We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
| 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 : 0667F
Lonmin PLC
15 May 2017
LEI No: 213800FGJZ2WAC6Y2L94
REGULATORY RELEASE
15 May 2017
2017 Interim Results
Lonmin Plc ("Lonmin" or "the Company") today publishes its Interim Results for the period ended 31 March 2017. Lonmin has published today its Q2 Production Report in a separate announcement. Lonmin also announces today conditional acquisition of the remaining 7.5% of the Pandora JV to take its equity to 100%.
KEY FEATURES
-- Total tonnes mined in the half year down 7.6% (387,000 tonnes) on comparative period due to the planned removal of high cost Generation 1 production (down 258,000 tonnes) and the poor mining production from K3, our biggest shaft, in the first four months (down 145,000 tonnes).
-- Decisive action taken to deliver mining improvement including senior management changes has resulted in the best March production for four years. A flatter management structure with the General Managers now reporting directly to the Chief Executive Officer; and by leveraging our relationship with the union to address the management/union impasse at K3 has resulted in a step change in production at all shafts. Whilst we are pleased with the improved overall mining performance, there is still much to do.
-- Improving production underpins maintenance of full year sales guidance of 650,000 to 680,000 Platinum ounces.
-- Unit costs in March were R9,695 per PGM ounce, on the back of improved mining production. Unit costs guidance for the full year is being revised to between R11,300 and R11,800 per PGM ounce from the original guidance of between R10,800 and R11,300, due the weak mining performance to 31 January 2017.
-- Net cash at 31 March improved to $75 million (from $49 million at 31 December 2016), typical of the seasonality of the business, and compared to $114 million at 31 March 2016. Total liquidity was $447 million.
-- Revenue of $486 million, down 6% compared to prior year revenue of $515 million as a result of lower production offset by an 8% increase in revenue per ounce.
-- Operating loss of $181 million and $35 million excluding the impairment charge compared to $15 million operating loss. The comparative period did not have an impairment charge.
-- The impairment of $146 million has reduced headroom on the Tangible Net Worth lending covenant to $334 million. Any future adverse movements in key assumptions could result in further impairment that could impact this covenant.
Commenting on the results Lonmin CEO Ben Magara said: "The whole Lonmin team working in partnership reversed the weak mining performance seen in the first four months of our financial year. That improvement continues to be essential for the sustainability of the business in the prevailing low pricing environment. We are pleased to maintain our full year sales guidance at between 650,000 and 680,000 Platinum ounces. Although unit cost guidance has increased we remain determined to be at least cash neutral in the current environment. While the improvement in mining performance since March is pleasing, I am not yet satisfied that we have delivered all that I know we can, and all of us at Lonmin recognise that this improvement needs to be sustained. We are operating in a volatile and challenging environment, but we have the right team in place to manage these challenges. Further, to enable maximum focus on production, and in line with our hands-on approach, we are moving Lonmin's South African headquarters from Johannesburg to our operations in Marikana."
Operational Results
-- LTIFR improved by 1.8% to 4.88 at 31 March 2017 from 4.97 at 30 September 2016 on a 12 month rolling basis. Regrettably however, three of our colleagues were fatally injured: Mr Giji Mxesibe; Mr Joao Fernando Macamo; and Mr Letlhohonolo Rakotsoane. We extend our deepest condolences to their families and friends.
-- In H1 2017 Generation 2 shafts produced 3.7 million tonnes (down 4% from 3.9 million in H1 2016), principally attributable to the poor mining performance in the first four months of the period at K3. Production at Rowland and Saffy increased year on year and decreased at 4B due to worse than planned geological conditions. Saffy shaft produced 213,000 tonnes in March 2017, an all-time record for the life of the shaft. K3 produced 276,000 tonnes in March 2017, the highest monthly mining production for the last 29 months, on the back of addressing the management/union impasse and change in management, compared to 126,000 tonnes in January 2016. Management changes and turnaround plans introduced at E3 shaft are showing progress as there was a quarter on quarter improvement of 25%.
-- Overall H1 unit costs of R12,059 per PGM ounce were higher, driven by the weak mining performance at K3 for the first four months, which now has been addressed. Lonmin delivered 978,000 tonnes in March, the highest March production since 2012 and the highest monthly mining production for the last 18 months. The unit cost for March at R9,695 per PGM ounce, highlight the importance and impact of good production.
-- Tonnes lost due to Section 54 safety stoppages were 194,000 tonnes, an improvement of 17% against the comparative period and tonnes lost due to management induced safety stoppages increased to 130,000 tonnes, resulting in total tonnes lost due to safety stoppages increasing to 324,000 tonnes, from 241,000 tonnes in the comparative period, reflecting our non-negotiable approach to safety.
-- Immediately Available Ore Reserves are 20.6 months average production, continuing to provide operational flexibility. Critical development areas were not compromised during the period, and development crews deployed to stoping areas earlier in the year have begun reverting to their own work areas and will be fully returned by the end of the financial year.
-- Refined Platinum production of 301,261 ounces benefited from 10,295 ounces from the ongoing smelter clean-up contribution, but was overall down 13.7% on the comparative prior year period, reflecting the weak mining performance to 31 January 2017.
-- Platinum sales of 306,996 ounces were down 15.2% on the prior year period, reflecting the lower production. Processing facilities have operated reliably and efficiently.
Financial Results
-- $98 million of cash consumed for the half-year compared to $74 million during the comparative period, in line with the normal business cycle
-- Quarter 2 cash positive by $26 million with $75 million of net cash and total liquidity of $447 million at 31 March 2017 (Q2 2016 cash positive by $46 million with $114 million of net cash and total liquidity of $474 million at 31 March 2016).
-- Revenue of $486 million, down 6% compared to prior year revenue of $515 million as a result of lower production offset by an 8% increase in revenue per ounce.
-- Operating loss of $181 million and $35 million excluding the impairment charge compared to $15 million operating loss. The comparative period did not have an impairment charge.
-- Spend remained well controlled with cost reductions of R1.7 billion over the last 18 months compared to a two year target of R1.8 billion, however, unit cost under pressure and guided upwards
-- Capital expenditure discipline continues and full-year guidance revised downward by R300 million - R400 million as guided below, as well as progressing Pandora acquisition to realise longer-term reductions as described later in this report.
-- Further impairment of $146 million resulting in the headroom against the tangible net worth covenant in lending agreements reducing to $334 million.
-- Adverse changes in assumptions could impact on compliance with lending covenants and our disclosure in the accounts draws attention to this.
Outlook and Guidance:
-- Sales guidance of 650,000 to 680,000 Platinum ounces for the full financial year maintained on the back of improved mining production and smelter clean-up project.
-- We are revising our unit costs guidance for the year from between R10,800 and R11,300 to between R11,300 to R11,800 per PGM ounce to reflect the weak production in the first four months of the year.
-- We continue to aim to fund sustaining capital expenditure from operating activities and third party funding. Consequently we are reducing our full year guidance from R1.8 billion to a range of R1.4 billion to R1.5 billion, which includes around R400 million for the third party funded Bulk Tailings Treatment project, whilst minimising near term impact to production.
FINANCIAL HIGHLIGHTS
Hot Features
Premium
6 months 6 months
to to
31 March 31 March
2017 2016
------------------------------- ----------- -----------
Revenue $486m $515m
EBITDA (i) $nil $36m
Operating loss (ii) $(181)m $(15)m
Operating loss (Ii) excluding
impairment $(35)m $(15)m
Loss before taxation $(199)m $(21)m
Loss per share (vi) (64.4)c (1.8)c
Trading cash inflow/(outflow)
per share (iii, vi) (16.9)c (24.9)c
Unit cost of production per R12,059/oz R10,668/oz
PGM ounce
Capital expenditure $45m $27m
Free cash outflow per share
(iv, vi) (32.9)c (37.3)c
Net cash/(debt) as defined
by the Group (v) $75m $114m
Liquidity as defined by the
Group (vii) $447m $474m
------------------------------- ----------- -----------
Footnotes:
The Group measures performance using a number of non-GAAP measures which better allow for understanding of the financial performance and position of the Group.
i EBITDA / (LBITDA) is operating profit / (loss) before depreciation, amortization and impairment of goodwill, intangibles and property, plant and equipment.
ii Operating profit / loss is defined as revenue less operating expenses, profit on disposal of joint venture, finance income and expenses and before share of (loss) / profit of equity accounted investment.
iii Trading cash flow is defined as cash flow from operating activities.
iv 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.
v 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.
vi The number of shares held prior to 12 December 2015 has been adjusted by a factor of 0.08 to reflect the bonus element of the Rights Issue.
vii Liquidity as defined by the Group comprises gross cash and cash equivalents and undrawn debt facilities.
ENQUIRIES
Investors / Analysts:
Lonmin
Tanya Chikanza (Head of +44 203 908 1073/+27 Investor Relations) 11 218 8358 Andrew Mari (Investor Relations Manager) +27 11 218 8420
Media:
+27 83 358
Wendy Tlou (Head of Communications) 0049
+44 207 930
Anthony Cardew/ Emma Crawshaw 0777
Notes to editors
Lonmin, which is listed on both the London Stock Exchange and the Johannesburg Stock Exchange, is one of the world's largest primary producers of PGMs. These metals are essential for many industrial applications, especially catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery.
Lonmin's operations are situated in the Bushveld Igneous Complex in South Africa, where nearly 80% of known global PGM resources are located.
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 Operations 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
After a challenging first four months of the financial year to 31 January 2017, I am pleased to report an improvement in mining performance since February. As a result the business was able to return to our goal of being cash neutral after capital expenditure in the second quarter of the year, in line with our strategic objective to be able to deal successfully with the continued low pricing PGM environment.
The duration and spread of Section 54 safety stoppages continued to decrease during the period, however, the weak mining performance seen in the first quarter and through January 2017 adversely affected unit costs for the first half, which was at a non cash-generative level of R12,059 per PGM ounce, 13% higher than the prior year period. They also impacted the Processing Division's performance, with refined Platinum production down 13.7% on the prior year period. Platinum sales were down 15.2% on the first half of 2016 to 306,996 ounces. This reduction in output is partly due to planned reduction of high cost production from Generation 1 shafts.
The improving trend in our mining performance in the latter half of the second quarter is encouraging, with the month of March delivering 978,000 tonnes, the highest monthly mining production for the last 18 months and the highest March production since 2012. This performance was achieved despite the continuing planned closure of our high cost Generation 1 shafts. Importantly, this strong performance had a positive effect on unit costs for the month of March, which were down at R9,695 per PGM ounce, demonstrating the importance and impact good mining performance has on unit costs. While I am pleased with the strong mining performance as sustained through April notwithstanding Easter break, I am not yet satisfied that we have delivered what I know we can and all of us at Lonmin recognise that the performance since March needs to be sustained to ensure our future. The recent unrest in our local communities illustrates the complex and challenging environment in which we operate as it has impacted the employees who work in our Eastern Limb shafts.
2. Safety
Regrettably three of our colleagues were fatally injured during the period: Mr Giji Mxesibe, a Rock Drill Operator at K3 shaft on 17 February; Mr Joao Fernando Macamo, a Production Team Leader from E1 shaft on 10 November 2016; and Mr Letlhohonolo Rakotsoane, a supervisor working at Newman Shaft on 15 March 2017. I also regret to report that since the period end, on Thursday 11 May 2017 Mr Simon Sibitane, a locomotive operator, was fatally injured at our 4B shaft. We extend our deepest condolences to all their families and friends.
LTIFR improved by 1.8% to 4.88 at 31 March 2017 from 4.97 at 30 September 2016 on a 12 month rolling basis. Year on year, we are equally pleased that the LTIFR has improved by 4%. Our Total Injury Frequency Rate improved 14% to 11.92, from 13.88 at 31 March 2016. The Total Injury Frequency Rate is a lead indicator of our safety improvement initiatives, which has resulted in a reduction in of Section 54 safety stoppages.
There was an increase in the number of management induced safety stoppages over the period, which illustrates our non-negotiable stance on safety. Safety is essential for good performance and remains our priority. We remain determined to better our overall safety performance and we continue to enhance our safety improvements.
In that regard, we are pleased that the downward trend in the duration of Section 54 safety stoppages seen in the fourth quarter of 2016 has continued into the first six months of 2017, notwithstanding the increase in the second quarter from the fatalities at K3 and Newman. We believe this is a reflection of our improving safety performance and our work to better engage with the Department of Mineral Resources (DMR), developing an improved understanding and working relationship with the inspectorate and with The Association of Mineworkers and Construction Union (AMCU). This has also resulted in more localised application of the stoppages, as evidenced, at our K3 shaft in February.
We remain committed to achieving zero harm.
3. Production Performance
Mining Operations
Total tonnes mined of 4.7 million during the period, represents a 7.6% or 387,000 tonne decrease on H1 2016. This decline is the result of the removal of high cost Generation 1 production (258,000 tonnes), in line with our Business Plan strategy to remove high cost ounces, and due to the weak mining performance experienced at K3 (145,000 tonnes). K3 production suffered from a breakdown in the relationship between management and the employees at K3, in the first fourth months to 31 January 2017.
As a result of the poor Q1 2017 performance, which continued into January 2017, a number of turnaround initiatives were implemented to address mining production and the relationship with employees at K3. Significant progress was made in this area, which consequently resulted in production increasing to 794,000 tonnes in February 2017, up from the 584,000 tonnes in January. March production was 978,000 tonnes, the highest monthly mining production for the last 18 months and the highest March production since 2012. This was achieved despite the planned reduction in high cost Generation 1 production and the reduced workforce, following the rationalisation programme in 2015/6. The main initiatives driving the improved mining performance have been:
-- Step change in approach and management routines at all shafts and a flatter structure, with the General Managers at the Generation 2 shafts now reporting directly to the Chief Executive Officer, which has provided the General Managers at the shafts with more clearly defined responsibilities and accountability.
-- Leveraging our union relationship to resolve management/union impasse at K3, and the management change which included:
o Meetings with unions, including the mass meeting on 6 February 2017;
o Reinforced communication of the need to increase throughput, cut costs and acceptance of this at all levels; and
o Underground visits to all the shafts by Coalition of Management, AMCU leadership and inspectors from the DMR North West office.
