Shares in troubled platinum miner Lonmin picked up from their recent record lows on Monday morning, as the company reported a “much improved mining performance” in its third quarter.
The company – which is restructuring its business after being rescued by shareholders at the end of 2015 – has come under renewed pressure in recent months after warning that falling production and currency movements had put it in danger of breaking its debt covenants.
The South Africa-focused group was further damaged by government plans for new laws that would require mining companies to permanently increase the stakes held by black shareholders.
Lonmin’s shares tumbled to an all-time low last month, and had struggled to make much headway until last Friday, when they were boosted by news that implementation of the mining charter had been suspended until at least September.
They climbed another 12 per cent on Monday morning, as the company reported a 3.8 per cent year on year increase in production in the three months to June 30. Production was 13.2 per cent higher than the previous quarter, while costs were at the lower end of forecasts and the company’s net cash improved.
At publication time shares in the company were up 9.3 per cent, at 73p.
Yuen Low at Shore Capital said the figures were “better than expected”, but remained wary that the stronger short-term cash position may have come “at the expense of capex and medium-longer term production”.
Ben Magara, Lonmin chief executive, said:
We had a pleasing operational performance all round and continue with our decisive work and aim to be at least cash neutral even at current low [platinum] prices and a strong rand. I am pleased that with the right team in place, our mining turnaround has been sustained.
Despite the difficult global macro-economics and the complex and challenging socio-political operating environment, we are still able to find common ground for Lonmin to deliver this sustained improved performance.