RESULTS FOR THE THREE MONTHS TO 30 JUNE 2010
(Thomson Reuters ONE) -
Highlights (including post-period)
Marampa, Sierra Leone
* 111Mt grading 33% Fe at a 15% Fe cut-off of new Inferred resources
* Additional resources include 22Mt of weathered material grading 40% Fe at a
15% Fe cut-off that can be incorporated into Phase 1 mine plan
* Construction of Phase 1 tailings operation on schedule for first exports in
Q2 2011
* 26,995m out of a planned 28,000m has been drilled at Marampa. Programme is
to be increased to 40,000m to expand and upgrade the resource
Wadi Sawawin, Saudi Arabia
* Updated BFS resulted in a material improvement in the project economics
* New agreement signed on 20 July 2010, will give London Mining a direct free
carried interest of 25% in the project
Isua, Greenland
* Prefeasibility study confirmed for a 21 year operation with a production
rate of 10Mtpa of premium pellet feed
* Feasibility study for the 10Mtpa operation expected to be completed by end
2011
CGMR, China
* Production halted pending consolidation of enlarged licence
* Raising of tailings dam completed
* Arbitration ongoing between CGMR and vendor of Sudan plant over deferred
payment timing
* USD 14.2 million provision made against receivables of CGMR and Wits Basin
following delay in mine consolidation
Colombia
* First coke production expected in Q2 2011
* Exploration programme initiated
Corporate
* The Company is fully funded to deliver key project milestones: cash position
USD 158.8 million at 30 June 2010
* USD 60 million revolving credit facility, credit approved term sheet agreed
with Standard Chartered Bank
Commenting on the results, Chief Executive Officer Graeme Hossie said: "We are
excited to announce the discovery of over 110Mt of additional Inferred resources
at our flagship Marampa project, including a higher grade fraction which has the
potential to significantly enhance the economics of the project. We are well
advanced with final procurement and remain on track for first shipments in Q2
2011."
Operating Review
The principal activities of the Group during the period were the development and
operation of mines for the global steel industry, conducted through its four key
iron ore properties in Sierra Leone, Saudi Arabia, Greenland and China as well
as through its coking business in Colombia.
Summary data for these key projects are:
+--------------------------------+------------+------------+---------+---------+
| |Sierra Leone|Saudi Arabia|Greenland| China|
+--------------------------------+------------+------------+---------+---------+
|Project | Marampa|Wadi Sawawin| Isua| CGMR|
+--------------------------------+------------+------------+---------+---------+
|Ownership (%) | 100| 25| 100| 50|
+--------------------------------+------------+------------+---------+---------+
|First production (year) | 2011| 2014| 2015|Producing|
+--------------------------------+------------+------------+---------+---------+
|Target production (Mtpa of | 9| 5| 10| 1|
|concentrate) | | | | |
+--------------------------------+------------+------------+---------+---------+
Total resources as at August 2010
+------------------+---------+------+--------+---------+----------+----------+
|Asset |Ownership|Cutoff|Measured|Indicated| Inferred| Total|
+------------------+---------+------+--+-----+---+-----+-----+----+-----+----+
| | %| % Fe|Mt| % Fe| Mt| % Fe| Mt|% Fe| Mt|% Fe|
+------------------+---------+------+--+-----+---+-----+-----+----+-----+----+
|Marampa (tailings)| 100| 10| 0| 0| 42| 21| 0| 0| 42| 21|
+------------------+---------+------+--+-----+---+-----+-----+----+-----+----+
|Marampa (primary) | 100| 15| 0| 0| 0| 0| 503| 31| 503| 31|
+------------------+---------+------+--+-----+---+-----+-----+----+-----+----+
|Wadi Sawawin | 25| 30| 0| 0|248| 40| 135| 39| 382| 40|
+------------------+---------+------+--+-----+---+-----+-----+----+-----+----+
|Isua | 100| 20| 0| 0|114| 37| 837| 36| 951| 36|
+------------------+---------+------+--+-----+---+-----+-----+----+-----+----+
|Total (100% basis)| | | 0| 0|404| 37|1,475| 35|1,878| 35|
+------------------+---------+------+--+-----+---+-----+-----+----+-----+----+
Marampa, Sierra Leone (100%)
Construction is well underway on the Phase 1 tailings operation, with the
majority of civil earthworks having been completed ahead of the rainy season as
scheduled. Resource definition work has advanced on the primary resource and
completion of the prefeasibility study for the Phase 2 expansion remains on
course for Q4 2010.