Generation 2 shafts
Tonnes mined from our Generation 2 shafts were 3.7 million tonnes, a decrease of 4.0% on the comparative period as a result of the weak mining performance at our main operation, K3 shaft, for the first four months to 31 January 2017.
-- K3, our biggest shaft, produced 1,173,000 tonnes in H1 2017, a decrease of 11.0% or 145,000 tonnes on the comparative prior year period. The strained relationship between operational management, employees and union which we highlighted in our Quarter 1 Production Report resulted in an impasse between operational management and the union and as a result impacted production at this shaft for four months to 31 January 2017. The impasse has since been addressed as explained above and the shaft produced 276,000 tonnes in March 2017, the highest monthly mining production for the last 29 months, compared to 126,000 tonnes in January 2017.
-- Saffy shaft produced 991,000 tonnes in H1 2017, broadly in line with the comparative prior year period, demonstrating that the shaft is maintaining its steady state performance. This shaft has performed well and is now operating at full production and achieved an all-time record of 213,000 tonnes in March.
-- Rowland shaft produced 876,000 tonnes in H1 2017, an increase of 8.5% or 69,000 on the prior year, as this shaft is yielding the production benefits from improved safety performance and steadfast management.
-- 4B produced 682,000 tonnes in H1 2017, a decrease of 10.7% or 82,000 as a result of worse than anticipated geological conditions]
Generation 1 shafts
We remain on track with the closure of our high cost Generation 1 shafts, as seen from lower platinum prices. As such, tonnes mined from our Generation 1 shafts (Hossy, Newman, W1, E1, E2, E3 and Pandora (100%)) for the half year were 900,000 tonnes, down 21.8% on H1 2016. Most of these shafts are staffed by contractors, which provides better flexibility to retain or close them.
Newman shaft
A thorough technical assessment was conducted at the Newman shaft following the recent fatality. As a result, the shaft, is currently on under review whilst on care and maintenance.
Hossy shaft
Production at Hossy shaft was flat at 330,000 tonnes. Hossy shaft remains on track for placement on care and maintenance for the end of the year.
Pandora JV/E3 shaft
Management changes and recovery plans introduced at E3 shaft are showing progress with a quarter on quarter production improvement of 25% having been achieved during the period.
Ore Reserve Development
We closely monitor our Immediately Available Ore Reserve position, in order to protect our operational flexibility. As at 31 March 2017, the ore reserve position of the Marikana mining operations was 3.5 million square meters (September 2016: 3.8 million square meters), which represents an average of 20.6 months production (September 2016: 22.4 months), well above the industry benchmark of around 15 months.
As part of our drive to increase mining production, following the Q1 2017 Production Report, some non-critical development crews were moved to provide additional stoping and vamping crews in our core Generation 2 shafts. However, following the stoppage of Newman, contractor crews from this shaft are also being moved to stoping and vamping in the Generation 2 shafts, which is allowing some of the developments crews to move back to development. The development crews are expected to be back to development by the end of the year.
Summary of Immediately Available Ore Reserves (square meters millions)
31 Mar 2017 30 Sep 2016
m(2) million m(2) million
------------- -------------
Generation 2 2.6 2.9
------------- -------------
Generation 1 0.7 0.7
------------- -------------
Generation 3 (K4 shaft on care and maintenance) 0.2 0.2
------------- -------------
Total 3.5 3.8
------------- -------------
Production Losses
We have been encouraged that tonnes lost due to Section 54 safety stoppages at 194,000 tonnes for the first half of the year were lower than the prior year period of 234,000 tonnes, an improvement of 17%. While the duration of Section 54 safety stoppages continued to decrease, as experienced during the first quarter of FY2017, and the fourth quarter of 2016, the K3 and Newman fatalities resulted in an increase in tonnes lost to Section 54 safety stoppages in the second quarter.
There was an increase in Management Induced Safety Stoppages (MISS). Production lost due to MISS for the half year increased to 130,000 tonnes from 7,000 tonnes in the prior year period, reflecting our non-negotiable stance on safety. Safety is essential for good performance and remains our priority. We remain determined to better our overall safety performance and we continue to enhance our safety initiatives.
Most of these stoppages were at our K3 shaft where 133,000 tonnes were lost to Section 54 safety stoppages and 96,000 tonnes were lost to MISS.
H1 2017 H1 2016
Tonnes Tonnes
-------- --------
Section 54 Safety Stoppages 194,000 234,000
-------- --------
Management Induced Safety Stoppages 130,000 7,000
-------- --------
Total tonnes lost 324,000 241,000
-------- --------
Process Operations
Total tonnes milled in the period under review was 4.6 million tonnes, down 9% or 0.5 million tonnes, on H1 2016.
Underground milled head grade was 4.56 grammes per tonne, broadly in line with H1 2016. Concentrator recoveries for the half year remained excellent at 86.6%. Total Platinum-in-concentrate was 290,966 saleable ounces, 9.5% lower than H1 2016, reflecting the weak mining performance in the first four months of the year and closure of high cost production.
Total refined Platinum production for H1 2017 at 301,261 ounces was 13.7% or 47,624 ounces lower than H1 2016 for the same reasons. Refined Platinum production benefited from the smelter clean-up project, which released a further 10,295 Platinum ounces during the second quarter. Platinum and PGM sales for the six months period were 306,996 ounces, 15% lower than prior year period. PGM sales of 609,858 ounces were achieved, with a disproportionately higher proportion of Ruthenium in the mix of metal which arose as a result of stock releases during Quarter 1 and Quarter 2 following the stock build from the prior year which arose as a result of changes to the OPM refining process.
Our processing facilities operated reliably during the period. Number Two furnace will however be on a planned shut down for a Tap-hole Mickey Block overhaul in May. Overall output is not expected to be affected owing to capacity at other furnaces.
We continue with various initiatives to fill the pipeline and utilise the excess capacity within our processing facilities. Our toll treatment contract with Jubilee Platinum Plc commenced in March 2017 and is expected to deliver approximately 1,000 Platinum ounces per month once in full production.
Bulk Tailings Treatment Plant Update
On 18 August 2016, we announced that we had secured $50million in external funding for the low-cost Bulk Tailings Treatment ("BTT") project. The project is progressing within cost, scope and time and is expected to ramp up and reach full production during 2018. Once at steady-state, the project is expected to deliver the lowest cost ounces in the Lonmin portfolio, producing about 29,000 ounces of Platinum per year or some 55,000 ounces of PGM. The project is expected to be mined by a contractor over a seven-year period.
Cost of Production per PGM Ounce
Unit costs for the six months under review were R12,059 per PGM ounce, a 13% increase on H1 2016. The holidays in December typically result in unit costs peaking in the first half of the financial year, however during the period under review unit costs were also adversely impacted by the weak mining performance seen in the first four months of the period. Mining is where the majority of our costs are incurred and as such, the importance and impact of good mining production on unit costs is significant. This was illustrated by the unit cost of R9,695 per PGM ounce for the month of March 2017, on the back of strong mining production.
While we do not anticipate significant unit cost increases over the remainder of the year, all else being equal, due to the impact from the weak mining performance of the first four months of the year, we are revising our guidance for unit costs for the full year to between R11,300 and R11,800 per PGM ounce from the original guidance of between R10,800 and R11,300.
Shaft Head Cost Per Tonne and Per PGM Ounce
-- At K3, the shaft head cost per tonne and per PGM ounce was R1,032 and R9,057 respectively, an increase on H1 2016 of 18.9% and 24.6%, due to the poor mining performance at this shaft, for the first four months to 31 January 2017 [unit costs have stabilized at normal levels again during March and April].
-- At Rowland, the shaft head cost per tonne and PGM ounce at R938 and R7,466 respectively represented cost reduction on H1 2016 of 1.7% and 1.4%, reflecting the improved mining performance.
-- Saffy has become and remains one of our lowest cost Generation 2 shafts at R887 per tonne and R6,863 per PGM ounce. There was an increase on H1 2016 of 4.7% and 1.6% respectively, well within South Africa's inflation of 5.4%.
-- 4B, also a lower cost Generation 2 shaft at R834 per tonne and R7,878 per PGM ounce, increased cost per tonne on H1 2016 by 15.2% and 12.1% respectively, due to lower production as a result of the worse than planned geological conditions.
The cost per PGM ounce at the Generation 1 shafts at R7,599 was 3.1% lower than the Generation 2 shafts at R7,838 due to limited development costs as they do not require ore reserve development at these shafts.
4. Wage Settlement
On 31 October 2016, we announced our agreement with Association of Mineworkers and Construction Union on wages and conditions of service. The agreement, effective from 1 July 2016 to 30 June 2019, acknowledges the tough PGM market conditions while providing employees with a realistic and competitive outcome and was negotiated without any business interruptions, demonstrating advances made in this area. The impact of this agreement is an average annual increase of 7.6%.
5. Pandora Acquisition Update
On 11 November 2016, we announced that we had reached agreement to acquire Anglo American Platinum's (AAP) 42.5% interest in the Pandora Joint Venture. We have received AAP and Northam Limited's (Northam) respective consents for the transaction and have submitted the Merger Notification to the Competition Authorities and requisite application for Section 11 consent to the DMR. The transaction is subject to consent from our lending banks. We expect the transaction to complete by the end of the year.
We have also reached agreement with Northam to acquire their 7.5% interest in the Pandora Joint Venture for R45.6million ($3.5million) in cash.
On completion of these transactions, Lonmin will own 100% of Pandora. Full ownership of Pandora allows us to extend the mining at Saffy shaft further on strike east and west of the shaft and to also access the same Saffy ounces through Pandora, which will enable the deferment of the deepening of the shaft. The acquisition allows us to defer over R1.6 billion of allocated capital expenditure required for the further deepening of Saffy shaft over the next four years. and defer another R1 billion thereafter.
6. Balance Sheet Management
Liquidity at 31 March 2017 was $447 million comprising gross cash of $229 million and undrawn bank facilities of $218 million. After deducting the term loan of $154 million, (including interest) from the gross cash balance, net cash at 31 March 2017 was $75 million, up from $49 million as at 31 December 2016 and compared with net cash of $173 million $114 million at 30 September 2016 and 31 March 2016 respectively.
We remain attentive to the challenging operating environment. Our objective remains to be at least cash break-even after capital expenditure. As ever, we continue to have proactive engagement with our lending banks.
Our change in outlook on unit costs combined with the strengthening of the Rand against the Dollar on the balance sheet date has resulted in an impairment charge of $146 million. This reduced the headroom against the Tangible Net Worth covenant in banking facilities to $334 million. Adverse movements in key assumptions could result in an additional impairment which could impact the Company's compliance with the lending covenants. More detail is also available in the Financial Review section and note 1 to the accounts.
Capital Expenditure
Our strategy is to minimise capital expenditure whilst ensuring compliance with regulatory and safety standards and ensuring that the Immediately Available Ore Reserve position is maintained at the level necessary to support planned production at the Generation 2 shafts. Capital expenditure in H1 was limited to R612 million (around $45 million compared with R403 million (around $27 million) in the prior year period. Capital invested in the period included R111 million for the Rowland MK2 project.
As a result of the deferrals, we have reviewed and revised our capital expenditure guidance for the current year to between R1.4 billion and R1.5 billion from our original guidance of R1.8 billion, whilst minimising the near term impact on production. As in previous years, capital expenditure will be H2 weighted.
Summary of Capital Expenditure:
6 months to 6 months to 12 months to
31 Mar 2016 31 Mar 2017 30 Sep 2017
Revised Guidance
---------------------------- ------------- ------------- --- -----------------
Rm Rm Rm
---------------------------- ------------- ------------- --- -----------------
K3 106 103 172
Rowland 21 14 42
Rowland MK2 91 111 159
Saffy - 2 7
------------- ------------- -----------------
Generation 2 shafts 219 230 379
------------- ------------- -----------------
K4 7 5 12
Hossy 6 - -
------------- ------------- -----------------
Generation 1 & 3 shafts 13 5 13
Central and other mining 27 49 143
Total Mining 259 284 535
---------------------------- ------------- ------------- --- -----------------
Concentrators - Excl BTT 25 67 185
BTT 20 146 408
Smelting & Refining 64 45 110
------------- ------------- -----------------
Total Process 109 258 703
---------------------------- ------------- ------------- --- -----------------
Hostel / Infill Apartments 32 43 156
Other 3 27 37
Total 403 612 1430
============================ ============= ============= === =================
7. PGM Market Overview
The global economy's recovery may be a good indicator of when platinum prices will recover driven by fundamental demand. Price is ultimately the real indicator of the perceptions of supply, demand and stock levels, fuelled by lack of supplier discipline and investor sentiment. Lonmin is certainly doing its part in managing supply and we can but hope others will follow suit.
As a Company, we are driving market development as follows:
Jewellery: We continue to support the Platinum Guild International (PGI) focusing on specific initiatives to assist in making a difference in the near to mid-term in key markets. We have increased our support of The Platinum Incubator in South Africa and will focus on assisting the incubator to increase support to SMME's.
Industrial: We are pleased to be working with Thakadu Battery Materials (Pty) Ltd (Thakadu) on the flagship Black Industrialist Nickel Purification Project. Thakadu has made good progress and successfully completed the Definitive Feasibility Study (DFS). Their project next step is the completion of a detailed engineering design. Thakadu has independently secured equity funding and are progressing debt finance discussions with the Industrial Development Corporation (IDC). Execution of the project plan with the plant commissioning is expected at the end of 2018. Other projects include 3D Printing, Purified Nickel Sulphate and the production of PGM powders.
Jewellery Investment: We continue to support the World Platinum Investment Counsel initiatives for new investment Platinum products; most recent products conceived and supported include the Platinum Investment product by the Bullion Vault and the series of platinum coin and bars by the Royal Mint.
8. Management and Board Update
As announced on 6 March 2017, Ben Moolman resigned as Chief Operating Officer and as a Director for personal
reasons. We thank Ben for his contribution to Lonmin and wish him well in his future career.
