OPERATIONS UPDATE
(Thomson Reuters ONE) -
This operational review has been provided to coincide with the analyst and
institutional investor site visit to the Marampa project, which is taking place
this week in Sierra Leone. The site visit presentation will be uploaded to the
London Mining website in conjunction with the site visit.
Marampa, Sierra Leone
* New resource of over 900Mt grading 32% announced for Marampa
* Includes over 130Mt of weathered ore that could extend the life of Phase1
3.6mtpa sinter feed project. Final optimised Phase 1 production plan is
expected in Q1 2011
* PFS for Phase 2 c.16mtpa pellet feed project due in Q1 2011
* First production expected end Q3 2011
* First commercial export and sales expected Q4 2011
Other / Corporate
* Isua undertaking scoping study to confirm 15mtpa production and related
improved economics
* External funds being sought for Isua project
* Colombia coke production now expected in Q3 2011 and exploration concessions
signed
* Cash position at 31 December 2010 of USD76 million
Commenting on the results, Chief Executive Officer Graeme Hossie said:
"We are very excited about the achievement of over 900Mt of resource at Marampa
which brings London Mining's iron ore resources to over 2.2 billion tonnes. We
are now planning a fast track expansion to 3.6 mtpa of sinter feed concentrate
and an initial 12 mtpa of pellet feed production from our Marampa mine which
will be a significant new entrant into the global seaborne iron ore trade
starting this year. We are continuing to develop our coking coal resources and
constructing our coke production project in Colombia also for production this
year and are now seeking partners for funding our Isua and Wadi Sawawin Projects
to enable us to build over 30mtpa iron ore production by 2015."
Operations Review
The principal activities of the Group are the development and operation of mines
for the global steel industry, conducted through its four key iron ore
properties in Sierra Leone, Greenland, Saudi Arabia, and China as well as
through its coke project in Colombia. Summary data for these key projects are:
+---------------+------------+--------+-----------+------------+---------------+
| |Sierra Leone|Colombia|Greenland |Saudi Arabia|China |
+---------------+------------+--------+-----------+------------+---------------+
|Project |Marampa |Socha |Isua |Wadi Sawawin|CGMR |
+---------------+------------+--------+-----------+------------+---------------+
|Ownership (%) |100 |100 |100 |25 |50 |
+---------------+------------+--------+-----------+------------+---------------+
| |P1: sinter | | | | |
|Product |feed |Coke |Pellet feed|DR pellets |Magnetite |
| |P2: pellet | | | |concentrate |
| |feed | | | | |
+---------------+------------+--------+-----------+------------+---------------+
|First | | | | | |
|production |2011 |2011 |2015 |2014 |2012 |
|(year) | | | | | |
+---------------+------------+--------+-----------+------------+---------------+
|Target | | | | | |
|production |16 |0.4 |15 |5 |0.4 to1 |
|capacity (Mtpa)| | | | | |
+---------------+------------+--------+-----------+------------+---------------+
Total resources as at end December 2010
+------------------+---------+------+--------+---------+---------+---------+
|Asset |Ownership|Cutoff|Measured|Indicated|Inferred |Total |
+------------------+---------+------+--+-----+---+-----+----+----+----+----+
| |% |% Fe |Mt|% Fe |Mt |% Fe |Mt |% Fe|Mt |% Fe|
+------------------+---------+------+--+-----+---+-----+----+----+----+----+
|Marampa (tailings)|100 |15 |0 |0 |37 |22 |0 |0 |37 |22 |
+------------------+---------+------+--+-----+---+-----+----+----+----+----+
|Marampa (primary) |100 |15 |0 |0 |379|32 |527 |32 |906 |32 |
+------------------+---------+------+--+-----+---+-----+----+----+----+----+
|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 |778|35 |1499|35 |2276|35 |
+------------------+---------+------+--+-----+---+-----+----+----+----+----+
Marampa, Sierra Leone (100%)
The current focus at Marampa continues to be the construction and optimisation
of Phase 1 to incorporate the new resources reported on 17 January 2011. In the
same announcement London Mining announced a move in first commissioned plant
production to end Q3 2011, with export of first concentrate now expected in Q4
2011. The budget for Phase 1a remains unchanged at USD136m. At the end of
December 2010, USD115m had been committed of which USD45m had been spent. A
revised production plan will be completed as part of the prefeasibility work
being undertaken for the Phase 2 expansion which focuses on the primary
resource.
