* Plans to relocate HQ to Johannesburg, CFO to step down
* FY refined platinum sales 682,955 ozs vs 726,918 ozs
* Expects 2010 sales of around 700,000 platinum ozs
* Number One furnace re-build started on Oct 10
* Shares fall 3.1 percent
(Adds interview with CEO, share price, broker comments)
By Julie Crust
LONDON, Oct 22 (Reuters) - Lonmin Plc, the world's third-largest platinum producer, said precious metal miners in South Africa would likely face continued challenges in 2010 as it posted a 25 percent drop in fourth-quarter platinum sales.
"We are seeing wage increases at well above inflation rates, which makes managing costs difficult in a highly labour intensive environment," Chief Executive Ian Farmer said in an interview with Reuters. A higher number of safety stoppages enforced by the ministry of mines is also resulting in a loss of production, while the stronger rand and South Africa's transforming society are also factors, he added.
Lonmin said on Tuesday it planned to relocate its headquarters from London to Johannesburg to help focus on its operational delivery and bring it closer to its South African shareholders.
Chief Financial Officer Alan Ferguson will oversee the move from London, where Lonmin employs about 22 staff, but is unwilling to relocate and will step down some time after the end of December 2010.
"It is positive that highly regarded Ian Farmer will be spending more time on the mine face, but Ferguson's departure is a negative," said Liberum Capital in a note. "As a whole this relocation to South Africa should be taken positively."
Farmer said the search for a new CFO had already started and that it was only looking at external candidates.
Shares in the FTSE 100 miner were down 3.1 percent at 0853 GMT, underperforming a 2.8 percent dip in the UK mining index.
Rival South African miner Anglo American Plc also released a production update on Tuesday and announced a restructuring.
PRODUCTION, TARGETS
Lonmin's refined platinum sales for the fourth quarter to end September fell to 192,608 ounces from the year earlier period, as platinum output dropped 27 percent to 166,851 ounces following reduced power from its troubled Number One furnace.
The rebuild of the furnace, which was running at reduced power in the fourth quarter, started on Oct. 10 and is expected to return to full capacity at the end of November.
Lonmin said platinum sales for the full year declined 6 percent to 682,955 ounces, within its revised target, and that it expected 2010 sales of around 700,000 platinum ounces.
The production statement "lays bare the short-term operational risk that dogs Lonmin", said Liberum. It called the 2010 target conservative and said it had previously forecast sales of 750,000 ounces for 2010.
Farmer said cost controls over the year had been good -- the company carried out a restructuring earlier in the year -- but he declined to provide details ahead of full-year results.
However, all the gains in dollar-priced precious metals had been offset by the stronger rand, he said.
He said a large part of the industry was not making any money and noted estimates that about 50 percent of South Africa's precious metal miners were operating at a loss.
Lonmin replaced management late last year in the wake of a hostile takeover bid by Xstrata, which dropped its $10 billion bid in October but took up 25 percent of the shares, setting the scene for a possible future attempt.
"We speak to Xstrata as a major shareholder on a regular basis but only in that context," Farmer said, when asked if he had spoken to its rival since Xstrata walked away from a bid for Anglo American last week. (Editing by Matt Scuffham/Will Waterman)