Lonmin plans $2b platinum expansion as prices increase

JOHANNESBURG, May 9 (Bloomberg): Lonmin Plc (LMI), the world's third-largest platinum company, will invest about $2 billion restarting mines and expanding production in South Africa to take advantage of a recovery in prices of the metal from a rout in 2008. Lonmin will spend about $400 million a year to boost annual production to 950,000 platinum ounces by 2015 from the 750,000 ounces it plans for this fiscal year ending Sept. 30, Chief Executive Officer Ian Farmer said in a phone interview today. "We're heading into a period between 2012 and 2014 where we're going to have a very tight supply-demand situation," he said. "Supply has been lethargic and demand is gradually recovering as the auto industry gets back on its feet." Platinum, used in jewelry and to control pollution from vehicles, has risen 33 per cent in the past two years to $1,793 an ounce in London as demand for cars rebounds from a world economic slump. Lonmin suspended opencast mining at Marikana in South Africa and shut its Limpopo underground operations after slowing economies ended a six-year surge in metal prices. Lonmin gained 1.3 per cent to 1,569 pence by 9:44 a.m. in London trading, giving it a market value of 3.17 billion pounds ($5.2 billion). Anglo Platinum Ltd. (AMS), the largest producer of the metal, which has also closed mines and cut jobs, fell 1 per cent. The forecast of expansion "is a positive for Lonmin and returning mothballed production is a key reason for its premium valuation," Liberum Capital Ltd. wrote in a note today.