Upon his resignation, I took charge of Ben's responsibilities and the General Managers at the Generation 2 shafts are now reporting directly to me. Mike da Costa, Executive Vice President: Business Support Office has taken responsibility for the management of all, and closure of some, of the Generation 1 shafts in addition to his Business Support Office responsibilities.
The relatively flat structure, changes in management routines and migration to operations that we have adopted are enabling us to focus on the delivery of our operational plan as outlined in our three year business plan, and is allowing us to maintain both operational and strategic focus.
9. Outlook
Months of hard work in partnership with the whole Lonmin team have succeeded in reversing the weak mining performance seen in the first four months of our financial year. Maintaining and improving production is essential for the sustainability of our business, especially in light of the low pricing environment. The recovery in mining performance since March has continued and we plan to build on that production platform. We will harness the improved relationships we have built with our workforce and the DMR and will continue to prioritise safety. Lonmin is now in a stronger position to deliver value to all stakeholders. We remain focused on managing the operational delivery.
10. Strategic Options
The operating environment remains tough and our operational strategy to be at least cash neutral by removing high cost ounces, improve production, reduce capital expenditure to the minimum required for the safe and efficient running of operations and maintaining operational and strategic flexibility remains appropriate.
We continue to review our portfolio of assets to ensure the focus remains on our core assets. As a result, we are carrying out a study on K4 to better understand our optionality with this shaft, and exploring the best way of optimising value from Limpopo, which has been on care and maintenance since 2009] and curtailing our exploration activities in Northern Ireland from FY2018.
We are relocating our South African operational headquarters from Johannesburg to Marikana in 2018, to enhance executive management support to operations. This is expected to have the consequential impact of generating further savings.
11. Guidance
The improvement in mining performance from February, through March and April, notwithstanding the recent unrest in our local communities that has impacted our Eastern Limb shafts, still supports maintaining our sales guidance at between 650,000 and 680,000 Platinum ounces for the full year on the back of improved mining production and smelter clean-up project.
Unit costs guidance for the full year is being revised to between R11,300 and R11,800 per PGM ounce from the original guidance of between R10,800 and R11,300, accounting for the weak mining performance to 31 January 2017.
Capital expenditure guidance is also being revised to between R1.4 billion and R1.5 billion from our original guidance of R1.8 billion.
12. Other
In acknowledgement of our shareholder register which reflects a significant South African holding (40/60 split between our South African and international shareholders), from next year, the Interim Results will be announced in Johannesburg. We will offer all our usual webcast facilities for London based analysts and investors wishing to join the presentation. We will continue to hold our Final Results presentation in London.
13. Conclusion
While I am pleased with the recovery in our performance since March, I am not yet satisfied that we have delivered what I know we can, and all of us at Lonmin recognize that the performance since March needs to continue to be. Our performance from March onwards demonstrates that, with relentless determination and energy, we can overcome the operational challenges. We are operating in a volatile and challenging environment but the Board, our employees, the management team and I will continue to focus on working to deliver the best result possible for all our stakeholders.
Ben Magara
Chief Executive Officer
14 May 2017
FINANCIAL REVIEW
Overview
Dollar PGM prices in H1 2017 were on average 8% higher than H1 2016 with the platinum price less volatile and ranging from $905 to $1,032 per ounce in the period in comparison to ranging from $816 to $1,020 per ounce in H1 2016. Palladium and Rhodium prices showed upwards trends through the period in comparison to downward trends in H1 2016.
PGM volumes sold were 13% lower than the prior year period. This was partly as planned due to the reduction of high cost production, however, production was also impacted by safety stoppages following fatalities and disappointing production in the first four months of the year.
Costs were well contained in Rand terms with the cost escalations offset by cost reductions. The cost reductions we achieved in H1 2017 amounted to R377 million (in FY15 money terms) which is pleasing when compared to the targeted reduction of R500 million for the year (in FY15 money terms) This brings the total cost reductions in 2016 and H1 2017 to R1.7 billion against the guidance of R1.8 billion in 2016 and 2017 (all in FY15 money terms).
However the Rand was on average 10% stronger against the Dollar when comparing period on period which resulted in an increase in costs in Dollar terms.
The cost of production per PGM ounce at R12,059 was 13% higher than H1 2016 driven by cost escalations and lower production despite the successful cost savings. Further details on unit costs can be found in the Operating Statistics section of the Report.
The operating loss for the period was $181 million including an impairment of $146 million (H1 2016 - a loss of $15 million). Excluding the impact of the impairment in H1 2017 the adjusted operating loss realised in the period was $35 million (H1 2016 - operating loss of $15 million). The depreciation charge was $16 million lower period on period due to the impact of the impairment in 2016 and the lower production levels. EBITDA for H1 2017 was $nil, a decrease of $36 million on H1 2016 as the increase in metal prices was more than offset by the stronger Rand and lower than planned productivity.
We typically see a net cash outflow in the first half of the year due to the impacts of public holidays, stock takes and maintenance work which is timed around these downtimes resulting in lower production. Net cash at 31 March 2017 at $75 million was $98 million lower than 30 September 2016. In the first quarter of the year the net cash outflow was $124 million due to seasonal working capital movements and low production. This partly reversed in the second quarter of the year with a net cash inflow of $26 million. The trading cash outflow for the half year period was $48 million, an improvement of $6 million on H1 2016 as a result of $24 million deferred revenue received in the period. After capital expenditure of $45 million in H1 2017 of which $11 million was for the Bulk Tailing Treatment project which was funded through a metal streaming transaction the free cash outflow for H1 2017 was $93 million of which $63 million related to working capital movements. We are continuing to take the steps required to work towards achieving our objective to fund the reduced capital expenditure from free cash flow.
Net cash at 31 March 2017 was $75 million being gross cash of $229 million offset by the drawn term loan of $154 million (including interest). Undrawn available debt facilities amounted to $218 million giving total liquidity of $447 million. The debt facilities expire in May 2020, assuming Lonmin exercises its option to extend by one year. As at 31 March 2017 the Company had adequate facilities in place.
Productivity assumptions planned at time of the 2015 Rights Issue are proving to be challenging which has placed upward pressure on our unit costs. We have therefore revised our cost guidance for the current year and have adjusted the productivity assumption in our value-in-use calculation used for impairment testing. At the same time we have made a downward revision to our platinum price outlook which was more than offset by an upward revision of prices for the other PGMs and base metals, especially palladium. The net impact of the change in these assumptions combined with the strengthening of the Rand against the US Dollar resulted in the value-in-use of our assets declining below the carrying value and resulted in an impairment charge of $146 million which is reflected in the financial statements.
The debt facilities available to the Group are subject to financial covenants, which include that the consolidated tangible net worth (TNW) of the Group will not be at any time less than $1,100 million. At 31 March 2017 the TNW of the Group was $1,434 million and the headroom in the TNW covenant was $334 million. As disclosed in note 1 to the financial statements adverse movements in key assumptions in the value-in-use modelling could result in an additional impairment. Should a further impairment in the future result in the TNW falling below $1,100 million this debt covenant would be breached which could reduce the liquidity of the Group. The external auditors in their review report draw attention to this material uncertainty. This risk has been flagged to the Group's lenders and is being managed proactively through regular engagements with them. The other debt covenants are well within thresholds and are not considered to be at risk.
The impairment testing uses the Rand:Dollar exchange rate on the balance sheet date in accordance with IAS 36. Given the volatility of the Rand against the Dollar there exists inherent uncertainty around what this assumption will be on the date of the next impairment review. Whilst there exists an inherent uncertainty in this regard the Directors consider that it remains appropriate to prepare the accounts on a going concern basis. All options available to the Group to improve viability and value creation are continuously reviewed.
Income Statement
The $36 million decrease between the EBITDA of $nil for the six months ended 31 March 2017 and EBITDA of $36 million for the six months ended 31 March 2016 is analysed below:
$m
H1 2016 EBITDA 36
PGM price 47
PGM volume (62)
PGM mix (18)
Base metals 4
------
Revenue changes (29)
South African operating cost reductions
(FY15 money terms and exchange rate) 26
South African one-off items in H1 2016 previously
disclosed as special (16)
Escalation on South African underlying costs
at CPI of 6.1% for FY17 and 6.5% for FY16 (26)
------
South African cost changes -
Non-South African one-off items in H1 2016
- Debt refinancing costs 10
Foreign exchange impact on cost, metal stock
and working capital (48)
Metal stock movement 47
------
H1 2017 EBITDA -
------
Revenue
Total revenue for the six months ended 31 March 2017 of $486 million reflects a decrease of $29 million compared to the prior year period.
The US Dollar PGM basket price (including by-products) increased by 8% compared to the H1 2016 average price, resulting in an increase in revenue of $47 million. It should be noted that whilst the US Dollar basket price increased compared to H1 2016, in Rand terms the basket price (including by-products) decreased by 1% driven by the stronger Rand. The average prices achieved on the key metals sold are shown below:
6 months to 6 months to
31 March 2017 31 March 2016
Platinum $/oz 960 905
Palladium $/oz 727 551
Rhodium $/oz 800 689
--------------- ---------------
PGM basket (including by-product revenue) $/oz 797 736
--------------- ---------------
Average FX rate ZAR/USD 13.56 15.02
Rand PGM basket (including by-product revenue) R/oz R10,852 R10,962
The PGM sales volume for the six months to 31 March 2017 was 13% lower compared to H1 2016, which had a negative impact on revenue of $62 million.
The mix of metals sold decreased revenue by $18 million mainly due to the higher proportion of Ruthenium sold in H1 2017 as a result of a one-off stock release following a change in the refining process. Base metal revenue increased by $4 million as a result of an increase in prices compared to H1 2016.
Costs
In Rand terms South African operating costs for H1 2017 at R6.8 billion were flat on H1 2016, excluding the benefit of one-off items in H1 2016, despite CPI at 6.1% and cost escalations above CPI for labour and utilities. The impact of the stronger Rand against the Dollar meant that in Dollar terms costs increased by $44 million to $504 million.
We guided to total cost reductions of R1.8 billion for the two financial years 2016 and 2017 in FY15 money terms. We reported cost savings of R1.3 billion in 2016 and for H1 2017, excluding two years of CPI to get back to FY15 money terms and one-off items in H1 2016 previously reported as special, we have achieved cost savings of R377 million as analysed below.
$m Rm
H1 2016 - South African operating costs (443) (6,573)
One-off items in H1 2016 (16) (239)
------ --------
H1 2016 - South African operating costs - adjusted (459) (6,812)
Cost reductions in 2015 money terms and exchange rate (Rand/USD 14.85):
------ --------
Underground mining 13 192
Opencast mining (1) (15)
Concentrating - (3)
Smelting and refining 1 16
Overhead, centralised services and other 8 115
Ore and concentrate purchases 5 72
26 377
Escalation, assuming South African CPI of 6.1% in 2016 and 6.5% in 2017 (26) (383)
------ --------
Translation losses on underlying costs due to movement in exchange rate (44)
H1 2017 - South African operating costs (504) (6,818)
------ --------
In FY15 money terms before CPI escalation, underground mining costs decreased by R192 million or 5% during the period driven by an 8% reduction in volumes mined combined with strict cost control which more than offset the above CPI labour cost increase of 7.6%. Opencast mining costs increased by R15 million as we extracted final ore from the opencast UG2 pit having previously stopped mining from the opencast Merensky pit. Concentrating costs were broadly flat (up R3 million) with volumes down 9%. Smelting and refining cost reductions were R16 million or 3% lower in FY15 money terms with PGM production down 15% period on period. Overheads reduced by R115 million or 17% largely due to a reduction in share-based incentive programmes for management. Ore and concentrate purchases decreased by R72 million period on period driven by lower volumes purchased.
One-off items in H1 2016 included the reversal of overprovision for restructuring and reorganisation costs of R313 million offset by a share-based payment charge of R74 million as employee share option schemes were adjusted to reflect the Rights Issue and share consolidation. These items were reported as special in 2016 and have been converted to FY15 money terms in this analysis.
Exchange rate impacts
The Rand strengthened by 10% against the US Dollar during the period averaging R13.56/$ in H1 2017 compared to an average of R15.02/$ in H1 2016 resulting in a $48 million negative impact on the underlying operating cost of sales.
6 months to 6 months to
31 March 2017 31 March 2016
R/$ R/$
Average exchange rate 13.56 15.02
Closing exchange rate 13.42 14.71
The stronger Rand resulted in underlying operating costs for H1 2017 being $44 million higher than H1 2016 and the movement in metals stock due to the weaker Rand was $18 million favourable to the prior year period. The exchange loss on working capital was $3 million in H1 2017 compared with $19 million in H1 2016 resulting in an adverse movement period on period of $22 million.
$m
Period on period Dollar cost increase due to impact of weaker Rand (44)
Reduction in metal stock movement due to impact of weaker Rand 18
Period on period reduction in exchange gains on working capital (22)
Net impact of exchange rate movements on operating profit (48)
-----
Metal stock movement
Excluding the impact of exchange rate movements the increase in metal stock of $47 million comprised an increase in metal stock of $10 million in H1 2017 and a decrease in metal stock of $37 million in H1 2016. The increase in H1 2017 was largely due to an increase in unit costs and a decrease of $5 million in the adjustment to bring the carrying value of metal stock down to net realisable value due to an increase in metal prices.
Depreciation and amortisation
Depreciation and amortisation decreased by $16 million period on period mainly due to the impairment of assets in September 2016. The reduced production also had an impact on the depreciation charge as depreciation is calculated on a units-of-production basis, spreading costs in relation to proven and probable reserves.
Impairment
At 31 March 2017 the value-in-use of the business units declined driven by a change in our outlook on unit costs and the stronger Rand against the Dollar on the balance sheet date. As a result an impairment charge of $146 million is reflected in the interim financial statements (H1 2016 - $nil). See note 11 to the financial statements for details.
