Lonmin Ordinary US$1 (LMI)

Company overview

Lonmin is a major mining group, with considerable interests in the continent of Africa.

HL Update (8 May 2008)

The mining group’s recent half year results saw the company making good progress, with underlying profit up nearly 70pc over last year to $399m, boosted by soaring precious metal prices. The figures broadly met analysts’ forecasts, although concerns in relation to production difficulties continued to weigh on prospects for the second half period. In April, management noted that over the first six months of the year, the group had mined a total of 6.0 million tonnes of ore, a decline of 0.9 million tonnes or 13pc over the same period last year. Difficulties were mainly as a result of the ongoing power supply problems in South Africa and safety shutdowns which the company had suffered. As for the positive, management is attempting to bear down on operational performance, although issues such as power supply remain outside of the company’s influence. On balance, market consensus opinion is currently neutral in tone.

HL Comment (4 January 2008)

The Group's principal activity is that of mining, refining and marketing of platinum group metals. The Group also produces Palladium and Rhodium. The company has three mining operations in the Marikana area and one in the Limpopo province all located in South Africa. During 2005, the Group acquired a 92.6pc interest in Southern Platinum Corp and acquired a further 9.11pc interest in Eastern Platinum Ltd and Western Platinum Ltd.

Group results announced in mid November (2007) highlighted a challenging year on an operational basis. Profits on an underlying basis fell 1.9pc to $811m, with production levels falling significantly below management’s original expectations. Production from its key Marikana operation was affected by a longer than usual Christmas break and industrial action during the year. Furthermore, costs were also on the increase led by a combination of higher energy prices and broad South African inflation. As for the outlook for 2008, management suggested that the year would likely be one of consolidation as the company continues to review its operations.

Acting for negative concerns, political and currency exposure combine with broader concerns over the health of the world economy. On the positive, management are continuing to review costs, both platinum and rhodium markets remain tight and demand for industrial metals show no imminent sign of disappearing just yet. On balance, market consensus opinion is favourable in tone. 

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS ($)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
30-09-2007	1,941.00	705.00	2.05	24.70	n/a	(5.00)	1.15	1.60
30-09-2006	1,855.00	633.00	2.20	16.40	0.10	163.00	1.00	2.00
30-09-2005	1,128.00	319.00	1.12	21.90	n/a	n/a	0.72	2.80
30-09-2004*	1,030.00	360.00	n/a	n/a	n/a	n/a	0.72	3.30
30-09-2003*	779.00	291.00	n/a	n/a	n/a	n/a	0.72	3.90

* Prior to 30th September 2005, figures were stated under UK Generally Accepted Accounting Principles (GAAP). Recent figures stated under International Financial Reporting Standards (IFRS).