OPERATIONS UPDATE AND FINANCIAL REVIEW FOR SIX MONTHS TO 30 JUNE 2011
(Thomson Reuters ONE) -
Highlights (including post-period)
Marampa, Sierra Leone
* Plant commissioning expected in Q3 2011
* First shipment expected in Q4 2011
* Phase 1a construction was 93% complete on 8 August 2011
* Glencore offtake agreed for Phase 1a production
* Transhipment and barging solution in place for 3.6Mtpa
* WHIMS plants for Phase 1b expansion to 3.6Mtpa ordered
* PFS supporting expansion to 16Mtpa complete
* BFS for initial 8Mtpa expansion due in Q2 2012
* Daniel Pop, ex BHP Billiton, Rio Tinto and Northern Iron appointed as
Managing Director, Sierra Leone
Isua, Greenland
* Royalty agreement signed with Anglo Pacific, USD 30 million to fund BFS
* Scoping study concluded for 15Mtpa operation, BFS for 15Mtpa operation
expected by Q4 2011
Colombia
* First production from Colombia coke ovens on track for Q4 2011
Corporate
* Standard Chartered corporate debt facility increased from USD 60 million to
USD 90 million with full draw down made in August 2011
* Net USD 105.1 million proceeds raised from convertible bond issue in
February 2011
* 513,000t of 2012 iron ore production hedged at USD 148/t (net on a 62% Fe
basis)
* Oslo delisting confirmed for 30 September 2011
* Cash balance of USD67.5 million at end of June 2011, before draw down of the
Standard Chartered facility
Graeme Hossie, CEO of London Mining said "Progress at our Marampa mine in Sierra
Leone continues with commercial production and shipments expected to begin in Q4
2011. In addition, procurement has commenced for the Phase 1b expansion to
3.6Mtpa for completion of full Phase 1 capacity in 2012. An expansion of an
additional 8Mtpa capacity at low capital intensity using Phase 1 logistics
infrastructure is planned, with the bankable feasibility study expected in Q2
2012. At our Isua project in Greenland, the agreement of a 1% royalty with
Anglo Pacific provides funding to ensure completion of a BFS in 2011 with
minimal dilution for shareholders."
Marampa (100% ownership)
London Mining continues to make significant progress at Marampa, with
construction of the initial Phase 1a production module now 93% complete. The
JORC drilling campaign continues with a further resource update expected by the
end of Q3 2011. A prefeasibility study ("PFS") was completed in April 2011 which
indicated the viability of an expansion to 16Mtpa (Phase 2) with a robust post-
tax NPV10 of USD 2.2 billion. Phase 2 can be developed in stages, with the
initial 8Mtpa able to be developed from cash flow without a strategic partner.
The Company can significantly increase production and has several options for
funding the entire 16Mtpa expansion. A bankable feasibility study ("BFS") for
the initial 8Mtpa expansion is expected to be completed in Q2 2012.
Phase 1
Construction of the Phase 1a operation was 93% complete at 8 August 2011 and
plant commissioning is expected in Q3 2011. First shipments are still on track
for Q4 2011. Work on finalising the haul road and Thofeyim port continues on
schedule in time for first shipment in Q4 2011. The Government of Sierra Leone
has confirmed that there are to be no restrictions on access preventing the
completion of the second stretch of haul road from the mine to Rogbere, enabling
it to be joined with the private road already constructed from Rogbere to London
Mining's port at Thofeyim.
At the end of July 2011, USD 136 million of the Phase 1a capital budget had been
committed (USD 107 million spent) with the total capital cost prior to
production expected to be USD 145 million plus a further USD 2 million
contingency. The total capital expenditure for the 3.6Mtpa production module is
estimated at USD 208 million, equating to USD 58/t capital intensity. In
addition certain preparations and procurement has now commenced for the Phase
1b expansion with the longest lead item, the WHIMS plant, now ordered.
