Lonmin full-year loss widens on impairment charge

Platinum miner Lonmin swung to a bigger loss in 2017 as it took a hit from a $1.05bn impairment charge.

In the year to 30 September, the company’s pre-tax losses widened to $1.17bn from $355m as it suffered a $1.05bn impairment charge. Revenue rose to $1.17bn from $1.12bn, driven by higher platinum group metals prices, but earnings before interest, taxes, depreciation and amortisation dropped to $40m from $115m.

Meanwhile, the company said it sold 706,030 ounces of platinum in the year, exceeding its sales guidance of between 650,000 and 680,000, having achieved refined production of 687,529 ounces.

Lonmin also said that its lenders have agreed to waive the tangible net worth covenants until 28 February 2019, the long stop date of the Sibanye-Stillwater acquisition. A condition of the waivers was that of the undrawn rolling credit facilities, $66m was cancelled and the remainder left undrawn.

Chief executive officer Ben Magara said: "Platinum prices continue to be depressed but the operational results achieved this financial year have been pleasing. We believe Lonmin has an enviable mine-to-market business with great mining assets, projects and process technology and a resilient workforce. Despite this, Lonmin continues to be hamstrung by its capital structure and liquidity constraints.

"The announced combination with Sibanye-Stillwater will provide a stronger platform for Lonmin's shareholders and allow them and our other stakeholders to benefit from the long-term upside potential of an enlarged and geographically diversified precious metals group. During the offer period, our strategy continues to focus on operational performance in particular and cost control, maintaining at least a cash neutral business to preserve cash, as we focus on liquidity."

RBC Capital Markets analyst Richard Hatch pointed out that the impairment charge was flagged last week. He added that the lenders' waiver provides breathing room for Lonmin to complete its deal with Sibanye without having to address balance sheet concerns.

At 1000 GMT, the shares were down 0.9% to 85.61p.