LON - Department of Mineral Resources orders Lonmin to suspend sale of associated minerals Lonmin Plc (Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number 1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN: GB0031192486 ("Lonmin")
Lonmin plc
Department of Mineral Resources orders Lonmin to suspend sale of associated minerals
Late on 4 August 2010, Lonmin plc ("Lonmin" or "the Company") received a letter from the Department of Mineral Resources of the Government of South Africa ("DMR") which contained an order to refrain from selling Nickel, Copper, Chrome and any other minerals ("associated minerals") other than Platinum Group Metals ("PGMs") with immediate effect, notwithstanding the natural occurrence of these minerals in the PGM reefs and seams. Lonmin will contest this matter vigorously and will be seeking an urgent court ruling to overturn this order.
Lonmin has mined PGMs and associated minerals at Western Platinum Limited and Eastern Platinum Limited for in excess of 30 years. Associated minerals are inextricably linked to PGMs in the ore body and it is not feasible nor economically viable to mine them alone. These minerals contributed US$80 million to Lonmin`s turnover in the 2009 financial year. The previous legal framework gave miners the right to dispose of associated minerals for their own benefit, while the 2002 Mineral and Petroleum Resources Development Act ("MPRDA"), under which Lonmin converted its mining rights in October 2006, is silent on this matter.
Whilst Lonmin believes it is entitled to mine and dispose of associated minerals, in order to protect its position, it filed MPRDA Section 102 applications which would explicitly give Lonmin these rights. This was done in late 2009.
The above mentioned applications did not cover 100% of Lonmin`s associated minerals as a prospecting right had already been applied for over the associated minerals on a small portion of Lonmin`s property, where we are mining the UG2 reef. This right was applied for in March 2009 and issued on 12 May 2010 to a Holgoun Group company. Lonmin understands that Holgoun`s shares are held by interests associated with Sivi Gounden, who resigned from the Lonmin Board on 16 October 2009. Lonmin appealed against both the original application in March 2009 and against the award of this right on 11
June 2010 and has not yet been notified of the outcome of the appeals made.
Lonmin has taken comprehensive legal advice on this matter and believes that the action taken by the DMR is wrong and the Company will defend its interests robustly.
Lonmin is deeply disappointed that this situation has arisen. Lonmin extracts the associated minerals as an integral part of mining PGMs from these two reefs, Merensky and UG2. The sale of these associated minerals has produced a revenue stream which has augmented taxable income and royalty payments, and has been reported monthly to the DMR.
Lonmin has made, and continues to make, every reasonable effort to support the transformation process espoused by the South African Government. At the same time the Company has a duty to preserve, and indeed enhance the integrity and value of its operations in South Africa, which derive ultimately from its mineral rights and its licence to operate under the New Order Mining Licence.
Lonmin will spare no effort in resolving this situation. Meanwhile, our mining and processing operations will continue as normal.
Statement issued by Lonmin on the JSE SENS service, August 5 2010
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