Lonmin PLC share price rallies to six-week high despite negative results as CEO sees no need for raising funds

Lonmin PLCs CEO said the company does not need to raise additional funds this year as it reported a 37% decline in revenue, a result of a five-month strike.

“We see no need at this juncture, given what we know, we have sufficient bank facilities” CEO Ben Magara said on a conference call, pointing towards to the untapped loans of $575 million.

Lonmin, the worlds third-largest platinum producer, stated a revenue of $965 million for the full-year ended September 30, down from $1.52 billion of last year.

Lower platinum prices contributed to the companys performance during the year, but not as much as one of South Africa’s longest strikes, which resulted in the loss of nearly one third of Lonmins annual production.

The Johannesburg-based company announced an operating loss of $255 million for the business year, compared to a $147-million profit for the previous fiscal 12 months.

Lonmin also reduced its plans for capital expenditure to around $250 million, versus the previous projection of around $400 million. As an explanation the company pointed towards suppressed market conditions and capital discipline.

Mr. Magara said: “This year has been unique” referring to the stop of production that resulted in $307 million in strike-related costs. The company accumulated a $29 million net debt by the end of the business year, as it bounced back to full production after the end of the industrial walk-out on June 24. In comparison Lonmin had $201 million net cash in the end of last fiscal year.

“The main concern has been around the balance sheet,” Edward Sterck, an analyst at Bank of Montreal, said in a phone interview for Bloomberg. “Finishing the year with net debt of only $29 million is probably better than what people were expecting.”

Lonmin projected to produce around 750 000 ounces of platinum in 2015 and sell around 730 000 oz of it, compared to the strike-hit sales of 441 000 oz this year. “The huge impact of a strike of unprecedented length across the South African Platinum Group Metals (PGM) sector resulted in Lonmin losing 391 000 equivalent saleable platinum ounces” Mr. Magara said.

The company said that its K4 shaft, which was placed under care and maintenance back in 2012, is its best brownfield replacement and growth option. Lonmin has sent a dedicated team to prepare K4 for an effective ramp up “without requiring excessive capital”.

Lonmin said that it expects 2015 unit production cost to be 10 800 rand per ounce, taking into consideration increased wages and the boosted production profile for next year.

Lomnin PLC gained 7.64% on Friday to close at GBX 187.40 in London. On Monday the stock edged up 3.74% to trade at GBX 194.40 at 13:37 GMT, marking a one-year decrease of 40.75%. The company is valued at GBP 1.07 billion.