Lonmin PLC Workers agree to return for 11-22% wage increase Lonmin workers have agreed to return to work on Thursday in return for an 11-22% wage increase and a one off US$245 payment.

This follows 6 weeks of strike action that has severely disrupted operations.

The outcome, we feel, is broadly in line with our expectations.

We await further news from the company on the full impact operationally and financially from the strike.

LMI will now be able to advance and review its refinancing options. ¢ We had previously assumed a 15% wage increase, which we believe likely reflects the overall agreement reached.

In addition, we had assumed exceptional operating costs of US$38m this financial year (Y/E September) and US$145m next year to accommodate exceptional costs from the strike. ¢ There remains considerable uncertainty on the impact of the strike in operational terms.

We await guidance from management as they will need to re-enter the mines and assess the potential damage from the closure and how long it will take for operations to resume at normal levels. ¢ Lonmin’s financial position is also uncertain, since, as of March it had drawn just over US$500m of its US$945m of available debt facilities and it has not provided an update since the interims.

Furthermore, the company indicated that it expects to produce 685-700koz of platinum for its full year, ahead of our 600koz assumption.

However, the cost of those ounces is unclear and it may well be at the expense of some ounces for the next financial year. ¢ Another source of uncertainty is the status of the capital programmes as LMI has previously announced its intention to move its K4 shaft to care and maintenance, although we expect that it will need to recommence the development of this shaft in due course. ¢ The resolution of the strike action should allow Lonmin to move forward and advance plans to refinance its operations.

Given the lack of visibility, we continue to offer no target price or recommendation.
To access the full note please click here Analysts: Europe: Marc Elliot +44 (0)20 7597 5189 South Africa: Albert Minassian +27 11 291 6176 Australia: Tim Gerrard +61 2 9293 2168
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