Lonmin recorded a 21 per cent rise in pre-tax profits for the six months to the end of March despite the November steam explosion at its smelter that crashed the platinum miner’s share price.

Pre-tax profits for the period were $142m on turnover of $421m, down 5 per cent. The board held the dividend at 30 cents.

Bradford Mills, chief executive, described the six months as challenging. The smelter accident resulted in the loss of nine weeks of production. The final cost of the incident was put at $14m. A cash outflow on working capital due to the build up of stocks of ore while the smelter was out of action is expected to be reversed in the second half.

The effect on volumes of platinum group metals (PGM) sold was a 15 per cent reduction to some 672,000 ounces but the realised price for the basket rose by the same proportion.

The company was able to keep costs per ounce sold of PGM within full year guidance at 2,475 rand.

The strength of the rand against the dollar has been a challenge to mining companies with substantial South African interests. Lonmin said the exchange rate appreciated by 9 per cent year-on-year. This has led the company to accelerate the switch from lower grade, higher cost open cast reserves to lower cost underground ore. This has brought a reduction in forecast annual production to 905,000-925,000 ounces of platinum from 930,000 ounces.

Looking ahead, Lonmin said its $190m offer for Southern Platinum was expected to complete by July. Southern’s operation at Messina in South Africa is currently making a loss but Lonmin believes it can be made to enhance earnings from 2007. The initial plan is to boost output from 45,000 ounces a year to 75,000 ounces by 2007. Most of the strike length of the property - the ore yielding structure - is currently unexploited.

The acquisition will allow Lonmin to target output of 1.1m ounces by 2008.

The company said it expects platinum markets to remain strong in the second half as industrial demand stays robust.

The share price, which stood well over 1050p before the smelter accident, moved up 1.7 per cent to 950p in early London trade.

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