Charlotte Mathews
Resources Editor

PLATINUM producer Lonmin hiked its dividend yesterday for the first time in four years, reflecting a confident outlook for platinum and the continued growth of the business, said CE Brad Mills.

The group, which operates mines at Marikana and Limpopo, declared an interim dividend of $0,45 a share for the six months to March, up from $0,30 a share in the same period last year, as underlying earnings more than doubled to $1,10 a share from $0,438 previously.

After taking into account movements in fair value of the embedded derivative associated with Lonmin’s convertible bond, which is related to the rise in its share price, the group reported a loss of $0,471 a share from a profit of $0,515 previously.

Numis Securities analyst John Meyer said Lonmin’s underlying earnings were almost 4% better than forecasts, and the group had delivered an impressive cost performance, with Marikana showing an increase in unit costs of only 0,5% .

Globally, mining companies are experiencing pressure on input costs such as fuel, steel, cement and wages.

The group had realised $32m in savings at the level of net earnings before interest and tax (ebit) from its Six Sigma continuous improvement programme, as well as $2,3m in savings from a shared business services programme.

Production from Marikana reached a record 5,7-million tons milled from underground and 1,3-million tons milled from opencast operations.

Management is continuing to introduce mechanised mining at Marikana with the aim of 8% of production from mechanised stopes by the end of this year and 50% by end 2010.

The group’s Limpopo operations, where it consolidated control through buying out the remaining 8,5% of minorities in the past six months, produced 487000 tons milled from underground operations and contributed $8m to ebit, which was “substantially” ahead of budget, Mills said.

The ramp-up of production had progressed well and costs were coming down.

Last month the company reported a leak at its number one furnace had caused an 11-day shutdown and this would bring down the forecast sales of platinum to between 970000oz and 980000oz from the original forecast of 1-million ounces.

But forecast mine production of about one-million ounces of platinum in concentrate in the current financial year remained.

Lonmin is investigating a number of possible expansion projects, including an open-cast operation at Limpopo to add 20000 ounces of platinum a year for two years, a second phase of development at Limpopo which could add about 125000oz of platinum a year, and development of the Pandora property using mechanised mining, which could add an attributable 85000oz of platinum to Lonmin.

The group is also looking to expand its metallurgical capacity, which would require adding a new furnace and upgrading the precious metals refinery at a cost of about $300m-$350m.