Lonmin looks to sell excess capacity and some assets

Concerned about platinum prices, Lonmin has decided to sell access to 500,000 ounces of yearly processing capacity, and consider partners for its K4 and MK2 projects, and possibly sell its Akanani and Limpopo properties.

Despite a good operational performance in the third quarter, Lonmin directors have been reviewing the business ongoing basis and decided to take additional measures “to ensure that its operations generate sufficient cash to support a sustainable business”.

Selling ‘excess’ processing capacity is designed to release capital for the company as it focuses on optimising cash generation from its operations and through releasing capital from activities where management feels the company is currently "bearing the cost of excess capacity and unrealized development potential".

Analysts at Shore Capital said it was "unclear" as to whether the 500,000 oz excess capacity sale relates only to smelting, or whether it also includes the highly-sensitive refining operations.

After reviewing its major development capital requirements over the next few years, Limpopo and Akanani will be considered for cash sales or finding joint venture partners, together with exploring options to introduce funding partners into the K4 shaft.

Despite the Rowland shaft's consistent performance, Lonmin said its current capital position makes it challenging to fund the MK2 project which is necessary to extend Rowland's economic life, but believes it "will be value accretive" and the company will explore options to introduce funding partners and preserve approximately five thousand jobs.

Lonmin said cutting overheads will save at least 500m rand and the company also announced the approval of its S11 application to acquire the Pandora JV from Anglo Platinum, which will defer 2.6bn rand of capital expenditure.