Resources
As announced on 17 January 2011, Snowden Mining Industry Consultants now
estimate a total resource of 906Mt grading 31.7% Fe comprising 378.9Mt at 31.5%
Fe in the Indicated category and 527.4Mt at 31.8% Fe in the Inferred category.
These resources represented an increase of 70% to the total primary resource of
533Mt at 31% Fe reported in November 2010 and a tenfold increase of the
historical primary resource of 84Mt grading 37.41% Fe reported at the time of
London Mining's admission to AIM in November 2009. The new resource also
reflects 24Mt of highly weathered ore at 37.6% and 107.4Mt of moderately
weathered ore at 35.0% Fe. The focus of the 56,825m diamond drilling programme
completed in 2010 was to define the parameters of the primary resource to at
least the Inferred category in order to determine the optimum production
capacity for Phase 2. The additional 20,000m of drilling, to be completed in the
first half of 2011, is aimed at converting resources from Inferred to Measured
and Indicated categories for detailed mine planning purposes. It is expected
however, that there will be further additions to the total resource. The tabular
nature of the Marampa ore body, homogenous geochemistry of the ore and highly
competent geotechnical behaviour of the Marampa pit walls mean that the life of
mine strip ratio is expected to allow almost all the currently defined resources
to fall within the confines of an open pit and therefore in the final reserve.
Phase 1 progress
Mine
Detailed mine and tailings plans have now been completed with a strip ratio of
0.9 estimated for weathered ore and 0.02 for tailings with ROM ore comprising
70% tailings and 30% weathered ore. The mineable resource is currently estimated
to be 59Mt with a head grade of 26.5% Fe. This mine plan currently only
considers weathered material from the Campbelltown and Hospital Ridges, with
further material from Masaboin Hill and the north east extension expected to be
captured in a revised mine plan.
Plant
Construction of the Phase 1a plant continues although reconfiguration of the
plant layout to allow full realisation of the new ore discovery now means first
production will commence end Q3 2011 and first commercial export and sales of
concentrate will be in Q4 2011. Construction is ongoing with work on all
essential concrete footings and erection of structural steel expected to be
completed during Q1 2011. All necessary earthworks are expected to be completed
ahead of the start of the wet season in May.
Testwork indicates that 100% of highly weathered material and 75% of material
considered moderately weathered can be processed in the Phase 1 processing
circuit with the installation of a small rod mill; the capex of which has been
included in the Phase 1a cost of USD136 million. It is envisaged that the
remaining moderately weathered material will be stockpiled for processing in
Phase 2 although this fraction may be increased if it improves the overall
economics of the project. A revised, optimised production plan for Phase 1 will
be released as part of the Phase 2 PFS in Q1 2011.
Commissioning of the plant is expected to be completed in Q3 2011 with first
concentrate from the plant also expected by the end of Q3, with shipment of
first concentrate following within one month of first commissioned production.
Ramp up to the full capacity of 1.8Mtpa is expected to take 6 months.
Construction of the second 1.8Mtpa module to complete the ramp up to 3.6mtpa is
scheduled to start in Q4 2011 with commissioning expected nine months later.
Earthworks for Phase 1b are to be completed as part of the Phase 1a construction
programme. In addition, excess WHIMS plant and power generating capacity has
been installed as part of the Phase 1a programme and London Mining is
investigating further strategies to accelerate
Phase 1b.
Logistics
Work on the haul road extension from Rogberi to Lunsar is to commence in Q1
2011 and is expected to be completed ahead of the wet season in Q2 2011.
Construction of the new 18km road between Rogberi and Tawfayim is completed.
Bollore will shortly be contracted to provide road haulage and maintenance with
mobilisation expected to take six months.
Construction of the port is scheduled to take place between Q1 and Q3 2011.
