Lonmin's annual profits sink 71% after five-month strike

Lonmin said that its full-year performance was "dominated" by the impact of a five-month strike in South Africa, which resulted in a sharp drop in profits as production slumped and costs soared.

The company, which is one of the largest primary platinum producers in the world, said platinum sales totalled 441,684 ounces (oz) in the year ended 30 September, compared with the 696,000oz sold the year before.

Some 391,000oz of saleable platinum were lost due to the strike, which also resulted in the costs of production per platinum group metal (PGM) rising 47% to 13,538 rand/oz.

As such, underlying pre-tax profit was just $46m during the year, down 71% from $158m the year before. Underlying earnings per share slumped to 5.4 cents from 20.5 cents.

Lonmin said results have "fallen short of market expectations".

"Significant destocking by mining companies during the longest strike in platinum's history, not to mention the growth of platinum exchange-traded funds products in South Africa, should have led to higher prices than prevail today," the group said.

"However, speculative investment positions have been long for some time constraining upward price movement leaving platinum largely range bound throughout most of 2014."

It also said that the recent strengthening in the dollar and "uneven global economic trends" have resulted in significant liquidation and price depreciation.

Looking ahead, the company expects to produce 750,000oz in the year ending September 2015, with sales of 730,000oz. Unit costs of production are estimated to be R10,800/oz.

Regarding shareholder returns, chief executive Ben Magara said: "I remain conscious of the need to pay dividends to shareholders at the earliest appropriate time."