Resources
As a result of the Company's extended drilling programme, additional resources
have been found at Campbelltown Ridge and Hospital Ridge, two structures which
are connected to Masaboin Hill and Ghafal Hill. Snowden have estimated a
combined resource of 111Mt grading 33% Fe Inferred. This includes a weathered
portion of 22Mt of softer higher grade ore that could be blended with tailings
to increase head grade to 26% Fe and extend the life of the Phase 1 from 5 years
to over 7 years with a peak run rate of 3Mtpa concentrate. Of the weathered ore
it is estimated that a fraction could be processed without milling (grain size
less than 1mm) but the balance could be incorporated if a simple rod mill is
installed to process the coarser fraction. The additional resources also mean
that steady state production of 9Mtpa over a mine life of over 20 years is now
being targeted.
Resources are reported in accordance with the JORC Code 2004.
Campbelltown Ridge and Hospital Ridge Inferred Resource as at August 2010 at a
15% Fe cut-off
+-------------------+--------------------+----+----+-----+-----+----+----+----+
| Area |Domain | Mt | Fe |Al2O3|SiO2 |CaO | P | S |
+-------------------+--------------------+----+----+-----+-----+----+----+----+
| | | |(%) | (%) | (%) |(%) |(%) |(%) |
+-------------------+--------------------+----+----+-----+-----+----+----+----+
| |Highly weathered |1.4 |44.8|4.01 |29.00|0.11|0.03|0.01|
| +--------------------+----+----+-----+-----+----+----+----+
| Hospital Ridge |Moderately weathered|7.9 |41.4|2.79 |34.02|0.68|0.09|0.01|
| +--------------------+----+----+-----+-----+----+----+----+
| |Unweathered |54.0|30.7|4.45 |37.42|3.64|0.11|0.01|
+-------------------+--------------------+----+----+-----+-----+----+----+----+
| |Total |63.3|32.3|4.23 |36.80|3.19|0.10|0.01|
+-------------------+--------------------+----+----+-----+-----+----+----+----+
| |Highly weathered |3.6 |42.3|4.52 |31.69|0.01|0.03|0.01|
| +--------------------+----+----+-----+-----+----+----+----+
|Campbell Town Ridge|Moderately weathered|9.3 |36.3|4.51 |39.24|0.23|0.08|0.01|
| +--------------------+----+----+-----+-----+----+----+----+
| |Unweathered |35.8|33.7|4.20 |38.80|2.20|0.24|0.01|
+-------------------+--------------------+----+----+-----+-----+----+----+----+
| |Total |48.5|34.8|4.28 |38.35|1.66|0.19|0.01|
+-------------------+--------------------+----+----+-----+-----+----+----+----+
Total Marampa resource as at August 2010
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
|Deposit |Category |Cutoff|Mt | Fe |Al2O3|SiO2 |CaO | P | S |
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
| | |(Fe %)| | (%) | (%) | (%) |(%) |(%) |(%) |
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
| | | | | | | | | | |
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
|Tailings |Indicated| 10 |42 |21.24|10.16|50.54|0.08|0.06|0.01|
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
| | | | | | | | | | |
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
|Masaboin Hill |Inferred | 15 |269|30.48|5.01 |40.79|2.45|0.14|0.03|
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
|Ghafal Hill |Inferred | 15 |123|31.19|4.67 |39.40|2.35|0.14|0.01|
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
|Campbell Town Ridge|Inferred | 15 |48 |34.84|4.28 |38.35|1.66|0.19|0.01|
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
|Hospital Ridge |Inferred | 15 |63 |32.33|4.23 |36.80|3.19|0.10|0.01|
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
|Total Primary |Inferred | 15 |503|31.30|4.76 |39.72|2.44|0.14|0.02|
+-------------------+---------+------+---+-----+-----+-----+----+----+----+
Phase 1 (Tailings) progress and optimisation
As previously reported, Phase 1 is being designed to produce 1.5Mtpa initially
with the ability to expand to 3Mtpa within 12 months of first production.
