Lonmin to cut social, discretionary spending to save cash
Troubled platinum producer Lonmin plans to cut spending on social and labour projects and freeze "non-critical" recruitment, part of an array of measures to save cash, according to an unpublished presentation reviewed by Reuters.
The South African miner, not for the first time, is facing an uncertain future after earlier this month delaying annual financial results pending conclusion of a business review, a move that sent its shares down 30 percent in a single day.
In the presentation to stakeholders earlier this month, the company signaled it would stop all discretionary spending and save 250 million rand ($18.3 million) via energy and water initiatives. It also reiterated plans to cut capital spending.
Cutting expenditure on social and labour plans - called SLPs in South Africa - could be problematic as mining companies are required to meet certain obligations to provide housing and other services to the communities around their shafts to maintain their operating licences.
In September, Lonmin said it had been informed by South Africa`s department of mineral resources that it had failed to meet some social and labour obligations, although the company added it did not think its operating licence was in jeopardy.
Lonmin spent 270.8 million rand on social and labour plans during the 2016 financial year, the last year for which it has provided full details.
"The law provides for a review of SLP plans depending on the prevailing business environment - called a section 102 process - and this is discussed with the regulator," Lonmin spokeswoman Wendy Tlou said in response to Reuters questions.
"We are in the process of engaging with the Department of Mineral Resources with regards to the proposed adjustments to the plan and only once those are completed and agreed upon, would we have an idea of impact."
She also said "non-critical recruitment" involved "positions we can delay or do without for some time compared to critical roles that you may need immediately for operational reasons."
Lonmin, which has been forced to tap investors three times since 2009, is under pressure on a range of fronts.
"The confidential presentation Lonmin presented to stakeholders does not paint a pretty picture," said one attendee, who declined to be named.
South Africa`s Public Investment Corporation, which has a 30 percent stake in the company, is planning to ask for two seats on the board by the end of 2017 and has suggested Lonmin move its main listing to Johannesburg from London, its chief executive told Reuters on Tuesday.
Lonmin has been hobbled for years by depressed prices, soaring costs and periodic bouts of violent labour unrest which highlight the social risks of South African mining.
An attempt at mechanisation years ago was abandoned in the face of geological challenges, one of many costly missteps that have dented investor confidence in a company that has seen its share price plummet around 97 percent in five years.
($1 = 13.6554 rand)
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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