savings of R61 million realised to date. We remain on course to achieve that full benefit for the 2013 financial year.
Stock levels
Although stocks of in-process materials were largely depleted by September 2012, we have successfully replenished these in the half year such that closing stock of contained PGMs was around 128, 000 ounces higher at 31 March 2013 than the 2012 financial year end.
5. Balance Sheet management
Cash and Net debt
Net cash as at 31 March 2013 was $194 million as a result of the Rights Issue, the better than anticipated ramp up of production and the improved Rand basket price. In addition, the Rand denominated facilities and the US Dollar bank facilities were repaid. For the full six months under review, the business had free cash flow of $70 million excluding working capital movements, a significant portion of which relates to the re-stocking of the processing pipeline.
Capital expenditure
We have been successful in managing our capital expenditure in the first half of the year and capital spend to date is $73 million. The spend to date has been mainly on ore reserve development and infrastructure at Hossy and Saffy, community projects and on the refurbishment of the Number One Concentrator plant.
6. Employee Relationships
The union membership profile in the platinum industry has evolved over the last few months and Lonmin is no exception to this change. At Lonmin, the Association of Mining and Construction Union (AMCU) is now the largest union, representing 70% of Lonmin's Category 4-9 employees. The National Union of Mineworkers (NUM) now represents approximately 20% of our Category 4-9 employees. We currently have an interim organisational agreement with AMCU which is valid until a new recognition agreement is finalised.
We commenced a process of negotiating a new recognition dispensation at the beginning of the calendar year, with a view to establishing an all-inclusive recognition agreement that provides appropriate representation to all the unions and associations representing our employees. Considerable focus and attention has been given to discussions with all unions around the benefits of such an approach in particular that an inclusive approach enables all unions to remain at the discussion table irrespective of any future changes in membership that may occur.
AMCU has referred the matter to the Commission for Conciliation, Mediation and Arbitration (CCMA). We welcome this development as a process facilitated by the CCMA presents an opportunity to reach an agreement.
We will fully participate in this process and remain committed to seeking a negotiated outcome which is fair to all stakeholders.
7. Key initiatives of the Renewal Plan
At the Annual General Meeting in January this year our Board announced five key initiatives around employee relations, empowerment, migrant and local labour, better use of invested capital and infrastructure and housing and accommodation. The initiatives are aimed at rebuilding trust with employees and employees' representatives and maximising the creation of value for all stakeholders. In doing so we believe we will enhance the long-term wealth creation and investment potential of the Company. As part of this initiative, project teams have been established. A summary of each project and progress to date is outlined below.
-- Employee relations - we aim to develop a sustainable employee relations framework, structure and system that adds value to the business. Our initial focus has been on the renegotiation of the union recognition dispensation with appropriate representation for all the unions and associations having the support of a significant proportion of our employee base. The progress made on this initiative is highlighted in Section 6 above. We have also established a task team to review our recruitment model with a view to identifying ways of addressing the imbalance between local and migrant labour in a manner which seeks to identify and manage possible broader social consequences.
-- Employee value proposition - we aim to take a holistic approach to our employees as we seek to understand and address the social and economic issues they face. We have identified key needs, such as the need for financial literacy, where we have implemented a pilot financial wellbeing programme and completed preliminary studies on the way forward. We are also evaluating Employee Share Ownership Plans.
-- Employee value proposition - Shift Configuration Project - the overall objective of this project is to establish a balance between economic value for the business and a socio-economic value proposition for our employees. This project team is looking at the viability of alternative shift and leave patterns in which operations can continue to run profitability while enabling employees to return home more frequently than has been possible in the past.
The process will involve identifying the optimum mine and shift cycles, establishing the costs and then developing an operational model to create a mutually beneficial environment for both Lonmin and its employees.
-- Community value proposition and the new Social Labour Plan (SLP) programme - our aim is to identify sustainable development measures that will create value for the Greater Lonmin Community (GLC) and integrate these into our SLP. Our preliminary work has involved identifying all relevant stakeholders and gathering data to enable us to identify the potential development areas. We are also looking at Community ownership trusts as highlighted in Section 8 below.
-- Housing settlement initiatives - our aim is to develop and implement an integrated and sustainable human settlement strategy which is compliant with our licence to operate requirements and consistent with our commitment to adequate accommodation, safety and wellbeing of our employees. Our programme of building and converting hostels is continuing and we expect to complete the conversion of all our hostels to decent and affordable family or single accommodation units by December 2014. In addition, we are evaluating other ways to improve employees' living conditions and are creating programmes to deliver on these commitments. We have launched a comprehensive analysis of the employees who are impacted as this will provide us with some insight into their requirements and enable us to assess the associated costs. Our aim is to partner with all levels of Government, local Government, and other stakeholders and explorative discussions with government and other potential partners are ongoing.
We are committed to the substantive change we believe is required and we have made a good start. We have not yet given any commitment on expenditure, benefits or timeline on some of these projects as the necessary research and consultation with relevant stakeholders has not been concluded. What is clear to us however, is that close collaboration with other stakeholders is required if we are to succeed with these initiatives and we are seeking to do so from the outset.
8. Equity
The Company continues to look at the different options that are available to increasing its Historically Disadvantaged South Africans' ownership from 18% to 26% by December 2014, as required by the Mining Charter. In order to achieve compliance, the Company may wish to facilitate the creation of trusts for the benefit of current and future employees, and separately for members of the GLC, to which new shares could be allotted for their sole economic benefit. The timeline with respect to the implementation of the employee scheme will be predicated on resolution of the discussions around the implementation of the union recognition agreement.
The discussions and timeline in the previously announced proposed transaction between Lonmin and Shanduka, our Black Economic Empowerment partner around the Limpopo asset have been extended by a year to 31 January 2015 in order to allow more time to complete the feasibility review, secure funding and obtain all necessary approvals.
9. Market
PGM prices
PGM prices improved marginally in the six months ended 31 March 2013, compared to the prior year period. Platinum strengthened by 2.0% from an average of $1,568 per ounce in the first half of the 2012 financial year to $1,615 in the first half of the 2013 financial year and palladium increased by 6.0 % from $655 per ounce to $695, whilst Rhodium fell by 23.5% from $1,526 to $1,167 per ounce.
Future demand for platinum grows
The light duty autocatalyst sector is forecast to grow by 2% to 83 million cars in 2013 up from 81.5 million in 2012. While China and South America are forecasting growth in excess of 5% these are offset by the more moderate 3% growth in the US and contraction of 4.4% in Japan and the dramatic decline of 8.8% in Europe. However, from 2014 onwards LMC Automotive forecasts an annual growth rate in excess of 5% through to 2017. Growing vehicle volumes, combined with tightening emission legislation will ensure long-term demand growth, while the planned introduction of Euro 6 legislation in 2014 should provide a demand boost in the short-term. The relatively new non-road diesel sector has already started to contribute to demand in the auto sector and may become more important in the medium-term as growing economies such as China and India commence implementing more stringent emissions standards for non-road applications.
Electric vehicles appear less likely to displace the internal combustion engine as technical challenges and consumer confidence hampers full scale adoption. However, there is growing interest, albeit in the longer-term, in fuel cells vehicles, which favour platinum. In addition, stationary fuel cells are also gaining market share offering an alternative to nuclear energy, especially in the Asian region.
The main driver for jewellery demand is still China, where demand has remained firm this year. However, the combination of strong economic growth, urbanisation and rising per capita income should be positive for long term jewellery demand in that region.
The ETF market appears to have matured, with demand best described as "sticky" as changes in fund holdings have been quite small despite large price swings. The platinum ETF market has also proven to be more resilient than palladium in the current cycle.
PGM supply-demand estimates
While this is a fluid situation with information emerging all the time, we expect the platinum market to be in deficit of around 200,000 ounces in 2013, largely due to the supply disruptions in late 2012, rising costs and resultant cutbacks. We expect deficits to deepen in the subsequent years as supply constraints persist and demand recovers. However, platinum stocks excluding ETF holdings are estimated at around six months of supply and it may take more than a year to be drawn down in various parts of the value chain.
The palladium market deficits are expected to be larger, and may exceed 1 million ounces for a few years as Russian exports are reportedly drying up and palladium continues to benefit from substituting platinum in autocatalysts. Palladium stocks are estimated at around 10 million ounces and will therefore take even longer than platinum stocks to be drawn down to critical levels. The implication of this is that palladium will remain competitive against platinum for several years.
The rhodium market is also expected to move into deficit from 2013 onward on the back of the South African platinum production cutbacks, recovering auto and industrial demand and its low price. Stocks are difficult to estimate in the rhodium market which subdues optimism around future price increases.
South Africa producer cash cost curve
Data from the Chamber of Mines shows that South African platinum industry costs have risen by 14% per year on average since 2007, largely driven by higher wages, electricity and raw material costs. Our view is that whereas companies' costs were more differentiated in the past, the cost curve has flattened as companies are increasingly being impacted by factors affecting the industry as a whole, such as challenging labour relations, tougher safety and regulatory issues, electricity constraints and escalating costs. Lonmin has continued to improve its relative position on the South African cost curve in spite of the challenging environment.
Platinum and palladium recycling
South African platinum supply dropped by almost 400,000 ounces in 2012 and is expected to grow by only 2 to 3% per annum over the next few years. While recycling is expected to partially fill that gap, with anticipated growth of perhaps up to 5% to 10% per year, it may still not be sufficient to make up for the primary supply losses.
A growth of 5% in palladium recycling per year is anticipated. This is slower than that of the platinum recycling market due to the fact that the spent catalysts now coming into the recycle market hold higher platinum than palladium loadings. This should leave the palladium market in deficits of over a million ounces.
10. Farlam Commission
The Commission is currently focused on Phase 1 of its enquiry into the events that led to the tragedy on 16 August 2012. Lonmin fully supports the objectives of the Commission.
11. Outlook for the year
We have delivered a solid performance in this period, exceeding the targets under our Renewal Plan and this positions us well for the remainder of the year. However, wage negotiations will commence in the middle of the calendar year (the existing agreement expires at the end of September 2013) and we anticipate significant challenge in this process as we seek to manage our relationships with the unions that represent our employees. We plan to continue building operational momentum in the second half of the financial year and, absent any abnormal disruptions associated with Section 54 stoppages and labour disruptions, we are increasing our guidance of Platinum metals in concentrate production from 680,000 ounces to in excess of 700,000 ounces. In view of the constraints around smelting capacity during Quarter Three resulting from the Number Two furnace incident, we are maintaining our sales guidance of 660,000 saleable Platinum ounces. This implies a stock build up in the second half of the financial year, which we will address in the most commercially advantageous manner. We will continue to manage costs in the second half of the year such that the corresponding unit cost increase per PGM ounce produced for the year is now expected to reduce from our previous guidance of a 10% increase to below 8%.
Our guidance for the full 2013 financial year capex spend remains at $175 million, most of which will be spent on the Hossy, Saffy shafts as well as the Number One furnace.
