UPDATED BANKABLE FEASIBILITY STUDY AND NEW JOINT VENTURE AGREEMENT, WADI SAWAWIN, SAUDI ARABIA
(Thomson Reuters ONE) -
Highlights
* BFS 5Mtpa updated to reflect new 20 year mine life
* Total capex of USD1.9bn, reduced from USD2.0bn on a like-for-like basis
* Potential for future expansion to 10Mtpa confirmed through further drilling
and identified exploration targets
* Agreement signed with National Mining Company for London Mining to move to
25% stake in joint venture in return for no further material funding
requirements and no further dilution in subsequent equity fundings
London Mining today announces the results of its updated bankable feasibility
study ("BFS") for the Wadi Sawawin project and a revised agreement with our
partner National Mining Company ("NMC").
The updated BFS has resulted in a material rise in the project IRR to over 13%,
based on the reduction in capex and the increase in long term price forecasts.
Potential opportunities for further improvement through 3rd party provision of
the power, desalination and potentially port facilities and through the
expansion of the project to 10Mtpa will continue to be investigated in
conjunction with National Mining Company. The results of the revised BFS will be
presented to the Ministry Of Petroleum and Mines in Jeddah, who continue to be
supportive of the project.
Under the terms of the new agreement signed on 20 July 2010, in return for no
further material funding requirements and no further dilution in subsequent
equity fundings, London Mining will receive a direct interest of 25% of the Wadi
Sawawin project through NMC. NMC holds the historic exploitation licence for the
Wadi Sawawin project and three adjacent exploration licences. The Chairman of
NMC is Prince Nawaf bin Sultan bin Abdul Aziz al Saud, who has provided his full
commitment to the project and to this agreement. This agreement supersedes the
previous agreement whereby London Mining held a 50% interest in a joint venture
company, Saudi London Iron, into which the licences were going to be
transferred. The transaction is expected to close in Q4 2010 following the
receipt of the necessary government approvals, upon which London Mining will
receive shares equal to 25% of the issued share capital of NMC. NMC and London
Mining will be working jointly to secure the funding of the Wadi Sawawin
project, which is expected in the next 6-12 months.
The Wadi Sawawin Project located in the north-west corner of Saudi Arabia,
125km from Tabuk and 60km from the Red Sea port of Duba. Wadi Sawawin is of
strategic and economic importance to Saudi Arabia as it will provide a domestic
source of Direct Reduction ("DR") pellets for use in the DRI steel plants which
account for 90% of steel production in the Middle East and North African
region. The location of Wadi Sawawin will provide it with a competitive
advantage over competing Brazilian and European supply through reduced freight
rates from its deep water port in the Red Sea and access to low cost Saudi
Arabian energy. In addition, the project will assist in the programme of
diversification of the economy which is an important element of Saudi Arabian
economic policy, and the government is expected to provide low cost funding via
the PIF and SIDF.
The updated BFS further improves the feasibility of the Wadi Sawawin project at
5Mtpa. The key economic parameters, based on the detailed analysis undertaken in
the BFS, are:
* total capex including power and desalination plant of USD1.9bn (a USD100m
reduction versus the previous BFS)
* capex for power and desalination plant of c.USD0.3bn
* operating costs of USD48.3/t pellets (increased from USD47.4/t)
* project IRR of 13%, which produces an NPV8 of USD932m (increased from 9% and
USD225m)
* project IRR of 15% estimated if power and water provided by a third party
(increased from 13%)
* project IRR of 18% estimated under 10Mtpa mine scenario (increased from
15%)
The economics of the project are also positively impacted by the assumption of
higher pricing for Brazilian benchmark Tuberao DR quality pellets, which feed
directly to higher pricing expectations for Wadi Sawawin DR pellets. These
assumptions are preliminary only and are subject to the completion of final
report.
In addition, the potential to increase the IRR through further optimisation of
the capex, provision of power, desalination and potentially port facilities by
3rd parties and through the expansion of the mine to 10Mtpa is significant.
The equity IRR will be dependent on the funding structure selected. National
Mining Company expects to raise financing to build the project through a
combination of funding from local sources (including PIF and SIDF), commercial
debt and the provision of offtake arrangements in exchange for an equity stake.
The minimum leverage achievable is expected to be 60%.
The current indicated JORC resource of 248Mt grading 39.8% fe is sufficient for
a mine life of 21 years at the run rate of 5Mtpa. In addition, London Mining
has inferred resources of 135Mt grading 39.2% Fe (as well as further exploration
targets) which may provide the basis for an extension of the mine life at 5Mtpa
by over 10 years or an expansion to 10Mtpa. London Mining will continue to
undertake sufficient exploration to maintain the licences in good standing until
funding is secured. The current resource is based entirely within the Western
exploration licence and is contiguous with the current exploration licence.
National Mining Company has recently submitted to the Ministry Of Petroleum and
Mines in Jeddah an application for a revised exploitation licence sufficient for
a 5mpta 20 year mine.
