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Thursday May 31, 7:25 am Eastern Time
Lonmin doubles H1 profit, hunts acquisitions
By Rex Merrifield
LONDON, May 31 (Reuters) - South African platinum producer Lonmin Plc reported doubled half-year profits on Thursday, driven by high metals prices and a strong U.S. dollar and said it was hunting acquisitions to boost its global assets.
Lonmin, the third biggest platinum producer outside Russia, said it was on track to produce a million ounces of platinum in South Africa annually by 2007, giving it ``critical mass''.
Sitting on a pile of cash, Lonmin also said it was expanding in Australia and considering possible North American projects. But it said it would quit its investment in African gold miner Ashanti (NYSE:ASL - news) when it could get a fair price.
Pre-tax profits were in line with forecasts, reaching US$252 million for the six months ended March 31. That compared with a restated US$127 million for the same period last year.
Lonmin's shares were up nearly two percent by 1120 GMT at 1,040 pence.
The firm was formed by the demerger of late entrepreneur Tiny Rowland's pan-African Lonrho empire and has focused on platinum group metals (PGMs). Strong prices for those metals -- platinum, palladium and rhodium -- have increased its cash inflow and it now has $447 million in the bank.
Chief Executive Edward Haslam said Lonmin was spending $550 million on organic growth in South Africa over seven years and about $75 million on developing its Pandora mining joint venture project with number one platinum miner Anglo American Platinum (Angloplat) .
Lonmin had recently agreed two deals in PGM prospecting and mining in Australia, and was eyeing North America too.
``We're looking at some major corporate activity, probably in the second half of this year,'' he said, adding that if the company did not find deals that increased value, it would give shareholders back the cash.
Among Lonmin's competitors in North America are Stillwater Mining Co. (AMEX:SWC - news) of the United States and Canada's North American Palladium (Toronto:PDL.TO - news). Analysts said industry consolidation could also involve nickel players such as Inco Ltd (Toronto:N.TO - news) and Sherritt International Corp (Toronto:S.TO - news).
Lonmin's first half production of PGMs totalled 568,289 ounces and adding its share of the Pandora project would take its production target to one million ounces of platinum and two million ounces of total PGMs by 2007.
It said construction of a new smelter in South Africa was well advanced and it would be commissioned in October.
PGM DEMAND ROBUST
Haslam said the outlook for PGMs was strong, driven by robust industrial demand.
Tighter pollution control standards around the world held out of the prospect of continued strength for use of PGMs as catalytic converters -- used to cut vehicle exhaust pollution.
``I don't say that that means the (platinum) price is going to stay at $600 forever, I have no idea. But I do know that the supply and demand equation is very positive for platinum group metals for the next few years,'' he said.
The company also announced plans to invest up to A$52 million ($27 million) in Platinum Australia Ltd (Australia:PLA.AX - news), which would give it a 55 percent fully diluted stake in the outback prospecting firm. That follows its recent deal with Australia's Helix Resources NL (Australia:HLX.AX - news) to back the development of the Munni Munni mining project in Western Australia.
Lonmin still has a 32 percent stake in African gold miner Ashanti Goldfields Co. Ltd, which it wants to sell.
``As far as Lonmin is concerned, and Lonmin shareholders, Ashanti is really not important,'' Haslam said. ``We're platinum... and we will stay that way for the time being.''
Lonmin increased the interim dividend 71 percent to 24 U.S. cents from 14 cents per share, underlining its commitment to return cash to shareholders .
``I think they're on the right track and will probably remain so,'' said analyst Martin Potts of brokers Williams de Broe.
``Operating margins about 60 percent give you an awful lot of comfort, and things have to go badly wrong for them for them to feel it,'' he said.
Lonmin's shares hit an all-time high of 11.70 pounds last week, buoyed by firm PGM prices which ensure strong revenues, and weakness in the South African rand, which accounts for most of its input costs. And rival platinum producers Impala Platinum Holdings (Implats) and Angloplat have seen their shares at new record highs this week.
The average price Lonmin received for its platinum was $586 per ounce over the half year -- about 30 percent higher than in the previous year.
PHIL
(Yep, I'm still here.) |