12. Management and Board update
On 2 April, Phuti Mahanyele joined the Board as a representative of Shanduka. This follows Cyril Ramaphosa's retirement from the Board which we announced on 31 January 2013. We are grateful for Cyril's commitment and wise contributions to the Company over the years and welcome Phuti who brings a wealth of executive experience, knowledge and skills to our boardroom, and in particular has a deep insight into the needs of 21(st) century South Africa which we value greatly.
On 2 April, we announced that Ben Magara would be Lonmin's next Chief Executive Officer. Ben will be joining Lonmin on 1 July 2013. We welcome Ben and look forward to working with him in continuing to rebuild this Company. I will move back into my Chief Financial Officer role with effect from that date. I am confident that whilst much still needs to be done to restore Lonmin to its full potential, we are making steady progress in the right direction.
13. Employee contribution
Finally I would like to express my gratitude to all our employees, contractors and community members for their support and commitment to delivering an encouraging performance in the first half of 2013.
Simon Scott
Acting Chief Executive Officer
10 May 2013
Financial Review
Overview
The financial performance for the six months ended 31 March 2013 was underpinned by a better than anticipated production ramp up following the production stoppage of August and September 2012, a focus on cost containment assisted by the weakening Rand, as well as the strengthening of our financial position after a successful refinancing.
The Group undertook a successful Rights Issue which was completed in December 2012. The Rights Issue was fully subscribed with just below 97% of the take up coming from existing shareholders and the remainder from the rump placement. Total net proceeds of $767 million after costs and foreign exchange movements were raised. In addition, the terms of our debt facilities were revised in conjunction with the successful Rights Issue. Details of the amendments to debt facilities are included below. This refinancing has resulted in a robust balance sheet with significantly improved funding flexibility.
The rapid production ramp up during the period allowed us to replenish the metal in process pipeline which had been depleted in order to protect liquidity in September 2012 with refined Platinum production exceeding that of the comparative prior period by 7.1%. However PGM sales volumes were slightly lower compared to 2012 given lower opening stocks. The PGM pricing environment improved marginally which partially mitigated the effect of lower sales volumes but the net result was slightly lower revenue for the six months ended 31 March 2013 compared to the 2012 period.
The Rand was significantly weaker during the period under review resulting in favourable exchange impacts. These, coupled with positive stock movements as a result of the metal in process replenishment, offset cost escalations yielding significantly improved profitability for the six months ended 31 March 2013. Profit for the year attributable to equity shareholders amounted to $66 million (2012 - loss of $24 million) and the earnings per share were 13.3 cents compared to a loss per share of 6.3 cents in 2012 (note that the prior period loss per share has been recalculated, in accordance with accounting standards, to take into account the effects of the Rights Issue referred to above).
In summary, the successful refinancing of the business, the return to profitability during the period under review and the revised growth strategy and streamlined capital investment programme have allowed us to repay all debt and end the period in a net cash position of $194 million. It is particularly pleasing to note that the business has generated positive free cash flows in Quarter Two. For the full six months under review, the business was free cash flow positive if we exclude working capital movements of which a significant portion relates to the re-stocking of the processing pipeline. The challenge ahead is to continue to generate free cash flow in a testing operational and market environment characterised by difficult labour relations and weakening metal prices.
Income Statement
The $79 million movement between the underlying operating profit of $93 million for the six months ended 31 March 2013 and that of $14 million for the six months ended 31 March 2012 is analysed below.
$m
Period to 31 March 2012 reported operating profit 14
Period to 31 March 2012 special items -
------
Period to 31 March 2012 underlying operating
profit 14
------
PGM price 5
PGM volume (25)
PGM mix 8
Base metals (4)
------
Revenue changes (16)
Cost changes (net of positive foreign exchange
impact of $95m) 95
Period to 31 March 2013 underlying operating
profit 93
Period to 31 March 2013 special items (3)
------
Period to 31 March 2013 reported operating profit 90
------
Revenue
Total revenue for the six months ended 31 March 2013 decreased by $16 million from the six months ended 31 March 2012 to $735 million.
As noted in the overview the PGM pricing environment improved only marginally over the prior period and the impact on the average prices achieved on the key metals sold is shown below:
Six months Six months
ended ended
31.03.13 31.03.12
$/oz $/oz
Platinum 1,598 1,568
Palladium 713 660
Rhodium 1,196 1,462
----------- -----------
PGM basket (excluding by-product revenue) 1,178 1,155
----------- -----------
PGM basket (including by-product revenue) 1,252 1,231
----------- -----------
The US Dollar PGM basket price (excluding by-products) increased by 2% contributing $5 million to the revenue movement. It should be noted that whilst the US Dollar basket price has increased by only 2% over the 2012 comparable period, in Rand terms the basket price (excluding by-products) increased by 15% impacted by the significantly weaker Rand.
While Platinum sales volume exceeded that achieved in the 2012 comparative period, PGM sales volume for the six months to 31 March 2013 at 586,753 ounces was down 4% on the six months to 31 March 2012. This highlights significantly better than anticipated production ramp up performance following last year's stoppage. The decline in PGM volumes had a negative contribution of $25 million. However, the mix of metals sold resulted in a positive impact of $8 million mainly due to the higher proportion of Platinum and Palladium arising from metal-in-process inventory timing differences. Base metal revenue was down $4 million due to a combination of volume and price movements.
Operating Costs
Total underlying costs in US Dollar terms decreased by $95 million with the impact of cost escalations being offset by a combination of positive foreign exchange movements and a build-up of stock in process as the production pipeline was replenished following its depletion towards the end of the previous financial year as a result of the production stoppage in August and September. A track of these changes is shown in the table below:
$m
Six months ended 31 March 2012 - underlying
costs 737
Increase / (decrease):
------
Marikana underground mining 31
Marikana opencast mining 19
Limpopo mining (1)
Concentrating and processing (1)
Overheads 6
------
Operating costs 54
------
Pandora and W1 ore purchases 8
Metal stock movement (79)
Foreign exchange (95)
Depreciation and amortisation 17
------
Cost changes (net of positive foreign exchange
impact) (95)
------
Six months ended 31 March 2013 - underlying
costs 642
------
Marikana underground mining costs increased in the period by $31 million or 7%, mainly due to wages and electricity costs escalating at rates above average CPI. This was partially offset by the 4% decrease in production in the period. Marikana opencast mining costs increased by $19 million or 155% largely driven by a 47% increase in production as well as escalations in contractual rates and other costs.
Concentrator and processing costs remained flat compared to the prior year period, as cost escalation effects were offset by the continued focus on cost containment, lower milling production as well as lower operating costs due to the stoppage of the Number One UG2 concentrator for planned upgrade.
Overheads increased by $6 million or 7% largely due to cost escalation effects.
Ore purchases increased by $8 million or 25% on the back of increased volumes of ore purchased.
The six months under review saw a replenishment of stock in process following last year's pipeline depletion. This has resulted in a $79 million positive impact on operating profit, excluding exchange impacts, arising from metal stock movements.
The Rand weakened considerably against the US Dollar during the period under review averaging ZAR8.79 to USD1 compared to an average of ZAR7.91 to USD1 in the 2012 period resulting in a $95 million positive impact on operating costs.
Depreciation and amortisation increased by $17 million over the 2012 period. Depreciation is calculated on a units of production basis, spreading costs in relation to proved and probable reserves. The increase in depreciation is largely as a result of increased opencast production and the relatively shorter life cycle of opencast pits at current production levels.
Cost per PGM Ounce
The C1 cost per PGM ounce produced for the six months to 31 March 2013 was R8,648. This was an increase of 5.8% compared to the same period in 2012. This exceptional achievement can be ascribed to continued focus on cost containment, increased grades and improved recoveries as a result of our emphasis on quality production all of which mitigated the impact of higher than inflation increases in the wage bill, diesel and electricity tariffs.
Further details of unit costs can be found in the Operating Statistics.
Special Operating Costs
Residual strike related costs arising from the Events at Marikana continue to be incurred. For the six months ended 31 March 2013, these costs totalled $2 million and largely consisted of communication costs relating to reputational rebuild as well as costs related to the ongoing Farlam Commission. In addition $1 million has been spent to date on the management restructuring exercise currently underway. There were no special operating costs incurred for the six months ended 31 March 2012.
Net Finance Costs
6 months to 31 March
2013 2012
$m $m
Net bank interest and fees (14) (11)
Capitalised interest payable and fees 9 10
Exchange 8 (2)
Other (10) (6)
--------- --------
Underlying net finance costs (7) (9)
HDSA receivable (15) 18
Exchange loss in respect of Rights (10) -
Issue
Net effects of unwinding the interest (7) -
rate swap
Net finance (costs)/income (39) 9
--------- --------
The total net finance costs of $39 million for the six months ended 31 March 2013 represent a $48 million adverse movement compared to the total net finance income of $9 million for the six months ended 31 March 2012.
Net bank interest and fees increased from $11 million to $14 million for the six months ended 31 March 2013 largely as a result of the unwinding of previously unamortised bank fees on settlement of the original loan facilities as discussed below. Interest totalling $9 million was capitalised to assets (2012 - $10 million).
The Historically Disadvantaged South Africans (HDSA) receivable, being the Sterling loan to Shanduka Resources (Proprietary) Limited (Shanduka), decreased by $15 million during the period to 31 March 2013 representing adverse exchange movements of $23 million partially offset by accrued interest of $8 million. This compares to favourable exchange movements of $10 million and accrued interest of $8 million in the period to 31 March 2012.
In order to minimise the risk of the exposure to currency fluctuations on the Rand and Sterling proceeds expected, the Group entered into forward exchange contracts in synchronisation with the Rights Issue process. The Dollar weakened over the offer period resulting in the Rand and Sterling proceeds received and translated at prevailing spot rates being more than that due under the forward exchange contracts. This resulted in the recognition of exchange losses under hedging arrangements of $11 million which was partially offset by a $1 million exchange gain on retranslation of advance proceeds of the Rights Issue.
The interest rate swap entered into in 2011 to hedge against interest rate fluctuations was unwound after the funds raised from the Rights Issue were used to settle the underlying bank debt. The net impact of releasing balance sheet amounts related to the hedging instrument as well as the unwinding fees incurred on early settlement was a $7 million charge to the income statement during the period under review.
Taxation
Reported tax for the current six month period was a credit of $34 million compared to a charge of $52 million in the 2012 period. The underlying tax charge of $13 million in the 2013 period becomes a $34 million tax credit after taking into account $47 million exchange gains on the retranslation of Rand denominated deferred tax liabilities. These gains are treated as special. In the prior year comparative period these exchange impacts had an adverse effect of $26 million on the tax charge.
