Lonmin will cut capital spending for this year by 26% because of low metal prices and as furnace breakdowns curb output by the world's third-biggest platinum producer.
The company will reduce capital expenditure to $185-million for the year until end September from $250-million, it said yesterday. Refined platinum output for the quarter ended December 31 fell 29% to 139823 ounces from a year earlier after the producer's two main furnaces broke down, it said.
"We reiterate our production guidance" of 730000 platinum ounces for the 2015 fiscal year even as the furnace breakdowns "caused a temporary bottleneck in our processing operations," Lonmin said.
The cut in capital spending comes as Lonmin is recovering from a five-month strike in the first half of last year. The company is now reviewing mines and imposing a hiring freeze as it seeks to preserve cash. Platinum tumbled 23% from a 2014 peak to $1176.75 an ounce in December, the lowest since July 2009. Platinum has since recovered 6%.
The cut in capital expenses will help Lonmin preserve its balance sheet even as prices may force the producer to take more action, analysts at Investec Securities said. "The company's current business plan is unsustainable and will require drastic surgery," Investec said.
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