In its interim results for the half-year ended March 31, the South Africa-based group also reported a remarkable improvement to its balance sheet. It is now sitting on cash of US$114mln compared with debt of US$185mln a year earlier.
“We have delivered on our promise to restructure and cut high cost production in this oversupplied market while simultaneously reducing costs and improving cashflows,” said chief executive Ben Magara.
Cost savings were well ahead of schedule, achieving US$30mln of savings in the period. It included the cutback of 5,433 members of staff.
“The aggressive cost reduction programme and pleasing operating performance has reduced unit costs," said Magara. Unit cost per ounce was down from US$700 in the first quarter to US$668 in the second quarter, enabling the group to maintain the unit cost guidance of around US$668 per PGM (platinum group metal) ounce produced.
Lonmin also maintained its 700,000 oz platinum sales target for the year.
Demand for platinum is expected to grow across all sectors, with the autocatalyst and jewellery industries making up the biggest segments.
The demand is expected to grow by nearly 1mln oz between 2015 and 2025, pushed by vehicle production and legislation of tighter emissions standards.
It expects demand for palladium to grow by around 1% in 2016. “The lacklustre performance is largely due to the downward revision in automotive production in China,” said the group.
Last year Lonmin shares plummeted more than 95% last year due to global slump in commodity prices. The slump was attributed to a supply glut and slower growth in the main consumer, China.
Despite facing pressure from the South African government and labour unions, the group was forced to slash more than 5,000 jobs in January as it commenced a campaign to slash costs. It now faces challenges surrounding staff pay following government reform.
“I am cautiously optimistic about wage negotiations as we have engaged continuously with our employees and unions on the economic realities that our Company has gone through, including the inevitable 5,433 colleagues that we had to sacrifice,” said CEO Magara.
Analysts at VSA Capital Research were upbeat: “We would hope the production ounce unit costs improvements continue. Rationalising production to a more resilient LMI is the way forward and we feel LMI appears to be on course for that.”
But analysts at Liberum remained cautious.
“Lonmin remains very much at the margin, the PGM Rand basket price has improved this year with stronger precious metal prices and is just about cash flow break even on ongoing basis,” said the broker.
Earlier this year, Magara told investors that a takeover or merger was “not something we would shy away from.”
Shares were trading at 201.5p.