South Africa: Lonmin struggling to stay afloat - and address environmental issuesPublished by MAC on 2016-01-27
Source: Mineweb, Reuters
The troubled British platinum mining company Lonmin held its annual general meeting in London last week.
Lonmin has recently become notorious for alleged complicity in the Marikana Massacre (see Report on Marikana Massacre is released to heavy criticism).
The website Mineweb notes that Lonmin is making progress on staying in business despite severe financial challenges. It appears this is at least partly through large-scale retrenchments, which may cause further social unrest in the future.
The South African NGO the Centre for Environmental Rights used the timing of the AGM to raise issues of Lonmin's environmental compliance. Their report on this can be downloaded here
Questions Lonmin’s shareholders should ask at the upcoming AGM on 28 January 2016
25 January 2016
The Centre for Environmental Rights’ September 2015 report, Full Disclosure: The Truth about Corporate Environmental Compliance in South Africa, revealed that over the period assessed (2008-2014), many of South Africa’s biggest listed companies, including Lonmin plc, committed serious breaches of environmental laws. The report also revealed that the level of disclosure of these breaches to shareholders was in most cases extremely poor, and that investors, in particular South Africa’s large institutional investors, are failing to recognise red flags in company reports and are not asking nearly enough questions about the environmental compliance of the companies in which they invest. In light of these findings, shareholders are called upon to exercise their powers at Lonmin’s upcoming AGM on the 28th of January and ask management questions on the following key issues:
Compliance with environmental laws
As highlighted in Full Disclosure, there is limited publicly available information regarding Lonmin’s compliance with environmental laws. What little information is publicly available, in Lonmin’s annual reports and elsewhere, reveals an apparent significant number of serious non-compliances with environmental laws and permits, including incidents causing harm to the environment at and around Lonmin operations, a failure to meet air quality permit requirements, repeated exceedances of dust emission limits, poor water management systems and non-functional sewage systems.
No mention is made in Lonmin’s annual reports of compliance inspections undertaken by regulatory authorities at Lonmin’s operations. Shareholders should accordingly ask:
- How many times have Lonmin’s facilities been inspected by regulatory authorities for compliance with environmental laws and permits?#
- What have been the results of these inspections?
Financial provision made to satisfy closure obligations
Lonmin’s 2015 annual report details the company’s plans to close certain shafts. Shareholders should accordingly ask:
- What is the estimated cost of environmental rehabilitation at the locations where the closure of shafts is set to occur?
- What assessments were done to determine this estimated cost?
- What financial provision has been made to satisfy the company’s rehabilitation obligations at these locations?
- World Bank complaint by the women of Marikana
As highlighted in Full Disclosure, in 2015 the women of Marikana lodged a complaint with the ombudsman of the World Bank in relation to the International Finance Corporation’s investment in Lonmin. The International Finance Corporation is the private sector investment arm of the World Bank. The complaint centres on Lonmin’s failure to comply with the social and environmental conditions attached to the investment, and alleges that the air and groundwater in local communities has been polluted by the mine. Shareholders should accordingly ask:
- What is the status of this complaint? Has any action been taken by the International Finance Corporation against Lonmin in relation to this complaint? If action has been taken, what are the relevant details?
- What steps, if any, has Lonmin taken to deal with the allegations in this complaint?
About the Centre for Environmental Rights (CER)
The CER is a non-profit organisation and an environmental rights law firm that helps communities defend their right to a healthy environment. It does this by advocating and litigating for transparency, accountability and compliance with environmental laws. For more information, visit http://cer.org.za/.
Lonmin cuts jobs and costs
Platinum producer targeting savings of R700 million in 2016.
28 January 2016
JOHANNESBURG – Platinum producer Lonmin will continue to review its services and reduce costs, mainly through cutting jobs, as the slide in the price of its main commodity bites further.
The company said labour costs fell R194 million ($11.8 million) in the last three months of 2015 after it shed 5 077 jobs, or 84.6% of its planned reduction in head count.
“Progress continues with the restructuring programme due to the new benchmarked operating model and removal of high cost production to ensure the business remains viable,” Lonmin said in a statement.
It is targeting savings of R700 million in 2016.
Hurt by a 2014 strike, rising costs and a plunging platinum price, Lonmin raised $400 million through a cash call in December which failed to find favour with shareholders and priced shares at about a penny each.
Some of the proceeds of the rights issue were used to pay down debt, leaving the company with $69 million in cash at end of December.
The miner said refined platinum production reached 171 441 ounces in the three months to the end of December, an increase of 22.6% from a year ago despite higher safety stoppages.
The price of platinum has been on the decline for roughly the past five years. It fell 26% last year and is less than half its 2011 peak.
Shares in Lonmin have lost nearly all of their value over the last year. It was the worst-hit of three top platinum miners by the 2014 five-month labour stoppage.
Lonmin maintained its full-year production guidance of 700 000 platinum ounces and its capital expenditure plan of $132 million despite projecting sustained weaker metal prices.
($1 = R16.3897)