The sensitivity of reasonably possible changes in assumptions may lead to a reduction or increase in the impairment charge as follows:
Assumption Movement in assumption Reversal of impairment / (Further impairment) ---------------------- ---------------------- --------------------------------------------- Metal prices +/-5% $407m / $(418)m ZAR:USD exchange rate -/+5% $318m / $(361)m Discount rate -/+100 basis points $173m / $(147)m Production +/-5% $352m / $(341)m
Net finance costs
6 months 6 months
to to
31 March 31 March
2017 2016
$m $m
Net bank interest and fees (6) (9)
Unwinding of discounting on
environmental provisions (5) (4)
Foreign exchange gains on
net cash/(debt) 4 9
Other - 2
---------- ----------
Net finance costs (7) (2)
HDSA receivable - accrued
interest 12 14
HDSA receivable - exchange
losses (12) (21)
HDSA receivable - impairment (8) -
Foreign exchange gains on
the Rights Issue proceeds - 5
Net finance costs (15) (4)
---------- ----------
Net finance costs increased by $3 million to $7 million for the six months ended 31 March 2017.
Net bank interest and fees incurred in the year at $6 million were $3 million lower than H1 2016 due to the impact of the strengthened balance sheet following the Rights Issue in December 2015 and accordingly the reduction in drawn debt facilities. Exchange gains on net cash in H1 2017 amounted to $4 million (H1 2016 - $9 million).
The Historically Disadvantaged South Africans (HDSA) receivable is the Sterling loan to Phembani Group (Proprietary) Limited (Phembani). In 2010, Shanduka Resources Group (Proprietary) Limited, our former BEE partner, acquired 50.03% of the shares in Incwala Resources Proprietary Limited (Incwala) which was part funded by a loan provided by Lonmin and which was subsequently restructured into a preference share structure comprising A and B class preference shares with the key terms of the preference shares including repayment provisions, mirroring the loan. The receivable is disclosed as a current asset as the preference shares are redeemable at any time on or after 8 July 2015 at Lonmin's request. It is not our current intention to request redemption as Phembani could forfeit the loan and the 50.03% that Phembani hold in Incwala would revert to Lonmin. Equity attributable to non-controlling interests amounted to a negative $199 million at 31 March 2017 and relates to Incwala's shareholding in Western Platinum Limited (WPL), Eastern Platinum Limited (EPL) and Akanani. In December 2015 Shanduka completed its merger with Phembani and the merged entity operates as Phembani Group (Proprietary) Limited.
The gross loan, excluding prior years impairments of $376 million, drew an exchange loss for the period of $12 million (H1 2016 - $21 million) due to the weakening of Sterling against the US Dollar. Prior years impairments are based in US Dollar, being the Group's functional currency, resulting in no exchange gains on the impairment. Accrued interest in the period amounted to $12 million (H1 2016 - $14 million). The loan was impaired by $8 million in the period due to the decline in the valuation of the Marikana cash generating unit (CGU). The receivable is secured on the HSDA's shareholding in Incwala, whose only asset of value is its underlying investment in WPL, EPL and Akanani. The value of the security is driven by the value of WPL, EPL and Akanani. The balance of the receivable at 31 March 2017 was $61 million (31 March 2016 - $95 million).
In the prior year period the $5 million foreign exchange gains on the Rights Issue comprise the gains on translation of advanced cash proceeds received prior to the effective date of the Rights Issue as well as hedging gains on forward exchange contracts entered into to minimise the risk of the exposure to currency fluctuations on the Rand and Pound Sterling proceeds.
Taxation
The tax charge for the six months ended 31 March 2017 was $15 million (H1 2016 - tax credit of $15 million) and comprised current tax of $4 million (H1 2016 - $4 million) and a deferred charge tax of $11 million (H1 2016 - deferred tax credit of $19 million). The deferred tax charge for H1 2017 included the derecognition of $28 million deferred tax assets for unredeemed capital expenditure in our subsidiary EPL as it does not seem likely that these will be utilised in the near term.
Cash Generation and Net Cash
The following table summarises the main components of the cash flow during the period:
6 months to 31 March
2017 2016
$m $m
Operating loss (181) (15)
Depreciation and amortisation 35 51
Impairment 146 -
Changes in working capital and provisions (61) (94)
Deferred revenue received 24 -
Other non-cash movements (1) 15
Cash flow generated from operations (38) (43)
Interest and finance costs (6) (11)
Tax paid (4) -
------------------------------------------------------------ -------- --------------
Trading cash inflow/(outflow) (48) (54)
Capital expenditure (45) (27)
Free cash outflow (93) (81)
Contributions to joint venture (1) (2)
Transfer to restricted funds for rehabilitation obligation (8) -
Net proceeds from equity issuance - 368
Cash inflow/(outflow) (102) 285
Opening net debt 173 (185)
Foreign exchange 4 14
Closing net cash/(debt) 75 114
-------------------------------------------------------------- -------- --------------
Trading cash inflow/(outflow) (cents per share) (16.9)c (24.9)c
-------------------------------------------------------------- -------- --------------
Free cash outflow (cents per share) (32.9)c (37.3)c
-------------------------------------------------------------- -------- --------------
Cash flow utilised in operations in the six months ended 31 March 2017 at $38 million improved by $5 million compared to $43 million utilised in H1 2016. The decrease in profitability in the current period was offset by $24 million of third party funding received for the bulk tailings project and working capital movements which at $(61) million were $33 million favourable to the prior year period.
The cash outflow on interest and finance costs decreased by $5 million as the proceeds from the Rights Issue in the prior year period were used to pay down the Rand debt facilities. Tax paid in the period was $4 million compared to nil in the prior year period due to the timing of provisional payments for the year.
Trading cash outflow for the period amounted to $48 million. The trading cash outflow per share was 16.9 cents for the six months ended 31 March 2017 (H1 2016 - 24.9 cents).
Capital expenditure at $45 million was $18 million higher than the prior year period largely due to $11 million spent on the construction of the Bulk Tailings Treatment plant for which we received $26 million third party funding in the period.
Barrie van der Merwe
Chief Financial Officer
Operating Statistics
6 months 6 months
to to
Units 31 March 31 March
2017 2016
----------------------- ------------------- ----------
Tonnes mined
(1) Generation 2 K3 shaft kt 1,173 1,318
Rowland shaft kt 876 807
Saffy shaft kt 991 990
4B shaft kt 682 763
------------------- ------------------------------------------------- ---------- ----------
Generation 2 kt 3,721 3,878
------------------- ------------------------------------------------- ---------- ----------
Generation 1 1B shaft kt 0 6
Hossy shaft kt 330 334
Newman shaft kt 50 245
W1 shaft kt 72 88
East 1 shaft kt 75 70
East 2 shaft kt 132 154
East 3 shaft kt 39 23
Pandora (100%)(2) kt 229 265
------------------- ------------------------------------------------- ---------- ----------
Generation 1 kt 927 1,185
------------------- ------------------------------------------------- ---------- ----------
Total underground kt 4,649 5,063
------------------- ------------------------------------------------- ---------- ----------
Opencast kt 38 10
------------------- ------------------------------------------------- ---------- ----------
Total tonnes
Lonmin (100%) mined (100%) kt 4,686 5,073
% tonnes mined
from UG2 reef
(100%) % 74,2% 76.2%
------------------- ------------------------------------------------- ---------- ----------
Lonmin (attributable) Tonnes mined kt 4,572 4,940
----------------------- ------------------- ------------------------- ---------- ----------
Ounces mined Lonmin excluding
(3) Pandora Pt ounces oz 280,745 303,367
Pandora (100%) Pt ounces oz 15,693 18,060
Lonmin Pt ounces oz 296,438 321,427
Lonmin excluding
Pandora PGM ounces oz 538,136 582,085
Pandora (100%) PGM ounces oz 31,047 35,425
Lonmin PGM ounces oz 569,183 617,510
----------------------- ------------------- ----------
Tonnes milled
(4) Marikana Underground kt 4,310 4,725
Opencast kt 49 50
Total kt 4,359 4,775
------------------- ------------------------------------------------- ---------- ----------
Pandora (5) Underground kt 229 265
----------------------- ------------------- ------------------------- ---------- ----------
Lonmin Platinum Underground kt 4,539 4,989
Opencast kt 49 50
Total kt 4,588 5,040
------------------- ------------------------------------------------- ---------- ----------
Milled head
grade (6) Lonmin Platinum Underground g/t 4.56 4.57
Opencast g/t 4.42 2.77
Total g/t 4.56 4.55
------------------- ------------------------------------------------- ---------- ----------
Concentrator Lonmin Platinum Underground % 86.8 86.8
recovery
rate (7) Opencast % 68.3 83.9
Total % 86.6 86.8
------------------- ------------------------------------------------- ---------- ----------
6 months 6 months
to to
Units 31 March 31 March
2017 2016
----------------------- ------------
Metals-in- Marikana Platinum oz 274,671 301,119
concentrate
(8) Palladium oz 126,868 140,126
Gold oz 6,915 7,223
Rhodium oz 38,933 43,649
Ruthenium oz 65,353 70,991
Iridium oz 13,535 13,984
Total PGMs oz 526,275 577,092
Pandora Platinum oz 15,693 18,060
Palladium oz 7,395 8,421
Gold oz 112 53
Rhodium oz 2,632 2,990
Ruthenium oz 4,319 4,920
Iridium oz 896 981
Total PGMs oz 31,047 35,425
------------ ----------------------------------------------- ---------- ----------
Lonmin Platinum
before Platinum oz 290,364 319,179
concentrate purchases Palladium oz 134,263 148,547
Gold oz 7,026 7,275
Rhodium oz 41,565 46,640
Ruthenium oz 69,673 75,912
Iridium oz 14,431 14,965
Total PGMs oz 557,322 612,517
------------ ----------------------------------------------- ---------- ----------
Concentrate purchases Platinum oz 603 2,265
Palladium oz 164 811
Gold oz 2 9
Rhodium oz 58 301
Ruthenium oz 99 473
Iridium oz 24 121
Total PGMs oz 950 3,980
------------ ----------------------------------------------- ---------- ----------
Lonmin Platinum Platinum oz 290,966 321,444
Palladium oz 134,427 149,358
Gold oz 7,028 7,284
Rhodium oz 41,624 46,941
Ruthenium oz 69,771 76,385
Iridium oz 14,456 15,086
Total PGMs oz 558,272 616,497
Nickel (9) MT 1,437 1,564
Copper (9) MT 893 945
------------ ----------------------------------------------- ---------- ----------
6 months 6 months
to to
Units 31 March 31 March
2017 2016
Lonmin refined
Refined metal Platinum oz 300,238 346,763
production production Palladium oz 133,131 155,097
Gold oz 7,678 9,528
Rhodium oz 42,593 53,770
Ruthenium oz 68,726 78,423
Iridium oz 14,683 20,441
Total PGMs oz 567,048 664,022
--------------- -------------------------------------------- ---------- ----------
Toll refined
metal Platinum oz 1,023 2,121
production Palladium oz 195 499
Gold oz 8 20
Rhodium oz 77 135
Ruthenium oz 236 565
Iridium oz 27 36
Total PGMs oz 1,566 3,376
--------------- -------------------------------------------- ---------- ----------
Total refined
PGMs Platinum oz 301,261 348,885
Palladium oz 133,326 155,597
Gold oz 7,685 9,547
Rhodium oz 42,670 53,906
Ruthenium oz 68,962 78,988
Iridium oz 14,710 20,476
Total PGMs oz 568,614 667,399
--------------- -------------------------------------------- ---------- ----------
Base metals Nickel (10) MT 1,477 1,743
Copper (10) MT 846 1,012
--------------- -------------------------------------------- ---------- ----------
Sales Lonmin Platinum Platinum oz 306,996 361,882
Palladium oz 132,516 162,744
Gold oz 7,345 10,645
Rhodium oz 50,997 61,161
Ruthenium oz 97,676 82,094
Iridium oz 14,329 20,742
Total PGMs oz 609,858 699,269
--------------- -------------------------------------------- ---------- ----------
Nickel (10) MT 1,728 1,781
Copper (10) MT 215 1,078
Chrome (10) MT 651,655 752,979
--------------- -------------------------------------------- ---------- ----------
Average prices Platinum $/oz 960 905
Palladium $/oz 727 551
Gold $/oz 1,207 1,363
Rhodium $/oz 800 689
Basket price
of PGMs (11) $/oz 745 697
Basket price
of PGMs (12) $/oz 797 736
Basket price
of PGMs (11) R/oz 10,129 10,394
Basket price
of PGMs (12) R/oz 10,852 10,962
Nickel (10) $/MT 8,643 6,946
Copper (10) $/MT 5,465 4,464
--------------- -------------------------------------------- ---------- ----------
Capital Rm 612 403
expenditure
(13) $m 45 27
------- ---------- ----------
Employees
and as at 31 March Employees # 24,922 25,543
contractors as at 31 March Contractors # 7,658 7,088
----------------- --------------- --------- ---------- ----------
6 months 6 months
to to
Units 31 March 31 March
2017 2016
---------------------- --------------------- ----------
m(2) per mining m(2)
Productivity employee K3 shaft /person 4.7 5.7
(Generation m(2)
2) (shaft head) 4B/1B shaft /person 6.5 7.5
m(2)
Rowland shaft /person 5.4 5.4
m(2)
Saffy shaft /person 5.0 5.4
--------------------- ------------------------------------------------ ---------- ----------
m(2)
Generation 2 /person 5.3 5.9
--------------------- ------------------------------------------------ ---------- ----------
m(2) per stoping m(2)
& white K3 shaft /crew 240.2 286.3
m(2)
area crew 4B/1B shaft /crew 330.5 386.2
m(2)
Rowland shaft /crew 327.4 318.5
m(2)
Saffy shaft /crew 280.8 278.1
--------------------- ------------------------------------------------ ---------- ----------
m(2)
Generation 2 /crew 284.6 308.2
--------------------- ------------------------------------------------ ---------- ----------
Exchange Average rate
rates(14) for period R/$ 13.56 15.02
GBP/$ 1.23 1.47
---------------------------------------------------------------------- ---------- ----------
Closing rate R/$ 13.42 14.71
GBP/$ 1.25 1.44
---------------------------------------------------------------------- ---------- ----------
Cost of
sales PGM operations Mining $m (331) (297)
segment Concentrating $m (59) (51)
Smelting and
refining (15) $m (52) (46)
Shared services $m (35) (26)
Management and
marketing services $m (8) (8)
Ore and concentrate
purchases $m (14) (17)
Limpopo mining $m - (1)
Royalties $m (2) (3)
Share based
payments $m - (10)
Other (16) $m - 17
Inventory movement $m 29 (37)
FX and Group
charges $m (9) 18
---------- ----------
Total PGM Operations
segment $m (484) (463)
---------- ----------
Exploration
- excluding
FX $m (3) (3)
Corporate - $m - -
excluding FX
Other (16) $m - (10)
FX $m - (4)
---------- ----------
$m (486) (479)
---------------------------------------------------------------------- ---------- ----------
PGM operations
segment Mining Rm (4,491) (4,424)
Concentrating Rm (803) (753)
Smelting and
refining (15) Rm (704) (681)
Shared services Rm (464) (384)
Management and
marketing
services Rm (114) (120)
Ore and concentrate
purchases Rm (193) (259)
Limpopo mining Rm (6) (8)
--------------------- ------------------------------------------------ ---------- ----------
6 months 6 months
to to
Units 31 March 31 March
2017 2016
--------------------- ----------------------- ----------
Cost of sales PGM operations ESOP & Community
(continued) trust
segment (continued) donations - (2)
Royalties Rm (39) (45)
