Lonmin running on empty

Even before the crisis, Lonmin was under immense pressure, and in June its sales were down by 6%. (Paul Botes, M&G)

Even before the crisis, Lonmin was under immense pressure, and in June its sales were down by 6%. (Paul Botes, M&G)

Raising the possibility of a shut-down.

The striking miners, whose representatives did not sign the accord, still refuse to return to work until their demand for a wage of R12 500 a month has been met.

But even before the crisis, Lonmin was under immense pressure, and in June its sales were down by 6%.

"In the past three years the government has not received tax and shareholders have not received dividends," an analyst, who did not want to be named, said.

Besides that, the entire platinum industry has been struggling because of rising costs and lower productivity, while an oversupply in the market has resulted in lower platinum prices.

But the wildcat strike at Marikana has hit Lonmin at the worst possible time, when a debt facility of almost R1-billion will be reconsidered. The first test period, when lenders will assess Lonmin's debt-to-profit covenants, is set for September 30. If the outcome is unsatisfactory, it could trigger a demand for the full repayment of the loan.

Lonmin warned earlier that the covenants could be breached, and said that it was being proactive and discussing the matter with the banks involved.

Need to shut down
Next year's balance sheet is also likely to look bad.

"We expect all their marginalised shafts will be shut down for an interim period.
I have no doubts about that," Gideon du Plessis, general secretary of trade union Solidarity told the Mail & Guardian.

But Lonmin said it would not speculate about if or when it would need to shut down and that the focus was on getting its employees to return to work.

James Dray, spokesperson for the company, said Lonmin was somewhat operational.

"We are currently running two concentrators on available stockpiles and both number one and two furnaces are running at idle level to ensure that the integrity of the furnaces is maintained."

The company would not reveal what ore reserves it had available, but it cannot be long before it hits rock bottom.

Economic reality
From the time ore is retrieved underground to the time it reaches the refinery is a four- to six-week process, and at any time an estimated R1.5-billion in molten metal is in Lonmin's smelter.

It is possible that the company was selling metal up until last week from ore mined in July. But, by now, it will be unable to take more metal from the smelter without compromising its contents.

Meanwhile, no resolution with striking employees is in sight. On Thursday, attendance remained low and striking miners continued to intimidate employees willing to return to work.

Dray said Lonmin could not speculate on whether the wage demands could be met "but the current economic reality means that any wage increases will be a trade-off against jobs".

Lisa Steyn

Lisa Steyn

Lisa Steyn is a business reporter at the Mail & Guardian. She holds a master's degree in journalism and media studies from Wits University. Her areas of interest range from energy and mining to financial services and telecommunication. When she is not poring over annual reports, Lisa can usually be found pottering about the kitchen. Read more from Lisa Steyn

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