Cash Generation and Net Cash / (Debt)
The following table summarises the main components of the cash flow during the period:
Six months ended 31 March
2013 2012
$m $m
Operating profit 90 14
Depreciation, amortisation and
impairment 78 61
Changes in working capital (226) 40
Other (2) 15
Cash flow (utilised in)/generated
from operations (60) 130
Interest and finance costs (23) (12)
Tax paid (2) (8)
--------------------------------------- ------------- -------------
Trading cash (outflow)/inflow (85) 110
Capital expenditure (73) (197)
Distribution from/(investment
in) joint venture 2 (1)
Additions to other financial
assets - (3)
--------------------------------------- ------------- -------------
Free cash outflow (156) (91)
Dividends paid to equity shareholders - (31)
Net proceeds from equity issuance 767 -
Cash inflow/(outflow) 611 (122)
Opening net debt (421) (234)
Foreign exchange 10 1
Unamortised fees (6) (1)
--------------------------------------- ------------- -------------
Closing net cash/(debt) 194 (356)
--------------------------------------- ------------- -------------
Trading cash (outflow)/inflow
(cents per share) (17.2)c 28.9c
--------------------------------------- ------------- -------------
Free cash outflow (cents per
share) (31.9)c (22.9)c
--------------------------------------- ------------- -------------
Cash flow utilised in operations in the six months ended 31 March 2013 at $60 million reflects a $190 million decrease from the same period in 2012. This was largely as a result of working capital movements, a significant portion of which can be attributed to the replenishment of the metal in process pipeline following last year's production stoppage ($121 million). For the six months under review, the business was free cash flow positive to the tune of $70 million if we exclude these working capital movements. It is worth noting that the business has generated positive free cash flows of $116 million in Quarter Two. It should also be noted that 2012 working capital movements included proceeds from the gold prepaid sale amounting to $107 million.
Trading cash outflow for the six months to 31 March 2013 amounted to $85 million (2012 - inflow of $110 million). The cash flow on interest and finance costs increased by $11 million largely as a result of amendment fees for the revised facilities and the costs of unwinding the interest rate swap. Tax payments represent provisional corporate tax payments. The trading cash outflow per share was 17.2 cents for the six months ended 31 March 2013 against an inflow of 28.9 cents for 2012.
Capital expenditure cash flow at $73 million was $124 million below the prior period reflecting our revised growth strategy and capital investment programme. In Mining the expenditure incurred was focused on operating developments at Hossy and Saffy shafts, investment in sub-declines at K3 and stay-in-business capital. In the Process Division spend largely focused on the UG2 concentrator upgrade, enhancing smelting capacity and maintenance.
The Group undertook a successful Rights Issue which was completed in December 2012 and raised total net proceeds of $767 million after costs and foreign exchange charges. The proceeds of the Rights Issue were utilised to settle debt resulting in a net cash position at 31 March 2013 of $194 million compared to a net debt position of $421 million at 30 September 2012.
Key Financial Risks
The Group faces many risks in the operation of its business. The Group's strategy takes into account known risks, but risks will exist of which we are currently unaware. This financial review focuses on financial risk management.
Financial Risk Management
The main financial risks faced by the Group relate to the availability of funds to meet business needs (liquidity risk), the risk of default by counterparties to financial transactions (credit risk), fluctuations in interest and foreign exchange rates and commodity prices (market risk). Factors which are outside the control of management which can have a significant impact on the business remain, specifically, volatility in the Rand / US Dollar exchange rate and PGM commodity prices.
These are the critical factors to consider when addressing the issue of whether the Group is a Going Concern.
Liquidity Risk
The policy on liquidity is to ensure that the Group has sufficient funds to facilitate all ongoing operations. The Group funds its operations through a mixture of equity funding and borrowings. The Group's philosophy is to maintain an appropriately low level of financial gearing given the exposure of the business to fluctuations in PGM commodity prices and the Rand / US Dollar exchange rate. We ordinarily seek to fund capital requirements from equity.
As part of the annual budgeting and long-term planning process, the Group's cash flow forecast is reviewed and approved by the Board. The cash flow forecast is amended for any material changes identified during the year, for example material acquisitions and disposals or changes in production forecasts. Where funding requirements are identified from the cash flow forecast, appropriate measures are taken to ensure these requirements can be satisfied. Factors taken into consideration are:
-- the size and nature of the requirement;
-- preferred sources of finance applying key criteria of cost, commitment, availability, security / covenant conditions;
-- recommended counterparties, fees and market conditions; and -- covenants, guarantees and other financial commitments.
During the period under review, the Group revised its debt facilities on the back of the successful Rights Issue. The amended US Dollar Facilities and amended Rand Facilities came into effect in December 2012. The proceeds of the Rights Issue were used to repay the Group's indebtedness under the original facilities, including (i) the repayment in full of amounts outstanding (amounting to $300 million plus accrued interest and applicable break fees) under the US Dollar Term Loan, which facility was cancelled; and (ii) the repayment of amounts outstanding under the US Dollar Revolving Credit Facility; and (iii) the repayment of amounts outstanding under the Rand Facilities Agreements.
The remaining facilities are summarised as follows:
-- Revolving Credit Facility of $400 million at a Lonmin Plc level; and -- Three bilateral facilities of R660 million each at a Western Platinum Limited (WPL) level.
The principal amendments to each of the original agreements were to remove the net debt/EBITDA and EBITDA/net interest covenants and to substitute these with the following financial covenants:
-- consolidated tangible net worth will not be less than $2,250 million; -- consolidated net debt will not exceed 25% of consolidated tangible net worth; and -- if:
o in respect of the amended US Dollar Facilities Agreement, the aggregate amount of outstanding loans exceeds $75 million at any time during the last six months of any test period; or
o in respect of both the amended US Dollar Facilities Agreement and the amended Rand Facilities Agreements, consolidated net debt exceeds $300 million as of the last day of any test period,
the capital expenditure of the Group must not exceed the limits set out in the table below, provided that, if 110% of budgeted capital expenditure for any test period ending on or after 30 September 2013 is lower than the capital expenditure limit set out in the table below for that test period, then the capital expenditure limit for that test period shall be equal to 110% of such budgeted capital expenditure.
Test Period Capital expenditure limit (ZAR)
1 October 2012 to 31 March 2013 (inclusive) 800,000,000
1 October 2012 to 30 September 2013 (inclusive) 1,600,000,000
1 April 2013 to 31 March 2014 (inclusive) 1,800,000,000
1 October 2013 to 30 September 2014 (inclusive) 2,000,000,000
1 April 2014 to 31 March 2015 (inclusive) 3,000,000,000
1 October 2014 to 30 September 2015 (inclusive) 4,000,000,000
1 April 2015 to 31 March 2016 (inclusive) 4,000,000,000
1 October 2015 to 30 September 2016 (inclusive) 4,000,000,000
Credit Risk
Banking Counterparties
Banking counterparty credit risk is managed by spreading financial transactions across an approved list of counterparties of high credit quality. Banking counterparties are approved by the Board and consist of the ten banks that participate in Lonmin's bank debt facilities. These counterparties comprise: BNP Paribas S.A., Citigroup Global Markets Limited, FirstRand Bank Limited, HSBC Bank Plc, Investec Bank Limited, J.P. Morgan Limited, Lloyds TSB Bank Plc, The Royal Bank of Scotland N.V., The Standard Bank of South Africa Limited and Standard Chartered Bank.
Trade Receivables
The Group is exposed to significant trade receivable credit risk through the sale of PGMs to a limited group of customers.
This risk is managed as follows:
-- aged analysis is performed on trade receivable balances and reviewed on a monthly basis;
-- credit ratings are obtained on any new customers and the credit ratings of existing customers are monitored on an ongoing basis;
-- credit limits are set for customers; and -- trigger points and escalation procedures are clearly defined.
It should be noted that a significant portion of Lonmin's revenue is from two key customers. However, both of these customers have strong investment grade ratings and their payment terms are very short, thereby reducing trade receivable credit risk significantly.
HDSA Receivables
HDSA receivables are secured on the HDSA's shareholding in Incwala Resources (Pty) Limited.
Interest Rate Risk
Given that all debt has been repaid, this risk is not considered to be high at this point in time. The interest position is kept under constant review in conjunction with the liquidity policy outlined above and the future funding requirements of the business.
Foreign Currency Risk
The Group's operations are predominantly based in South Africa and the majority of the revenue stream is in US Dollars. However, the bulk of the Group's operating costs and taxes are paid in Rand. Most of the cash received in South Africa is in US Dollars. Most of the Group's funding sources are in US Dollars.
The Group's reporting currency is the US Dollar and the share capital of the Company is based in US Dollars.
During the period under review Lonmin did not undertake any foreign currency hedging except in respect of the Rights Issue proceeds as mentioned above. Therefore fluctuations in the Rand to US Dollar exchange rate can have a significant impact on the Group's results.
The approximate effects on the Group's results of a 10% movement in the Rand to US Dollar based on the 2013 average exchange rate would be as follows:
Underlying operating profit +/- $65m Underlying profit for the period +/- $38m EPS (cents) +/- 7.7c
These sensitivities are based on 2013 prices, costs and volumes and assume all other variables remain constant. They are estimated calculations only.
Commodity Price Risk
Our policy is not to hedge commodity price exposure on PGMs, excluding gold, and therefore any change in prices will have a direct effect on the Group's trading results.
For base metals and gold, hedging is undertaken where the Board determines that it is in the Group's interest to hedge a proportion of future cash flows. The policy allows Lonmin to hedge up to a maximum of 75% of the future cash flows from the sale of these products looking forward over the next 12 to 24 months. The Group did not undertake any hedging of base metals under this authority in the period under review and no forward contracts were in place in respect of base metals at the end of the period.
In respect of gold, Lonmin entered into a prepaid sale of 75% of its current gold production for the next 54 months in March 2012. In terms of this contract Lonmin will deliver 70,700 ounces of gold over the period with delivery on a quarterly basis and in return received an upfront payment of $107 million. The upfront receipt was accounted for as deferred revenue on our balance sheet and is being released to profit and loss as deliveries take place at an average price of $1,510/oz delivered.
The approximate effects on the Group's results of a 10% movement in the 2013 average metal prices achieved for Platinum (Pt) ($1,598 per ounce), Palladium (Pd) ($713 per ounce) and Rhodium (Rh) ($1,196 per ounce) would be as follows:
Pt Pd Rh
Underlying operating profit +/- $52m +/- $10m +/- $4m
Underlying profit for the
period +/- $31m +/- $6m +/- $2m
EPS (cents) +/- 6.2c +/- 1.2c +/- 0.5c
These sensitivities are based on 2013 costs and volumes and assume all other variables remain constant. They are estimated calculations only.
Contingent Liabilities
The Group provided third party guarantees to Eskom as security to cover estimated electricity accounts for three months.At 31 March 2013 these guarantees amounted to $11 million (2012 - $6 million).
