Lonmin plc (LON:LMI) has announced plans to slash costs, pointing to concerns about adverse macroeconomic conditions and inflationary cost pressures facing platinum miners in South Africa.
Shares in the platinum producer fell 1.68% to 88p in morning trading.
Following an operational review, Lonmin said it is taking steps to "ensure that its operations generate sufficient cash to support a sustainable business".
READ: Citigroup thinks there is a “high likelihood” that Lonmin will have to make another cash call later this year
It has decided to sell excess processing capacity of up to 500,000 platinum ounces per year in order to maximise cash from processing operations and preserve cash.
The company said its current capital position has made it challenging to fund its MK2 project in Marikana, South Africa, and it would look for funding partners.
Lonmin will also consider selling or introducing joint venture partners into its Limpopo and Akanani operations.
The miner plans to reduce annual overhead costs by at least 500mln rand by September 30 through the right-sizing of overheads to its operations.
“Overall aim remains for the business to be cash positive after capital investment”, the company said.
"Overall its a positive but this not change Lonmin's cash cost position at the top of the curve, and the longer the platinum market stays at current price levels, Lonmin will continue to lose cash," said Liberum analyst Ben Davis.
Meanwhile, the Department of Mineral Resources has approved Lonmin’s application to buy the Pandora joint venture from Anglo Platinum, which will defer 2.6bn rand of capital expenditure and “contribute to the sustainability of the business” by potentially preserving jobs at the E3 shaft.
Lonmin has already received approval from the competition tribunal and is in the process of seeking lender consent.