Ausenco Sandwell has completed the final designs and is to act as construction
management for the project. The main long lead items for this aspect of
operations, namely the jetty and barge loading equipment, have been ordered from
Quayquip and Telestack respectively and are under construction. The final design
considers a floating jetty which can accommodate river level fluctuations.
Jan de Nul, the dredging contractor, already has a dredge working in the
Freetown Harbour and will commence dredging of the Port Loko river in Q1 2011.
Dredging a navigable channel in the Port Loko River is expected to require the
removal of an estimated 650,000m3 of material and is expected to take
approximately 60 days. London Mining is in the final stages of agreeing
contracts for barging and transhipment with mobilisation expected in time for
first exports in Q4 2011. The company is evaluating the use of tidal assistance
to optimise barge loads and reduce dredging requirements. The planned loading
rates of around 20,000t per day will be unaffected.
Phase 2 prefeasibility study
The Phase 2 PFS is being reconfigured to reflect the increase in resources and
the targeted production of up to 16Mtpa with the inclusion of some moderately
weathered ore is expected to have a significant favourable impact on initial
operating cost and metallurgical recovery. The PFS will provide capex and opex
estimates and will enable a detailed evaluation of the full potential and
deliverability of the Marampa project, including mining, processing, waste
disposal and logistics plans, as well as time to production. The PFS is due for
completion during Q1 2011. A full feasibility study is expected to be
commissioned shortly afterwards.
Mining Lease Agreement ("MLA")
A review of the MLA comprising fiscal incentives for Phase 1 by the Sierra Leone
Government ("GoSL") is near to conclusion. Current discussions with the
Committee indicate there should be no material change to the project value as a
result of any modifications to the MLA and associated fiscal incentive package
and hence the investment programme remains unchanged.
London Mining has also engaged in discussions with the Committee to accelerate
the review that was to take place after five years and to agree now what the
fiscal regime will be for the five years from 2015. This will provide certainty
on the financial modelling, in particular for the expansion of Phase 1 to
incorporate the full effect of the weathered ore and the Phase 2 development. It
is expected that the resulting package for the second five years should not
differ materially from fiscal incentives either awarded recently to other mining
companies or from those that have previously been negotiated with companies
already having been through this review process. The Company supports efforts to
increase transparency in the mining industry in Sierra Leone, and GoSL remains
very supportive of London Mining's production and investment plans.
Environmental permitting and management
London Mining received its final environmental permit for Marampa at the
beginning of January 2011. The issuance of the permit followed the formal
approval and acceptance by the Sierra Leone Environmental Protection Agency
("SLEPA") of London Mining's Environmental Impact Assessment ("EIA"), the EIA
having been discussed publically via four public hearings in Sierra Leone, which
were attended by members of the public and NGOs. The permit is subject to an
annual renewal by SLEPA, which requires ongoing environmental compliance in
accordance with the Sierra Leone Environmental Act 2008 and the payment of an
annual fee. The EIA meets all local regulations and London Mining is working
with an internationally recognised environmental consultant to ensure compliance
with international best practice.
Colombia (100% ownership)
London Mining is continuing to construct coke ovens with a capacity of 200ktpa
in the Boyaca region of Colombia, a region with significant local production of
high quality coking coal. Construction is now expected to be completed in Q3
2011, with first coke production also expected at the end of Q3. This revised
timeline is due to significant flooding associated with the La Niña weather
system which required significant remedial drainage and some limited redesign.
Full capacity of 200ktpa is expected to be reached in Q1 2012, following which
the Company expects to commence a second phase of construction, increasing
capacity to 400ktpa of coke. The capex for the first phase is expected to be
USD30 million.
The Company has agreed in principle a supply agreement with Invercoal at a small
discount to local market prices for up to 300ktpa of low volatility coking coal
from mines being developed on neighbouring properties to London Mining's coke
ovens. Following a high-level drilling programme on these properties, London
Mining decided to enter in to a supply agreement in preference to the original
proposed joint venture structure.