Share based payments Rm (5) (152)
Other (16) Rm - 255
Inventory movement Rm 317 (351)
FX and group charges Rm 298 (1,017)
---------- ----------
Rm (6,203) (7,940)
---------------------------------------------------------------------------- ---------- ----------
Shaft head
unit costs Rand per
- tonne K3 shaft R/T (1,032) (868)
underground 4B/1B shaft R/T (834) (724)
operations Rowland shaft R/T (938) (954)
excluding K4 Saffy shaft R/T (887) (847)
----------------------- -------- ---------- ----------
Generation 2 R/T (935) (852)
----------------------- ---------------------------------------------------- ---------- ----------
Hossy shaft R/T (950) (965)
Newman shaft R/T (1,783) (852)
East 1 shaft R/T (899) (1,010)
East 2 shaft R/T (1,130) (928)
East 3 shaft &
ore purchases R/T (920) (921)
W1 shaft R/T (801) (914)
----------------------- ---------------------------------------------------- ---------- ----------
Generation 1 R/T (997) (925)
----------------------- ---------------------------------------------------- ---------- ----------
Total Underground R/T (947) (869)
----------------------- ---------------------------------------------------- ---------- ----------
Rand per
PGM oz K3 shaft R/oz (9,057) (7,270)
4B/1B shaft R/oz (7,878) (7,028)
Rowland shaft R/oz (7,466) (7,576)
Saffy shaft R/oz (6,863) (6,755)
----------------------- ---------------------------------------------------- ---------- ----------
Generation 2 R/oz (7,838) (7,158)
----------------------- ---------------------------------------------------- ---------- ----------
Hossy shaft R/oz (7,246) (7,526)
Newman shaft R/oz (13,210) (6,529)
East 1 shaft R/oz (6,866) (7,739)
East 2 shaft R/oz (8,358) (6,988)
East 3 shaft &
ore purchases R/oz (6,943) (6,970)
W1 shaft R/oz (6,892) (6,653)
----------------------- ---------------------------------------------------- ---------- ----------
Generation 1 R/oz (7,599) (7,056)
----------------------- ---------------------------------------------------- ---------- ----------
Total Underground R/oz (7,786) (7,132)
----------------------- ---------------------------------------------------- ---------- ----------
Cost of production Cost Mining Rm (4,491) (4,424)
(PGM operations Concentrating Rm (803) (753)
Smelting and refining
segment) (17) (15) Rm (704) (681)
Shared services Rm (464) (384)
Management and
marketing
services Rm (114) (120)
---------- ----------
Rm (6,576) (6,362)
---------------------------------------------------------------------------- ---------- ----------
6 months 6 months
to to
Units 31 March 31 March
2017 2016
-------------------- ------------------------ ----------
Cost of PGM saleable Mined ounces excluding
production ounces ore
(PGM operations purchases oz 538,136 582,085
segment) Metals-in-concentrate
(17) before
concentrate purchases oz 557,322 612,517
Refined ounces oz 568,614 667,399
Metals-in-concentrate
including
concentrate purchases oz 558,272 616,497
Cost of production Mining R/oz (8,346) (7,601)
Concentrating R/oz (1,441) (1,230)
Smelting and refining
(15) R/oz (1,238) (1,020)
Shared services R/oz (831) (623)
Management and
marketing
services R/oz (204) (194)
---------- ----------
R/oz (12,059) (10,668)
---------- ----------
% change in Mining % (9.8) n/a
cost of
production Concentrating % (17.2) n/a
Smelting and refining % (21.4) n/a
(15)
Shared services % (33.4) n/a
Management and
marketing
services % (5.3) n/a
---------- ----------
% (13.0) n/a
------------------------------------------------------------------------- ---------- ----------
Footnotes:
1 Reporting of shafts are in line with our operating strategy
for Generation 1 and Generation 2 shafts.
2 Pandora underground tonnes mined represents 100% of the
total tonnes mined on the Pandora joint venture of which
42.5% for October and November 2014 and 50% thereafter
is attributable to Lonmin.
3 Ounces mined have been calculated at achieved concentrator
recoveries and with Lonmin standard downstream processing
recoveries to present produced saleable ounces.
4 Tonnes milled exclude slag milling.
5 Lonmin purchases 100% of the ore produced by the Pandora
joint venture for onward processing which is included
in downstream operating statistics.
6 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).
7 Recovery rate in the concentrators is the total content
produced divided by the total content milled (excluding
slag).
8 Metals-in-concentrate have been calculated at Lonmin
standard downstream processing recoveries to present
produced saleable ounces.
9 Corresponds to contained base metals-in-concentrate.
10 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.
11 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.
12 As per note 11 but including revenue from base metals.
13 Capital expenditure is the aggregate of the purchase
of property, plant and equipment and intangible assets
(includes capital accruals and excludes capitalised interest).
14 Exchange rates are calculated using the market average
daily closing rate over the course of the period.
15 Comprises of Smelting and Refining costs as well as direct
Process Operations shared costs and group security costs.
16 Other includes costs such as Restructuring and Reorganisation
costs, Debt refinancing costs and Accelerated vesting
of the Share-Based payment expenses per IFRS 2. (Previously
reported as "Special costs".)
17 It should be noted that with the implementation of the
revised operating model, cost allocation between business
units has been changed and, therefore, whilst the total
is on a like-for-like basis, individual line items are
not totally comparable.
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 enterprise during that period; and any changes in the related party transactions described in the last annual report that could do so.
Brian Beamish Barrie van der Merwe
Chairman Chief Financial Officer
14 May 2017
INDEPENT 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 2017 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 Guidance 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 2017 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Emphasis of matter - Going concern
In forming our conclusion on the condensed set of financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 1 to the condensed set of financial statements concerning the Group's ability to continue as a going concern; in particular, the sensitivity of the carrying value of the Marikana CGU to movements in key assumptions which could in downside scenarios result in a banking covenant breach and the potential for withdrawal of facilities. These conditions, along with the other matters explained in note 1 of the condensed set of financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern. The condensed set of financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.
Adrian Wilcox
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London E14 5GL
14 May 2017
Consolidated income statement
for the 6 months to 31 March 2017
6 months 6 months
to to Year ended
31 March 31 March 30 September
2017 2016 2016
Notes $m $m $m
------------------------------------- ------ ---------- ---------- --------------
Revenue 2 486 515 1,118
------------------------------------- ------ ---------- ---------- --------------
EBITDA (i) 2 - 36 115
Depreciation and amortisation (35) (51) (102)
Impairment 10 (146) - (335)
Operating loss (ii) 2 (181) (15) (322)
Profit on disposal of joint venture - - 5
Finance income 3 19 33 55
Finance expenses 3 (34) (37) (88)
Share of loss of equity accounted
investment (3) (2) (5)
------------------------------------- ------ ---------- ---------- --------------
Loss before taxation (199) (21) (355)
Income tax (charge) / credit
(iii) 4 (15) 15 (45)
------------------------------------- ------ ---------- ---------- --------------
Loss for the period (214) (6) (400)
------------------------------------- ------ ---------- ---------- --------------
Attributable to:
- Equity shareholders of Lonmin
Plc (182) (4) (342)
- Non-controlling interests (32) (2) (58)
------------------------------------- ------ ---------- ---------- --------------
Basic and diluted loss per share
(iv) 5 (64.4)c (1.8)c (137.0)c
------------------------------------- ------ ---------- ---------- --------------
Footnotes:
i EBITDA is operating profit before depreciation, amortisation
and impairment of goodwill, intangibles and property,
plant and equipment.
ii Operating loss is defined as revenue less operating expenses
before finance income and expenses and share of loss
of equity accounted investment.
iii The income tax (charge) / credit substantially relates
to overseas taxation and includes exchange gains of $2
million (6 months to 31 March 2016 - exchange gains of
$5 million and year ended 30 September 2016 - exchange
gains of $5 million) as disclosed in note 4.
iv Diluted 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 loss
for the 6 months to 31 March 2017
6 months 6 months Year ended
to to 30 September
31 March 31 March 2016
2017 2016
Note $m $m $m
------------------------------------------ ----- ---------- ---------- --------------
Loss for the period (214) (6) (400)
Items that may be reclassified
subsequently to the income statement:
- Changes in fair value of available
for sale financial assets 7 1 (1) -
- Foreign exchange loss on retranslation - (1)
of equity accounted
investment -
- Deferred tax on items taken directly
to the statement of
comprehensive income - - (1)
------------------------------------------------- ---------- ---------- --------------
Total other comprehensive income
/ (loss) for the period 1 (2) (1)
------------------------------------------ ----- ---------- ---------- --------------
Total comprehensive loss for
the period (213) (8) (401)
------------------------------------------ ----- ---------- ---------- --------------
Attributable to:
- Equity shareholders of Lonmin
Plc (181) (6) (343)
- Non-controlling interests (32) (2) (58)
------------------------------------------ ----- ---------- ---------- --------------
(213) (8) (401)
------------------------------------------ ----- ---------- ---------- --------------
Consolidated statement of financial position
as at 31 March 2017
As at As at As at
31 March 31 March 30 September
2017 2016 2016
Notes $m $m $m
--------------------------------------- ------ ---------- ---------- --------------
Non-current assets
Intangible assets 63 94 74
Property, plant and equipment 1,033 1,455 1,158
Equity accounted investment 21 25 24
Royalty prepayment 37 38 37
Other financial assets 7 30 18 21
Deferred tax assets - 8 -
--------------------------------------- ------ ---------- ---------- --------------
1,184 1,638 1,314
--------------------------------------- ------ ---------- ---------- --------------
Current assets
Inventories 276 243 245
Trade and other receivables 59 85 67
Other financial assets 7 61 95 69
Cash and cash equivalents 9 229 264 323
--------------------------------------- ------ ---------- ---------- --------------
625 687 704
--------------------------------------- ------ ---------- ---------- --------------
Current liabilities
Trade and other payables (153) (143) (193)
Deferred revenue 8 - (14) -
Tax payable - (1) -
(153) (158) (193)
--------------------------------------- ------ ---------- ---------- --------------
Net current assets 472 529 511
--------------------------------------- ------ ---------- ---------- --------------
Non-current liabilities
Interest bearing loans and borrowings 9 (154) (150) (150)
Deferred tax liabilities (45) - (34)
Deferred royalty payment (1) (3) (3)
Deferred revenue 8 (33) - (9)
Provisions (134) (119) (127)
--------------------------------------- ------ ---------- ---------- --------------
(367) (272) (323)
--------------------------------------- ------ ---------- ---------- --------------
Net assets 1,289 1,895 1,502
--------------------------------------- ------ ---------- ---------- --------------
Capital and reserves
Share capital 586 586 586
Share premium 1,816 1,816 1,816
Other reserves 88 88 88
Accumulated loss (1,002) (484) (821)
--------------------------------------- ------ ---------- ---------- --------------
Attributable to equity shareholders
of Lonmin Plc 1,488 2,006 1,669
Attributable to non-controlling
interests (199) (111) (167)
--------------------------------------- ------ ---------- ---------- --------------
Total equity 1,289 1,895 1,502
--------------------------------------- ------ ---------- ---------- --------------
Consolidated statement of changes in equity
for the 6 months to 31 March 2017
Equity interest
--------------------------------------------------------
Called Share Non-
up
share premium Other controlling Total
Accumu-lated
reserves loss interests
capital account (i) (ii) Total (iii) equity
$m $m $m $m $m $m $m
At 1 October 2016 586 1,816 88 (821) 1,669 (167) 1,502
Loss for the period - - - (182) (182) (32) (214)
Total other comprehensive
income: - - - 1 1 - 1
--------- --------- ---------- -------------- ------ ------------- --------
- Change in fair value
of available for sale
financial
assets - - - 1 1 - 1
At 31 March 2017 586 1,816 88 (1,002) 1,488 (199) 1,289
------------------------------------------------------------ --------- --------- ---------- -------------- ------ ------------- --------
At 1 October 2015 586 1,448 88 (493) 1,629 (109) 1,520
Loss for the period - - - (4) (4) (2) (6)
Total other comprehensive
expense: - - - (2) (2) - (2)
--------- --------- ---------- -------------- ------ ------------- --------
* Change in fair value of available for sale financial
assets - - - (1) (1) - (1)
* Foreign exchange loss on retranslation of equity
accounted investment - - - (1) (1) - (1)
Transactions with owners,
recognised directly in
equity: - 368 - 15 383 - 383
--------- --------- ---------- -------------- ------ ------------- --------
* Share-based payments - - - 15 15 - 15
* Share capital and share premium recognised on
equity issuance 395 - - 395 - 395
* Equity issue costs charged to share premium - (27) - - (27) - (27)
--------- --------- ---------- -------------- ------ ------------- --------
At 31 March 2016 586 1,816 88 (484) 2,006 (111) 1,895
------------------------------------------------------------ --------- --------- ---------- -------------- ------ ------------- --------
At 1 April 2016 586 1,816 88 (484) 2,006 (111) 1,895
Loss for the period - - - (338) (338) (56) (394)
Total other comprehensive
income: - - - 1 1 - 1
--------- --------- ---------- -------------- ------ ------------- --------
- Change in fair value
of available for sale
financial
assets - - - 1 1 - 1
- Foreign exchange loss
on retranslation of equity
accounted investment - - - 1 1 - 1
- Deferred tax on items
taken directly to the
statement of comprehensive
income - - - (1) (1) - (1)
--------- --------- ---------- -------------- ------ ------------- --------
At 30 September 2016 586 1,816 88 (821) 1,669 (167) 1,502
------------------------------------------------------------ --------- --------- ---------- -------------- ------ ------------- --------
Footnotes:
i Other reserves at 31 March 2017 represent the capital
redemption reserve of $88 million (31 March 2016 and 30
September 2016 - $88 million).
ii Accumulated loss include $1 million of accumulated credits
in respect of fair value movements on available for sale
financial assets (31 March 2016 - $1 million debit and
30 September 2016 - $nil) and a $17 million debit of accumulated
exchange on retranslation of equity accounted investments
(31 March 2016 - $18 million and 30 September 2016 - $17
million).
