Lonmin Contests S Africa Order To Suspend Nickel Copper Sales

LONDON, Aug. 6 -- Lonmin PLC (LMI.LN), the world's third largest platinum producer, Thursday said it received a letter on Aug. 4 from the South African government ordering the company to refrain from selling any minerals other thanplatinum group of metals with immediate effect.

Lonmin said it will contest the matter "vigorously" and will be seeking an urgent court ruling to overturn this order.

"Lonmin will spare no effort in resolving this situation. Meanwhile, our mining and processing operations will continue as normal," the company said.

Lonmin sells nickel, copper, chrome and other minerals as a byproduct of its mining operations, which are focused on mining and selling precious metals with the platinum group of metals. Lonmin generated $80 million in sales from the
sale of such associated minerals.

"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" South Africa's Department of Mineral Resources, the government body which sent the letter.

Lonmin applied for rights to mine and dispose of its associated minerals in 2009 but the applications didn't cover 100% of Lonmin's property since a company called Holgoun Group had applied for and was granted prospecting rights
to a small portion of Lonmin's property where Lonmin mines the UG2 reef.

Lonmin said Holgoun's shares are supposedly held by interests associated with Sivi Gounden, who resigned from Lonmin's board of directors on Oct. 16, 2009. Holgoun Group applied for the prospecting right on March 2009 and was granted
the right on June 11, 2010.

Lonmin appealed against both Holgoun's original application and the award of this right but has not yet been notified of the outcome of the appeals made, the company said.