Hot Features
Premium
Register for real-time alerts, custom portfolio, and market movers
Lonmin’s share price soared 12% by 1:15 pm today, gaining 37.80 to arrive at 352.80 after reaching 354.80 during noon-hour trading.
The world’s third largest platinum mining group’s first quarter Production Report gave investors something to shout about after several months of not such good news. CEO Ian Farmer resigned in December due to illness. That news was preceded in November by the company calling on investors in order to raise $817 million USD to stay in compliance with lending covenants.
Actually, the company released an initial report at 7:01 that indicated that they production performance during the quarter “has substantially exceeded our planned ramp up to produce platinum concentrate of 174,523 salable ounces and platinum sales of 185,497. At 11:55 am Lonmin released an amendment to the first report, citing an error in the aforementioned numbers – the correction of which further boosted investor confidence. The actual numbers were 185,497 of salable ounces and sales of 108,342 ounces.
The production numbers – even the wrong ones – have given some reassurance to investors who rode out of late summer of violent strikes at Lonmin’s South African mines which resulted in production shut downs lasting as long as six weeks. Whilst the financials are the chief concern of investors, Lonmin had to deal with intense worker relations issues in the wake of the deaths that occurred during the strike and the feelings of resentment by workers in the aftermath. To put the incident in proper perspective, one needs to comprehend that the protests and riots at Lonmin’s Marikana project was the worst outbreak of violence in South America since the end of Apartheid.
This report restores confidence that production has been able not only to be re-established, but that it has been able to do so effectively and efficiently. Given the the operations results so far, the company is sticking with its previously forecast output 680,000 ounces and sales of 660,000 ounces for the 2013 fiscal year.
One analyst noted that “The results were quite significantly ahead of where I’d expected them to be in Q1. The ramp up following the strike is going better than expected. They had a very, very bad year on a number of fronts, but they’ve now got the balance sheet addressed and, operationally, they seem to be doing very well. That underpins what is happening in the share price.”
Reuters noted some adverse investor reaction, citing the fact that “29% of the shareholders voted against a proposed pay package for the company directors.” Whilst executive compensation has been headline news during the last two years, this response by Lonmin shareholders may be over reaction. Success should be rewarded. The activities of the UK banking institutions, where compensation should be reduced as a result of illegal activities, are a far cry from Lonmin’s situation.
Lonmin’s directors did not cause the strikes or the violence that shut down mining operations. Nor was it a lack of competence on their part. They could not be expected to grab individual MK-47’s and put their wingtips on the ground to stop the violence. Their job was to manage a successful recovery and ramp up of production. Even with the added burden of Ian Farmer’s illness and departure, the board did its job – as witnessed to by today’s release. These people are deserving of appropriate compensation for keeping the company intact and successfully restoring operations in spite of circumstances.
Congratulations, Lonmin. You deserve a good ole “Atta Boy!”