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 Proprietary Limited.
No advance dividends were made by WPL, a subsidiary of
Lonmin Plc, to Incwala Platinum Proprietary Limited (IP)
during the period under review (6 months to 31 March 2016
- $nil and for the year ended 30 September 2016 - $nil).
IP is a substantial shareholder in the Company's principal
operating subsidiaries. Total advance dividends made between
2009 and 2015 amounted to $135 million (R1,309 million).
IP has authorised WPL to recover these amounts by reducing
future dividends that would otherwise be payable to all
shareholders.
These advance dividends are adjusted for in the non-controlling
interest of the Group.
Consolidated statement of cash flows
for the 6 months to 31 March 2017
6 months 6 months Year ended
to to 30 September
31 March 31 March 2016
2017 2016
Notes $m $m $m
--------------------------------------- ------ ---------- ---------- --------------
Loss for the period (214) (6) (400)
Taxation 15 (15) 45
Share of loss of equity accounted
investment 3 2 5
Finance income 3 (19) (33) (55)
Finance expenses 3 34 37 88
Profit on disposal of joint
venture - - (5)
Non-cash movement on deferred
revenue 8 (2) (9) (23)
Depreciation and amortisation 35 51 102
Impairment 146 - 335
Change in inventories (31) 38 36
Change in trade and other receivables 8 (11) (4)
Change in trade and other payables (40) (65) (15)
Change in provisions 2 (47) (51)
Deferred revenue received 8 26 - 9
Share-based payments - 15 15
Other movements (1) - -
Cash (outflow) / inflow from
operations (38) (43) 82
Interest received 3 5 6
Interest and bank fees paid (9) (16) (20)
Tax paid (4) - (10)
--------------------------------------- ------ ---------- ---------- --------------
Cash (outflow) / inflow from
operating activities (48) (54) 58
--------------------------------------- ------ ---------- ---------- --------------
Cash flow from investing activities
Contribution to joint venture (1) (2) (3)
Proceeds on disposal of joint
venture - - 5
Additions to other financial (8) - -
assets
Purchase of property, plant
and equipment (44) (27) (87)
Purchase of intangible assets (1) - (2)
Cash used in investing activities (54) (29) (87)
--------------------------------------- ------ ---------- ---------- --------------
Cash flow from financing activities
Repayment of current borrowings 9 - (505) (506)
Proceeds from non-current borrowings 9 4 150 150
Proceeds from equity issuance - 395 395
Costs of issuing shares - (27) (27)
Profit on forward exchange
contracts on equity issuance - 5 5
Cash inflow from financing
activities 4 18 17
--------------------------------------- ------ ---------- ---------- --------------
Decrease in cash and cash equivalents 9 (98) (65) (12)
Opening cash and cash equivalents 9 323 320 320
Effect of foreign exchange
rate changes 9 4 9 15
--------------------------------------- ------ ---------- ---------- --------------
Closing cash and cash equivalents 9 229 264 323
--------------------------------------- ------ ---------- ---------- --------------
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 2017 comprise the Company and its subsidiaries (together referred to as the Group) and the Group's interest in its equity accounted investment.
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 2016, 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 2016.
The comparative figures for the financial year ended 30 September 2016 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) did not contain a reference to a matter to which the auditors 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 2016 are available upon request from the Company's registered office at Connaught House, 5th Floor, 1-3 Mount Street, London, W1K 3NB.
These condensed consolidated interim financial statements were approved by the Board of Directors on 12 May 2017.
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 2017.
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 debt facilities available to the Group are summarised as follows:
- Revolving credit facilities totalling $71 million and a $150 million term loan, at a Lonmin Plc level.
- Revolving credit facility totalling R1,980 million, at Western Platinum Limited (WPL) level.
At 31 March 2017 the term loan of $150 million was fully drawn and the Group had gross cash of $229 million. This capital structure places the Group in a strong financial position to ride the normal working capital cycles while providing a buffer to withstand the effects of operational shocks that the business may face. The financial performance of the Group is also 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 PGM commodity prices and the ZAR / USD exchange rate.
In assessing the Group's ability to continue as a going concern, the Directors have prepared cash flow forecasts for a period in excess of 12 months. Various scenarios have been considered to test the Group's resilience against operational risks including:
- Adverse movements in PGM commodity prices and ZAR/ USD exchange rate or a combination thereof;
- Failure to meet forecast production targets.
The Directors have concluded that the Group's capital structure provides sufficient headroom to cushion against downside operational risks and minimises the risk of breaching debt covenants.
Given the challenging market conditions for the platinum industry the Board established sub-committee in 2016 to oversee strategy development and execution which meets more regularly than the full Board. This ensures that all options available to the Group to improve viability and value creation are continuously reviewed. This includes consideration of all strategic options ranging from business structure through to merger, debt restructuring, sale and acquisition opportunities.
The debt facilities available to the Group are subject to financial covenants which include that the consolidated tangible net worth (TNW) of the Group will not be at any time less than $1,100 million. At 31 March 2017 the TNW of the Group was $1,434 million and the headroom in the TNW covenant was $334 million.
As disclosed in the impairment review in note 10, adverse movements in key assumptions in the value in use modelling could result in an additional impairment which would reduce the Group's TNW. These assumptions are kept under review and are specifically considered by the Board. Should a further impairment result in the TNW falling below $1,100 million this debt covenant would be breached which could reduce the debt facilities available to the Group.
The sensitivity of the Marikana CGU to reasonably possible changes in assumptions may lead to a reduction or increase in the impairment charge as follows:
Assumption Movement in assumption Reversal of
Impairment /
(further impairment)
---------------------------- ----------------------- ----------------------
Metal prices (i) +/- 5% $407m / ($418m)
ZAR:USD exchange rate (ii) -/+ 5% $318m / ($361m)
Discount rate (ii) -/+ 100 basis points $173m / ($147m)
Production (i) +/- 5% $352m / ($341m)
---------------------------- ----------------------- ----------------------
Footnotes:
i Over the period of the discounted cash flow model. ii As at the reporting date.
The potential impact of changes in assumptions arising from matters outside the Group's control which are used to calculate the value-in-use of the Group's assets may result in a further impairment charge which could give rise to a breach of the Group's financial covenants and absent a change in those covenants, the potential loss of its banking facilities. This eventuality would require a substantial and difficult adjustment to the Group's operations and the further curtailment of capital expenditure, which represent a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern such that the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.
Nevertheless, based on the Group's expectation of the assumptions used in the impairment review the Directors believe that the Group will continue to have adequate financial resources to meet obligations as they fall due and comply with its financial covenants and accordingly have formed a judgement that 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 of preparation is inappropriate.
New standards and amendments in the period
The following IFRSs have been adopted in these condensed consolidated financial statements. The application of these IFRSs have not had any material impact on the amounts reported for the current and prior periods.
- Annual Improvements to IFRSs 2012-2014 cycle - amendments to IFRS 5, 7 and IAS 19, 34. - Joint Arrangements - amendments to IFRS 11 - Presentation of financial statements - amendments to IAS 1 - Property, Plant and Equipment - amendments to IAS 16 - Investment in Associates and Joint Ventures - amendments to IAS 28 - Intangible assets - amendments to IAS 38
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
The Group has not early adopted any standard, interpretation or amendment that was issued, but not yet effective. The Group will consider the impact on the financial statements of relevant forthcoming standards during the coming year, including IFRS 15 - Revenue from Contracts with Customers, IFRS 16 - Leases and IFRS 9 - Financial Instruments.
2 Segmental analysis
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. This segment also includes exploration and evaluation activities involved in the discovery or identification of new PGM deposits and the evaluation through pre-feasibility of the economic viability of newly discovered PGM deposits. Currently exploration activities occur on a worldwide basis and evaluation projects are based in South Africa. 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.
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.
No operating segments have been aggregated. Operating segments have consistently adopted the consolidated basis of accounting and there are no differences in measurement applied.
6 months to 31 March 2017
-------------------------------------------
PGM
Operations Intersegment
Segment Other Adjustments Total
$m $m $m $m
-----------------------------------
Revenue (external sales by
product):
Platinum 295 - - 295
Palladium 96 - - 96
Gold 9 - - 9
Rhodium 41 - - 41
Ruthenium 3 - - 3
Iridium 10 - - 10
----------------------------------- ------------ ------ ------------- ------
PGMs 454 - - 454
Nickel 15 - - 15
Copper 1 - - 1
Chrome 16 - - 16
----------------------------------- ------------ ------ ------------- ------
486 - - 486
----------------------------------- ------------ ------ ------------- ------
EBITDA (i) - - - -
Depreciation, amortisation
and impairment (181) - - (181)
----------------------------------- ------------ ------ ------------- ------
Operating loss (i) (181) - - (181)
Finance income 9 37 (27) 19
Finance expenses (ii) (34) (27) 27 (34)
Share of loss of equity accounted
investment (3) - - (3)
----------------------------------- ------------ ------ ------------- ------
(Loss) / profit before taxation (209) 10 - (199)
Income tax credit (15) - - (15)
----------------------------------- ------------ ------ ------------- ------
(Loss) / profit after taxation (224) 10 - (214)
----------------------------------- ------------ ------ ------------- ------
Total assets (iii) 1,765 1,809 (1,765) 1,809
Total liabilities (2,099) (186) 1,765 (520)
----------------------------------- ------------ ------ ------------- ------
Net assets / (liabilities) (334) 1,623 - 1,289
----------------------------------- ------------ ------ ------------- ------
Share of net assets of equity
accounted investment 21 - - 21
Additions to property, plant,
equipment and intangibles (45) - - (45)
----------------------------------- ------------ ------ ------------- ------
6 months to 31 March 2016
-------------------------------------------
PGM
Operations Intersegment
Segment Other Adjustments Total
$m $m $m $m
---------------------------------------
Revenue (external sales by
product):
Platinum 327 - - 327
Palladium 90 - - 90
Gold 15 - - 15
Rhodium 42 - - 42
Ruthenium 3 - - 3
Iridium 11 - - 11
--------------------------------------- ------------ ------ ------------- ------
PGMs 488 - - 488
Nickel 12 - - 12
Copper 5 - - 5
Chrome 10 - - 10
--------------------------------------- ------------ ------ ------------- ------
515 - - 515
--------------------------------------- ------------ ------ ------------- ------
EBITDA / (LBITDA) (i) 52 (16) - 36
Depreciation and amortisation (51) - - (51)
--------------------------------------- ------------ ------ ------------- ------
Operating (loss) / profit (i) 1 (16) - (15)
Finance income 15 47 (29) 33
Finance expenses (ii) (37) (29) 29 (37)
Share of loss of equity accounted
investment (2) - - (2)
--------------------------------------- ------------ ------ ------------- ------
(Loss) / profit before taxation (23) 2 - (21)
Income tax credit 15 - - 15
--------------------------------------- ------------ ------ ------------- ------
(Loss) / profit after taxation (8) 2 - (6)
--------------------------------------- ------------ ------ ------------- ------
Total assets (iii) 2,219 1,800 (1,694) 2,325
Total liabilities (1,945) (179) 1,694 (430)
--------------------------------------- ------------ ------ ------------- ------
Net assets 274 1,621 - 1,895
--------------------------------------- ------------ ------ ------------- ------
Share of net assets of equity
accounted investment 25 - - 25
Additions to property, plant,
equipment and intangibles (27) - - (27)
Material non-cash items - share-based
payments 14 1 - 15
--------------------------------------- ------------ ------ ------------- ------
Year ended 30 September 2016
-------------------------------------------
PGM
Operations Intersegment
Segment Other Adjustments Total
$m $m $m $m
---------------------------------------
Revenue (external sales by
product):
Platinum 720 - - 720
Palladium 197 - - 197
Gold 30 - - 30
Rhodium 82 - - 82
Ruthenium 5 - - 5
Iridium 25 - - 25
--------------------------------------- ------------ ------ ------------- ------
PGMs 1,059 - - 1,059
Nickel 28 - - 28
Copper 10 - - 10
Chrome 21 - - 21
--------------------------------------- ------------ ------ ------------- ------
1,118 - - 1,118
--------------------------------------- ------------ ------ ------------- ------
EBITDA / (LBITDA) (i) 130 (15) - 115
Depreciation, amortisation
and impairment (437) - - (437)
--------------------------------------- ------------ ------ ------------- ------
Operating loss (i) (307) (15) - (322)
Profit on disposal of joint
venture 5 - - 5
Finance income 25 81 (51) 55
Finance expenses (ii) (66) (73) 51 (88)
Share of loss of equity accounted
investment (5) - - (5)
--------------------------------------- ------------ ------ ------------- ------
Loss before taxation (348) (7) - (355) Income tax charge (45) - - (45) --------------------------------------- ------------ ------ ------------- ------ Loss after taxation (393) (7) - (400) --------------------------------------- ------------ ------ ------------- ------ Total assets (iii) 1,952 1,796 (1,730) 2,018 Total liabilities (2,062) (184) 1,730 (516) --------------------------------------- ------------ ------ ------------- ------ Net assets / (liabilities) (110) 1,612 - 1,502 --------------------------------------- ------------ ------ ------------- ------ Share of net assets of equity accounted investment 24 - - 24 Additions to property, plant, equipment and intangibles 98 - - 98 Material non-cash items - share-based payments 15 - - 15 --------------------------------------- ------------ ------ ------------- ------
Revenue by destination is analysed by geographical area below:
6 months to 6 months to Year ended
30 September
31 March 2017 31 March 2016 2016
$m $m $m
-------------- --------------- --------------- --------------
The Americas 221 61 508
Asia 111 106 215
Europe 113 236 338
South Africa 41 112 57
486 515 1,118
-------------- --------------- --------------- --------------
The Group's revenues are all derived from the PGM Operations segment. This segment has three major customers who respectively contributed 42% ($203 million), 22% ($109 million) and 18% ($87 million) of revenue in the six months to 31 March 2017, 43% ($221 million), 18% ($94 million) and 17% ($87 million) in the six months to 31 March 2016 and 41% ($455 million), 19% ($211 million) and 19% ($209 million) in the year ended 30 September 2016.
