Lonmin forges ahead after repairs (February 07, 2005)

Repairs have been completed, testing has been done, and production is expected to resume at Lonmin‘s (LMI-L) No. 1 smelter in Gauteng province, South Africa.

In mid-November 2004, an explosion occurred, causing water from an electrode cooling system to leak into the furnace. The smelter repair cost about US$6 million. An additional cost of US$11 million was incurred as a result of processing ore through less-efficient pyromet furnaces and paying smelter fees to Impala Platinum Holdings (IMPUY-O).

In the year ended Sept. 30, 2004, Lonmin generated 32% more revenue than in the previous year and produced a record 913,263 oz. platinum. The operating profit totalled US$303 million.

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

Lonmin’s mines are east of Rustenburg in the North West province; the refinery is in Brakpan in Gauteng province.

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

At Sept. 30, 2004, Merensky had proven and probable reserves of 201.7 million tonnes grading 4.09 grams combined platinum group elements (platinum, palladium, rhodium, rubidium and iridium) plus gold per tonne. Contained platinum amounted to 14.8 million oz. The measured plus indicated resource totalled 13.6 million tonnes grading 5 grams combined PGEs and gold per tonne.

The UG2 deposit has a proven and probable reserve of 286.8 million tonnes grading 5.16 grams PGEs plus gold. Contained platinum is pegged at 22.9 million oz. The measured and indicated figure at UG2 is estimated at 18.7 million tonnes grading 6.35 grams PGEs plus gold.

All reserves are less than 1,400 metres below surface. The resource estimate is based on a minimum mining width of 90 cm.

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

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

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

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

At Nov. 30, 2004, Lonmin had 141.6 million shares outstanding. At presstime, the stock was trading at 944 pence, on the way up from a low of 875 pence in early December 2004, but down from a high of 1,240 pence at the beginning of March 2004.