Lonmin triples pre-tax profits in first half

Platinum producer Lonmin tripled its first half pre-tax profit driven by better-than-expected production volumes and higher platinum prices.

Pre-tax profit for the first half of the year came to $54m compared to $18m a year earlier. Operating profit rose to $90m from $14m.

Prices in the platinum group metal market improved by 2.0% from an average of $1,568 per ounce in the first half of 2012 to $1,615 this year. It partially offset lower sales volumes but revenue fell to $735m from the prior year's $751m.

The company said it successfully delivered against its forecast of ramp up production, with 366,059 ounces of platinum in concentrate and sales of 326,142 ounces.

"We are pleased to have maintained the momentum of the safe re-start and ramping up of production at our operations to deliver a strong operational and financial performance in the first half of our financial year," said Acting Chief Executive Officer Simon Scott.

"The successful refinancing of the business, the return to profitability during the period under review and the revised growth strategy and streamlined capital investment programme have allowed us to de-risk the balance sheet and it is pleasing to note that the business has generated positive free cash flows in quarter two."

The group lifted its production guidance for the year but warned of the "significant challenge" of wage talks ahead. Lomin is yet to make a new recognition agreement with its majority union, AMCU.

"We expect to continue to build operational momentum in the second half of the financial year and we are increasing our metals in concentrate guidance from 680,000 ounces of platinum to in excess of 700,000 saleable platinum ounces," Scott added.

Shares soared 6.64% to 297.30p at 10:09 Monday.

RD