Simon Scott
Acting Chief Executive Officer and Chief Financial Officer
Operating Statistics
6 months 6 months
to to
Units 31 March 31 March
2013 2012
--------------- ------------------------- -----------------
Tonnes mined Marikana Karee (1) kt 2,423 2,459
Westerns (1) kt 1,416 1,508
Middelkraal (1) kt 1,017 965
Easterns (1) kt 427 556
----------------- --------------------------------------------------- ---------- ----------
Underground kt 5,284 5,489
Opencast kt 288 196
Pandora attributable
(2) Underground kt 112 104
Lonmin Platinum Underground kt 5,395 5,593
Opencast kt 288 196
Total kt 5,683 5,789
% tonnes mined from the
UG2 reef % 72.6 71.0
-------------------------------------------- ------------------------ ---------- ----------
Tonnes milled
(3) Marikana Underground kt 5,238 5,533
Opencast kt 213 239
Pandora (4) Underground kt 266 226
------------------------- ----------------- ------------------------- ---------- ----------
Lonmin Platinum Underground kt 5,503 5,759
Opencast kt 213 239
Total kt 5,716 5,998
----------------- --------------------------------------------------- ---------- ----------
Milled head Lonmin Platinum Underground g/t 4.63 4.48
grade (5) Opencast g/t 2.93 2.89
Total g/t 4.56 4.42
----------------- --------------------------------------------------- ---------- ----------
Concentrator Lonmin Platinum Underground % 86.8 85.5
recovery rate
(6) Opencast % 85.4 85.0
Total % 86.8 85.5
----------------- --------------------------------------------------- ---------- ----------
Metals in Marikana Platinum oz 345,083 351,695
concentrate
(7) Palladium oz 156,088 159,805
Gold oz 8,820 9,582
Rhodium oz 45,508 44,338
Ruthenium oz 70,132 69,023
Iridium oz 16,124 15,009
Total PGMs oz 641,754 649,452
Pandora (4) Platinum oz 19,095 15,608
Palladium oz 8,756 7,232
Gold oz 143 118
Rhodium oz 2,992 2,389
Ruthenium oz 4,537 3,655
Iridium oz 837 615
Total PGMs oz 36,360 29,617
Concentrate purchases Platinum oz 1,880 872
Palladium oz 548 310
Gold oz 5 3
Rhodium oz 185 104
Ruthenium oz 197 127
Iridium oz 79 43
Total PGMs oz 2,896 1,458
----------------- --------------------------------------------------- ---------- ----------
Lonmin Platinum Platinum oz 366,059 368,175
Palladium oz 165,392 167,346
Gold oz 8,968 9,703
Rhodium oz 48,686 46,831
Ruthenium oz 74,866 72,805
Iridium oz 17,039 15,667
Total PGMs oz 681,010 680,528
----------------- --------------------------------------------------- ---------- ----------
Operating Statistics (continued)
6 months 6 months
to to
Units 31 March 31 March
2013 2012
---------------- ------------------------------- ----------------- --------- ---------- ----------
Metals in Lonmin Platinum Nickel (8) MT 1,789 1,963
concentrate
(7) Copper (8) MT 1,147 1,258
Lonmin refined metal
Refined production Platinum oz 324,720 284,309
production Palladium oz 145,964 136,502
Gold oz 9,049 8,536
Rhodium oz 35,746 51,760
Ruthenium oz 82,187 72,969
Iridium oz 12,853 16,705
Total PGMs oz 610,519 570,782
Toll refined metal production Platinum oz 1,364 20,019
Palladium oz 312 4,189
Gold oz 271 200
Rhodium oz 1,717 1,662
Ruthenium oz 5,185 3,682
Iridium oz 913 1,006
Total PGMs oz 9,762 30,759
----------------- ---------------------------------------------------------- ---------- ----------
Total refined PGMs Platinum oz 326,084 304,329
Palladium oz 146,276 140,691
Gold oz 9,321 8,736
Rhodium oz 37,463 53,421
Ruthenium oz 87,372 76,651
Iridium oz 13,766 17,711
Total PGMs oz 620,282 601,540
Base metals Nickel (9) MT 1,650 1,645
Copper (9) MT 1,030 899
----------------- ---------------------------------------------------------- ---------- ----------
Sales Lonmin Platinum Platinum oz 326,142 318,402
Palladium oz 140,775 135,554
Gold oz 8,337 9,333
Rhodium oz 33,469 49,020
Ruthenium oz 66,417 77,911
Iridium oz 11,614 18,359
Total PGMs oz 586,753 608,579
Nickel (9) MT 1,687 1,793
Copper (9) MT 1,024 870
Chrome (9) MT 651,010 596,032
----------------- ---------------------------------------------------------- ---------- ----------
Average prices Platinum $/oz 1,598 1,568
Palladium $/oz 713 660
Gold $/oz 1,529 1,673
Rhodium $/oz 1,196 1,462
Ruthenium $/oz 76 103
Iridium $/oz 1,005 1,041
Basket price of
PGMs (10) $/oz 1,178 1,155
Basket price of
PGMs (11) $/oz 1,252 1,231
Basket price of
PGMs (10) R/oz 10,410 9,070
Basket price of
PGMs (11) R/oz 11,056 9,638
Nickel (9) $/MT 14,184 16,087
Copper (9) $/MT 7,472 7,321
Chrome (9) $/MT 18 18
----------------- ---------------------------------------------------------- ---------- ----------
Operating Statistics (continued)
Footnotes:
1 Karee includes the shafts K3, K4 (currently on care and maintenance),
1B and 4B. Westerns comprises Rowland, Newman and ore purchases from W1.
Middelkraal represents Hossy and Saffy. Easterns includes E1, E2 and E3.
2 Pandora attributable tonnes mined represents Lonmin's share (42.5%) of
the total tonnes mined on the Pandora joint venture.
3 Tonnes milled excludes slag milling.
4 Lonmin purchases 100% of the ore produced by the Pandora joint venture
for onward processing which is included in downstream operating statistics.
5 Head grade is the grammes per tonne (5PGE + Au) value contained in the
tonnes milled and fed into the concentrator from the mines (excludes slag
milled).
6 Recovery rate in the concentrators is the total content produced divided
by the total content milled (excluding slag).
7 Metals in concentrate includes slag and has been calculated using industry
standard downstream processing losses.
8 Corresponds to contained base metals in concentrate.
9 Nickel is produced and sold as nickel sulphate crystals or solution and
the volumes shown correspond to contained metal. Copper is produced as
refined product but typically at LME grade C. Chrome is produced in the
form of chromite concentrate and volumes shown are in the form of chromite.
10 Basket price of PGMs is based on the revenue generated in Rand and Dollar
from the actual PGMs (5PGE + Au) sold in the period based on the appropriate
Rand/Dollar exchange rate applicable for each sales transaction.
11 As per note 10 but including revenue from base metals.
6 months 6 months
to to
Units 31 March 31 March
2013 2012
------------------------------------------------------ --------- ---------- ----------
Capital Expenditure (1) Rm 656 1,552
$m 73 197
---------------------------------------------------------------- ---------- ----------
Group cost per PGM ounce sold
Mining - Marikana R/oz 6,219 5,698
Concentrating - Marikana R/oz 966 973
Process division R/oz 879 961
Shared business services R/oz 584 540
------------------------------------------------------ --------- ---------- ----------
C1 cost per PGM ounce produced R/oz 8,648 8,172
Stock movement R/oz (880) (413)
------------------------------------------------------ --------- ---------- ----------
C1 cost per PGM ounce sold before base metal credits R/oz 7,769 7,759
Base metal credits R/oz (629) (568)
------------------------------------------------------ --------- ---------- ----------
C1 costs per PGM ounce sold after base metal credits R/oz 7,139 7,190
Amortisation R/oz 1,070 780
------------------------------------------------------ --------- ---------- ----------
C2 costs per PGM ounce sold R/oz 8,210 7,970
------------------------------------------------------ --------- ---------- ----------
Pandora mining cost:
C1 Pandora mining cost (in joint venture) R/oz 4,851 5,326
Pandora JV cost/ounce produced to Lonmin (adjusting
Lonmin share of profit) R/oz 7,895 8,079
Exchange rates Average rate for period (2) R/$ 8.79 7.91
Closing rate R/$ 9.22 7.65
------------------------------------------------------ --------- ---------- ----------
Footnotes:
1 Capital expenditure is the aggregate of the purchase of property, plant
and equipment and intangible assets (includes capital accruals and excludes
capitalised interest).
2 Exchange rates are calculated using the market average daily closing rate
over the course of the period.
Responsibility statement of the directors in respect of the interim financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, and
-- the interim management report includes a fair review of the information required by:
(a) DTR4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Roger Phillimore Simon Scott
Chairman Chief Financial Officer
10 May 2013
INDEPENDENT REVIEW REPORT TO LONMIN PLC
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2013 which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules (the DTR) of the UK's Financial Conduct Authority (the UK FCA). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2013 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Robert M. Seale
for and on behalf of KPMG Audit Plc
Chartered Accountants
15 Canada Square
London E14 5GL
10 May 2013
Consolidated income statement
for the 6 months to 31 March 2013
6 6
months months
6 months to 6 months to Year Year
to 31 to 31 ended ended
31 March Special March 31 March Special March 30 Sep Special 30 Sep
2013 items 2013 2012 items 2012 2012 items 2012
Underlying (note Underlying (note Underlying (note
(i) 3) Total (i) 3) Total (i) 3) Total
Continuing
operations Note $m $m $m $m $m $m $m $m $m
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
Revenue 2 735 - 735 751 - 751 1,614 - 1,614
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
EBITDA (ii) 2 171 (3) 168 75 - 75 193 (169) 24
Depreciation,
amortisation
and impairment (78) - (78) (61) - (61) (126) (600) (726)
Operating profit
/ (loss) (iii) 2 93 (3) 90 14 - 14 67 (769) (702)
Impairment of
available
for sale
financial
assets - - - - (6) (6) - (6) (6)
Finance income 4 9 16 25 2 18 20 5 30 35
Finance expenses 4 (16) (48) (64) (11) - (11) (19) - (19)
Share of profit
/
(loss) of
equity
accounted
investments 3 - 3 1 - 1 4 (10) (6)
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
Profit / (loss)
before
taxation 89 (35) 54 6 12 18 57 (755) (698)
Income tax
credit
/ (expense)
(iv) 5 (13) 47 34 (26) (26) (52) (39) 187 148
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
Profit / (loss)
for
the period 76 12 88 (20) (14) (34) 18 (568) (550)
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
Attributable to:
- Equity
shareholders
of Lonmin Plc 61 5 66 (14) (10) (24) 15 (425) (410)
-
Non-controlling
interests 15 7 22 (6) (4) (10) 3 (143) (140)
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
Earnings /
(loss)
per share (v) 6 13.3c (6.3)c (107.7)c
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
Diluted
earnings
/ (loss) per
share
(v,vi) 6 13.3c (6.3)c (107.7)c
----------------- ----- ----------- -------- ------- ----------- -------- ------- ----------- -------- ---------
Footnotes:
i Underlying results are based on reported results excluding the effect of
special items as defined in note 3.
ii EBITDA is operating profit / (loss) before depreciation, amortisation and
impairment of goodwill, intangibles and property, plant and equipment.
iii Operating profit / (loss) is defined as revenue less operating expenses
before impairment of available for sale financial assets, finance income
and expenses and share of profit / (loss) of equity accounted investments.
iv The income tax credit / (expense) substantially relates to overseas taxation
and includes exchange gains of $47 million (6 months to 31 March 2012 -
exchange losses $26 million and year ended 30 September 2012 - exchange
gains of $17 million) as disclosed in note 5.
v During the six months to March 2013 the Group undertook a Rights Issue
of shares. As a result the March 2012 and September 2012 LPS and diluted
LPS have been adjusted to reflect the bonus element of the Rights Issue
as disclosed in note 6.
vi Diluted earnings / (loss) per share is based on the weighted average number
of ordinary shares in issue adjusted by dilutive outstanding share options.
