* EPS 70.2 cents vs loss of 59 cents last yr
* Higher than consensus estimate of 64 cents
* Resumes dividend at 15 cents per share
* Shares jump 2.6 percent in flat mining sector
(Adds analyst comments, more details, updates shares)
By Eric Onstad
LONDON, Nov 15 (Reuters) - Lonmin, the world's third-biggest platinum producer, is to resume dividend payments after posting a better-than-expected swing to full-year profit on Monday as prices and output recovered.
Investors were heartened that the London-listed company met its annual sales target despite repeated processing problems and targeted platinum sales growth of 7.0 percent this fiscal year.
Shareholders had suffered repeated disppointements over the past several years as a troublesome furnace kept causing shutdowns and new mechanised mining failed to meet targets.
"The smelter issues that have dogged the group now seem to us to be in hand. Lonmin is entering a sweet spot operationally in our view," said analyst Steve Shepherd at JP Morgan in Johannesburg.
Its London shares jumped 2.6 percent to 1813 pence by 1100 GMT, making them the second best performer in the blue chip FTSE 100 index.
They outperformed a flat British mining index. after lagging that index by nearly 25 percent this year.
"The time is now right to recommence dividends," Chief Executive Ian Farmer told Reuters.
Lonmin, which operates in South Africa, recommended a payout of 15 cents per share and launched a new dividend policy. The company will pay one dividend a year, seeking to maintain the initial level and increase payouts through special dividends.
Lonmin posted earnings per share of 70.2 cents for the financial year to the end of September compared with a loss of 59 cents last year.
Consensus EPS was forecast at 64 cents, according to Thomson Reuters I/B/E/S, based on estimates from 17 analysts.
CHALLENGING COST OUTLOOK
Lonmin sold 706,000 ounces of refined platinum compared with guidance of 700,000 ounces and last year's level of 682,955 ounces.
It met its sales target despite being forced to close its troublesome No.1 furnace again in May shortly after being repaired and had to send material to be processed by rivals, adding to costs.
The No.1 furnace, which was rebuilt last year, has a history of problems and shutdowns and has often forced the firm to cut sales guidance.
Lonmin set a sales target of 750,000 ounces for the current fiscal year, but warned that costs would be a challenge.
"There are some quite chunky cost drivers that are very difficult for us control that we have to absorb," Farmer said.
The company was in negotiations with the biggest miners' union in South Africa, where wage settlements in the sector have been running at more than double the wider inflation rate.
The unit cost per ounce in local currency was expected to rise by less than 8 percent in the coming year, Lonmin said.
Rising costs have been offset by a market that has been slowly recovering from the global downturn.
The price of platinum has gained 15 percent so far this year to trade at $1,675 per ounce, but is still well below the peak of $2,290 touched in 2008.
The price has been buoyed by a recovery in the battered auto sector since one of the metal's key uses is for catalysts to clean pollution from vehicle exhausts. The other main use is for jewellery.
Farmer was upbeat about the platinum market tightening next year. "We're gradually getting into firmer territory ... I think as we head into 2011 and auto markets gradually firm, I think we'll move back from currently balanced markets to small deficits in about 2012," Farmer said in an interview.
In June, consultant CPM Group forecast that the platinum market would see a narrower market surplus in 2010. (Reporting by Eric Onstad; Editing by David Cowell)