The Company is in the process of investigating the potential of further
concessions both in proximity to the coke ovens and also in other areas with
high coking coal potential. An agreement has been signed for a concession in the
vicinity of the coke ovens and which the Company is currently drilling with the
expectation of developing a low and mid volatility coking coal mine to supply
the coke ovens. In addition, the Company has a signed a concession agreement for
a property in the Cundinamarca province, which it will be exploring as a joint
venture with another party. At the end of December 2010, 2,615m of diamond
drilling and 3,724m of RC drilling had been completed.
The Company is also in a number of discussions with port and transport companies
regarding short and medium term export arrangements.
Isua, Greenland (100% ownership)
Following a review of the Isua project, London Mining has decided to increase
the scope of the project further to 15Mtpa of concentrate for the BFS. The
project has sufficient resources to produce these volumes which would have a
material positive impact on the project economics. A scoping study is currently
underway, with the results expected in Q1 2011.
Work has now commenced on the BFS with SNC Lavalin Inc with Chinese companies
Sinosteel and CCCC also contributing. SGS have commenced a metallurgical and
environmental testing program which will include mineralogy, Davis Tube test
work, grindability, bench scale beneficiation and acid rock drainage. Davis Tube
testing and assay work is proceeding on drill core produced by the 5,200m 2010
drilling campaign. This work is expected to allow an updated resource
announcement to be reported for Isua by the end of Q1 2011.
London Mining is committed to a social and environmental program that adheres to
international best practice and Greenlandic governmental requirements. London
Mining held its first public meeting in Nuuk in November, 2010 and has awarded
the EIA to Orbicon with the SIA in progress by Grontmij-Carl Bro. Baseline data
reports on water quality, quantity, and bathymetry for future water and tailings
management system have now been completed. The Government of Greenland is keen
to develop its mining industry and is actively supportive of the development of
the Isua project.
London Mining is seeking funds to finance the BFS in full in 2011 and to develop
the project into production by January 2015, with financial and strategic
partners being considered as well as a potential listing. Royal Bank of Canada
and Macquarie are advising on the process for selecting a funding partner.
Wadi Sawawin, Saudi Arabia (25% ownership)
National Mining Company and London Mining continue to work jointly on the
ongoing application to the Deputy Ministry for Mineral Resources for an
exploitation licence for the proposed 5Mtpa 20 year operation and there are
ongoing discussions.
The process to secure the funding of the Wadi Sawawin project continues. There
have been initial positive discussions with the power, water and port
authorities in Saudi Arabia regarding the provision of those services. In the
event that agreements are reached, this would materially reduce the capex
requirement of the project.
London Mining is currently producing 10 tonnes of concentrate at a pilot plant
in Perth, Australia to enable DR pellet samples to be produced by pellet plant
bidders, and to provide samples to potential offtake providers.
CGMR, China (50% ownership through a joint venture)
Mining operations continue to be halted by the mining authorities in Anhui
province, for reasons which primarily concern the continued delay in
consolidating the mines situated on the CGMR license. The operator of the other
two pits on the CGMR license, Maanshan Binyong Mining Co. Ltd ("Binyong"), has
recently won a court case which ruled that integration of CGMR's XNS pit with
the two Binyong pits should be enforced whereby Binyong would receive 60% of the
equity in an enlarged Maanshan Xiaonanshan Mining Co., Ltd ("XNS"), the company
which holds the CGMR mining licence. This would integrate all current pits on
the licence into one operation without payments being made between the parties.
London Mining and the CGMR group received legal advice from Chinese counsel
throughout the court process that based on the evidence available; there was no
legal basis for the claim. The CGMR group intends to appeal this ruling.
In addition, the arbitration claim from the original vendors of the XNS mine and
Sudan processing plant regarding the timing for payment of deferred
consideration of approximately USD18 million (translated at 31 December 2010)
remains unresolved, with an initial hearing date set for February 2011. While
London Mining is in negotiations with the vendor regarding the arbitration, the
outcome is uncertain.
London Mining's is investigating bringing in a Chinese partner to operate the
mine in return for equity in the business, and it is in discussions with several
parties regarding this approach. However, given the current inability to operate
the mine and the ongoing legal claims and rulings, London Mining expects to
report a material write down of the CGMR asset in the Company's year end
accounts. London Mining has no intention to commit material new funds to the
CGMR joint venture, and is minimising the management time spent on this project.
