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Complied by Cass Gilroy-Business Editor

Rising input costs eat into profits at SA’s Lonmin

South Africa’s platinum producer Lonmin, overcame production problems in the year to September to produce record ouputs but warned that its margins had been squeezed by production issues and higher input costs. 

The group said in its production report that it has exceeded its target of producing 1 million ounces of platinum in concentrate for the year by 17,137 ounces. In the final quarter, smelter operations were stabilised and the process division recovered quickly from a fire in the precious metals refinery. About a fifth of sales were in the form of concentrate rather than refined metals because of the rebuilding of the smelter and other processing issues, Lonmin said. 

Concentrate carries a lower margin than the refined product. At interim stage, the group's costs appeared to be well under control with an increase in unit costs of only 0,5% at Marikana, which is the bulk of Lonmin's operations. 

But it said that cost pressures increased in the second half, suggesting full year costs at Marikana would be about R2400-R2450/oz of platinum group metals sold. This compares with last year's cost of R2243/oz.


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