LONDON (Reuters) - Lonmin (LMI.L), the world's third biggest platinum producer, said up to 20,000 ounces may be left unprocessed at the end of its fiscal year due to a furnace shutdown, but the impact on its sales target was uncertain.

Lonmin (LONJ.J), which has a history of problems with processing and missed production targets, said on June 15 it had shut down its No. 1 furnace due to a production incident.

On Wednesday 24 June, it released a statement about the expected impact, saying 20,000 ounces may be stuck in the processing pipeline and costs would be around $4 million (2.4 million pounds).

"We believe this update is not bad as the market may have initially feared, namely that the tappe-out was not a catastrophic failure of the furnace and at $4 million the cost of the repair is slight," said analyst Michael Rawlinson at Liberum Capital.

Lonmin shares, which have gained 32 percent this year on a rebound in platinum prices, rose 2.3 percent to 1,160 pence by 9:05 a.m. This compared to a 2.6 percent increase in the British mining index .FTNMX1770.

SALES TARGET?

In its statement, Lonmin did not refer to its sales target of 700,000 ounces of refined platinum for its 2008-09 year to end-September.

"The guided 20,000 ounce increase in metal in process implies that the company's 700,000 ounce platinum sales target for 2009 will now be closer to 680,000 ounces," Rawlinson said.

A spokesman said there were uncertainties regarding how the processing issues might flow through to actual sales.

"We are signalling a possible impact of the No. 1 furnace outage on stock movements ... This could clearly have a knock-on impact on sales, but we have a number of options available to potentially treat and/or sell this material," he said.

"We will take a decision on these options in due course, as it clearly depends on a number of complex factors ... Importantly, we have not lost any ounces of platinum as a result of this incident."

The furnace was expected to be back in operation within 30 days, as previously estimated, and three additional Pyromet furnaces have been started up to help fill the gap, Lonmin said.

The No. 1 furnace has a capacity to process about 550 tonnes of matte per day, and the three Pyromet furnaces together have a capacity about half that. Matte is a mixture of metals that is an intermediate product of a smelter.

News of the shutdown had been a blow to chief executive Ian Farmer, who took the reins last October and had begun to win the confidence of investors frustrated at repeated disappointments over production shortfalls.

The Process Division performed better than expected during the first half of Lonmin's financial year.

During that period it managed to process the majority of a build-up of inventory when the No. 1 smelter was rebuilt during about two months from November 2008. A redesign was expected to make it more reliable.

On May 11, the firm said it had swung to a first-half loss, scrapped its dividend and launched a $457 million rights issue.

(Reporting by Eric Onstad; editing by John Stonestreet and Dan Lalor)