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 arrangements.
Non-current assets (excluding financial instruments and deferred tax assets) of $1,154 million (31 March 2016 - $1,612 million and 30 September 2016 - $1,291 million) are all situated in South Africa.
Footnotes:
EBITDA / (LBITDA) and operating (loss) / profit are the
i key profit measures used by management.
ii The impairment of the HDSA receivable of $8 million (31
March 2016 and 30 September 2016 - $nil) and of non-financial
assets of $146 million (31 March 2016 - $nil, 30 September
2016 - $335 million) are included under finance expenses
and impairment respectively. The HDSA receivable forms
part of the "Other" segment. The impairment of non-financial
assets is all allocated to the PGM Operations segment.
iii The assets under "Other" include the HDSA receivable
of $61 million (31 March 2016 - $95 million and 30 September
2016 - $69 million) and intercompany receivables of $1,684
million (31 March 2016 - $1,694 million and 30 September
2016 - $1,658 million). Available for sale financial
assets of $8 million (31 March 2016 - $6 million and
30 September 2016 - $7 million) form part of the "Other"
segment and the balance of $4 million (31 March 2016
- $4 million and 30 September 2016 - $4 million) forms
part of the PGM Operations segment.
3 Net finance expenses
6 months 6 months
to to Year ended
31 March 31 March 30 September
2017 2016 2016
------------------------------------------
$m $m $m
------------------------------------------ ---------- ---------- --------------
Finance income: 19 33 55
---------- ---------- --------------
- Interest receivable on cash
and cash equivalents 3 4 7
- Foreign exchange gains on net
cash / (debt) (i) 4 9 15
- Interest accrued from HDSA
receivable 12 14 27
- Gain on retranslation and forward
exchange contracts in respect
of Rights Issue - 5 5
- Dividend received from investment - 1 1
---------- ---------- --------------
Finance expenses: (34) (37) (88)
---------- ---------- --------------
- Interest payable on bank loans
and overdrafts (5) (10) (14)
- Bank fees (4) (2) (4)
- Unwinding of discount on environmental
provisions (5) (4) (9)
- Foreign exchange loss on HDSA
receivable (12) (21) (60)
- Impairment of HDSA receivable -
(note 7) (8) -
- Unamortised bank fees realised
on settlement of old loan facility - (1) (1)
- Capitalised interest (ii) - 1 1
- Other finance expenses - - (1)
Net finance expenses (15) (4) (33)
------------------------------------------ ---------- ---------- --------------
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 Interest expenses incurred have been capitalised on a
Group basis to the extent that there is an appropriate
qualifying asset. No interest has been capitalised for
the period to 31 March 2017. The weighted average interest
rate used by the Group for capitalisation for the 6 months
to 31 March 2016 was 1.9% and 4.0% for the year ended
30 September 2016.
4 Taxation
6 months 6 months
to to Year ended
31 March 31 March 30 September
2017 2016 2016
$m $m $m
----------------------------------------- ---------- ---------- --------------
Current tax charge:
United Kingdom tax expense
- Current tax expense at 21% (March
2016 - 21%, September 2016 - 21%)(i) - - -
Overseas current tax expense at 28%
(2016 - 28%) 4 4 19
---------- ---------- --------------
- Corporate tax expense - current
year 4 4 8
- Adjusted in respect of prior years - - 11
---------- --------------
Total current tax charge 4 4 19
----------------------------------------- ---------- ---------- --------------
Deferred tax charge / (credit):
Deferred tax charge / (credit) -
UK and overseas 11 (19) 26
---------- ---------- --------------
- Origination and reversal of temporary
differences 8 (14) 13
- Adjustment in respect of prior
years 1 - 18
- Foreign exchange revaluation on
deferred taxation (ii) 2 (5) (5)
---------- --------------
Total deferred tax charge / (credit) 11 (19) 26
----------------------------------------- ---------- ---------- --------------
Total tax charge / (credit) 15 (15) 45
========================================= ========== ========== ==============
Effective tax rate (8%) 71% (13%)
----------------------------------------- ---------- ---------- --------------
A reconciliation of the standard tax charge / (credit) to the actual tax charge / (credit) 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 2016 2016
2017 2017 2016 2016
% $m % $m % $m
-------------------------- ---------- ---------- ---------- ---------- -------------- --------------
Tax credit on loss
at standard tax
rate 28 (56) 28 (6) 28 (99)
Tax effect of:
- Unutilised losses
(iii) 1 (2) 5 (1) (18) 65
- Foreign exchange
impacts on
taxable profits (5) 9 (24) 5 (10) 34
- Adjustment in
respect of prior
years (18) 35 - - (8) 29
- Disallowed expenditure (12) 26 43 (9) (6) 23
- Expenses not
subject to tax (1) 1 (5) 1 - (2)
- Foreign exchange
revaluation on
deferred tax (1) 2 24 (5) 1 (5)
-------------------------- ---------- ---------- ---------- ---------- -------------- --------------
Actual tax charge
/ (credit) (8) 15 71 (15) (13) 45
-------------------------- ---------- ---------- ---------- ---------- -------------- --------------
The Group's primary operations are based in South Africa.
The South African statutory tax rate is 28% (2016 - 28%).
Lonmin Plc operates a branch in South Africa which is subject
to a tax rate of 28% on branch profits (2016 - 28%). The
aggregated standard tax rate for the Group is 28% (2016
- 28%). The dividend withholding tax rate is 15% (2016
- 15%). Dividends payable by the South African companies
to Lonmin Plc are subject to a 5% withholding tax benefitting
from double taxation agreements.
Footnotes:
i Effective from 1 April 2017 the United Kingdom tax rate
changed from 20% to 19% and will change from 19% to 18%
from 1 April 2020. This does not materially impact the
Group's recognised 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 2017 is
$69 million (31 March 2016 - $39 million, 30 September
2016 - $62 million).
iii Unutilised losses reflect losses generated in entities
for which no deferred tax asset 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.
5 Loss per share
Loss per share (LPS) has been calculated on the loss for
the period attributable to equity shareholders amounting
to $182 million (6 months to 31 March 2016 - loss of $4
million and year ended 30 September 2016 - loss of $342
million) using a weighted average number of 282.4 million
ordinary shares in issue for the 6 months to 31 March 2017
(6 months to 31 March 2016 - 217.2 million ordinary shares
and year ended 30 September 2016 - 249.7 million ordinary
shares).
Diluted 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 6 months to 31 March 2017 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 6 months to 31
March March Year ended 30
2017 2016 September 2016
----------------------------- ----------------------------- ---------------------------
Loss Loss Loss
for Number Per for Number Per for Number Per
the of share the of share the of share
period shares amount period shares amount year shares amount
$m millions cents $m millions cents $m millions cents
---------- -------- --------- -------- -------- --------- -------- ------ --------- --------
Basic &
diluted
LPS (182) 282.4 (64.4) (4) 217.2 (1.8) (342) 249.7 (137.0)
---------- -------- --------- -------- -------- --------- -------- ------ --------- --------
Headline loss and the resultant headline 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 Year ended
31 March 31 March 30 September
2017 2016 2016
---------------------------------
$m $m $m
--------------------------------- ---------- ---------- --------------
Loss attributable to ordinary
shareholders (IAS 33 earnings) (182) (4) (342)
Add back profit on disposal of
joint venture - (5)
Add back impairment of assets 146 - 335
Tax related to the above items 20 - (64)
Non-controlling interests (23) - (37)
Headline loss (39) (4) (113)
--------------------------------- ---------- ---------- --------------
6 months to 31 6 months to 31
March March Year ended 30
2017 2016 September 2016
----------------------------- ----------------------------- ---------------------------
Loss Loss Loss
for Number Per for Number Per for Number Per
the of share the of share the of share
period shares amount period shares amount year shares amount
$m millions cents $m millions cents $m millions cents
------------ -------- --------- -------- -------- --------- -------- ------ --------- --------
Headline
& diluted
LPS (39) 282.4 (13.8) (4) 217.2 (1.8) (113) 249.7 (45.3)
------------ -------- --------- -------- -------- --------- -------- ------ --------- --------
6 Dividends
No dividends were declared during the period (6 months to 31 March 2016 and year ended 30 September 2016 - $nil).
7 Other financial assets
Restricted Available
cash for sale HDSA receivable Total
$m $m $m $m
------------------------- ----------- ---------- ---------------- ------
At 1 October 2016 10 11 69 90
Additions 6 - - 6
Interest accrued 1 - 12 13
Movement in fair value - 1 - 1
Foreign exchange losses 1 - (12) (11)
Impairment loss - - (8) (8)
------------------------- ----------- ---------- ---------------- ------
At 31 March 2017 18 12 61 91
------------------------- ----------- ---------- ---------------- ------
Restricted Available
cash for sale HDSA receivable Total
$m $m $m $m
------------------------- ----------- ---------- ---------------- ------
At 1 April 2016 8 10 95 113
Interest accrued 2 - 13 15
Movement in fair value - 1 - 1
Foreign exchange losses - - (39) (39)
------------------------- ----------- ---------- ---------------- ------
At 30 September 2016 10 11 69 90
------------------------- ----------- ---------- ---------------- ------
Restricted Available
cash for sale HDSA receivable Total
$m $m $m $m
------------------------- ----------- ---------- ---------------- ------
At 1 October 2015 8 11 102 121
Interest accrued - - 14 14
Movement in fair value - (1) - (1)
Foreign exchange losses - - (21) (21)
------------------------- ----------- ---------- ---------------- ------
At 31 March 2016 8 10 95 113
------------------------- ----------- ---------- ---------------- ------
6 months 6 months
to to Year ended
31 March 31 March 30 September
2017 2016 2016
$m $m $m
------------------------ ---------- ---------- --------------
Current assets
------------------------ ---------- ---------- --------------
Other financial assets 61 95 69
========================= ========== ========== ==============
Non-current assets
------------------------ ---------- ---------- --------------
Other financial assets 30 18 21
========================= ========== ========== ==============
Restricted cash deposits are in respect of mine rehabilitation obligations.
Available for sale financial assets include listed investments of $8 million (31 March 2016 - $6 million and 30 September 2016 - $7 million) held at fair value using the market price on 31 March 2017.
On 8 July 2010, Lonmin entered into an agreement to provide financing of GBP200 million to Lexshell 806 Investments Proprietary Limited, a subsidiary of Phembani Group Proprietary Limited, to facilitate the acquisition, at fair value, of 50.03% of shares in Incwala Resources Proprietary Limited from the original HDSA shareholders. The terms of the financing provided by Lonmin Plc to the Phembani subsidiary include the accrual of interest on the HDSA receivable at a fixed rate based on a principal value of GBP200 million which is repayable on demand, including accrued interest.
The Company holds the HDSA receivable at amortised cost. The receivable is secured on shares in the HDSA borrower, Lexshell 806 Investments Proprietary Limited, whose only asset of value is its holding in Incwala Resources Proprietary Limited (Incwala). Incwala's principal assets are investments in Western Platinum Limited (WPL), Eastern Platinum Limited (EPL) and Akanani Mining Proprietary Limited (Akanani), all subsidiaries of Lonmin Plc. One of the sources of income to fund the settlement of the receivable is the dividend flow from these underlying investments. Given the continued subdued PGM pricing environment, there have not been any substantial dividends declared by these Lonmin subsidiaries in recent years.
The HDSA receivable is disclosed as a current asset as it was redeemable at any time on or after 8 July 2015 at Lonmin's request. It is not our current intention to request redemption as Phembani could forfeit the loan and the 50.03% that Phembani hold in Incwala would revert to Lonmin.
An impairment assessment has been performed on the balance of the loan at 31 March 2017. This assessment has been made based on the value of the security, which is primarily driven by the value of Incwala's underlying investments in WPL, EPL and Akanani. The same valuation model for the Marikana CGU that was prepared to assess impairment of non-financial assets was used as the basis for determining the value of Incwala's investments. Thus, similar judgements apply around the determination of key assumptions in those valuation models. The value of the security at 31 March 2017 was $61 million (March 2016 - $95 million and 30 September 2016 - $69 million) which was in line with the carrying amount of the HDSA receivable. Any movements in the key assumptions would affect the value of the security which would lead to further impairment or reversal of a previous impairment of the receivable as follows:
Reversal in impairment
/
(further impairment)
Assumption Movement in assumption of receivable
---------------------------- ----------------------- -----------------------
Metal prices (i) +/-5% $37m / ($37m)
ZAR:USD exchange rate (ii) -/+5% $29m / ($32m)
-/+100 basis
Discount rate (ii) points $16m / ($13m)
Production (i) +/-5% $32m / ($30m)
---------------------------- ----------------------- -----------------------
Footnotes:
i Over the period of the discounted cash flow model. ii As at the reporting date. 8 Deferred revenue
In March 2012 Lonmin entered into a pre-paid sale of 75% of its current gold production for the next 54 months. Under this contract Lonmin delivered 70,700 ounces of gold over the period with delivery of fixed quantities on a quarterly basis and in return received an upfront payment of $107 million. Proceeds of the pre-paid sale were treated as deferred revenue and amortised to profit as deliveries occur. All gold deliveries were completed by 30 September 2016.
