Lonmin produced a satisfactory performance in 2009, despite some significant challenges and the completion of a major restructuring programme during the year. Production at our core Marikana underground operations was in line with 2008 levels and we achieved our revised 2009 sales guidance by selling 682,955 ounces of Platinum.
Whilst there is still some way to go before we achieve our goal of fully restoring the operational health of the business, 2009 saw significant steps in achieving this objective, enabling us to provide guidance for 2010 sales of 700,000 Platinum ounces, implying a slight increase from 2009. Whilst the increment is only modest, it is a significant turning point.
Importantly, improving the operational health of the business will also ensure that we are well positioned to capitalise on the investments we have made over recent years as we look to deliver further growth into the robust market fundamentals we foresee in 2011 and beyond.
Significant management actions taken:
At the end of 2008, we reacted swiftly to the global economic downturn, taking a number of significant actions.
Non-value adding production eliminated
Firstly, we took an immediate decision to eliminate non-value adding production. We placed our uneconomic Baobab shaft at Limpopo on to care and maintenance for the foreseeable future. We also closed our opencast operations at Marikana, as well as rationalising certain areas of high cost production at the underground operations there. In total, these actions have removed around 75,000 Platinum ounces from the market place.
Major cost restructuring programme completed
Alongside that exercise, we completed a major restructuring programme across our operations, with all personnel levels affected and around 20% of our total workforce leaving the business during the year. This was a significant, but essential, exercise as we right sized the organisation and reduced costs. Understandably the restructuring programme impacted employee morale and caused some disruption to production for a large part of the year.
Balance sheet strengthened
We negotiated with our lending banks the re-financing of a significant portion of our debt facilities during the year, with the tenure of these facilities being extended beyond short term horizons. In addition, we then successfully strengthened our balance sheet by raising $458 million through the completion of a Rights Issue in June. Furthermore, we successfully negotiated the waiving of all EBITDA covenants relating to our debt facilities until September 2010.
Operational headquarters and executive management team relocated
In October 2009, we announced plans to relocate our operational headquarters from London to Johannesburg. This will place executive management in a single location close to our operations and will therefore enhance day-to-day management and communications. It will also enable us to engage more effectively with our South African stakeholders.