The BFS process was managed by the London Mining project team, based primarily
in Oman, who engaged a team of consultants comprising: WorleyParsons (project
management, transport, bathymetry and ESHIA studies), Ausenco (mineral
processing and plant engineering), Snowden Group (geology and mine planning),
AMMTEC (ore variability testing), Corus Consulting (formerly British Steel
Consulting Overseas, mineral processing), CIT (drilling contractor), AME Mineral
Economics and CRU Strategies (market report) and Southern Mining Consultants
(financial analysis. The BFS has been conducted to ensure the operation will
meet Equator Principles.
The project configuration envisages mining and primary crushing at the mine site
after which ore will be transported 52km by road to a beneficiation and
pelletizing plant on the coast, adjacent to the proposed deep-water port and
related power and desalination facilities. The project process, based on the
British Steel flowsheet, will employ fine grinding and reverse flotation to
produce pellets suitable for use in Direct Reduction Iron ("DRI") plants and the
port will be built with sufficient capacity to load Suez-size and coastal ships.
Construction is anticipated to take 27 months.
Graeme Hossie, CEO of London Mining, said "The updated BFS has confirmed that
the Wadi Sawawin mining and DR pellet project provides a substantial economic
opportunity and is of significant importance to steelmaking in the region. The
project has been confirmed to be technically and economically sound, with a
large, scalable resource base and has strategic and competitive advantages over
alternative sources of DR pellet supply. The revised agreement with National
Mining Company and London Mining provides clarity over the equity funding
structure and will enable National Mining Company and London Mining to work
together jointly to secure the funding of the Wadi Sawawin project."
Matar Faih Al-Ghubiwi, Deputy Chairman of National Mining Company and the
representative of Prince Nawaf bin Sultan bin Abdul Aziz al Saud, said "This is
an important strategic project for the Kingdom of Saudi Arabia. We look forward
to working together as one team with London Mining to raise the finance and move
this project forward in to production."
The Company's website can be found at www.londonmining.co.uk
For more information, please contact:
London Mining Plc
Thomas Credland, Head of Investor Relations+44 20 7201 5000
Liberum Capital (Nominated Advisor/Broker)
Clayton Bush/Ellen Francis+44 20 3100 2000
Brunswick Group
Carole Cable/ Daniel Thöle+44 20 7404 5959
About London Mining
London Mining is focused on identifying, developing and operating scaleable
mines to become a mid-tier supplier to the global steel industry. London Mining
is developing four iron ore mines in Sierra Leone, Saudi Arabia, Greenland and
China as well as a coking coal operation in Colombia. All London Mining's assets
have deliverable production with potential for expansion. The Company listed on
the Oslo Axess on 9 October 2007 and on AIM in London on 6 November 2009. It
trades under the symbols LOND.L and LOND.NO (Reuters) and LOND LN and LOND NO
(Bloomberg).
Notes to Editors
Glossary of Technical Terms:
"bathymetry" The study of the underwater depth of the
ocean floor.
"Bankable Feasibility Study" or "BFS" A comprehensive design and costing study
of the selected option for the development
of a mineral project in which appropriate
assessments have been made of
realistically assumed, geological, mining,
metallurgical, economic, marketing, legal,
environmental, social governmental,
engineering, operational and all other
modifying factors which are considered in
sufficient detail to demonstrate at the
time of reporting (i) that extraction is
reasonably justified (economically
mineable) and (ii) the factors finance the
development of the project.
"ESHIA" Environmental, Social and Health Impact
Assessment
"Fe" Iron
"FOB" Free on Board (FOB) indicates that the
seller will pay for all charges regarding
transportation and loading on to the
vessel.
"JORC" Australasian Institute of Mining and
Metallurgy Joint Ore Reserves Committee
(JORC) code on mineral resources and ore
reserves.
"Mt" Million metric tonnes.
"Mtpa" A million metric tonnes per annum.
"NPV8" Net Present Value at an 8% discount rate.
"ore" A natural aggregate of one or more
minerals which, at a specified time and
place, may be mined and sold at a profit,
or from which some part may be profitably
separated.
"reverse flotation" A process whereby the unwanted material
rises to the top of the flotation tank and
is skimmed off, and the target material
descends to the bottom of the tank and is
collected.
"pellet" A small spherical marble-sized ball of
iron ore used in steelmaking.
"PIF" The Public Investment Fund was established
by the kingdom of Saudi Arabia to provide
financing for commercial projects which
have significant importance in developing
the economy.
"SIDF" The Saudi Industrial Development Fund
provides loans to industrial projects to
facilitate the industrialization of Saudi
Arabia.
This information is subject of the disclosure requirements acc. to §5-12 vphl
(Norwegian Securities Trading Act)
[HUG#1433342]
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: London Mining Plc via Thomson Reuters ONE
Unternehmensinformation / Kurzprofil:
Datum: 22.07.2010 - 08:01 Uhr
Sprache: Deutsch
News-ID 24277
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