LONDON (Commodity Online):Lonmin Plc, world’s third largest primary platinum producer, is in a soup in South Africa after the government restrained it from selling nickel, copper, chrome and any other minerals other than Platinum Group Metals with immediate effect, notwithstanding the natural occurrence of these minerals in the PGM reefs and seams.

Lonmin has received the order from the Department of Mineral Resources of the Government of South Africa. Lonmin, which has mines in South Africa from which ore mined and concentrated before being processed through smelter and refineries to deliver finished metals to the market, 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 nor feasible nor economically viable to mine them alone. These minerals contributed USD 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, 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 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 May 12th 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 October 16th 2009. Lonmin appealed against both the original application in March 2009 and against the award of this right on June 11th 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.
(Source: SteeGuru)