Construction of Phase 1 is on track with the majority of the civil earthworks
completed prior to the wet season and as of 1 August 2010, USD 10.7 million of
the expected capital budget of USD 114.0 million has been spent with additional
funds committed to procure long lead items including the Wet High Intensity
Magentic Separation plant which was ordered in April 2010. The capital programme
is scheduled to accelerate once the wet season is over at the end of September
and London Mining continues to target commencement of mining in Q1 2011 and
first production and export of concentrate in Q2 2011.
The Company has now received approval to refurbish an existing underutilised
public road instead of making use of 22km of public highway to connect the mine
with a new private road the Company has already built. The refurbishment will be
completed prior to the commissioning of the mine and means that the entire route
could now be undertaken on a dedicated haul road, permitting the use of 80 tonne
twin trailer trucks. This is expected to yield significant cost efficiencies and
safety benefits.
Phase 2 (Primary Ore)
London Mining expects to complete the Marampa pre feasibility study ("PFS") for
the primary ore expansion in Q4 2010, with first production expected in 2013.
Production from primary ore is expected to reach a peak of 10Mtpa of concentrate
in 2018 before falling to a steady state run-rate of 9Mtpa in 2020.
Ongoing exploration
At the end of July 2010, 26,995m of the 28,000m programme planned for 2010 had
been completed. Following success in delineating additional resources at the
Campbelltown Ridge and Hospital Ridge deposits, the programme has been expanded
to 40,000m in order to upgrade them to the Indicated category as part of the
Phase 2 PFS.
Wadi Sawawin, Saudi Arabia (25%)
In July 2010, London Mining announced the results of an updated bankable
feasibility study ("BFS") for Wadi Sawawin and a revised ownership agreement
with its joint venture partner National Mining Company ("NMC").
The updated BFS resulted in a material improvement in the project economics
based on a reduction in capex and the increase in long term price forecasts.
Potential opportunities exist for further improvement through third party
provision of power, desalination and port facilities and the expansion of the
project to 10Mtpa.
The updated BFS enhances the feasibility of the Wadi Sawawin project at 5Mtpa of
DR pellets and extends the mine life to 20 years. The key economic parameters,
based on the detailed analysis undertaken in the BFS, were:
* Total capex including power and desalination plant of USD 1.9 billion (a USD
0.1 billion reduction from the previous BFS reported in December 2009)
* Capex for power and desalination plant of c.USD 0.3 billion
* Initial operating costs of USD 48.3/t pellets (increased from USD 47.4/t)
The Company also announced that under a new agreement signed 20 July 2010, in
return for no further material funding requirements and no further dilution in
subsequent equity fundings, London Mining will now 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. This agreement superseded the previous agreement whereby London Mining
held a 50% interest in a joint venture company, Saudi London Iron Limited, into
which the licences were going to be transferred. The transaction is still
expected to close in Q4 2010 following the receipt of the necessary government
approvals.
NMC and London Mining continue to work jointly on the ongoing application to the
Deputy Ministry for Mineral resouces for an exploitation licence for the
5Mtpa 20 year operation and to initiate a process to secure the funding of the
Wadi Sawawin project.
Isua, Greenland (100%)
In June 2010 London Mining announced the results of a revised prefeasibility
study for its 100% owned Isua magnetite project in Greenland.
