Troubled platinum miner Lonmin's shares dropped as much as eight per cent in London today as its losses widened in the six months to the end of March.
Lonmin, which has mines in South Africa, reported a loss before tax of $199m (£154m) for the half-year compared with a loss of $21m the previous year as costs increased while production slowed.
Total tonnes mined in the half year dropped 7.6 per cent compared with the previous year.
The miner revealed a $146m writedown due to the stronger rand against the dollar.
Capital expenditure guidance for the rest of the year was revised down to between 1.4bn South African rand and 1.5bn rand (£82.3m and 88.1m) from an original guidance of 1.8bn rand.
Shares in the firm closed down 7.35 per cent at 104p.
Why it's interesting
As part of its cost-saving efforts, the company will move its head office from Johannesburg to its operations in Marikana by the end of the year.
Yuen Low, analyst at Shore Capital, said the firm's balance sheet is reasonably healthy for now, but this could rapidly change for the worse if rand metal prices do not improve significantly.
Low added Lonmin is edging closer to breaking its debt covenants: "Furthermore, Lonmin’s debt facilities are subject to financial covenants, including that consolidated tangible net worth (TNW) cannot be less than $1.1bn. An impairment of $146m saw, TNW fall to $1.43bn, reducing the ‘headroom’ on the TNW covenant to $334m."
The miner's director and chief operating officer, Ben Moolman, resigned in April due to personal reasons, which analysts at the time said was "not ideal" and signalled future problems.
What Lonmin said
Chief executive Ben Magara said:
"The whole Lonmin team working in partnership reversed the weak mining performance seen in the first four months of our financial year. That improvement continues to be essential for the sustainability of the business in the prevailing low pricing environment."
Although unit cost guidance has increased we remain determined to be at least cash neutral in the current environment. While the improvement in mining performance since March is pleasing, I am not yet satisfied that we have delivered all that I know we can, and all of us at Lonmin recognise that this improvement needs to be sustained.
"We are operating in a volatile and challenging environment, but we have the right team in place to manage these challenges. Further, to enable maximum focus on production, and in line with our hands-on approach, we are moving Lonmin's South African headquarters from Johannesburg to our operations in Marikana."