Consolidated statement of comprehensive income
for the 6 months to 31 March 2013
6 months 6 months Year ended
to to 30 September
31 March 31 March 2012
2013 2012
$m $m $m
--------------------------------------------------- ---------- ---------- --------------
Profit / (loss) for the period 88 (34) (550)
Items that may be reclassified subsequently
to the income statement
- Change in fair value of available for sale
financial assets (2) 2 (8)
- Ineffective portion of changes in fair - (1) -
value of cash flow hedges
- Changes in cash flow hedges released to - 2 -
the income statement
- Changes in settled cash flow hedges released 8 - -
to the income statement (i)
- Foreign exchange (loss) / gain on retranslation
of equity accounted investments (6) 2 (5)
- Deferred tax on items taken directly to the
statement of comprehensive income - - (2)
--------------------------------------------------- ---------- ---------- --------------
Total other comprehensive income / (expense): - 5 (15)
Total comprehensive income / (loss) for the
period 88 (29) (565)
--------------------------------------------------- ---------- ---------- --------------
Attributable to:
- Equity shareholders of Lonmin Plc 67 (20) (425)
- Non-controlling interests 21 (9) (140)
--------------------------------------------------- ---------- ---------- --------------
88 (29) (565)
--------------------------------------------------- ---------- ---------- --------------
Footnote:
i Refer note 4 for detail regarding the unwinding of the interest rate swap
derivative.
Consolidated statement of financial position
as at 31 March 2013
As at As at As at
31 March 31 March 30 September
2013 2012 2012
Note $m $m $m
------------------------------------------- ----- ---------- ---------- --------------
Non-current assets
Goodwill 40 113 40
Intangible assets 469 990 462
Property, plant and equipment 2,885 2,718 2,889
Equity accounted investments 36 178 157
Other financial assets 399 416 418
------------------------------------------- ----- ---------- ---------- --------------
3,829 4,415 3,966
------------------------------------------- ----- ---------- ---------- --------------
Current assets
Inventories 381 467 260
Trade and other receivables 99 99 79
Tax recoverable 4 1 3
Cash and cash equivalents 8 196 157 315
------------------------------------------- ----- ---------- ---------- --------------
680 724 657
------------------------------------------- ----- ---------- ---------- --------------
Current liabilities
Trade and other payables (248) (315) (328)
Interest bearing loans and borrowings 8 (2) (215) (123)
Derivative financial instruments - (4) (5)
Deferred revenue (23) (23) (24)
(273) (557) (480)
------------------------------------------- ----- ---------- ---------- --------------
Net current assets 407 167 177
------------------------------------------- ----- ---------- ---------- --------------
Non-current liabilities
Interest bearing loans and borrowings 8 - (298) (613)
Derivative financial instruments - (9) (10)
Deferred tax liabilities (527) (762) (562)
Deferred revenue (61) (84) (70)
Provisions (139) (137) (143)
------------------------------------------- ----- ---------- ---------- --------------
(727) (1,290) (1,398)
------------------------------------------- ----- ---------- ---------- --------------
Net assets 3,509 3,292 2,745
------------------------------------------- ----- ---------- ---------- --------------
Capital and reserves
Share capital 568 203 203
Share premium 1,411 997 997
Other reserves 88 81 80
Retained earnings 1,240 1,609 1,208
------------------------------------------- ----- ---------- ---------- --------------
Attributable to equity shareholders of
Lonmin Plc 3,307 2,890 2,488
Attributable to non-controlling interests 202 402 257
------------------------------------------- ----- ---------- ---------- --------------
Total equity 3,509 3,292 2,745
------------------------------------------- ----- ---------- ---------- --------------
Consolidated statement of changes in equity
for the 6 months to 31 March 2013
Equity shareholders' funds
------------------------------------------------------------------------------
Called Share Non-
up share premium Other Retained controlling Total
reserves earnings interests
capital account (i) (ii) Total (iii) equity
$m $m $m $m $m $m $m
At 1 October 2011 203 997 80 1,650 2,930 411 3,341
Loss for the period - - - (24) (24) (10) (34)
Comprehensive income: - - 1 3 4 1 5
---------- --------- ---------- ---------- ------ ------------- --------
- Change in fair value of available
for sale financial
assets - - - 2 2 - 2
- Ineffective portion of changes
in fair value of cash
flow hedges - - (1) - (1) - (1)
- Changes in cash flow hedges
released to the
income statement - - 2 - 2 - 2
- Foreign exchange gain on
retranslation
of equity
accounted investments - - - 1 1 1 2
Items recognised directly in
equity: - - - (20) (20) - (20)
---------- --------- ---------- ---------- ------ ------------- --------
- Share-based payments - - - 11 11 - 11
- Dividends - - - (31) (31) - (31)
---------- --------- ---------- ---------- ------ ------------- --------
At 31 March 2012 203 997 81 1,609 2,890 402 3,292
-------------------------------------- ---------- --------- ---------- ---------- ------ ------------- --------
At 1 April 2012 203 997 81 1,609 2,890 402 3,292
Loss for the period - - - (386) (386) (130) (516)
Comprehensive expense: - - (1) (18) (19) (1) (20)
---------- --------- ---------- ---------- ------ ------------- --------
- Change in fair value of available
for sale financial
assets - - - (10) (10) - (10)
- Effective portion of changes
in fair value of cash
flow hedges - - 1 - 1 - 1
- Changes in settled cash flow
hedges released to
the income statement - - (2) - (2) - (2)
- Foreign exchange loss on
retranslation
of equity
accounted investments - - - (6) (6) (1) (7)
- Deferred tax on items taken
directly to the
statement of comprehensive
income - - - (2) (2) - (2)
---------- --------- ---------- ---------- ------ ------------- --------
Items recognised directly in
equity: - - - 3 3 (14) (11)
---------- --------- ---------- ---------- ------ ------------- --------
- Share-based payments - - - 3 3 - 3
- Dividends - - - - - (14) (14)
---------- --------- ---------- ---------- ------ ------------- --------
At 30 September 2012 203 997 80 1,208 2,488 257 2,745
-------------------------------------- ---------- --------- ---------- ---------- ------ ------------- --------
Consolidated statement of changes in equity (continued)
for the 6 months to 31 March 2013
Equity shareholders' funds
------------------------------------------------------------------------------
Called Share Non-
up share premium Other Retained controlling Total
reserves earnings interests
capital account (i) (ii) Total (iii) equity
$m $m $m $m $m $m $m
At 1 October 2012 203 997 80 1,208 2,488 257 2,745
Profit for the period - - - 66 66 22 88
Comprehensive income: - - 8 (7) 1 (1) -
---------- --------- ---------- ---------- ------ ------------- --------
- Change in fair value of available
for sale financial
assets - - - (2) (2) - (2)
- Changes in settled cash flow
hedges released to
the income statement (iv) - - 8 - 8 - 8
- Foreign exchange loss on
retranslation
of equity
accounted investments - - - (5) (5) (1) (6)
Items recognised directly in
equity : 365 414 - (27) 752 (76) 676
---------- --------- ---------- ---------- ------ ------------- --------
- Share-based payments - - - 12 12 - 12
- Incwala equity accounting
adjustment
(v) - - - (39) (39) (76) (115)
- Share capital and share premium
recognised on
Rights Issue (vi) 365 459 - - 824 - 824
- Rights Issue costs charged
to the share premium (vi) - (45) - - (45) - (45)
---------- --------- ---------- ---------- ------ ------------- --------
At 31 March 2013 568 1,411 88 1,240 3,307 202 3,509
-------------------------------------- ---------- --------- ---------- ---------- ------ ------------- --------
Footnotes:
i Other reserves at 31 March 2013 represent the capital redemption reserve
of $88 million (31 March 2012 and 30 September 2012 - $88 million) and
a $nil hedging loss net of deferred tax (31 March 2012 - $7 million and
30 September 2012 - $8 million).
ii Retained earnings include $3 million of accumulated credits in respect
of fair value movements on available for sale financial assets (31 March
2012 - $15 million and 30 September 2012 - $5 million) and a $2 million
debit of accumulated exchange on retranslation of equity accounted investments
(31 March 2012 - $9 million credit and 30 September 2012 - $3 million
credit).
iii Non-controlling interests represent a 13.76% effective shareholding in
Eastern Platinum Limited, Western Platinum Limited and Messina Limited
and a 19.87% effective shareholding in Akanani Mining (Pty) Limited.
iv Refer note 4 for detail regarding the unwinding of the interest rate
swap derivative.
v Where an associate owns an equity interest in a group entity an adjustment
is made to the equity accounting and the non-controlling interest to
avoid double counting. Any difference between the adjustment to the investment
in the associate and non-controlling interest is taken direct to equity.
vi During December 2012 the Group undertook a Rights Issue in which 365,496,943
shares were issued as disclosed in note 9.
Consolidated statement of cash flows
for the 6 months to 31 March 2013
6 months 6 months Year ended
to to 30 September
31 March 31 March 2012
2013 2012
Note $m $m $m
---------------------------------------------- ----- ---------- ---------- --------------
Profit / (loss) for the period 88 (34) (550)
Taxation 5 (34) 52 (148)
Share of (profit) / loss after tax
of equity accounted investments (3) (1) 6
Finance income 4 (25) (20) (35)
Finance expenses 4 64 11 19
Impairment of available for sale
financial assets 3 - 6 6
Non-cash movement on deferred revenue (10) - (13)
Depreciation, amortisation and impairment 78 61 726
Change in inventories (121) (83) 124
Change in trade and other receivables (15) 55 75
Change in trade and other payables (80) (39) (28)
Change in provisions (14) 7 (3)
Deferred revenue received - 107 107
Share-based payments 12 11 14
Other non-cash items - (3) -
Cash (outflow) / inflow from operations (60) 130 300
Interest received 1 1 4
Interest and bank fees paid (24) (13) (31)
Tax paid (2) (8) (10)
---------------------------------------------- ----- ---------- ---------- --------------
Cash (outflow) / inflow from operating
activities (85) 110 263
---------------------------------------------- ----- ---------- ---------- --------------
Cash flow from investing activities
Distribution from / (investment in)
joint venture 2 (1) 7
Additions to other financial assets - (3) (2)
Purchase of property, plant and equipment (70) (197) (404)
Purchase of intangible assets (3) - (4)
Cash outflow from investing activities (71) (201) (403)
---------------------------------------------- ----- ---------- ---------- --------------
Cash flow from financing activities
Equity dividends paid to Lonmin shareholders - (31) (31)
Dividends paid to non-controlling
interests - - (14)
Proceeds from current borrowings 8 - 246 120
Repayment of current borrowings 8 (120) (46) (10)
Proceeds from non-current borrowings 8 200 - 589
Repayment of non-current borrowings 8 (819) - (275)
Proceeds from equity issuance 9 823 - -
Costs of issuing shares 9 (45) - -
Loss on forward exchange contracts
on equity issuance 9 (11) - -
Cash inflow from financing activities 28 169 379
---------------------------------------------- ----- ---------- ---------- --------------
(Decrease) / increase in cash and
cash equivalents 8 (128) 78 239
Opening cash and cash equivalents 8 315 76 76
Effect of exchange rate changes 8 9 3 -
---------------------------------------------- ----- ---------- ---------- --------------
Closing cash and cash equivalents 8 196 157 315
---------------------------------------------- ----- ---------- ---------- --------------
Notes to the accounts
1 Statement on accounting policies
Basis of preparation
Lonmin Plc (the Company) is a Company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company as at and for the six months to 31 March 2013 comprise the Company and its subsidiaries (together referred to as the Group) and the Group's interests in equity accounted investments.
