November 29, 2018 / 11:18 AM / 7 months ago

Lonmin turns first profit in four years ahead of Sibanye takeover

(Reuters) - Lonmin Plc, which is being bought by Sibanye-Stillwater, reported its first annual operating profit in four years as cost cuts by the platinum miner paid off.

FILE PHOTO: Miners work deep underground at Sibanye Gold's Masimthembe shaft in Westonaria, South Africa, April 3, 2017. REUTERS/Mike Hutchings/File Photo

Lonmin also said on Thursday it expects Sibanye’s deal to close early next year, but cautioned that some uncertainty still exists over its completion, which is subject to certain conditions.

Lonmin shares rose as much as 9.3 percent to 47 pence after its results for the year ended September showed an operating profit of $101 million, compared with a more than $1 billion loss a year earlier.

The London-listed miner, crippled by soaring costs and subdued platinum prices, has been cutting spending to conserve cash and retain a positive cash balance, one of the conditions upon which South Africa-based Sibanye’s takeover is contingent.

The completion of the merger is vital to Lonmin’s survival.

Sibanye late last year proposed to buy Lonmin for about 285 million pounds ($365 million) to create the world’s No. 2 platinum producer in a bid to ride out depressed prices for the metal.

Lonmin said net cash rose 10.7 percent to $114 million as of Sept. 30, adding that its liquidity and funding arrangements improved during the year as it secured a new $200 million forward metal sale facility.

Lonmin projected it would spend between 1.4 billion rand and 1.5 billion rand ($102.5 million-$109.8 million) in 2019, well above the 967 million rand it spent in the 2018 financial year.

Unit costs in 2019 are expected to range between 12,900 rand and 13,400 rand per ounce of platinum group metals, above the previous year’s 12,307 rand.

Platinum sales should range between 640,000 and 670,000 ounces, the company said, lower than the 681,580 ounces in 2018.

($1 = 13.6601 rand)

Reporting by Tanishaa Nadkar in Bengaluru; Editing by Bernard Orr and Sai Sachin Ravikumar

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