Bloomberg News

Lonmin Studies Third Furnace in Bid to Boost Platinum Target

July 05, 2011

(Updates with share price in final paragraph.)

July 5 (Bloomberg) -- Lonmin Plc, the third-largest platinum producer, started a prefeasibility study on a third furnace as part of preparations for possible expansion beyond its current 2015 production target.

The furnace would have a power capacity of 10 megawatts, the same size as the No. 2 unit currently under construction, Natascha Viljoen, the executive president of Lonmin’s processing division, said in a speech near Rustenburg in northwestern South Africa today. The company may decide in the next 18 months whether to build the third furnace, she said.

Lonmin plans to spend about $400 million a year to boost output at its biggest mine, Marikana, to 950,000 ounces of platinum annually by 2015 as it bets demand for the metal will improve. The producer targeted 750,000 ounces in the year to Sept. 30, 2011, before a strike and safety incidents cut that by 30,000 ounces.

Lonmin suspended its Limpopo mine in 2009, halted expansion projects and cut staff after a six-year commodity rally ended in 2008, sending platinum and other metal prices plummeting. London-based Lonmin and rivals Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd. mine the metal in South Africa, which has more than three-quarters of the world’s reserves of the metal, used in devices that cut vehicle emissions and to make jewelry.

Lonmin plans to restart development work at its Limpopo mine over the next few months, Executive Vice President of Mining Mark Munroe said in an interview today. Asked whether that is in preparation for restarting production, he said: “We’re keeping our options open.”

The company’s view on the outlook for platinum demand is “fairly robust,” Munroe said.

Lonmin’s No.1 furnace, which was rebuilt about 6 months ago, is performing well and is more predictable, with temperatures that are under control, said Frans de Beer, vice president for smelting in a speech today.

Lonmin fell 14 pence, or 1 percent, to 1,437 pence at the 4:30 p.m. close in London.

--Editor: John Viljoen

To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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