More than £530 million was wiped off the market value of Lonmin, the London-listed platinum producer, today as the mining group gave warning that a string of production problems meant it would miss output targets this year.

At a time of record prices for the precious metal, Lonmin said that it may now produce only 940,000 ounces of saleable platinum, down from one million.

Lonmin added that costs at its South African mines in the current financial year - to the end of September - could be at least 10 per cent higher.

Shares in the group tumbled nearly 7 per cent, down 343p to £39.35, as analysts gave warning that profits were likely to be far lower than expected.

Citigroup downgraded the stock to "hold".

The shares had been trading at all-time highs before the weekend on speculation that Lonmin was being lined up as a takeover target by Xstrata, its FSTE 100 rival.

John Meyer, an analyst at Numis Securities, said: “This is a disaster.”

In a trading statement Lonmin revealed that it was suffering from poorer recovery rates at its converters in South Africa.

Effectively, the group is recovery less platinum from each rock brought out of the ground.

Lonmin blamed an “ongoing change in the mix of ore types” caused by an earlier-than-expected shift in the mix of underground ores at its Marikana mine.

With platinum prices at $1,316 an ounce, the 60,000-ounce shortfall in targeted production means that group revenue in the financial year to the end of September will be at least $79 less than expected.

Lonmin emphasised that it expected to meet all its contractual sales obligations.

The group mined 9.6 million tonnes of platinum group metals at its Marikana site in the first nine months of the year, a small increase on the same nine months a year ago.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax