Final Presentation 131107 - The Vault · PDF fileFinal Results - 2007 4 Mining – Issues & Actions Strengthened senior team • New EVP, Chris Sheppard, two new VP’s in Marikana

Lonmin Plc FINAL RESULTS 2007

Final Results - 2007

2

2007 Overview

• A number of operational challenges

• Actions being taken to address these issues

• Successes

• Substantial growth in high quality resources – 27% increase in PGM ounces

• Long term growth profile further enhanced with Akanani acquisition

• PGM markets remain robust

• Full year dividend increased by 15% to 115.0 cents per share


3

Agenda for today

• 2007 Issues & Actions

• Financial Results

• Operational Overview

• Quality Resource Base

• Outlook

• Questions


4

Mining – Issues & Actions

Strengthened senior team

• New EVP, Chris Sheppard, two new VP’s in Marikana mining and new management team at Limpopo

• Capital Projects group established

Business improvement

• Renewed focus on grade control and face advance

• Completed new wage agreement including measures to address absenteeism

• Continued focus on mechanisation

Strengthening planning

• Integrate short and long term planning

• Advanced development planning for Limpopo

• Increased drilling and geo-physical surveys at Limpopo

• Reviewing options for entire Limpopo property

Production planning

• Disconnect in short term planning and long term life of mine plan

• Sourced more UG2 underground ore from east of Marikana

People

• Productivity

• Industrial action

Limpopo

• Currently adverse ground conditions

ACTIONSISSUES


5

Process Division – Issues & Actions

Full action plan for Concentrators

• Now managed by Process Division

• Recruitment of new skills

• Focus on forecasting and planning

• Move Six Sigma Black Belts to Concentrators

• Technical forecasting model introduced to focus on recoveries

Mitigated risk

• Re-build of Number One furnace

• Completed re-commissioning of Merensky furnace

• Conservative operating philosophy and planned maintenance

Concentrators’ Recoveries

• Lack of skilled personnel

• Marginal decline in milled head grade

• More opencast ore

• Timing/planning of deliveries

Number One Furnace

• Burn through in December 2006

ACTIONSISSUES

Financial Results

Alan FergusonChief Financial Officer


7

Summary of Operating Results

12 months to 30 Sept 2007

12 months to 30 Sept 2006 Variance

US$m US$m %

Revenue 1,941 1,855 5%

EBIT 794 842

Underlying EBIT 796 830 (4)%

Underlying EBIT margin (%) 41% 45%

Profit before tax 705 633

Underlying profit before tax 811 827

Attributable profit 314 313

Basic EPS (cents) 205.1 219.5

Underlying attributable profit 453 445

Underlying EPS (cents) 295.9 312.1 (5)%


8

EBIT Variances

842 (12) 830

345

52 (303)

(28)(100)

796 (2) 794

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

FY06

Rep

orte

d

Spec

ial

FY06

Und

erly

ing

PGM

Pric

e

Bas

e M

etal

s

PGM

Volu

me

PGM

Mix

Cos

ts

FY07

Und

erly

ing

Spec

ial

FY07

Rep

orte

d

$ m

illio

ns


9

Year on Year Cost Variance Analysis

28 5

11

19

67

18 7

18 (79)

6 100

0

25

50

75

100

125

150

175

200

SHEC

Mar

ketin

g

Expl

orat

ion

and

Dev

elop

men

t

Shar

ed S

ervi

ces

Prod

uctiv

eC

osts

Toll

Fees

Roy

altie

s

Shar

e-ba

sed

Paym

ents

Fore

ign

Exch

ange

Dep

reci

atio

n an

dA

mor

tisat

ion

Tota

l

$ m

illio

ns


10

Cost per PGM Ounce Sold - 2007

12 monthsto 30 Sept

2007

12 monthsto 30 Sept

2006R/oz R/oz %

Mining - Marikana 2,306 1,700 36%Mining - Limpopo 4,463 3,740 19%Mining (weighted average) 2,430 1,827 33%

Concentrating - Marikana 470 330 42%Concentrating - Limpopo 1,506 847 78%Concentrating (weighted average) 526 361 46%

Process division 600 406 48%SBS 612 463 32%Stock movement 28 (9)

C1 cost per PGM ounce (gross) 4,196 3,048 38%Base metal credits (762) (400) 91%

C1 cost per PGM ounce (net) 3,434 2,648 30%Amortisation 360 272 32%

C2 cost per PGM ounce (net) 3,794 2,920 30%

Variance


11

Reconciliation of Unit Costs to EBIT

12 monthsto 30 Sept

2007

Total revenue $m 1,941

Absorbed operating costs:

Normal operations ("C1") PGMs sold K oz 1,218Cost per ounce (gross) R/oz (4,196)Cost Rm (5,109)

Other operations PGMs sold K oz 273(Toll-refined and joint venture) Cost per ounce (gross) R/oz (5,416)

Cost Rm (1,476)

Total Total PGMs sold K oz 1,490Avg Cost per ounce (gross) R/oz (4,419)Total absorbed cost Rm (6,585)

FX R:$ 7.06Total absorbed cost $m (933)

Unabsorbed costs:Operating overheads $m (43)Corporate $m (59)Exploration $m (23)Total unabsorbed costs $m (125)

Operating amortisation $m (87)

EBIT (underlying) $m 796


12

Free Cash Generated

12 months to 30 Sept

2007


2006 VarianceUS$m US$m %

Operating profit 794 842

Working Capital 81 (202)

Depreciation and other items 108 82

Net cash inflow from operating activities 983 722 36%Net interest and finance costs (25) (31) Tax paid (266) (185)

Trading cash flow 692 506 37%Capital expenditure (276) (182) Proceeds from disposal of assets held for sale 5 28 Minority dividends paid (41) (62)

Free cash flow 380 290 31%

Trading cash flow per share (cents) 452.0 354.9 27%Free cash flow per share (cents) 248.2 203.4 22%

Operational Overview

Brad MillsChief Executive


14

2007 Safety Record

32007

6 2006

62005

82004

Lonmin

Industrial Fatalities

0

5

10

15

20

25

2003 2004 2005 2006 2007

LTIF

(per

mill

ion

man

-hou

rs w

orke

d)

0

2

4

6

8

10

12

14

16

18

20

Seve

rity

Rat

e (d

ays

per i

ncid

ent)

LTIF (per million man-hours worked) Severity Rate (days per incident)


15

Mineral Resource Grade

(3PGE +Au g/t)

Prospecting Permit

Pandora JV

E3 BELT INCLINE

E2 BELT INCLINE

E1 BELT INCLINE

SAFFY SHAFT

NEWMAN INCLINE

HOSSY SHAFT

ROWLAND SHAFT

1 EAST LIFT SHAFT

1 SHAFT

K4 SHAFT

K3 SHAFT

4B INCLINE

Depth increases w

ith latitude

Marikana UG2 Underground Ore Body

Fault Lines


16

Marikana – Underground Production

N.B. Excludes production from Pandora Joint Venture ground

0

500

1000

1500

2000

2500

3000

3500

Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407

Tonn

es h

oist

ed (0

00's

)

3

3.5

4

4.5

5

5.5

Mill

ed H

ead

Gra

de (5

PGE

+ A

u) g

/t

Shallow Deep Saffy & Hossy Milled Head Grade


17

Hossy and Saffy - Performance

0

20

40

60

80

100

120

140

160

180

200

Q306 Q406 Q107 Q207 Q307 Q407

Tonn

es M

ined

(000

's)

0

1

2

3

4

5

6

7

8

% o

f und

ergr

ound

pro

duct

ion

Tonnes Mined - Saffy & Hossy % of underground production


18

Hossy and Saffy – Safety

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07

LTIF

R (p

er m

illio

n m

an-h

ours

wor

ked)

Conv. LTIFR Mech. LTIFR Progressive Conv LTIFR Progressive Mech LTIFR


19

Marikana Opencast – Tonnes and Grade

0

100

200

300

400

500

600

Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407

Tonn

es M

ined

(000

's)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Mill

ed H

ead

Gra

de (g

/t 5

PGE

+ A

u)

Tonnes Mined Milled Head Grade


20

Limpopo – Tonnes and Grade

0

50

100

150

200

250

Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407

Tonn

es H

oist

ed (0

00's

)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Mill

ed H

ead

Gra

de (g

/t 5P

GE

+ A

u)

Ore Hoisted Milled Head Grade (g/t)


21

Limpopo – Ground Conditions

IRUPIRUP

Baobab ShaftPot-Holes

MERENSKY REEF


22

Pandora Joint Venture

N.B. Underground mining from E3 shaft includes both Lonmin-owned ground and Pandora JV ground

0

20

40

60

80

100

120

Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407

Min

ed T

onne

s (0

00's

)

4.00

4.20

4.40

4.60

4.80

5.00

5.20

5.40

5.60

5.80

Mill

ed H

ead

Gra

de (g

/t 5

PGE

+ Au

)

Underground Tonnes Opencast Tonnes Underground Grade Opencast Grade


23

Marikana Concentrators

0

50

100

150

200

250

Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407

Sale

able

Met

al in

Con

cent

rate

(Pt o

z - 0

00's

)

75

76

77

78

79

80

81

82

83

84

85

Rec

over

y R

ate

(%)

Saleable Metal in Concentrate (Pt oz) Recovery Rate (%)


24

Smelter

No. 1Furnace

No. 1Furnace

Installed Megawatts

0

50

100

150

200

250

300

Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407

Contained Pt oz produced (000’s)

0

5

10

15

20

25

30

35

40

45

2006 2007

Inst

alle

d M

egaw

atts

No. 1Furnace

Pyromet

Pyromet

Pyromet

Pyromet

Pyromet

Pyromet

No. 1Furnace

Merensky

32MW

40MW

2006 2007


25

Refineries

BMR:

• New senior manager in place

• Performed well in H207, with throughput of 5,276 tonnes of matte

• Continuing capacity upgrade – increasing by 12% from 33 to 37 tonnes per day

PMR:

• Produced 695,842 oz of refined Platinum and 1,289,857 oz of refined PGM’s

• Toll refined 93,609 Platinum oz and 174,378 PGM oz

• Total capacity of around 2 million PGM oz per annum

0

50000

100000

150000

200000

250000

300000

Q107 Q207 Q307 Q407

Prod

uctio

n (P

t oz)

Contained Pt oz

0

100000

200000

300000

400000

500000

600000

Q107 Q207 Q307 Q407

Prod

uctio

n (o

z)

Pt Pd Au Rh Ruth Iri


26

Long Term Sustainability

• New Order Mining Licence granted in October 2006

• IFC agreement - US$5.9 million technical assistance partnership, focusing on:

• Women in mining

• Local supplier development

• HIV/AIDS in workplaces and communities

• Community capacity building

• HIV/AIDS programme – encouraging results:

• Now tested over 50% of the workforce through VCT campaign

• 836 patients receiving ART through the Wellness programme

• Housing programme:

• Plan to build 500 houses for category 3 to 8 employees in 2008

• Plan to convert 38 hostel units into married accommodation

Quality Resource Base



28

Current Production Growth Profile

* includes Pandora Joint Venture underground ounces from existing operations

** includes Pandora Joint Venture opencast ounces from existing operations

*** This profile will be fully reviewed by the new Mining team over the next few months

Estimated capital expenditure of US$400 -450 million for 2008. Expect similar levels for 2009 and 2010

(includes a total of around US$50m estimated initial spend on Akanani for 2008 & 2009. Depending on options selected, Akanani could have a material impact on capexfrom 2009)

0

200

400

600

800

1000

1200

1400

2008 2009 2010 2011 2012

Pt o

z (0

00's

)

Marikana Opencast ** Marikana Shallow * Marikana Deep Marikana Mechanised (Hossy, Saffy & K4) Limpopo


29

Limpopo - Future Plans

Baobab Shaft


30

Akanani – Drill Hole Map


31

Quality Resource Base

AttributableMineral Resources(Total Measured, Indicated & Inferred)

76.1130.3 *4.85835.791.6165.6 *4.441,159.7Total

0.50.74.355.20.81.34.0410.1Loskop JV

4.67.34.0955.44.97.94.3356.7Pandora JV

----12.530.03.46269.7Akanani

9.518.94.72124.612.124.14.19178.8Limpopo

61.5103.34.94650.461.2102.34.94644.4Marikana

MozMozg/tMozMozg/t

Pt3PGE+AuMt

Pt3PGE+AuMt

30-Sep-200630-Sep-2007

Ore source

Attributable Mineral Reserves (Total Proved & Probable)

27.747.0 **4.11355.230.051.3 **4.03396.0Total

----0.030.044.550.30Pandora JV

1.22.33.5820.33.46.73.2664.3Limpopo

26.644.64.14334.926.644.54.18331.4Marikana

MozMozg/tMozMozg/t

Pt3PGE+AuMt

Pt3PGE+AuMt

30-Sep-200630-Sep-2007

Ore source

* 27% increase in resources, in PGM ounces, from 2006 to 2007

** 9% increase in reserves, in PGM ounces, from 2006 to 2007

Outlook



33

2008 Guidance

2008 guidance:

• Expected to be a year of consolidation

• Sales guidance of around 900,000 Pt ounces

2008 costs & capital expenditure:

• Challenging cost environment in South Africa expected to continue

• C1 cost guidance expected to increase by around 15% on reported 2007 C1 cost number

• Assumed base metal credit for 2008 in line with 2007

• Anticipating capital expenditure of US$400 - 450 million


34

Outlook

• PGM markets remain robust with buoyant metal prices

• Rand/US$ : Platinum price inverse relationship remains intact

• Actions being taken to address issues encountered in 2007

• Continue to execute our strategy of mechanising and modernising our mines

• Building on safety and sustainability performances

• Increase in Reserves and Resources – supports our long term value and growth

Questions

Appendices


37

Metal Split

FY07 – PGM Split (saleable ounces) FY07 – Revenue Split (%)

50

7

31

4

8

Platinum Palladium Rhodium OPM's Base Metals

53

25

7

11

3 1

Platinum Palladium Rhodium Ruthenium Iridium Gold


38

Akanani – latest drill results (Southern Section)

0.300.156.0620.88Weighted Mean

0.240.126.2530.64ZF049

0.260.034.080.97ZF047

0.400.218.3111.74ZF046

0.220.142.5128.00ZF045

0.340.179.6435.98ZF044*

0.360.175.5125.60ZF043*

0.250.162.6213.27ZF015

Southern Section - P2 Unit

Ni(%)

Cu(%)

3PGE+Au(g/t)

Drilled width(metres)Borehole

0.230.134.1723.061041.521018.46ZF046

0.310.205.1138.371014.51976.14ZF045

0.270.184.4116.461333.591317.13ZF044_ED1

0.200.115.0919.391301.911282.52ZF044

0.140.093.1637.691264.561226.87ZF044

Southern Section - P1 Unit

Ni(%)

Cu(%)

3PGE+Au(g/t)

Drilled width(metres)ToFromBorehole


39

Akanani – latest drill results (Northern Section)

0.160.093.0724.34MO020

0.060.042.663.45MO019

0.080.054.620.86MO016

0.170.101.9926.27MO014

0.310.183.081.92MO013

0.180.075.787.56MO009

Northern Section

Ni(%)

Cu(%)

3PGE+Au(g/t)

Drilled width(metres)Borehole


40

Free Cash Utilised


2007


2006 US$m US$m

Free cash flow 380 290 Acquisition of subsidiary (net of cash offsets) (393) (14) Purchase of other financial assets (21) (36) Dividends paid to Lonmin shareholders (171) (124) Issue of ordinary share capital 68 15

(Increase) / decrease in net debt (137) 131 Opening net debt (458) (585) Effect of exchange rate changes 7 (4) Conversion of the convertible bond 213 -

Closing net debt (375) (458)

Gearing 15% 27%


41

Disclaimer

• This presentation, which is personal to the recipient and has been issued by Lonmin.

• This presentation includes forward-looking statements. All statements other than statements of historical fact included in this announcement, including without limitation those regarding Lonmin's plans, objectives and expected performance, are forward-looking statements. Lonmin has based these forward-looking statements on its current expectations and projections about future events, including numerous assumptions regarding its present and future business strategies, operations, and the environment in which it will operate in the future.

• Forward-looking statements generally can be identified by the use of forward-looking terminology such as 'ambition', 'may', 'will', 'could', 'would', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek' or 'continue', or negative forms or variations of similar terminology. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors related to Lonmin, including, among other factors: (1) material adverse changes in economic conditions generally or in relevant markets or industries in particular; (2) fluctuations in demand and pricing in the mineral resource industry and fluctuations in exchange rates; (3) future regulatory and legislative actions and conditions affecting Lonmin's operating areas; (4) obtaining and retaining skilled workers and key executives; and (5) acts of war and terrorism.

• By their nature, forward-looking statements involve risks, uncertainties and assumptions and many relate to factors which are beyond Lonmin's control, such as future market conditions and the behaviour of other market participants. Actual results may differ materially from those expressed in forward-looking statements. Given these risks, uncertainties, and assumptions, you are cautioned not to put undue reliance on any forward-looking statements. In addition, the inclusion of such forward-looking statements should under no circumstances be regarded as a representation by Lonmin that Lonmin will achieve any results set out in such statements or that the underlying assumptions used will in fact be the case.

• Other than as required by applicable law or the applicable rules of any exchange on which Lonmin's securities may be listed, Lonmin has no intention or obligation to update or revise any forward-looking statements included in this presentation after the publication of this presentation.

• This presentation is for information only and does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any shares in Lonmin or any other securities, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied upon in connection with, any contract or investment decision related thereto.

Documents

Final Presentation 131107 - The Vault · PDF fileFinal Results - 2007 4 Mining – Issues & Actions Strengthened senior team • New EVP, Chris Sheppard, two new VP’s in Marikana