REGULATORY RELEASE

29 January 2015

First Quarter 2015 Production Report

Overview

We are pleased to report that the Company has been fatality free for the fourth quarter in succession following the one fatality which occurred on 26 October 2013. The rolling 12 month average Lost Time Injury Frequency Rate (LTIFR) for the 12 months to 31 December 2014 improved by 2.7% to 3.58 incidents per million man hours compared to 3.69 at 31 December 2013.

Lonmin maintained the strong operational momentum that was built up in Q4 2014 by achieving the highest Q1 production from underground (including Pandora) since 2011. Total attributable tonnes mined in the quarter were 2.8 million tonnes, 7.2%, or 0.2 million tonnes higher than the prior year period. Employee attendance levels have returned quickly to normal levels following the December 2014 holiday period.

Saleable metal-in-concentrate was the highest Q1 production since 2007 with output of 200,170 Platinum ounces. This was 11.4%, or 20,479 ounces higher than the prior year period.

RefinedPlatinum production of 139,823 ounceswas unfortunately impacted by the repairs to the Number One furnace and decreased by 28.8%, or 56,426 ounces comparedto the prior year period. We expect to process the build-up in concentrate stock by the end of the financial year.

Sales of 146,890Platinum ounces increased by 9.0%, or 12,086 ounces on the prior year period.

Mining Operations

The Marikana underground mining operations produced 2.7 million tonnes during the first quarter, an increase of 7.9%, or 0.2 million tonnes on the prior year period.

Production at Karee was 1,124,000 tonnes, an increase of 6.9%, or 72,000 tonnes on the prior year period. K3, our biggest shaft, increased production by 8.2%, or 53,000 tonnes. We saw limited activity at K4 with 8,000 tonnes produced.

Production at Westerns was 1,045,000 tonnes, an increase of 3.0%, or 30,000 tonnes on the prior year period. Rowland, our second largest shaft,increased production by 1.4%. Newman shaft delivered a 9.0% increase from the prior year period and Hossy shaft, which remains under review, pleasingly increased production by 4.9%. East 1 shaft, which is reaching its end of life saw a decrease in production of 13,000 tonnes. (East 1 has been reported under Westerns since Q4 2014 in-line with changes in management structure).

Production at Easterns was 523,000 tonnes which was 22.3%, or 95,000 tonnes higher than the prior year period. Saffy shaft recorded an increase of 30.1%, or 95,000 tonnes over the prior year period demonstrating the progress that we have made with our planned ramp up.

These results have been achieved with significantly reduced safety and industrial relations stoppages. Tonnes of production lost due to safety and labour stoppages in the quarter totalled only 22,000 tonnes. This was 249,000 tonnes lower than the prior year period which was impacted by a fatality and tensions around the wage negotiations..

Process Operations

Total tonnes milled in the quarter increased by 9.5%, or 0.3 million tonnes to 3.1 million tonnes when compared to the prior year. This was the highest Q1 volume milled in seven years and was achieved using six out of our seven Marikana concentrators as part of our measures to reduce costs. Underground tonnes milled were 11.7% or 318,000 tonnes higher than the prior year period and opencast tonnes milled decreased by 33.3%, or 46,000 tonnes.

Underground milled head grade increasedslightly by 0.8% to 4.55 grammes per tonne (5PGE+Au) when compared to the 4.51 grammes per tonne in the prior year period. The overall milled head grade was 4.50 grammes per tonne, up 1.3% on the prior year period due to the aforementioned increase in the grade of underground ore and the increase of underground ore in the mix.

Concentrator recoveries for the quarter were slightly lower than the prior year period at 87.1% largely due to ore mix.

Total Platinum in concentrate for the quarter at 200,170saleable ounces was 11.4% higher than the prior year period. Total PGMs in concentrate were 381,804saleable ounces which was 10.6% higher than the prior year period.

As announced on 8 December 2014, the Number One furnace was safely stopped in early December following the detection of a leak. We are making good progress with repairs to this furnace and the additional maintenance work that was brought forward and we are on track to complete these within the scheduled three months. As announced on 31 December 2014, the Number Two furnace was also safely stopped at the end of December following the detection of electrode breaks. The repairs have been successfully made to the Number Two furnace and the first matte tap was successfully made last week. The three smaller Pyromet furnaces were restarted in early December to increase smelting capacity during this time. We expect to process the build-up of concentrate by the end of Q4 2015. 

Sales & Pricing

Completion of Black Economic Empowerment transaction

As announced on 26 November 2014, wesuccessfully completed the three BEE transactions in the quarter thus achieving the target of 26% BEE ownership. At the end of the quarter the Bapo ba Mogale Traditional Community were shareholders in the Company and held 3.3%. Through an Employee Share Ownership Plan our employees held 3.8% and through a Community Share Ownership Trust the local communities on the western portion of our Marikana operations held 0.9%. All three transactions collectively provided the additional 8% equity empowerment which Lonmin required to achieve the 26% effective BEE equity.

Outlook and Guidance

Because of low dollar metal prices and short to medium term uncertainty around platinum prices we will reduce our expected capital expenditure for 2015 from $250 million to $185 million and will keep this under review. Despite the revised capital expenditure for 2015 we reiterate our production guidance for the year.

As previously anticipated we expect our net borrowings to be higher at the end of March as a direct result of the lower sales volume in H1 which will unwind in H2. We are confident of managing our working capital requirements through cost conservation measures and capital discipline to keep borrowings and debt covenants well within our committed debt facilities.

We are disappointed that the repairs and maintenance to both our main furnaces necessitated by the shutdowns have overlapped and caused a temporary bottleneck in our processing operations. Following the repairs to the Number Two furnace that we built in 2012, we have sufficient smelting capacity during 2015 to overcome this obstacle and we anticipate processing the current build-up in concentrate stock during the financial year. We are making good progress towards achieving the target of more than R2 billion value benefits over three years through the freezing of general recruitment, natural attrition and reduction of contractors as we redeploy some employees to areas previously worked on by contractors. This, combined with our focus on efficiencies has resulted in a quarter on quarter mining productivity improvement of 8%. Our mining operations continue to perform well and consequently we are maintaining our guidance for the full year of sales of around 730,000 Platinum ounces. Additionally we are managing our costs so as to maintain our guidance for the unit cost of production of around R10,800 per PGM ounce.

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