Good Morning,
Has the market lost its mind, Lonmin results are dire.
We'll ignore the electricity issues (likely 13%+
appreciation over 4 years) as this makes up a modest 7% of production costs and
focus on the costs. As LMI kindly outline, unit cost of production per PGM
ounce rose from R13,058/oz. to R10,516/oz. Using LMI's average exchange rate,
South African Rand (ZAR/R) to US Dollar, R/$ 11.48, costs were $916/oz, before
associated costs.
Average prices achieved on the key metal PGM basket (excluding
by-product revenue) $916/Oz. (2014: $999/oz.) PGM basket (including by-product
revenue) $988/oz (2014: $1,056/oz). Simply put, why are LMI bothering. If any
expectant Glencore LMI holders are planning on retaining their stock, it would
be interesting to hear why. Maybe they like gift-aid, keeping construction
workers in employment with the forth bridge of furnaces?
With the market pricing in Platinum at $1135/oz today, LMI
believe their 200K ounces locked up due to Furnace One & Two being shut
down for maintenance and repairs would have reduced their debt. Indeed it
would, but there's a trend occurring, so any debt reduction is going to be
short lived.
Production backlog will unwound in the second half. So will
global prices by the looks of things if they haven't appreciated with 200K
ounces being "locked in." The question is will the sales be at a
profit, loss or break-even, there's two probabilities and it certainly isn't a
profit.
It would be wise not to get too excited by the 70+%
increases in production as the comparative period had a strike on! So LMI would
perhaps be wise to consider their inventories 200K ounces higher and drip into
market, over 24 months.
For those long-standing readers of EMC, you'll note the
positives of Aureus Mining (AUE), with the company declaring Liberia is Ebola
free, well for 42 days so far. They update its Bea Mountain Mining Licence has been
enlarged to include the Leopard Rock gold target. With first production due in
3 weeks (or perhaps sooner, the share price should respond. (EMC: Aureus Mining).
Highfield Resources (ASX: HFR) come out with a 10%
discounted placing for $101M below the targeted amount but enough to raise the
debt for their Muga Potash Mine, expect news of a $166M debt facility in
due course.
A rare earth miner may just have a significant haircut...no time either for Orogen Gold (ORE), had those punters listened...EMC: ORE and the no news award goes to AFC Energy AFC Energy.
Atb Fraser
