LONDON MINING - OPERATIONS UPDATE AND FINANCIAL REVIEW FOR THREE MONTHS TO 31 MARCH 2011
(Thomson Reuters ONE) -
Highlights (including post-period)
Marampa, Sierra Leone
* Commissioning on target for Q3 2011, first shipment in Q4 2011
* All environmental permits received in January 2011
* Phase 1a construction is 60% complete at end of April 2011
* Glencore offtake agreed for Phase 1a production
* Phase 2 PFS completed to 16Mtpa
* Total JORC compliant resources increased to 1,008Mt
Isua, Greenland
* JORC compliant resources increased to 1,002Mt
* Updated scoping study for 15Mtpa operation
* BFS commenced with expected completion December 2011
Other projects
* First production from Colombia coke ovens expected Q4 2011
Corporate
* Net USD105.1 million proceeds raised from oversubscribed convertible bond
issue in February 2011
* Colin Harris joins the London Mining Board of Directors as an independent
non executive director
Marampa (100% ownership)
Significant progress was made at Marampa over the year to date with construction
of the initial Phase 1a production module being 60% complete at the end of
April, and with both environmental permits and an offtake agreement secured with
Glencore in January. The JORC drilling campaign continues with further primary
resources added taking the total JORC resource at Marampa to over 1 billion
tonnes. A prefeasibility study was completed in April which demonstrated the
viability of an expansion to 16Mtpa with a robust post-tax NPV10 of USD 2.2
billion.
Phase 1 construction
London Mining continues to target commissioning in Q3 2011 with first shipments
to follow in Q4 2011. A potential delay of around six weeks to the overall
project schedule was experienced as a result of congestion issues at the
Freetown Port which coincided with Sierra Leone's 50th Anniversary of
Independence celebrations. However with the exceptional assistance of the
Government of Sierra Leone ("GoSL"), the port authorities and all associated
parties, all containers have now been cleared and transported to site. London
Mining will now use a double shift to recover lost time to achieve the targeted
completion of construction and commissioning in Q3 2011.At the end of April
2011, USD 123 million of the Phase 1a capital budget had been committed of which
USD 93 million was spent with the total capital cost still expected to be USD136
million.
Stockpiling of tailings material is progressing as part of construction, with
mining of higher grade weathered material expected to commence shortly. A
stockpile sufficient for approximately one year's mine production is being
established allowing areas to be cleared for haul roads and a tailings storage
facility.
Completion of the processing plant remains the critical path item in the Phase
1a schedule but essential concrete works have been completed to allow erection
of structural steel and the route for a 5km pipe and powerline to the river
pumping station has been cleared. Concrete bases have also been poured for the
main power plant and the heavy fuel oil generators are now on site.
The second stretch of haul road from the mine to Rogbere is 90% complete and
GoSL has confirmed that there should be no restrictions on access preventing its
completion, enabling it to be joined with the private road already constructed
from Rogbere to London Mining's port at Thofeyim. Mobilisation notice has been
given to Bollore Africa to provide trucking and road maintenance ahead of first
production: Bollore is responsible for ongoing road maintenance of the dedicated
haul road and any required dust suppression.
At the Thofeyim port, bulk earthworks and piling for the barge loading jetty
have been completed but dredging progress has been slower than expected due to a
requirement by the contractor to mobilise additional rock breaking equipment to
remove 6,000m3 of harder material out of a total programme of 650,000m3. This
additional capital cost is covered by the Phase 1a contingency and does not
affect the critical path for the project.
Definitive contracts are close to finalisation with providers of barging and
transhipment in preference to an earlier proposed agreement with Louis Dreyfus
Armatures. The new agreement will provide four tugs and four barges in time for
the first expected shipments to self-loading handymax vessels in Q4 2011, and
will allow an accelerated delivery of an offshore transhipment vessel for
loading to larger ships in Q1 2012.
Drilling progress and resource upgrade
11,788m of drilling was completed over the first quarter as part of London
Mining's strategy to convert existing resource to the measured and indicated
categories. Snowden Mining Industry Consultants estimated an overall increase in
primary ore resources during the quarter of 64.4Mt, with total primary resources
at the end of the March 2011 now totalling 971Mt at 31.2% Fe and includes an
increase in Indicated primary ore resources from 379Mt at 31.5% Fe to 566Mt at
31.5% Fe. Total resources including tailings are now 1,008Mt of which 60% is in
the Indicated category.
Resources are reported in accordance with the JORC Code 2004.