Lonmin has secured competitive funding of $50 million for the Bulk Tailings Treatment project ("the BTT project") through a finance metal streaming arrangement. The $50 million will be treated as deferred revenue. Contractual deliveries will be at a discounted price which will be treated as normal sales. The deferred revenue of $50 million will be amortised by the discount value of the deliveries. Project funding of $26 million was received for the period to 31 March 2017 (31 March 2016 - $nil and 30 September 2016 - $9 million). Commissioning and ramp up to full production is expected during the 2018 financial year.
6 months 6 months
to to Year ended
31 March 31 March 30 September
2017 2016 2016
$m $m $m
------------------------------ ---------- ---------- --------------
Opening balance 9 23 23
Deferred revenue received 26 - 9
Less: Contractual deliveries (2) (9) (23)
------------------------------- ---------- ---------- --------------
Closing balance 33 14 9
=============================== ========== ========== ==============
Current liabilities
------------------------------ ---------- ---------- --------------
Deferred revenue - 14 -
============================== ========== ========== ==============
Non-current liabilities
------------------------------ ---------- ---------- --------------
Deferred revenue 33 - 9
=============================== ========== ========== ==============
9 Analysis of net cash / (debt) (i)
Transfer
Foreign of unamortised
As at exchange bank fees As at
1 October Cash and non-cash to other 31 March
2016 flow movements receivables 2017
$m $m $m $m $m
--------------------------- ----------- ------ -------------- ---------------- ----------
Cash and cash equivalents
(ii) 323 (98) 4 - 229
Non-current borrowings (150) (4) - - (154)
--------------------------- ----------- ------ -------------- ---------------- ----------
Net cash / (debt)
as defined by the
Group 173 (102) 4 - 75
--------------------------- ----------- ------ -------------- ---------------- ----------
Transfer
of unmortised
bank fees
to other
receivables
$m As at
Foreign
exchange
As at and non-cash 30 September
1 April Cash
2016 flow movements 2016
$m $m $m $m
--------------------------- ---------- ------- -------------- --------------- --------------
Cash and cash equivalents
(ii) 264 53 6 - 323
Current borrowings - 1 (1) - -
Non-current borrowings (150) - - - (150)
--------------------------- ---------- ------- -------------- --------------- --------------
Net cash as defined
by the Group 114 54 5 - 173
--------------------------- ---------- ------- -------------- --------------- --------------
Transfer
Foreign of unamortised
As at exchange bank fees As at
1 October Cash and non-cash to other 31 March
2015 flow movements receivables 2016
$m $m $m $m $m
--------------------------- ----------- ------ -------------- ---------------- ----------
Cash and cash equivalents
(ii) 320 (65) 9 - 264
Current borrowings (506) 505 1 - -
Non-current borrowings - (150) - - (150)
Unamortised bank fees
(iii) 1 - - (1) -
Net (debt) / cash
as defined by the
Group (185) 290 10 (1) 114
--------------------------- ----------- ------ -------------- ---------------- ----------
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 Current cash and cash equivalents to the value of $6
million will be treated as restricted cash to be utilised
for rehabilitation obligations (30 March 2016 - $6 million,
30 September 2016 - $6 million).
iii As at 31 March 2017 unamortised bank fees of $3 million
relating to undrawn facilities were included in other
receivables (31 March 2016 - $4 million and 30 September
2016 - $4 million).
The Group's debt facilities are summarised as follows:
* Revolving credit facilities totalling $70.8 million
and a $150 million term loan, at a Lonmin Plc level,
which are committed until May 2019 (Lonmin can
exercise its option to extend the term up until May
2020); and
* Revolving credit facility totalling R1,980 million,
at a Western Platinum Limited level, which are
committed until May 2019 (and likewise Lonmin can
extend the term until May 2020).
The following financial covenants apply to these facilities:
* The consolidated tangible net worth of the Group will
not be at any time less than $1,100 million. At 31
March 2017 consolidated tangible net worth was $1,434
million (31 March 2016 - $1,917 million and 30
September 2016 - $1,608 million);
* The consolidated debt of the Group will not at any
time exceed an amount equal to 35% of consolidated
tangible net worth of the Group. At 31 March 2017
consolidated debt:consolidated tangible net worth was
11% (31 March 2016 - 8% and 30 September 2016 - 9%);
* The liquidity of the Group will not, for any week
from 1 January 2016, be less than $20 million. Cash
and cash equivalents as at 31 March 2017 was $229
million (31 March 2016 - $264 million and 30
September 2016 - $323 million); and
* The capital expenditure of the Group (excluding any
Bulk Tailings Agreement) shall not exceed the limits
set out in the table below. The revised capital
guidance of R1.4 billion - R1.5 billion for the
financial year ending 30 September 2017 is less than
the capex limits detailed below. The Company shall
also have the option to carry forward or back up to
10% of the limits set out in the table below.
Financial Year Capex Limit
----------------------------------------------- ------------------
1 October 2015 - 30 September 2016 (inclusive) ZAR 1,338 million
1 October 2016 - 30 September 2017 (inclusive) ZAR 1,242 million
1 October 2017 - 30 September 2018 (inclusive) ZAR 2,511 million
1 October 2018 - 30 September 2019 (inclusive) ZAR 3,194 million
1 October 2019 - 31 May 2020 (inclusive) ZAR 4,049 million
----------------------------------------------- ------------------
There is also additional limit on capital expenditure in relation to any Bulk Tailings Agreement as set out below:
Financial Year Bulk Tailings Capex
Limit
----------------------------------------------- --------------------
1 October 2015 - 30 September 2016 (inclusive) ZAR 103 million
1 October 2016 - 30 September 2017 (inclusive) ZAR 414 million
1 October 2017 - 30 September 2018 (inclusive) ZAR 31 million
----------------------------------------------- --------------------
The limit on capital expenditure in relation to any Bulk Tailings Agreement after 30 September 2018 will be zero.
As at 31 March 2017, Lonmin had net cash of $75 million, comprising of cash and cash equivalents of $229 million and borrowings of $154 million (31 March 2016 - net cash of $114 million and 30 September 2016 - net cash of $173 million). Undrawn facilities amounted to $218 million at 31 March 2017 (31 March 2016 - $210 million and 30 September 2016 - $215 million).
10 Impairment of non-financial assets
At each financial reporting date, the Group assesses whether there is any indication that non-financial assets are impaired. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment (if any). The recoverable amount is the higher of fair value less costs to sell and value in use.
For impairment assessment, the Group's net assets are grouped into CGUs being the Marikana CGU, Akanani CGU, Limpopo CGU and Other. The Marikana, Limpopo and Akanani CGUs relate to the PGM segment.
The Marikana CGU is located in the Marikana district to the east of the town of Rustenburg in the North West province of South Africa. It contains a number of producing underground mines, various development properties, concentrators and tailings storage.
The Akanani CGU is located on the Northern Limb of the Bushveld Igneous Complex in the Limpopo province of South Africa. A pre-feasibility study was completed in 2012.
The Limpopo CGU is located on the Northern Sector of the Eastern Limb of the Bushveld Igneous Complex in the Limpopo province of South Africa and comprises two resource blocks (Boabab and Boabab east). The CGU includes mines which were placed on care and maintenance in 2009 and a concentrator complex.
For Marikana and Akanani, the recoverable amounts were calculated using a value-in-use valuation. The key assumptions contained within the business forecast and management's approach to determine appropriate values in use are set out below:
Key Assumption Management Approach
----------------------- ---------------------------------------------
PGM prices Projections are determined through a
combination of the views of the Directors,
market estimates and forecasts and other
sector information. The Platinum price
is projected to be in the range of $968
to $1,549 per ounce in real terms over
the life of the mine. Palladium and
rhodium prices are expected to range
between $740 to $1,355 and $783 to $1,426
respectively per ounce in real terms
over the same period.
Production volume Projections are based on the capacity
and expected operational capabilities
of the mines, the grade of the ore and
the efficiencies of processing and refining
operations.
Production costs Projections are based on current cost
adjusted for expected cost changes as
well as giving consideration to specific
issues such as the difficulty in mining
particular sections of the reef and
the mining method employed.
Capital expenditure Projections are based on the operational
requirements plan, which sets out the long-term plan
of the business and is approved by the
Board and includes capital expenditure
to access reported reserves from existing
mining operations as well as maintenance
expenditure.
Foreign currency Spot rates as at the end of the reporting
exchange rates period are applied.
Reserves and resources Projections are determined through surveys
of the CGU performed by Competent Persons and the
views of the Directors of the Company.
Discount rate The discount rate is based on a Weighted
Average Cost of Capital (WACC) calculation
using the Capital Asset Pricing Model
grossed up to a pre-tax rate. The Group
uses external consultants to calculate
an appropriate WACC.
----------------------- ---------------------------------------------
For impairment testing, management projects cash flows over the life of the relevant mining operations which is significantly greater than five years. For the Marikana CGU a life of mine spanning until 2070 was applied. Whilst the majority of mining licences are currently valid until 2037 the Director's expect the licences will be renewed until beyond 2070.
The risk-adjusted pre-tax discount rate applied for impairment testing of the Marikana CGU for 31 March 2017 was 15.6% real (30 September 2016 - 15.6% real).
The Akanani asset was fully impaired at 30 September 2015. There have been no significant changes since that date to lead us to believe that the valuation of this asset is different. Therefore expenditure capitalised since 30 September 2015 has been fully impaired.
The non-financial assets of the Limpopo CGU were also fully impaired at 30 September 2015. No full assessment has been performed at 31 March 2017 as we do not expect a reversal of impairment at this stage.
For the six months to 31 March 2017, the Group's non-financial assets were impaired by $146 million (12 months to September 2016 - $335 million) primarily due to the increase in our outlook on unit costs and the strengthening of the Rand against the US Dollar since our Final results in September 2016. Whilst we have made a downward revision to our Platinum price outlook this was more than offset by an upward revision on price for the other PGMs and base metals, especially Palladium. The net impact of the change in these assumptions led to the value in use declining below the carrying amount of the non-financial assets of the operations.
The impairment charge was allocated as follows:
Year ended 30
6 months to 31 March September
2017 2016
--------------------------- --------------
Marikana Akanani
CGU CGU Total Marikana CGU
$m $m $m $m
-------------------------------- --------- -------- ------ --------------
Carrying amount pre-impairment
Other intangibles 72 3 75 91
Property, plant and equipment 1,167 - 1,167 1,473
Equity accounted investment 21 - 21 24
Royalty prepayment 37 - 37 37
-------------------------------- --------- -------- ------ --------------
Total 1,297 3 1,300 1,625
-------------------------------- --------- -------- ------ --------------
Recoverable amount
Other intangibles 63 - 63 72
Property, plant and equipment 1,033 - 1,033 1,157
Equity accounted investment 21 - 21 24
Royalty prepayment 37 - 37 37
-------------------------------- --------- -------- ------ --------------
Total 1,154 - 1,154 1,290
-------------------------------- --------- -------- ------ --------------
Impairment
Other intangibles 9 3 12 19
Property, plant and equipment 134 - 134 316
Equity accounted investment - - - -
Royalty prepayment - - - -
-------------------------------- --------- -------- ------ --------------
Total 143 3 146 335
-------------------------------- --------- -------- ------ --------------
For the Marikana CGU, the impairment charge was allocated pro-rata to intangibles and property, plant and equipment, but limited to the assets' recoverable amounts.
In preparing the financial statements, management has considered whether a reasonably possible change in the key assumptions on which management has based its determination of the recoverable amounts of the CGUs would cause the units' carrying amounts to exceed their recoverable amounts. A reasonably possible change in any of the assumptions used to value the Marikana CGU will lead to a reduction or increase in the impairment charge as follows:
Reversal in impairment
/
Assumption Movement in assumption (further impairment)
---------------------------- ----------------------- -----------------------
Metal prices (i) +/-5% $407m / ($418m)
ZAR:USD exchange rate (ii) -/+5% $318m / ($361m)
-/+100 basis
Discount rate (ii) points $173m / ($147m)
Production (i) +/-5% $352m / ($341m)
---------------------------- ----------------------- -----------------------
Footnotes:
i Over the period of the discounted cash flow model. ii As at the reporting date. 11 Events after the financial reporting period
The Group has entered into an agreement to acquire Mvelaphanda Resources Proprietary Limited's (Mvelaphanda) 7.5% of the Pandora Joint Venture (Pandora JV) for a cash payment of R45.565 million. In addition, Lonmin will refund the value of any cash calls paid by Mvelaphanda to the Pandora JV during the period from 1 January 2017 to completion of the transaction. The Company's current expectation is that the aggregate cash calls payable to Mvelaphanda will be around R6-8 million. Lonmin is in the process of finalising its acquisition of Anglo American Platinum's 42.5% of the Pandora JV. The two transactions combined will result in Lonmin increasing its ownership in Pandora to 100%.
The acquisition allows Lonmin to consolidate its position in this relatively shallow and high-grade mineral resource providing an attractive option for development by EPL in both the short and longer term. The Pandora JV area is contiguous with our existing EPL operations, relies on Lonmin's mining and processing infrastructure and is operated by EPL.
The transaction remains subject to certain conditions precedent and all necessary consents being obtained from the Department of Mineral Resources of South Africa, and section 11 approval for the transfer of the mining rights. The transaction is also subject to approval by Lonmin's lending banks. The transaction is expected to become unconditional during 2017 following the fulfilment of all conditions precedent.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BXGDULSBBGRS
(END) Dow Jones Newswires
May 15, 2017 02:00 ET (06:00 GMT)
1 Year Lonmin Chart |
1 Month Lonmin Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
