Lonmin No. 1 platinum matte furnace shut down yet again

Only days after it has been brought back on line after shutdown for repairs, Lonmin's main platinum matte furnace will be down for another 25-30 days

LONDON (Reuters) - 

Lonmin Plc, the world's third-biggest platinum producer, suffered a setback with its troublesome No. 1 furnace, which needed to be shut down again shortly after being repaired.

"Lonmin's troubled smelter has failed yet again, further undermining the company's outlook for the rest of this year," said analyst Charles Kernot at Evolution Securities.

"One smelter failure is a misfortune, but nine in eight years?" he said in a note on Monday.

London-listed shares rose 0.4 percent to 1644 pence by 0743 GMT, lagging a 1.7 percent increase in the UK mining index.

Evolution cut its price target on Lonmin to 1455 pence from 1559 pence and reiterated its "sell" rating, also due to a drop in European car sales in April.

The main use of platinum is in auto catalysts to clean exhaust fumes.

The company, which operates in South Africa, said it would have to make adjustments to meet it sales target of 700,000 ounces of refined platinum for the fiscal year to the end of September.

"In order to maintain our sales guidance ... we will need to increase the volume of toll refining (where a company sends its material to another smelter to be processed) over and above our current contractual commitments," the company said in a statement on Monday.

The No.1 furnace, which was rebuilt last year, has a history of problems and shutdowns and has often forced the firm to cut sales guidance.

On March 30, Lonmin announced an incident forcing a shutdown of the furnace, but when it announced interim results on May 10, it said the problem had been resolved and the annual sales target was reiterated.

On Monday, Lonmin said it will take another 25 to 30 days to get the furnace back in operation and in the meantime, three other Pyromet furnaces will operate to help fill in the gap.

Those three furnaces have total capacity of 40 percent of the main furnace. (Reporting by Eric Onstad; Editing by David Holmes and Louise Heavens)

© Thomson Reuters 2010. All rights reserved.

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