Summary of Marampa resource as at March 2010 reported at a 15% Fe cutoff
Ore type|Classification| Mt|Fe (%)| Al2O3| SiO2|CaO (%)|MnO (%)|P (%)|S (%)
| | | | (%)| (%)| | | |
--------+--------------+----+------+--------+-------+-------+-------+-----+-----
| Indicated| 566| 31.5| 4.9| 39.3| 2.79| 0.71| 0.14| 0.01
Primary | | | | | | | | |
| Inferred| 404| 30.8| 5.1| 39.7| 2.61| 0.86| 0.13| 0.01
--------+--------------+----+------+--------+-------+-------+-------+-----+-----
Tailings| Indicated| 38| 22.5| 9.0| 51.4| 0.1| 1.05| 0.05| 0.01
--------+--------------+----+------+--------+-------+-------+-------+-----+-----
Total | |1008| 30.9| 5.1| 39.9| 2.6| 0.78| 0.13| 0.01
Phase 2 PFS results and next steps
On 10 April 2011, London Mining announced the results of a prefeasibility study
for an expansion of the Phase 2 Marampa Project to 16Mtpa. The new production
plan extends the life of Marampa until 2036. Construction is anticipated to
commence in 1H 2012 following the completion of a full feasibility study, to
enable first production from Phase 2 in Q3 2014.
Development of Phase 2 of Marampa is a three stage process outlined below.
Phase 2a : low capex expansion
Initial expansion of 8Mtpa for an estimated capital cost of USD659m. The
utilisation of softer weathered material and use of expanded existing haul road
and barging capacity produces a low capital intensity of USD82/t of capacity.
Construction is anticipated to commence in 1H 2012 with first production in Q3
2014. The low capital cost of Phase 2a provides London Mining with a number of
options to finance the expansion, including options that do not involve a
strategic partner.
Phase 2b : hard rock expansion
A further expansion of up to 8Mtpa of pellet feed, to a total of 16Mtpa, based
on the mining and processing of the unweathered portion of the Marampa ore body
for an estimated capital cost of USD1,187m. The higher capital intensity of
USD148/t of capacity reflects the processing of harder ore as well as the
construction of a pipeline, a coal fired power station and a new port.
Phase 2c (2019-2020 when 2a is complete) : reconfiguration of Phase 2a to allow
processing of hard rock
Addition of regrinding and flotation capacity to the sinter concentrate circuit
to allow for processing of unweathered ore once soft weathered ore has been
depleted. The estimated capital cost of 2c is USD523m, equivalent to USD65/t of
capacity. Phase 2c will utilise Phase 2b logistics but require an expansion of
port and power facilities.
Capital costs are reported below and have an accuracy range of - 25%/+30%
| Phase 2a | Phase 2b | Phase 2c
--------------------------------------+----------+----------+----------
Target production rate | 8 | 8 | 8
--------------------------------------+----------+----------+----------
First production | 2014 | 2015 | 2021
--------------------------------------+----------+----------+----------
Capital expenditure breakdown (USDm) | | |
--------------------------------------+----------+----------+----------
Mining | 101.4 | 71.3 | 0.0
| | |
Process Plant | 229.7 | 374.1 | 115.7
| | |
Site Infrastructure | 57.6 | 25.9 | 2.7
| | |
Port Facilities | 10.4 | 129.9 | 100.8
| | |
Power Infrastructure | 46.8 | 149.3 | 94.4
| | |
Thofeyim Port | 23.3 | 0.0 | 0.0
| | |
First Fills, Spares, Mobile Equip. | 17.8 | 48.9 | 8.6
| | |
Indirects | 78.0 | 223.7 | 128.1
| | |
Owner's costs and Contingencies | 93.9 | 163.7 | 73.1
--------------------------------------+----------+----------+----------
Total | 658.8 | 1186.7 | 523.4
--------------------------------------+----------+----------+----------
Capital Intensity (USD/t capacity) | 82 | 148 | 65
Operating costs have been produced with an accuracy of +/- 30% and are as
follows:
Expected Opex |Phase 2a|Phases 2a and 2b|Phases 2b and 2c|LOM
-------------------------------+--------+-----------------+----------------+---
Mining | 7 | 6 | 8 | 8
-------------------------------+--------+-----------------+----------------+---
Processing (including pipeline)| 9 | 10 | 12 |11
-------------------------------+--------+-----------------+----------------+---
Truck haulage | 3 | 2 | - | 1
-------------------------------+--------+-----------------+----------------+---
Port | 1 | 1 | 2 | 2
-------------------------------+--------+-----------------+----------------+---
Barges and transhipment | 5 | 6 | 5 | 5
-------------------------------+--------+-----------------+----------------+---
G&A | 3 | 2 | 2 | 2
-------------------------------+--------+-----------------+----------------+---
Total (USD/t) | 28 | 27 | 29 |29
The new production plan extended the life of Marampa until 2036. The production
plan produces a post-tax NPV10 for the Marampa expansion of USD 2.2 billion with
an IRR of 28.8% and a payback of 4.0 years. This is based on sale of
concentrates to China with price forecasts provided by AME Mineral Economics.
