Platinum producer Lonmin is cutting costs as low commodity prices continues to bite harder, by letting some of its workers go. So far, 5,077 workers, had left the Group out of about 6,000 the company plans to sack. This, it said made labour costs fall R194 million ($11.8 million) in the last three months of 2015.
“Our Business Plan assumes that a low pricing environment will persist in the short to medium term and we are managing our business on that basis,” Lonmin said in a statement.
“Progress continues with the restructuring programme due to the new benchmarked operating model and removal of high cost production to ensure the business remains viable,” it added.
The company, operating in the Bushveld Complex of South Africa, is targeting savings of R700 million in 2016 through the reduction in the size of the Group’s workforce, overhead costs and support service structures and the total cost of ownership projects. Apart from the money saved in labour costs, total cost of ownership savings amounted to R12 million. In addition a further benefit of around R84 million has been realised as a result of permanently reducing metal in process stock.
A record 2014 strike, rising costs and a plunging platinum price, affected Lonmin’s finances, forcing it to raise $400 million through a cash call in December with shares priced too low at about a penny each. However, the company hopes to manage its business by maintaining capital expenditure guidance for the year of around $132 million, maintain sales guidance for the full year at around 700,000 Platinum ounces and unit cost guidance of around R10,400 per PGM ounce produced, in the absence of any material safety stoppages.
Lonmin said refined platinum production reached 171,441 ounces in the three months to the end of December, an increase of 22.6 percent from a year ago despite higher safety stoppages.
Platinum sold at $886.60 per ounce at 3:38AM on Thursday.