Lonmin warns of $2bn write-down, 6,000 job cuts
South African platinum producer Lonmin (LON:LMI), the world’s third largest, said Monday it expects to take an impairment charge of about $2 billion triggered mainly by weak metal prices and rising costs, when posting annual results next week.
The company, still hurting from a lengthy strike that crippled its mines last year, revealed in October extreme measures to stay afloat, such us planned layoffs of 6,000 people and its intention to raise $400 million in a rights issue of new shares for debt repayments.
"The impairment charge is primarily driven by lower PGM prices and the business plan which has an impact on future discounted cash flows over the life of mine business plan across the group's operations," it said in a statement.
Lonmin added that the results for the year would show an operating loss of $207 million before the impairment, even though it was already “removing high-unit cost [platinum group metals —PGM] production and associated overhead costs.” Lonmin said it hoped to keep unit costs generally flat in nominal terms for the next three years.
The miner, which is planning for lower production at some of its South African mines, is expected to cut platinum output from over 750,000 ounces to 700,000 ounces in 2016 and then down to 650,000 ounces for 2017 and 2018.
Despite a five-month strike that axed South Africa’s platinum output last year, prices for the metal have been down to historic lows. According to the company, during the final quarter of its financial year it sold platinum at a price 30% lower in dollar terms than in the same period last year.