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting, as adopted by the EU. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the EU. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 30 September 2012, except as noted below. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2012.
The comparative figures for the financial year ended 30 September 2012 are not the Group's full statutory accounts for that financial year. Those accounts have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) included a reference to the Group's ability to continue as a going concern to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements of the Group as at and for the year ended 30 September 2012 are available upon request from the Company's registered office at 4 Grosvenor Place, London, SW1X 7YL.
These condensed consolidated interim financial statements were approved by the Board of Directors on 10 May 2013.
These condensed consolidated interim financial statements apply the accounting policies and presentation that will be applied in the preparation of the Group's published consolidated financial statements for the year ending 30 September 2013.
Going concern
In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.
The financial performance of the Group is dependent upon the wider economic environment in which the Group operates. Factors exist which are outside the control of management which can have a significant impact on the business, specifically, volatility in the Rand / US Dollar exchange rate and PGM commodity prices. The events at Marikana in August and September 2012 necessitated a review of the strategy and capital structure of the Group. To this end, the Lonmin Plc Board concluded that reducing capital expenditure in the near term and raising additional equity, in conjunction with a revision to bank facilities would result in the appropriate capital structure and retain the Group's flexibility as regards financial risks.
In December 2012, Lonmin Plc successfully concluded a Rights Issue which raised net proceeds of $767 million (see note 9). In conjunction with the Rights Issue, Lonmin Plc negotiated certain amendments to the terms of the Group's existing debt facilities. The proceeds of the Rights Issue were utilised to reduce the Group's debt exposure.
The Directors have prepared cash flow and covenant forecasts for a period in excess of twelve months and have concluded that the capital structure, after the successful Rights Issue and debt facilities amendments, provides sufficient head room to cushion against downside operational risks and minimises the risk of breaching new covenants.
As a result, the Directors believe that the Group will continue to meet its obligations as they fall due and comply with its financial covenants and accordingly have formed a judgement that it is appropriate to prepare the financial statements on a going concern basis. Therefore, these financial statements do not include any adjustments that would result if the going concern basis on preparation is inappropriate.
Notes to the accounts (continued)
1 Statement on accounting policies (continued)
New standards and amendments in the period
The following revised IFRS has been adopted in these condensed consolidated financial statements. The application of this IFRS has not had any material impact on the amounts reported for the current and prior periods.
-- IAS 1 - Amendments to Presentation of Financial Statements (effective 1 July 2012) requires that an entity present separately the items of Other Comprehensive Income that may be reclassified to the income statement in future from those that would never be reclassified to the income statement.
There were no other new standards, interpretations or amendments to standards issued and effective for the period which materially impacted the Group.
New standards that are relevant to the Group but not yet effective
There are no new standards, interpretations or amendments to standards issued, but not yet effective for the period which are expected to materially impact the Group's financial statements.
Notes to the accounts (continued)
2 Segmental analysis
The Group distinguishes between three reportable operating segments being the Platinum Group Metals (PGM) Operations segment, the Evaluation segment and the Exploration segment.
The PGM Operations segment comprises the activities involved in the mining and processing of PGMs, together with associated base metals, which are carried out entirely in South Africa. These operations are integrated and designed to support the process for extracting and refining PGMs from underground. PGMs move through each stage of the process and undergo successive levels of refinement which result in fully refined metals. The Chief Executive Officer, who performs the role of Chief Operating Decision Maker (CODM), views the PGM Operations segment as a single whole for the purposes of financial performance monitoring and assessment and does not make resource allocations based on margin, costs or cash flows incurred at each separate stage of the process. In addition, the CODM makes his decisions for running the business on a day to day basis using the physical operating statistics generated by the business as these summarise the operating performance of the entire segment.
The Evaluation segment covers the evaluation through pre-feasibility of the economic viability of newly discovered PGM deposits. Currently all of the evaluation projects are based in South Africa.
The Exploration segment covers the activities involved in the discovery or identification of new PGM deposits. This activity occurs on a worldwide basis.
No operating segments have been aggregated. Operating segments have consistently adopted the consolidated basis of accounting and there are no differences in measurement applied. Other covers mainly the results and investment activities of the corporate Head Office. The only intersegment transactions involve the provision of funding between segments and any associated interest.
Notes to the accounts (continued)
2 Segmental analysis (continued)
6 months to 31 March 2013
------------------------------------------------------------------------
PGM
Operations Evaluation Exploration Intersegment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
-------------------------------
Revenue (external sales
by product):
Platinum 521 - - - - 521
Palladium 100 - - - - 100
Gold 13 - - - - 13
Rhodium 40 - - - - 40
Ruthenium 5 - - - - 5
Iridium 11 - - - - 11
------------------------------- ------------ ----------- ------------ ------ ------------- --------
PGMs 690 - - - - 690
Nickel 24 - - - - 24
Copper 8 - - - - 8
Chrome 13 - - - - 13
------------------------------- ------------ ----------- ------------ ------ ------------- --------
735 - - - - 735
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Underlying (i) :
EBITDA / (LBITDA) (ii) 180 4 (1) (12) - 171
Depreciation, amortisation
and impairment (78) - - - - (78)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Operating profit / (loss)
(ii) 102 4 (1) (12) - 93
Finance income 11 - - 5 (7) 9
Finance expenses (14) - - (9) 7 (16)
Share of profit of equity
accounted investments 3 - - - - 3
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Profit / (loss) before
taxation 102 4 (1) (16) - 89
Income tax expense (13) - - - - (13)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Underlying profit / (loss)
after taxation 89 4 (1) (16) - 76
Special items (note 3) 45 - - (33) - 12
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Profit / (loss) after
taxation 134 4 (1) (49) - 88
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Total assets (iii) 3,819 275 1 1,507 (1,093) 4,509
Total liabilities (iv) (1,828) (193) (48) (24) 1,093 (1,000)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Net assets / (liabilities) 1,991 82 (47) 1,483 - 3,509
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Share of net assets of
equity accounted investments
(v) 36 - - - - 36
Additions to property,
plant, equipment and
intangibles 75 7 - - - 82
Material non-cash items
- share-based payments 12 - - - - 12
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Notes to the accounts (continued)
2 Segmental analysis (continued)
6 months to 31 March 2012
------------------------------------------------------------------------
PGM
Operations Evaluation Exploration Intersegment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
----------------------------------
Revenue (external sales
by product):
Platinum 499 - - - - 499
Palladium 89 - - - - 89
Gold 16 - - - - 16
Rhodium 72 - - - - 72
Ruthenium 8 - - - - 8
Iridium 19 - - - - 19
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
PGMs 703 - - - - 703
Nickel 29 - - - - 29
Copper 6 - - - - 6
Chrome 13 - - - - 13
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
751 - - - - 751
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Underlying (i) :
EBITDA / (LBITDA) (ii) 79 (2) (3) 1 - 75
Depreciation, amortisation
and impairment (61) - - - - (61)
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Operating profit / (loss)
(ii) 18 (2) (3) 1 - 14
Finance income 1 - - 10 (9) 2
Finance expenses (9) - - (11) 9 (11)
Share of profit / (loss)
of equity accounted investments 2 - - (1) - 1
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Profit / (loss) before
taxation 12 (2) (3) (1) - 6
Income tax expense (26) - - - - (26)
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Underlying loss after
taxation (14) (2) (3) (1) - (20)
Special items (note 3) (26) - - 12 - (14)
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Loss after taxation (40) (2) (3) 11 - (34)
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Total assets (iii) 3,805 865 1 1,350 (882) 5,139
Total liabilities (iv) (1,871) (310) (46) (502) 882 (1,847)
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Net assets / (liabilities) 1,934 555 (45) 848 - 3,292
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Share of net assets of
equity accounted investments 52 - - 126 - 178
Additions to property,
plant, equipment and
intangibles 208 1 - - - 209
Material non-cash items
- share-based payments 11 - - - - 11
---------------------------------- ------------ ----------- ------------ ------ ------------- --------
Notes to the accounts (continued)
2 Segmental analysis (continued)
Year ended 30 September 2012
------------------------------------------------------------------------
PGM
Operations Evaluation Exploration Intersegment
Segment Segment Segment Other Adjustments Total
$m $m $m $m $m $m
-------------------------------
Revenue (external sales
by product):
Platinum 1,064 - - - - 1,064
Palladium 212 - - - - 212
Gold 31 - - - - 31
Rhodium 152 - - - - 152
Ruthenium 17 - - - - 17
Iridium 39 - - - - 39
------------------------------- ------------ ----------- ------------ ------ ------------- --------
PGMs 1,515 - - - - 1,515
Nickel 55 - - - - 55
Copper 16 - - - - 16
Chrome 28 - - - - 28
------------------------------- ------------ ----------- ------------ ------ ------------- --------
1,614 - - - - 1,614
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Underlying (i) :
EBITDA / (LBITDA) (ii) 202 3 (4) (8) - 193
Depreciation, amortisation
and impairment (126) - - - - (126)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Operating profit / (loss)
(ii) 76 3 (4) (8) - 67
Finance income 5 - - 14 (14) 5
Finance expenses (15) - - (18) 14 (19)
Share of profit of equity
accounted investments 2 - - 2 - 4
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Profit / (loss) before
taxation 68 3 (4) (10) - 57
Income tax expense (39) - - - - (39)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Underlying profit / (loss)
after taxation 29 3 (4) (10) - 18
Special items (note 3) (103) (481) - 16 - (568)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
(Loss) / profit after
taxation (74) (478) (4) 6 - (550)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Total assets (iii) 3,862 269 - 1,493 (1,001) 4,623
Total liabilities (iv) (2,094) (188) (46) (551) 1,001 (1,878)
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Net assets / (liabilities) 1,768 81 (46) 942 - 2,745
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Share of net assets of
equity accounted investments 42 - - 115 - 157
Additions to property,
plant, equipment and
intangibles 439 5 - - - 444
Material non-cash items
-
share-based payments 13 - - 1 - 14
------------------------------- ------------ ----------- ------------ ------ ------------- --------
Notes to the accounts (continued)
2 Segmental analysis (continued)
Revenue by destination is analysed by geographical area below:
6 months to 6 months to Year ended
31 March 2013 31 March 2012 30 September 2012
$m $m $m
-------------- --------------- --------------- -------------------
The Americas 221 184 319
Asia 237 238 485
Europe 215 175 508
South Africa 62 154 302
735 751 1,614
-------------- --------------- --------------- -------------------
The Group's revenues are all derived from the PGM Operations segment. This
segment has two major customers who contributed 59% and 32% of revenue in
the six months to 31 March 2013, 56% and 33% in the six months to 31 March
2012 and 49% and 29% in the year ended 30 September 2012.
