September 17, 2012 / 10:28 AM / in 5 years

UPDATE 2-Lonmin cuts sales forecast as strikes continue to hurt

* Now expects sales of 685,000-700,000 oz of platinum for full year

* Keeps expectation to exceed 8.5 percent rise for unit costs

* Prolonged production delay to force more “difficult management decisions”

Sept 17 (Reuters) - Platinum miner Lonmin Plc cut its full-year sales forecast as it continues to be hurt by violent strikes at its mines in South Africa.

The world’s No.3 platinum producer said it now expects to sell between 685,000 ounces and 700,000 ounces of platinum for the year ending Sept. 30.

The company, whose shares have dropped 37 percent since January, said in August that it was unlikely to meet its previous target of 750,000 ounces.

Lonmin also reiterated its expectation to exceed its forecast of an 8.5 percent rise for unit costs.

The company has been hit by a month of lost production and the absence of Chief Executive Ian Farmer, who has been on sick leave since last month.

It has already warned it is in danger of breaching debt covenants and has said it may need to raise equity. The covenants would likely be breached by Sept. 30, when they are due to be tested.

The strikes, arising out of a push for wage hikes, have already claimed the lives of 45 people, the company said.

Last week, striking workers rejected a pay offer from Lonmin, dimming prospects of ending several weeks of industrial action that has swept through South Africa’s platinum sector.

On Monday, the company said it gave notice to terminate its contract with Murray and Roberts - a contractor which supplies about 1,200 staff at its K4 shaft with effect from October 17.

“The situation is delicate but we have limited options in terms of managing the trade-off between lost production, higher wages and business rationalisation, including a significant reduction in jobs,” Simon Scott, Lonmin’s acting CEO, said.

“A prolonged delay in production will only force further difficult management decisions.”

Aquarius Platinum’s Kroondal platinum mine and Xstrata’s chrome mine near Rustenburg in South Africa restarted on Monday after suspending operations last week, although the situation on the ground remained tense.

Lonmin said mining activity at its Marikana remains minimal, though all shafts are operational.

Despite South Africa’s dominance of the platinum sector, rising power and labour costs and a sharp drop in the price of the precious metal this year have left many mines struggling to keep their heads above water.

South Africa is home to 80 percent of the world’s known reserves of platinum.

However, platinum prices have jumped over 20 percent in the past five weeks as investors fear more disruption to supplies of the precious metal used in jewellery and vehicle catalytic converters.

Lonmin shares were roughly flat at 617.5 pence at 1124 GMT on the London Stock Exchange on Monday.

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