Further to the results of the pre-feasibility study for 5Mtpa announced on 25
February 2010, SNC Lavalin completed a prefeasibility study for a 10Mtpa, 21
year life of mine, high-grade concentrate operation and evaluated the use of a
combination of local, European, North American and Chinese groups to complete
construction. The new study incorporated budgetary quotes from Sinosteel and
China Communications Construction Company to deliver a total project capital
cost of USD 1.74 billion with an average operating unit cost per tonne of
concentrate of USD 27.13/t (accuracy +/-30%) if a combination of local, western
and Chinese labour is utilised. Fixed cost infrastructure items including port,
access road and pipeline in Isua achieve greatly reduced capital intensity if a
10Mtpa operation is considered, rather than a 5Mtpa operation.
As announced in June 2010, testwork confirmed that Isua ore can produce a
concentrate with a specification of 70.2% Fe, 1.9% SiO2, 0.05% Al2O3 and
0.12+/-0.06%S. This product has potential for application as a premium blast
furnace pellet feed for sale into the European and Chinese steel markets or as a
direct reduced pellet feed for use in Hyl type direct reduced iron production in
the Middle East.
All necessary base line data collections, advanced field drilling programs,
Environmental Impact Assessment (EIA) and Social Impact Assessment (SIA) have
been or will be undertaken to facilitate completion of a full feasibility study
by the end of 2011. Construction is still estimated to start in 2012 with first
production at the beginning of 2015. This timeline will be confirmed once
financing is secured and a construction partner selected.
Additional resource drilling continues on site and at the end of July 3,663m of
drilling had been completed comprising 1,004m of ice and 2,659m of rock.
CGMR, China (50% Joint Venture)
On 19 August 2010, the Company announced that China Global Mining Resources (HK)
Limited ("CGMR"), a subsidiary of the China Global Mining Resources (BVI)
Limited joint venture ("CGMR JV") which is held 50:50 with Wits Basin Precious
Minerals Inc ("Wits Basin"), received an arbitration claim from the sellers of
the Sudan processing plant regarding the payment of the deferred consideration
for the purchase. CGMR is in discussions with the sellers of the plant regarding
this claim and a resolution (either by agreement or through arbitration) is
expected in the next six months. The Sellers have no legal or commercial
recourse to London Mining or any of its subsidiaries with respect to this claim.
The claim relates to the timing for payment of deferred consideration of RMB
120 million (USD 17.5 million) payable to the Sellers of the Sudan processing
plant entered into between CGMR and the Sellers under the terms of CGMR's
acquisition of the Sudan processing plant. CGMR believes the payment is only
payable to the extent of available cash within the CGMR JV as stipulated by the
equity transfer agreement of Sudan and therefore not payable at this time. It
is subject to the decision of the arbitrator whether such stipulation may be
upheld in the process of the arbitration. The Sellers, in addition, are seeking
liquidated damages for late payment of the deferred consideration of USD 33.0
million plus costs.
CGMR intends to defend this claim to the fullest extent and is also pursuing
various claims and counterclaims that it believes it has against the Sellers for
their non-compliance with the acquisition terms, including a claim for USD 15.0
million for breach of contract.
As announced originally in May and updated in August 2010, CGMR operations were
halted in May 2010 to allow for the tailings dam to be raised as a precautionary
measure following heavy rains. The tailings dam work was completed in June 2010
and during the period of non-operation, maintenance was undertaken at the Sudan
processing plant. Subsequent to the raising of the tailings dam, mining
operations have not resumed due to the enforcement of a requirement from the
regulatory authorities in Anhui Province for the mining operations to be
consolidated on the CGMR license, held by the Chinese subsidiary Maanshan
Xiaonanshan Mining Company Limited ("XNS").
As reported in the Admission Document, the granting of the larger mining lease
for the area, incorporating the neighbouring mines, in addition to the original
license, required consolidation either through acquisition or amalgamation.
