A billion-dollar writedown pushed Lonmin deeper into the red last year as low platinum prices and rising costs took their toll.
The miner, which is set to be bought by a local rival, reported a $1.17 billion loss in the year to last September.
This was attributed almost entirely to its impairment charge after writing down the value of its operations in the Marikana region of South Africa. Excluding the charge, the company reported an underlying loss of $26 million, on revenues of $1.1 billion, compared with a profit of $13 million in 2016.
Platinum, which is used in catalytic converters and jewellery, is trading at about $1,016 per ounce, less than half its peak of 2008. To cope with falling prices and rising costs, Lonmin has been cutting jobs and closing older mines. Last month it recommended a $285 million all-stock offer from Sibanye-Stillwater, a rapidly expanding precious metals miner that recently bought some of Anglo American’s older and less profitable platinum mines. The deal is yet to be approved by shareholders and regulators in South Africa.
Sibanye-Stillwater plans to cut about 12,600 jobs at Lonmin, more than a third of its workforce, and to produce savings of $112 million a year by 2021. The Association of Mineworkers and Construction Union said that it would consider “mass action backed by all conceivable legal avenues” to defend its members.
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Lonmin had delayed its annual results for months because the impairment charge meant that it could have breached its banking covenants. Ben Magara, its chief executive, said that despite making progress in its operations, the company “continues to be hamstrung by its capital structure and liquidity constraint”.
He said: “During the offer period, our strategy continues to focus on operational performance, in particular, and cost-control, maintaining at least a cash-neutral business.”
In a production report, Lonmin said that its net cash position at the end of last month had fallen to $63 million, from $103 million. It expects to sell between 650,000 and 680,000 ounces of platinum this year.
Lonmin traces its roots back to the London and Rhodesian Mining and Land Company, founded in 1909. It was the group’s mining division. Tiny Rowland took the helm in 1961 but was pushed out in 1993. After his death five years later, Lonrho was broken up.
Lonmin came close to collapse in 2012 after police fired on striking miners at its mine at Marikana, killing 34 people and injuring about 80. Three years later it raised £267 million in a rights issue.