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| Mining Division
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During the 2011 financial year, the Mining Division demonstrated continued growth despite the impact of the illegal industrial action encountered at the Karee operations during May as well as the safety stoppages. Total tonnes mined during the 2011 financial year were 11.7 million, a 0.4 million tonne increase from 2010.
This is largely attributable to improvements at K3 shaft and the ramp up in
production from our Merensky opencast operations. Momentum has been
re-established following the strike in May.
Marikana Ore Reserves:
| |
FY11
(’000 m2) |
FY10
(’000 m2) |
Variance |
% |
| Karee |
1,437 |
1,154 |
283 |
25% |
| Middelkraal |
385 |
354 |
31 |
9% |
| Westerns |
533 |
702 |
(169) |
(24)% |
| Easterns (including JV) |
576 |
483 |
93 |
19% |
| Total |
2,931 |
2,693 |
238 |
9% |
It is pleasing to note that the ore reserve position has increased by 9% from
the level reported in 2010. The ore reserve increase for Karee of 25%,
Middelkraal of 9% and Easterns of 19% support Lonmin’s growth build up towards
the 950,000 Platinum ounces. The Westerns operations decreased as planned.
Mining grades reduced in comparison to 2010 due to:
- an overall reduction in the in situ grade;
- increased development to support the ramp up in production, poor ground conditions at K3;
- increased dilution necessitated for safety reasons while mining through geologically disturbed ground conditions; and
- an increase in the proportion of underground Merensky and of lower grade opencast Merensky ore.
Grades, however, remain within the acceptable range.
Initiatives
Progress has been made on a number of initiatives launched over the past years
to ensure improved delivery and increased productivity in the Mining Division.
These include:
- finalisation of incentive programmes for our productive employees including supervision to increase the element of variable pay;
- improved long and short term planning systems are entrenched and have been enhanced to enable the evaluation of different production scenarios at short notice;
- design of fit for purpose cost and management systems have been completed and are scheduled to be rolled out to all operations during the course of 2012;
- the “Line of Sight” management system to track production on a daily basis has been embedded in all the operations and is starting to bear fruit in allowing early identification of technical bottlenecks, lost blast analysis and improved productivity; and
- relationships with the unions and DMR improved and continue to be enhanced as a result of various management actions, such as the safety initiatives, that were driven through the year.
The inflationary cost pressures being experienced by the industry are of great
concern to management and various productivity improvement programmes such as
team effectiveness development, technical up skilling of employees, face advance
and blast frequency improvement projects, have been identified and are scheduled
for implementation in 2012 to mitigate these pressures.
Karee
In 2011 the Karee operations, K3,1B, 4B and K4, mined 4.4 million tonnes which
represents an increase of 0.3 million tonnes from 2010. This is a result of the
flexibility created by an improvement in ore reserves at K3 resulting in a
better than anticipated ramp up following the industrial action during May of
this year.
Going forward management is confident that the improved momentum will continue
and result in the planned increase from the Karee operations. The mining grade
has decreased as a result of increased dilution associated with split reef and
increased stoping widths for safety reasons. Unit cost per tonne increased by
6.8% to R573 and was negatively impacted by the high fixed cost base during the
strike.
Westerns
Production from our Westerns operations, Rowland and Newman, at 3.4 million
tonnes declined by 0.3 million tonnes on 2010 as expected with the depletion of
Newman shaft. Additional dilution from the roof bolting in the stoping horizon,
necessitated by safety concerns, together with a drop in the in situ grade had a
negative impact on the head grade. The reduced production resulted in the unit
cost per tonne increasing by 14.3% to R542 per tonne.
Middelkraal
The production from our mechanised and hybrid shafts at Middelkraal, Saffy and
Hossy, was largely flat at 1.9 million tonnes per year. Grade was negatively
impacted by the higher ratio of development ore versus stoping production. Unit
cost per tonne increased to R739 per tonne or 17.5% whilst the operations
struggled to meet increased production targets.
Saffy’s production was significantly impacted during 2011 by adverse ground
conditions. The production delays experienced during the year have largely been
addressed by means of changes in layout designs as well as a revision to the
support strategy. The increase in face length availability resulting from the
change in layout and the build up of stoping crews have resulted in this shaft
having the necessary flexibility to achieve planned production increases in
2012.
Good progress was made at Hossy during the year. However, the biggest challenges
that continue to be faced by the mechanised mining team centre around machine
reliability, the availability of replacement parts and the supply of trained
artisans. Whilst we have ongoing programmes to address these issues a decision
has been taken to introduce hybrid mining in some upper quadrants, to reduce the
risk to production.
Easterns
Although this is a small section of our business our Easterns operations, E1,
E2, and E3, performed exceptionally well with production increasing by 8.4% in
comparison to 2010 supported by the healthy position of the ore reserve. The
mining grade from stoping operations improved, however, this was offset by
increased ore from development evident from the improved ore reserve position.
Cost per tonne was contained to increase by only 6.1% to R577 per tonne.
Opencast
The Merensky opencast operation at Marikana included a full year of production
in 2011 compared to around six months of production in 2010. Although the grade
was below expectations during most of the year the change in the mining method
and sequencing introduced in the last quarter have resulted in improved grades
being achieved.
Future growth from our underground operations will be generated from our Karee
and Middelkraal mines as the K4 shaft continues to ramp up over the next few
years.
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