Lonmin PLC (Price: 271p | Target: 279p | Rec: Hold) LMI reported a solid result at its recent interims that have been overshadowed by a wild cat strike and various production problems, in conjunction with PGM prices at levels that would be unsustainable for the business plan long term in our view.

We have reviewed our near term commodity price outlook as PGM prices have failed to hold onto gains, as well as adjusting valuation multiples to reflect the increased risk in the sector, leading to a reduction in our TP from 366p to 279p.

We maintain our Hold recommendation. * LMI’s current share price, in our view reflects an anticipated recovery in the platinum sector, since the current pricing and cost dynamic is unsustainable long term.

We assume medium term commodity prices that would enable industry margins to return to more sustainable levels.

LMI has the balance sheet to weather the current PGM and rand environment for next 2-3 years which we hope will see it through to a recovery in the market. * Holding or investing in LMI is contingent on the belief that a recovery will occur over the next 2-3 years.

Should the current environment continue, then LMI will have to review its business plan and cut planned capital programmes, such as recommencing the development of the major K4 shaft.

The company retains its capital guidance plan for the time being. * The situation in South Africa at all PGM mines remains extremely volatile.

Major miners are entering a period of wage negotiations.

The largest producer, Amplats (AMS SJ), has had to water down production cuts in response to government and union pressure.

Market commentary indicates that despite the reduction in cuts from the initial planned 14,000 job cuts to 6,000, unions may not accept any cuts.

The friction between the more aggressive AMCU union and the NUM, that has been losing membership to AMCU, looss set to cause continued difficulties, such as the wildcat strike recently LMI suffered.
To access the full note please click here Analyst: Marc Elliott
To receive further information or change your Research Preferences please email: South Africa or United Kingdom and Australia
IMPORTANT NOTICE: This communication forms part of an electronic communication sent to the intended recipient (or such persons authorised representative) for their sole use and is subject to important legal and regulatory restrictions, qualifications and disclaimers that may be accessed and read in the attached research publication.

If you cannot access the disclaimer, please obtain a copy thereof from us by sending an e-mail to in the case of SA or in the case of the UK or Australia: The disclaimer is deemed to form part of this communication.

In the event of a conflict between the disclaimer and this notice, the disclaimer shall take precedence.

This communication is confidential for the information of the addressee only (and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, unless permitted pursuant to and in accordance with the disclaimer. If you are not the intended recipient of this e-mail, then: (a) please notify the sender of this e-mail immediately by return e-mail, facsimile or telephone and delete this message from your system; (b) you may not print, store, forward or copy this message or any part thereof or disclose or cause information in this message to be disclosed to any other person. Nothing in this message constitutes an offer, warranty or representation from us.

None of our employees or representatives are permitted to send unsolicited messages ("spam") and our company cannot be held liable therefore.

If you regard this message as spam, please inform us immediately by sending an e-mail to in the case of SA or in the case of the UK or Australia: Unless otherwise agreed: (a) We are only deemed to have received an e-mail once we have confirmed receipt thereof to you; (b) We are deemed to have sent an e-mail once reflected as “sent” on our e-mail server. If this message contains offensive, derogatory or defamatory statements or materials, it means the message has been sent outside the sender’s scope of employment with us and only the sender can be held liable in his/her personal capacity.

Our corporate information and names of our office bearers can be accessed by sending an e-mail to in the case of SA or in the case of the UK or Australia: The disclaimer applies to our original message, any attachments and all subsequent messages or attachments we may send.
________________________________
-------------------------------------------------------------------------------- CONFIDENTIALITY NOTICE AND LEGAL LIABILITY WAIVER: The content of this email and any attachments are CONFIDENTIAL and may contain privileged information.

If you are not the addressee it may be UNLAWFUL for you to read, copy, distribute, disclose or otherwise use the information contained herein.

The content of the message and or attachments may not reflect the view and opinions of the originating company or any party it is representing.

If you are NOT the intended recipient then please email back to ------------------------------------------------------------------------------------