CGMR has been investigating interim alternatives to consolidation but no
agreement has yet been reached either with the neighbouring mines or with the
authorities. However, as a result of the delays to the consolidation exercise
and the likely delays to the current fund raising process, the Group has made an
impairment to receivables recoverable from CGMR and the JV partner, Wits Basin
Precious Minerals Inc, of USD 14.2 million (see the Financial review and note
15). The CGMR JV, led by London Mining's JV partner Wits Basin Precious
Minerals Inc, continues to undertake a fund raising process to allow for the
consolidation of the license, acquisition of deep mining rights and for payment
of the deferred consideration to Mr and Ms Lu. London Mining is not the
operator of the CGMR JV and has no intention of committing further material
funds to the CGMR JV.
Chile (50%)
On July 30 2010, London Mining announced it had entered into a joint venture
with a Chinese and Chilean based partner to take advantage of several iron ore
opportunities in the Atacama region of Chile. Under the agreement, London Mining
has subscribed for 50% of the shares of the joint venture company, Atacama
Mining Resources Corporation ("Atacama"). Atacama holds options over concessions
to iron ore deposits in the Atacama region of Northern Chile, an area of known
iron ore resources. Atacama is evaluating the concessions with a view to
defining a sizable resource to enable offtake and strategic partner investment.
The concessions are located within a short distance from a number of existing
ports and logistics arrangements for export to China are being investigated.
Colombia (100%)
The Company announced in May that it had completed its acquisition of the
remaining 80% of International Coal Company Limited ("ICC") that it did not
already own for an initial consideration of USD 5.5 million cash and 3.5 million
newly issued London Mining plc shares, with a potential further consideration of
up to USD 8.5 million and up to 6.3 million London Mining plc shares payable
subject to the satisfaction of performance conditions.
All the construction and environmental permits for the coke ovens have been
obtained, a construction and a management contract have been signed with a local
leading construction group, and earthmoving and civil engineering for the coke
batteries is underway. Earthworks are scheduled to be completed in Q3 2010 with
construction of the coke ovens due to start in Q4 2010. First coke production is
expected in Q2 2011 ramping up to 200ktpa of coke in Q4 2011. In addition a
programme to evaluate potential coking coal concessions and resources has been
initiated and 1,506m of drilling on the most prospective concessions had been
carried out by the beginning of August.
Michael Andrew, Divisional Manager Applied Geosciences of Snowden Mining
Industry Consultants BSc, MAUSIMM, who meets the criteria of a qualified person
under the AIM Rules - Guidance for Mining, Oil and Gas Companies, has reviewed
and approved the information that relates specifically to the reporting of
resources for Marampa, Wadi Sawawin and Isua projects contained within this
announcement.
The Company's website can be found at www.londonmining.co.uk.
For more information, please contact:
London Mining Plc
Graeme Hossie, Chief Executive Officer+44 20 7201 5000
Rachel Rhodes, Finance Director
Thomas Credland, Head of Investor Relations
Liberum Capital (Nominated Advisor/Broker)
Clayton Bush/Ellen Francis+44 20 3100 2000
Crux Kommunikasjon AS
Charlotte Knudsen +47 97 56 19 59
Brunswick Group
Carole Cable / Daniel Thöle +44 20 7404 5959
About London Mining
London Mining is focused on identifying, developing and operating mines to
become a mid-tier supplier to the global steel industry. Its four principal
assets in Sierra Leone, Saudi Arabia, Greenland and China all 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).
This information is subject of the disclosure requirements acc. to §5-12 vphl
(Norwegian Securities Trading Act)
[HUG#1440389]
Second quarter 2010 report:
http://hugin.info/137683/R/1440389/384810.pdf
Second quarter 2010 presentation:
http://hugin.info/137683/R/1440389/384811.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(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.
All reproduction for further distribution is prohibited.
Source: London Mining Plc via Thomson Reuters ONE
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Datum: 26.08.2010 - 08:21 Uhr
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