www.lonmin.com
Lonmin is the world's third largest primary platinum producer with mines in South Africa's Bushveld Complex.
Goldman Sachs cuts Lonmin target price
Goldman Sachs (NYSE:GS) called the recent developments at Lonmin (LON:LMI), including strike action by workers in South Africa, “disappointing” as the broker and slashed its target price for the stock.
The investment bank also warned investors that the whole platinum mining industry of South Africa is likely to miss targets this year.
The FTSE 100 platinum miner has recently reduced its full year production target from 750,000 ounces to 720,000 ounces as a result of several accidents at the Karee mine and a strike. The company has had to hire new workers after sacking those involved in the unprotected strike, which further affected production at the mine.
Lonmin also said that unit costs will exceed its 8 percent increase target for the year.
As a result, Goldman Sachs reduced its 12 month target price from 1,950 pence to 1,860 pence and lowered its own production forecasts from 740,000 ounces to 715,000 ounces of platinum. The new target implies 20 percent upside potential for the shares.
“These developments are a disappointing result for the company, which was making strides to improve its delivery records after a series of misses.”
Goldman noted that the recent disappointing developments at Lomnin follows similar events at Eastplats and the news that the South African National Union of Mineworkers (NUM) is seeking a 14 percent wage hike.
“Against this backdrop, we believe the South African platinum industry is likely to under-deliver in 2011 and that unit cost inflation will return to more than 10 percent a year,” Goldman said in the note.
Lonmin is the world's third largest primary platinum producer and South Africa currently contributes nearly 80 percent of the global production of the metal.