Mining Lease Agreement ("MLA") and review of fiscal incentives
A review of the MLA comprising fiscal incentives for Phase 1 by GoSL is near to
conclusion. Current discussions with the Government review committee ("the
Committee") indicate there should be no material changes to the total 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 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 full 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 ("Sierra Leone Environmental Protection Agency"), 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.
Offtake and marketing
An offtake agreement for Marampa was signed with the trading house Glencore
International AG ("Glencore") on 26 January 2011. The offtake covered 9.5
million wet metric tonnes (WMT) production from Phase 1a of the Company's
Marampa project. The five year agreement, which included a pre-payment facility
for up to USD 27.0 million, will provide guaranteed offtake and shipping from
Sierra Leone for all Phase 1a production, with the option for London Mining to
expand the agreement to Phase 1b on the same terms. The offtake will be based on
Platts 62% CFR China benchmark, with an upward adjustment for the Fe content of
the Company's 65% Fe sinter feed concentrate, and an incentive to place product
at locations such as Europe where there is a net pricing benefit through lower
shipping costs. The Agreement accommodates London Mining's ramp up expectations
and is flexible to accommodate varying shipping sizes and frequencies to supply
European, Chinese and other markets.
Isua (100% ownership)
In February 2011 London Mining released the results of a 15Mtpa scoping study
completed by SNC Lavalin. The scoping study considered a 15Mtpa open pit and
processing operation with a 15 year initial mine life for estimated capital
expenditure of USD 2.0 billion, representing a 22% reduction in capital
intensity from that previously reported in the pre feasibility study of a
10Mtpa operation released in June 2010. Operating costs increased from USD 27 to
USD 29/t mostly due to a 20% increase in fuel costs. The scoping study was based
on capital and operational cost estimates to a level of accuracy of -30% to
+40% with Chinese contractors CCCC and Sinosteel providing engineering support
and cost estimates for certain capital items.
The 15Mtpa scoping study and detailed work undertaken for the 10Mtpa PFS is to
form the basis of a 15Mtpa bankable feasibility study ("BFS") which has already
commenced and is scheduled to be completed by the end of 2011.
Highlights of the two studies are as follows:
Scoping Study | PFS
Study date (15Mtpa) | (10Mtpa)
February 2011 | June 2010
-------------------------------------------------------------+-----------
Annual production (Mtpa) 15 | 10
|
Mine life (years) 15 | 21
|
Opex (USD/t concentrate) 29 | 27
-------------------------------------------------------------+-----------
Capital expenditure breakdown - USD million |
|
Mine 143 | 132
|
ROM Crushing 41 | 34
|
Process Plant 229 | 165
|
Tailings 11 | 9
|
Product Delivery 253 | 202
|
Port 164 | 132
|
Project Sensitivities 145 | 137
|
Project Infrastructure 396 | 358
|
Project Indirect Costs 398 | 345
-------------------------------------------------------------+-----------
Subtotal 1,780 | 1,514
-------------------------------------------------------------+-----------
Contingency (15%) 267 | 227
-------------------------------------------------------------+-----------
Total 2,047 | 1,741
-------------------------------------------------------------+-----------
Capital Intensity (USD/tpa) 136 | 174
The post-tax project economics based on new scoping study estimates and an
August 2010 price deck provided by Raw Materials Group ("RMG") are displayed
below. The value of the Isua Project is significantly increased if the Isua
concentrate is sold into Europe rather than China, based on a significant
freight differential of around USD 25/WMT.
100% of | 100% of
product sold | product sold
in China | in Europe
-----------------------------------------+--------------
NPV8 (USD billion) 2.5 | 4.5
|
IRR (%) 23 | 33
| |
| Payback period (months) 36 | 25
Resource update
Based on additional drilling of 5,200m completed in the 2010 season, Snowden
Mining Industry Consultants now estimate a total resource for Isua of 1,002Mt at
34.4% Fe, including Indicated resources of 209Mt, an 83% increase from the March
2010 estimate of 114Mt.
Summary of Isua Mineral Resource at March 2011 reported at a 20% Fe cut-off
grade
Category | Tonnes (Mt) | Fe (%) | Al2O3 (%) | SiO2 (%) | S (%) | P (%)
-----------+-------------+--------+-----------+----------+-------+-------
Indicated | 209 | 36.8 | 0.4 | 41.6 | 0.17 | 0.03
| | | | | |
Inferred | 793 | 33.8 | 0.5 | 45.0 | 0.23 | 0.03
-----------+-------------+--------+-----------+----------+-------+-------
Total | 1002 | 34.4 | 0.5 | 44.3 | 0.22 | 0.03
London Mining has now completed three seasons of exploration drilling, and a
further 7,000 to 8,000 metres of drilling will be undertaken in 2011 to convert
further resources currently in the Inferred category to Indicated as part of the
BFS programme. In addition, all necessary base line data collections, advanced
field drilling programmes, Environmental Impact Assessment (EIA) and Social
Impact Assessment (SIA), together the ESIA, have been, or are expected to be
undertaken to allow completion of a full BFS by the end of 2011. Government
approval of the ESIA at the end of 2011 would allow construction to start in
2012 for first production at the beginning of 2015.
