Lonmin is selling off its surplus refinery capacity, cutting head-office jobs and disposing of two of its mines.
The struggling South African platinum miner said that it was acting in light of “persistent adverse macroeconomic conditions and the inflationary cost pressures confronting the industry in South Africa”.
It said that the operational review was focused on “optimising the cash produced by the business, both from its operations and through releasing capital from those activities where the company is bearing the cost of capacity and unrealised development potential”. The sale of 500,000 ounces of excess processing capacity will leave it with the capacity to process 700,000 ounces, still more than its forecast production of up to 680,000 ounces for this year.
Lonmin has been trying to shift its focus to its new “generation two” shafts that generate most of its revenue. It said yesterday that it would try to find a partner to shoulder the burden of the MC2 project, which would help it to secure 5,000 jobs at its Rowland shaft. It is also aiming to cut 500 million rand (£29 million) from its head-office costs by the end of the year.
Lonmin has been in a parlous condition for years. It derives 95 per cent of its revenue from its operations at Marikana, which was scene of a massacre of striking miners by police in 2012.
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The company later needed to be bailed-out in a rescue rights issue after the longest strike in South African history. That cash injection almost wiped out the previous shareholders and gave the South African government a big shareholding.
It also faces tough conditions in the platinum industry, with prices under pressure from big stockpiles of the metal and the declining popularity of diesel cars, which use platinum in catalytic converters.
Lonmin shares rose 4¾p, or 5 per cent, to 93¾p, valuing the company at about £260 million.