Metal sales prices are based on market prices which are denominated in US
Dollars. The majority of sales are also invoiced in US Dollars with the exception
of certain sales in South Africa which are invoiced in South African Rand
based on exchange rates determined in accordance with the contractual arrangement.
Non-current assets, excluding financial instruments, by geographical area
are shown below:
As at As at As at
31 March 2013 31 March 2012 30 September 2012
$m $m $m
-------------- --------------- --------------- -------------------
South Africa 3,429 3,998 3,547
Europe 1 1 1
3,430 3,999 3,548
-------------- --------------- --------------- -------------------
Footnotes:
Underlying results are based on reported results excluding the effect of
i special items as defined in note 3.
EBITDA / (LBITDA) and operating profit / (loss) are the key profit measures
ii used by management.
iii The assets under "Other" include the HDSA receivable of $366 million (31
March 2012 - $369 million, 30 September 2012 - $381 million) and intercompany
receivables of $1,019 million (31 March 2012 - $807 million, 30 September
2012 - $707 million).
The liabilities under "Other" include borrowings of $nil (31 March 2012
iv - $465 million, 30 September 2012 - $500 million).
v Refer to footnote v in the Statement of changes in equity.
Notes to the accounts (continued)
3 Special items
"Special items" are those items of financial performance that the Group believes
should be separately disclosed on the face of the consolidated income statement
to assist in the understanding of the financial performance achieved by the
Group and for consistency with prior periods.
6 months to 6 months to Year ended
31 March 31 March 30 September
2013 2012 2012
-----------------------------------------------
$m $m $m
----------------------------------------------- ------------ ------------ --------------
Operating loss: (3) - (769)
------------ ------------ --------------
- Costs relating to illegal work stoppage
(i)
Idle fixed production costs - - (120)
Contract costs - - (29)
Payroll costs - - (7)
Other costs (2) - (3)
- Capital raising costs - - (5)
- Impairment of property, plant and equipment - - 2
- Restructuring and reorganisation costs
(ii) (1) - -
- Costs incurred relating to disputed
prospecting rights - - (5)
- Impairment of exploration and evaluation
asset - - (602)
------------ ------------ --------------
Impairment of available for sale financial
assets - (6) (6)
Share of impairment recognised in investment
in associate - - (10)
Net finance (expenses) / income: (32) 18 30
------------ ------------ --------------
- Interest accrued from HDSA receivable
(iii) 8 8 16
- Exchange (loss) / gain on HDSA receivable
(iii) (23) 10 14
- Net change in fair value of settled
cash flow hedges (iv) 7 - -
- Unwinding fees relating to early settlement
of interest rate swap (iv) (14) - -
- Exchange gain on holding Rights Issue
proceeds received in
advance (note 9) 1 - -
- Loss on forward exchange contracts
in respect of Rights Issue
(note 9) (11) - -
------------ ------------ --------------
(Loss) / profit on special items before
taxation (35) 12 (755)
Taxation related to special items (note
5) 47 (26) 187
----------------------------------------------- ------------ ------------ --------------
Special gain / (loss) before non-controlling
interests 12 (14) (568)
Non-controlling interests (7) 4 143
----------------------------------------------- ------------ ------------ --------------
Special gain / (loss) for the period
attributable to equity shareholders of
Lonmin Plc 5 (10) (425)
----------------------------------------------- ------------ ------------ --------------
Footnotes:
i Costs were incurred during the six months to March 2013 which relate to
the illegal strike in 2012.
ii These costs relate to the management restructuring exercise currently
underway.
iii During the year ended 30 September 2010 the Group provided financing to
assist Shanduka to acquire a majority shareholding in Incwala, Lonmin's
Black Economic Empowerment partner. This financing gave rise to foreign
exchange movements and the accrual of interest.
iv Refer note 4 for detail regarding the unwinding of the interest rate swap
derivative.
Notes to the accounts (continued)
4 Net finance (expenses) / income
6 months to 6 months to Year ended
31 March 31 March 30 September
2013 2012 2012
------------------------------------------------
$m $m $m
------------------------------------------------ ------------ ------------ --------------
Finance income: 9 2 5
------------ ------------ --------------
- Interest receivable on cash and cash
equivalents 1 1 4
- Ineffective portion of interest rate
swaps (i) - 1 -
- Other interest receivable - - 1
- Exchange gains on net debt (ii) 8 - -
------------ ------------ --------------
Finance expenses: (16) (11) (19)
------------ ------------ --------------
- Interest payable on bank loans and
overdrafts (9) (9) (20)
- Effective portion of cash flow hedges
released to the income
statement - (2) (5)
- Bank fees (3) (3) (6)
- Unamortised bank fees realised on settlement
of old loan facility
(note 8) (3) - -
- Capitalised interest (iii) 9 10 26
- Unwind of discounting on provisions (10) (5) (11)
- Ineffective portion of cash flow hedges
released to the income
statement - - (2)
- Exchange losses on net debt (ii) - (2) (1)
Special items (note 3): (32) 18 30
------------ ------------ --------------
- Interest accrued on HDSA receivable 8 8 16
- Exchange (loss) / gain on HDSA receivable (23) 10 14
- Net change in fair value of settled
cash flow hedges (i) 7 - -
- Unwinding fees relating to early settlement
of interest rate swap (i) (14) - -
- Exchange gain on holding Rights Issue
proceeds received in
advance (note 9) 1 - -
- Loss on forward exchange contracts
in respect of Rights Issue
(note 9) (11) - -
------------ ------------ --------------
Net finance (expenses) / income (39) 9 16
------------------------------------------------ ------------ ------------ --------------
Footnotes:
i The interest rate swap entered into in 2011 was unwound after the funds
raised from the Rights Issue were used to settle the underlying bank debt.
The equity related hedging loss of $8m and the derivative liability of
$15m were transferred to the Income Statement resulting in net finance
income of $7m. In addition unwinding fees of $14m were incurred for early
settlement of the interest rate swap.
ii Net cash / (debt) as defined by the Group comprises cash and cash equivalents,
bank overdrafts repayable on demand and interest bearing loans and borrowings
less unamortised bank fees, unless the unamortised bank fees relate to
undrawn facilities in which case they are treated as other receivables.
iii Interest expenses incurred have been capitalised on a Group basis to the
extent that there is an appropriate qualifying asset. The weighted average
interest rate used by the Group for capitalisation in the period was 5.7%
(6 months to 31 March 2012 - 4.6%, year ended 30 September 2012 - 4.3%).
Notes to the accounts (continued)
5 Taxation
6 months 6 months
to to Year ended
31 March 31 March 30 September
2013 2012 2012
$m $m $m
---------------------------------------------- ---------- ---------- --------------
Current tax charge (excluding special
items):
United Kingdom tax expense
- Current tax expense at 24% (March 2012
- 26%, September 2012 -
25%) (i) - - -
Overseas current tax expense at 28% (2012
- 28%) - 6 10
- Corporate tax expense - current year - 6 9
- Adjustment in respect of prior years - - 1
Deferred tax charge (excluding special
items):
Deferred tax expense - UK and overseas 13 20 29
---------- ---------- --------------
- Origination and reversal of temporary
differences 13 18 31
- Adjustment in respect of prior years - 2 (2)
Special items - UK and overseas (note
3): (47) 26 (187)
---------- ---------- --------------
- Reversal of utilisation of losses from
prior periods to offset
deferred tax liability - - (2)
- Exchange on deferred taxation (ii) (47) 26 (17)
- Deferred tax on special items impacting
profit before tax - - (168)
---------- ---------- --------------
Actual tax (credit) / charge (34) 52 (148)
---------------------------------------------- ---------- ---------- --------------
Tax charge excluding special items (note
3) 13 26 39
---------------------------------------------- ---------- ---------- --------------
Effective tax rate (63%) 289% 21%
---------------------------------------------- ---------- ---------- --------------
Effective tax rate excluding special items
(note 3) 15% 433% 68%
---------------------------------------------- ---------- ---------- --------------
Notes to the accounts (continued)
5 Taxation (continued)
A reconciliation of the standard tax charge to the actual tax charge was as follows:
6 months 6 months 6 months 6 months Year ended Year ended
to to to to 30 September 30 September
31 March 31 March 31 March 31 March 2012 2012
2013 2013 2012 2012
% $m % $m % $m
------------------------------- ---------- ---------- ---------- ---------- -------------- --------------
Tax charge on profit / (loss)
at standard tax rate 28 15 28 5 28 (195)
Tax effect of:
- Unutilised losses (iii) 17 9 51 9 - -
- Foreign exchange impacts
on taxable profits (26) (14) 72 13 (2) 14
- Adjustment in respect of
prior years - - 11 2 - -
- Other 5 3 (17) (3) - (1)
- Special items as defined
above (87) (47) 144 26 (5) 34
------------------------------- ---------- ---------- ---------- ---------- -------------- --------------
Actual tax (credit) / charge (63) (34) 289 52 21 (148)
------------------------------- ---------- ---------- ---------- ---------- -------------- --------------
The Group's primary operations are based in South Africa. The South African
statutory tax rate is 28% (2012 - 28%). Lonmin Plc operates a branch in South
Africa which is subject to a tax rate of 28% on branch profits (2012 - 28%).
Footnotes:
i Effective from 1 April 2013 the United Kingdom tax rate changed from 24%
to 23%. This does not significantly impact the Group's deferred tax liabilities.
ii Overseas tax charges are predominantly calculated in Rand as required
by the local authorities. As these subsidiaries' functional currency is
US Dollar this leads to a variety of foreign exchange impacts being the
retranslation of current and deferred tax balances and monetary assets,
as well as other translation differences. The Rand denominated deferred
tax balance in US Dollars at 31 March 2013 is $425 million (31 March 2012
- $539 million, 30 September 2012 - $461 million).
iii Unutilised losses reflect losses generated in entities for which no deferred
tax is provided as it is not thought probable that future profits can
be generated against which a deferred tax asset could be offset or previously
unrecognised losses utilised.
Notes to the Accounts (continued)
6 Earnings / (loss) per share
Earnings / (loss) per share (EPS / (LPS)) has been calculated on the profit
for the period attributable to equity shareholders amounting to $66 million
(6 months to 31 March 2012 - loss of $24 million, year ended 30 September
2012 - loss of $410 million) using a weighted average number of 495.1 million
ordinary shares in issue for the 6 months to 31 March 2013 (6 months to 31
March 2012 - 380.7 million ordinary shares, year ended 30 September 2012
- 380.7 million ordinary shares).
