Lonmin forges ahead after repairs (January 27, 2005)

Repairs have been completed, testing has been done and as of next week, production is expected to be back to normal at Lonmin‘s (LMI-L) no. 1 smelter in Gauteng province, South Africa.

In mid-November, an explosion damaged the furnace when water from an electrode cooling system on the roof of the furnace, leaked into it. The smelter repair cost about US$6 million. In addition, US$11 million was spent in processing ore through less-efficient pyromet furnaces and paying a toll smelter-fee to Impala Platinum Holdings (IMPUY-P).

In the year ended Sept. 30, 2004, Lonmin saw a 32% rise in revenue over the previous year. Platinum production (913,263 oz.), and sales were at a high. The company reported a total operating profit of US$303 million.

Lonmin Platinum comprises three companies: Western Platinum, Eastern Platinum and marketing company, Western Metal Sales. Lonmin is the world’s third-largest producer of platinum group metals.

The mines are located east of the town of Rustenburg in the North West Province of South Africa. The refinery is in Brakpan, Gauteng Province.

Two platinum-bearing reefs (Merensky and UG2) contain the reserves and resources.

As at Sept.30, 2004, total proven and probable reserves at Merensky were 201.7 million tonnes grading 4.09 grams combined platinum group elements (PGE = combined platinum, palladium, rhodium, rubidium and iridium) plus gold per tonne (or 14.8 million oz. contained platinum). The measured plus indicated resource totalled 13.6 million tonnes at 5 grams combined, PGE plus gold per tonne.

The UG2 deposit contained an estimated proven and probable reserve of 286.8 million tonnes grading 5.16 grams PGE plus gold per tonne (22.9 million oz. contained.platinum) and a measured plus indicated resource of 18.7 million tonnes grading 6.35 grams PGE plus gold per tonne.

Mineral resources do not include mineral reserves. All reserves are less than 1400 metres below surface. The resource estimate used a minimum mining width of 90cm.

In addition a combined total inferred resource for the two reefs is estimated at 220.2 million tonnes grading 5.45 grams PGE plus gold.

The two reefs are mined over a strike-length of about 27 km and at an average depth of 360 metres.

In December of 2002, a much more serious explosion damaged the furnace. The company has only just received a settlement from that insurance claim (and for a prior theft claim from 1999).

Sales and mine production volumes are expected to be on target for 2005.

As at Nov. 30, 2004, Lonmin had 141.6 million shares outstanding. At press-time the stock was trading at 944 pence, on the way up from a low of 875 pence in early December (but down from a high of 1240 pence at the beginning of March 2004).