Chile (50% ownership through a joint venture)
As announced on 30th July 2010 London Mining has 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.
The joint venture has received interest from a number of parties for a potential
off-take from concessions being explored in this area based on initial sample
specifications taken and is currently in negotiations for a possible strategic
investor in to the project.
London Mining's USD7 million development loan to the joint venture is currently
shown as a long term receivable on the Group balance sheet, as under the terms
of the agreement it will receive a priority return from production and also from
any new cash raised into the venture. The Group's initial USD5 million
investment into the project is classified as goodwill. The Company will assess
the near term carrying value of the goodwill and the receivable for yearend
reporting purposes in light of the expected timing of cash generated from both
operating and investment options as well as allowing for various structures to
accommodate new investment and reinvestment of initial cashflows in Atacama..
The Company's Website can be found at: www.londonmining.co.uk
For more information, please contract:
London Mining Plc
Graeme Hossie, Chief Executive Officer +44 207 201 5000
Rachel Rhodes, Chief Financial Officer
Thomas Credland, Head of Investor Relations
Liberum Capital (Nominated Advisor/Broker)
Clayton Bush/Christopher Kololian +44 203 100 2000
Crux Kommunikasjon AS
Charlotte Knudsen +47 97 56 1959
Brunswick Group LLP
Carole Cable/ Daniel Thöle +44 207 404 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 five assets in
Sierra Leone, Colombia, Greenland, Saudi Arabia 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).
Glossary of Technical Terms
"Fe" Iron.
"inferred mineral resource" The part of a mineral resource for which quantity
and grade or quality can be estimated on the basis
of geological evidence and limited sampling and
reasonably assumed, but not verified, geological
and grade continuity. The estimate is based on
limited information and sampling gathered through
appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill
holes.
"indicated mineral resource" the part of a mineral resource for which quantity,
grade or quality, densities, shape and physical
characteristics can be estimated with a level of
confidence sufficient to allow the appropriate
application of technical and economic parameters,
to support mine planning and evaluation of the
economic viability of the deposit. The estimate is
based on detailed and reliable exploration and
testing information gathered through appropriate
techniques from locations, such as outcrops,
trenches, pits, workings and drill holes that are
spaced closely enough for geological and grade
continuity to be reasonably assumed.
"JORC" Australasian Institute of Mining and Metallurgy
Joint Ore Reserves Committee (JORC) code on mineral
resources and ore reserves.
"measured mineral resource" The part of a mineral resource for which quantity,
grade or quality, densities, shape and physical
characteristics are so well established that that
they can be estimated with confidence sufficient to
allow the appropriate application of technical and
economic parameters, to support production planning
and evaluation of the economic viability of the
deposit. The estimate is based on detailed and
reliable exploration, sampling and testing
information gathered through appropriate techniques
from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely
enough to confirm both geological and grade
continuity.
"mineral resource" A concentration or occurrence of natural, solid,
inorganic or fossilised organic material in or on
the Earth's crust in such form and quantity and of
such a grade or quality that it has reasonable
prospects for economic extraction. The location,
quantity, grade, geological characteristics and
continuity of a mineral resource are known,
estimated or interpreted from specific geological
evidence and knowledge.
"Mt" Million metric tonnes.
"Mtpa" A million metric tonnes per annum.
"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.
"sinter" Process for agglomerating ore concentrate in which
partial reduction of minerals may take place and
some impurities may be expelled prior to subsequent
smelting and refining.
"sinter feed" Iron ore product used to make sinter.
WHIMS Wet High Intensity Magnetic Separation - the
process that will be used for ore processing at
Marampa.
This information is subject of the disclosure requirements acc. to §5-12 vphl
(Norwegian Securities Trading Act)
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.
Source: London Mining Plc via Thomson Reuters ONE
[HUG#1481628]
Unternehmensinformation / Kurzprofil:
Datum: 24.01.2011 - 08:07 Uhr
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News-ID 50652
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contact information:
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