Lonmin Plc on Monday released its interim results for the period ending 31st March 2016 in an update to investors and analysts.
Highlights from the update included net cash improving within the period to $114 million as of 31st March 2016 in comparison to $185 million net debt on 30th September 2015. The group outlined total liquidity of $474 million which comprises gross cash of $264 million prior to a deduction of the drawn term loan of $150 million and undrawn debt facilities of $210 million.
Lonmin undertook a $400 million rights issue in November 2015 as the crash in platinum prices and significant production costs brought the company near to collapse. The rights issue offered 27 billion shares at a price of 1p each, discounting the shares by 94% from the company’s stock market price of 16.25p when the rights issue was announced.
In the groups update it said the reorganisation of Lonmin had been successfully completed with 5,433 roles being cut from the business as of 31st March whilst a further 1,428 employees would be redeployed into alternative positions found to be more productive.
Cost savings were indicated as being well ahead of schedule with R469 million in cost savings being achieved in the first half of 2016. This placed Lonmin at 67% of its full year cost savings goal of R700 million.
Ben Magara, Chief Executive Officer, said:
“These results reflect the positive momentum in Lonmin, we have delivered on our promise to restructure and cut high cost production in this oversupplied market while simultaneously reducing costs and improving cashflows. Quarter on quarter, Lonmin has reduced unit costs to R10,390 per PGM ounce and improved the net cash to $114 million; thus delivering on our promise at the time of the Rights Issue to be cash positive after capital in this subdued PGM pricing environment. There is still a lot of hard work ahead as we squeeze out more costs and drive operational improvements and our key risks remain safety and its related stoppages and relationships. Lonmin has long life, shallow mining assets and unrivaled processing expertise and an invaluable mine to market business.”
Magara also added that Lonmin’s investment in relationships and the concept of shared value is going to be tested in upcoming salary negotiations alongside local government elections. He said he is cautiously optimistic about the negotiations with staff and unions due to the economic realities the company faces.
Looking forward to H2 2016 the platinum producer outlined the demand from the automotive and chemical industry as appearing robust despite concerns over the diesel market and Chinese economic headwinds.
The results soothed investor concerns over the company’s debts as it closed the period with $114 million in cash, in comparison to debts of $282 million in 2015.