London Mining has also started regular public meetings to be held every two
months to inform local people of Isua's development and has established monthly
project meetings with the Bureau of Minerals and Petroleum ("BMP") in Greenland
to report on project development.
As previously announced London Mining is considering opportunities to fund the
BFS by selling a financial interest at project level and continues to implement
its programme to sell a strategic stake and offtake in exchange for the funding.
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 the
extension of the existing exploitation licence to serve the proposed 5Mtpa 20
year operation and discussions progress.
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. There have also been initial discussions with
offtake partners and contractors.
London Mining has produced 10 tonnes of Wadi Sawawin iron ore concentrate at a
small scale production plant built in Perth, Australia, of which a portion is en
route to Metso in the USA for the production of DR pellets which will be used to
provide samples to potential providers of offtake.
Colombia (100% ownership)
Construction of the first 60 ovens (200kt coking capacity) continues with first
production expected in Q4 2011. Following the impact of La Nina, expected capex
is currently expected to be USD34m primarily as a result of increased drainage
costs and other impacts of the rains, but also due to a weaker US dollar putting
inflationary pressures on local costs. London Mining is close to securing a 10
year deal for port capacity, and is in discussions regarding haulage and offtake
agreements, and has finalized a number of coal supply agreements for the ovens.
London Mining has secured three concessions with potential to supply coking coal
feedstock to the ovens and is reviewing two more. These concessions have the
potential to provide all the feedstock for the expanded 120 oven scenario for at
least the next fifteen years. London Mining continues to explore for further
coking coal resource potential with 4,064m of drilling completed in the first
four months of 2011.
Corporate
In February 2011, London Mining raised net proceeds of USD105.1 million from the
issue of USD110.0 million 5-year 8.0% convertible bonds. The issue was
oversubscribed and priced at a 38% premium to the reference share price.
London Mining welcomes the addition of Colin Harris to its Board of Directors as
an independent non executive director with effect from 12 May 2011. Mr Harris
brings extensive mining experience to London Mining, as an exploration geologist
with over 40 years industry experience including: Anglo American (5 years),
Cominco (14 years) and Rio Tinto (19 years). He is currently the Managing
Director of iron ore company Zanaga UK Services Ltd, and is a non-executive
director of AIM-listed Ncondezi Coal Company Limited. In the last five years he
has also acted as a Director for Simfa S.A. He has a BSc in Geology from Rhodes
University (South Africa).
Russell Turner, Principal Consultant, Snowden Mining Industry Consultants MAIG,
who has 10 years experience in Iron Ore and is familiar with the deposit types
in question in order to be considered as a competent person in accordance with
the JORC code requirements, has reviewed and approved the information that
relate specifically to the resources figures contained within this announcement.
Please find the full operations and financial review, as well as the company's
presentation of the period enclosed.
London Mining will be hosting a webcast and conference call for the results of
the first quarter 2011 today at 9:00am GMT (UK)/10:00am CET (Norway). Details
for the webcast and conference call can be found on London Mining's homepage,
www.londonmining.co.uk.
For more information, please contact:
London Mining Plc +44 207 201 5000
Graeme Hossie, Chief Executive Officer
Rachel Rhodes, Chief Financial Officer
Thomas Credland, Head of Investor Relations
Liberum Capital (Nominated Advisor/Broker) +44 203 100 2000
Clayton Bush/Christopher Kololian
J.P. Morgan Cazenove (Broker) +44 207 742 4000
Adam Brett / Neil Passmore
Brunswick Group LLP +44 20 7404 5959
Carole Cable / Daniel Thöle
Crux Kommunikasjon AS +47 97 56 19 59
Charlotte Knudsen
About London Mining
London Mining is focused on identifying, developing and operating scalable mines
to become a mid-tier supplier to the global steel industry. London Mining is
developing three iron ore mines in Sierra Leone, Saudi Arabia and Greenland as
well as a coking coal operation in the Socha region of 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).
This information is subject of the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.
First quarter 2011 report:
http://hugin.info/137683/R/1518954/455483.pdf
First quarter 2011 presentation :
http://hugin.info/137683/R/1518954/455484.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.
Source: London Mining Plc via Thomson Reuters ONE
[HUG#1518954]
Unternehmensinformation / Kurzprofil:
Datum: 26.05.2011 - 08:01 Uhr
Sprache: Deutsch
News-ID 55015
Anzahl Zeichen: 29614
contact information:
Town:
London
Kategorie:
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