Jane Wardell, THE ASSOCIATED PRESS

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LONDON - Lonmin PLC, the world's third largest platinum producer, said Tuesday it plans to cut output and jobs and halve its exploration expenditure to ride out a downturn in the market even as annual net profit rose 45 per cent.

Lonmin, which is looking to reassure investors after holding off a hostile takeover bid by Anglo-Swiss miner Xstrata PLC, also said it would simplify its business structure and slim down management.

The company posted net profits for the year ended Sept. 30 of US$455 million, up from US$314 million a year earlier, driven by high platinum prices.

Revenue over the period rose 16 per cent to US$2.2 billion from $1.9 billion, but the company warned of tough times ahead.

"We are exercising producer discipline by announcing that we will close those portions of our operations which are uneconomic and cut back on capital expenditure," chief executive Ian Farmer said in a statement.

"We are also changing our approach to mechanized mining and cutting costs across the business."

Lonmin said it planned to suspend some of its mining operations, including at Marikana in South Africa, and reduce its work force.

Lonmin is being hit by falling demand for platinum - prices have plunged by around two-thirds since its March high of $2,200 an ounce as the global economic slowdown has reduced demand for the metal used in jewelry and cars.

Lonmin shares dropped 4.7 per cent to close at 833 pence or $12.48.

A report out Tuesday by the world's top platinum refiner, Johnson Matthey, forecast a 2.3 per cent fall in demand for platinum to 6.52 million ounces in 2008.

The report added that the outlook for the platinum market "is more uncertain than it has been for many years," saying that the metal could trade as low as $700 an ounce over the next six months as investors prefer cash to other investments.

Conversely, it said that if the recent selling of platinum by funds abates, the price will more closely reflect fundamentals "suggesting that platinum could trade as high as $1,400."

Platinum was trading at around $813 on Tuesday.

Farmer, who took over the CEO post six weeks ago, said that by making cuts now the company's outlook would be improved.

"These actions will ensure that Lonmin maintains its sound financial position and remains well placed to weather the current challenging market conditions and to exploit the upturn when markets recover," he said.

The Johnson Matthey report said that jewelry demand is expected to fall to 1.12 million ounces in 2008, reflecting soft retail sales and greatly increased recycling levels in Japan and China.

However, it said that gross purchases of platinum for use in autocatalysts should grow to 4.23 million ounces this year as more metal is used in diesel to particulate filters in Europe, outweighing weak North American light duty vehicle output.

More than 60 per cent of platinum is used in auto catalytic converters to clean exhaust fumes.