During the six months to March 2013 the Group undertook a capital raising
by way of a Rights Issue. As a result the EPS / (LPS) figures have been adjusted
retrospectively as required by IAS 33 - Earnings Per Share. On 11 December
2012, 365,496,943 ordinary shares were issued with nine new ordinary shares
issued for every existing five ordinary shares held. For the calculation
of the EPS / (LPS), the number of shares held prior to 11 December 2012 has
been increased by a factor of 1.878 to reflect the bonus element of the Rights
Issue.
Diluted earnings / (loss) per share is based on the weighted average number
of ordinary shares in issue adjusted by dilutive outstanding share options
in accordance with IAS 33 - Earnings Per Share. In the twelve months to 30
September 2012 outstanding share options were anti-dilutive and so were excluded
from diluted loss per share in accordance with IAS 33 - Earnings Per Share.
6 months to 31 March 6 months to 31 March Year ended 30 September
2013 2012 (restated) 2012 (restated)
--------------------------------- -------------------------------- --------------------------------
Profit
for Loss Per Loss Per
the Number Per share for the Number share for the Number share
period of shares amount period of shares amount year of shares amount
$m millions cents $m millions cents $m millions cents
--------------- -------- ----------- ---------- --------- ----------- -------- --------- ----------- --------
Basic EPS /
(LPS) 66 495.1 13.3 (24) 380.7 (6.3) (410) 380.7 (107.7)
Share option
schemes - 1.2 - - 0.8 - - - -
--------------- -------- ----------- ---------- --------- ----------- -------- --------- ----------- --------
Diluted EPS /
(LPS) 66 496.3 13.3 (24) 381.5 (6.3) (410) 380.7 (107.7)
--------------- -------- ----------- ---------- --------- ----------- -------- --------- ----------- --------
6 months to 31 March 6 months to 31 March Year ended 30 September
2013 2012 (restated) 2012 (restated)
--------------------------------- -------------------------------- --------------------------------
Profit
for Loss Per Profit Per
the Number Per share for the Number share for the Number share
period of shares amount period of shares amount year of shares amount
$m millions cents $m millions cents $m millions cents
--------------- -------- ----------- ---------- --------- ----------- -------- --------- ----------- --------
Underlying EPS
/ (LPS) 61 495.1 12.3 (14) 380.7 (3.7) 15 380.7 3.9
Share option
schemes - 1.2 - - 0.8 - - 3.2 -
--------------- -------- ----------- ---------- --------- ----------- -------- --------- ----------- --------
Diluted
underlying
EPS / (LPS) 61 496.3 12.3 (14) 381.5 (3.7) 15 383.9 3.9
--------------- -------- ----------- ---------- --------- ----------- -------- --------- ----------- --------
Underlying earnings / (loss) per share has been presented as the Directors
consider it important to present the underlying results of the business.
Underlying earnings / (loss) per share is based on the earnings / (loss)
attributable to equity shareholders adjusted to exclude special items (as
defined in note 3) as follows:
6 months to 31 March 6 months to 31 March Year ended 30 September
2013 2012 (restated) 2012 (restated)
---------------------------------- -------------------------------- ---------------------------------
(Loss)
Profit Loss Per / profit Per
for the Number Per share for the Number share for the Number share
period of shares amount period of shares amount year of shares amount
$m millions cents $m millions cents $m millions cents
------------- --------- ----------- ---------- --------- ----------- -------- ---------- ----------- --------
Basic EPS /
(LPS) 66 495.1 13.3 (24) 380.7 (6.3) (410) 380.7 (107.7)
Special
items
(note 3) (5) - (1.0) 10 - 2.6 425 - 111.6
------------- --------- ----------- ---------- --------- ----------- -------- ---------- ----------- --------
Underlying
EPS
/ (LPS) 61 495.1 12.3 (14) 380.7 (3.7) 15 380.7 3.9
------------- --------- ----------- ---------- --------- ----------- -------- ---------- ----------- --------
Notes to the Accounts (continued)
6 Earnings per share (continued) Headline earnings / (loss) and the resultant headline earnings / (loss) per share are specific disclosures defined and required by the Johannesburg Stock Exchange.
These are calculated as follows:
6 months 6 months to
to 31 March Year ended
31 March 2012 30 September
2013 2012
--------------------------------------------
$m $m $m
-------------------------------------------- ---------- ------------ --------------
Earnings / (loss) attributable to ordinary
shareholders (under IAS 33) 66 (24) (410)
Add back impairment of assets (note 3) - 6 616
Tax related to the above items - - (120)
Non-controlling interests - - (86)
Headline earnings / (loss) 66 (18) -
-------------------------------------------- ---------- ------------ --------------
6 months to 31 March 6 months to 31 March Year ended 30 September
2013 2012 (restated) 2012 (restated)
---------------------------------- --------------------------------- -----------------------------
Loss Loss
Profit for for Per
for the Number Per share the Number Per share the Number share
period of shares amount period of shares Amount year of shares amount
$m millions cents $m millions cents $m millions cents
---------------- --------- ----------- ---------- -------- ----------- ---------- ------ ----------- --------
Headline EPS
/ (LPS) 66 495.1 13.3 (18) 380.7 (4.7) - 380.7 -
Share option
schemes - 1.2 - - 0.8 - - 3.2 -
---------------- --------- ----------- ---------- -------- ----------- ---------- ------ ----------- --------
Diluted
headline
EPS / (LPS) 66 496.3 13.3 (18) 381.5 (4.7) - 383.9 -
---------------- --------- ----------- ---------- -------- ----------- ---------- ------ ----------- --------
7 Dividends
No dividends were declared during the period (6 months to 31 March 2012 and
year ended 30 September 2012 - $nil).
Notes to the Accounts (continued)
8 Analysis of net cash / (debt) (i)
Transfer
of unmortised
As at Foreign exchange bank fees As at
1 October and non-cash to other 31 March
2012 Cash flow movements receivables 2013
$m $m $m $m $m
--------------------------- ----------- ---------- ----------------- --------------- ----------
Cash and cash equivalents 315 (128) 9 - 196
Current borrowings (123) 120 1 - (2)
Non-current borrowings (619) 619 - - -
Unamortised bank fees
(ii) 6 3 (4) (5) -
--------------------------- ----------- ---------- ----------------- --------------- ----------
Net cash / (debt) as
defined by the Group
(i) (421) 614 6 (5) 194
--------------------------- ----------- ---------- ----------------- --------------- ----------
Transfer
of unmortised
As at Foreign exchange bank fees As at 30
1 April and non-cash to other September
2012 Cash flow movements receivables 2012
$m $m $m $m $m
--------------------------- --------- ---------- ----------------- --------------- -----------
Cash and cash equivalents 157 161 (3) - 315
Current borrowings (216) 90 3 - (123)
Non-current borrowings (304) (314) (1) - (619)
Unamortised bank fees
(ii) 7 - (1) - 6
--------------------------- --------- ---------- ----------------- --------------- -----------
Net debt as defined
by the Group(i) (356) (63) (2) - (421)
--------------------------- --------- ---------- ----------------- --------------- -----------
Transfer
of unmortised
As at Foreign exchange bank fees As at
1 October and non-cash to other 31 March
2011 Cash flow movements receivables 2012
$m $m $m $m $m
--------------------------- ----------- ---------- ----------------- --------------- ----------
Cash and cash equivalents 76 78 3 - 157
Current borrowings (10) (200) (6) - (216)
Non-current borrowings (308) - 4 - (304)
Unamortised bank fees
(ii) 8 - (1) - 7
Net debt as defined
by the Group (i) (234) (122) - - (356)
--------------------------- ----------- ---------- ----------------- --------------- ----------
Footnotes:
i Net cash / (debt) as defined by the Group comprises cash and cash equivalents,
bank overdrafts repayable on demand and interest bearing loans and borrowings
less unamortised bank fees, unless the unamortised bank fees relate to
undrawn facilities in which case they are treated as other receivables.
ii As at 31 March 2013 unamortised bank fees of $5 million relating to undrawn
facilities were treated as other receivables (31 March 2012 - $7 million
and 30 September 2012 - $6 million of unamortised bank fees relating
to drawn facilities were offset against loans). During the six months
ended 31 March 2013 the term loan was repaid and cancelled resulting
in the related unamortised bank fees of $3 million being expensed. Additional
bank fees incurred in amending the USD and the Rand revolving credit
facilities were capitalised and are being amortised over the remaining
term of the facilities.
Notes to the Accounts (continued)
9 Rights Issue
Overview of the Rights Issue offer
On 9 November 2012, Lonmin announced a fully underwritten 9 for 5 Rights Issue of 365,503,264 new shares at 140 pence per new share for shareholders on the London Stock Exchange and at ZAR19.4872 per new share for shareholders on the Johannesburg Stock Exchange. The offer period commenced on 20 November 2012 and closed for acceptance on 10 December 2012. The final number of shares issued was 365,496,943. In the prospectus, Lonmin anticipated raising $817 million of total proceeds which, net of expenses of $40 million would raise funds of $777 million. The issue was successful with a take up of just below 97% and the remaining 3% raised through a rump placement. The Company raised total net cash proceeds of $767 million which was slightly below expectations given in the prospectus as a result of exchange differences between the prospectus exchange rate and that achieved ($4 million) as well as expenses being $5 million more than anticipated. Accounting for the Rights Issue The Rights Issue proceeds were received over the offer period and initially credited to a "shares to be issued" account at the prevailing spot exchange rates at the dates of receipt resulting in the recognition of cash inflow of $823 million before the impact of hedging arrangements. The retranslation of these receipts at the spot rate on closing resulted in a $1 million exchange gain recognised through finance income as a special item. Share capital and share premium of $365 million and $459 million respectively were recognised on the statement of financial position using the spot exchange rate on the date of issuance being 11 December 2012. $45 million of issue costs were also recognised and charged against share premium. Therefore the total net increase in share capital and share premium was $779 million. In order to minimise the risk of the exposure to currency fluctuations on the Rand and Sterling proceeds expected, the Group entered into forward exchange contracts in synchronisation with the Rights Issue process. The Dollar weakened over the offer period resulting in the Rand and Sterling proceeds received and translated at prevailing spot rates being more than due under the forward exchange contracts. This resulted in the recognition of exchange losses of $11 million. This $11 million fair value loss cannot be offset against equity (which it was effectively hedging for economic purposes) as, under IFRS, hedge accounting can only be applied to cash flows which ultimately affect profit and loss. The loss on forward exchange contracts has therefore been shown as a special charge in finance costs in the income statement. The offset is effectively in the recognition of a higher credit to the share premium account.
A summary of the above transaction is shown below:
$m
Cash proceeds received at spot rates 823
Foreign exchange gain on retranslation of advance cash proceeds
(i) 1
----------------------------------------------------------------- -----
Gross increase in share capital and share premium 824
Costs of issue charged to share premium (45)
----------------------------------------------------------------- -----
Net increase in share capital and share premium 779
Loss on settlement of forward exchange contracts (11)
----------------------------------------------------------------- -----
Total (i) 768
----------------------------------------------------------------- -----
Footnote:
i Net cash proceeds amounted to $767 million (excluding the foreign exchange
gain on retranslation of advance cash proceeds of $1 million).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUCWAUPWGRP
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