London Mining now has a full transhipment solution in place for its entire
3.6Mtpa Phase 1 production at Marampa. Tugs, barges and a transhipment vessel
have been secured. This provides London Mining with a capability to load a range
of vessels up to Cape class at a rate of 20,000t per day and allows for an
increased rate of 60,000t per day for further expansions. The respective
agreements will provide barging capacity in time for first shipments from
Marampa, due in Q4 2011, and for the transhipment vessel expected to be in place
by Q1 2012, six months earlier than previously envisaged. To allow for rapid
expansion to 3.6Mtpa and beyond, a decision was taken to install seaborne
logistics and incur and maintain certain increased overhead costs. This involves
contracting barging capacity on a yearly fixed cost arrangement, and maintaining
fast-track construction capability and continuity. In addition, London Mining
has conducted a review of the financing options for the transhipment vessel and
has decided to finance the vessel from the Company balance sheet to ensure early
delivery in Q1 2012 as well as realising operating expenditure savings.
Dredging is expected to be completed in time for first shipment in Q4 2011.
The total Phase 1 operating cost is expected to remain at around USD 30/t FOB at
the nameplate 3.6Mtpa run rate but will be around USD 42/t for Phase
1a's 1.8Mtpa as a result of higher fixed G&A and transhipment costs.
Phase | 1a 1a + 1b
--------------------------------+---------------
Production (Mtpa) | 1.8 3.6
--------------------------------+---------------
Mine (USD/t) | 10 9
|
Processing (USD/t) | 7 6
|
Road Haulage (USD/t) | 5 4
|
Barging & Transhipment (USD/t) | 10 6
|
G&A (USD/t) | 10 5
--------------------------------+---------------
Total (USD/t) | 42 30
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.
Drilling progress and resource upgrade
In March 2011, Snowden Mining Industry Consultants estimated an overall increase
in primary ore resources of 64.4Mt, with total primary resources totaling 971Mt
at 31.2% Fe and including 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 last reported as at March 2011 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 | |1,008| 30.9| 5.1| 39.9| 2.6| 0.78| 0.13| 0.01
27,763m of drilling was completed over the first half of 2011 as London Mining
continues to convert Inferred resources to the Measured and Indicated
categories. Drilling has now been completed and the rigs demobilised. An updated
resource statement for Marampa is expected by the end of Q3 2011.
Phase 2 PFS results and next steps
On 10 April 2011, London Mining announced the results of a PFS, completed by
Ausenco, for an expansion of the Phase 2 Marampa Project to 16Mtpa. The PFS
considered the extension of Marampa until 2036 and consisted of three further
stages:
Phase 2a : low capex expansion
Initial expansion of 8Mtpa for an estimated capital cost of USD 659 million. The
utilisation of softer weathered material, use of an upgraded tarmac haul road
and expanded transhipment capacity is forecast to produce a low capital
intensity of USD 82/t of capacity. The low capital cost of Phase 2a provides
London Mining with a number of options to finance the expansion, including
funding from project cash flow.
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 USD 1,187 million. The higher capital intensity
of USD 148/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 : reconfiguration of Phase 2a following weather ore depletion
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 Phase 2c is USD 523 million, equivalent
to USD 65/t of capacity. Phase 2c will utilise Phase 2b logistics but will
require an expansion of the new port and power facilities
A dual track is being applied to the expansion BFS. An initial study, expected
in Q2 2012, is intended to capture the Phase 2a self-funded expansion of an
additional 8Mtpa of sinter feed concentrate production from weathered ore from
2014 with Phase 2c reconfigured to process unweathered material from 2020 using
existing infrastructure. Following the Phase 2a BFS, a second BFS will be
undertaken to define expansion to a 16Mtpa operation from the entire Marampa
resource.. London Mining intends to consider strategic partner options once
production from Phase 1 has commenced.
Mining Lease Agreement ("MLA") and review of fiscal incentives
The review of the MLA covering London Mining's development of the Marampa mine,
including the fiscal incentives for Phase 1, has been concluded between London
Mining and the Government of Sierra Leone ("GoSL"). The draft MLA and fiscal
incentives for the initial 10 year period is subject to Presidential approval
prior to its submission to Parliament for ratification. The results of the
review will be disclosed once Presidential approval has been obtained. London
Mining does not expect any material impact to the economics of the project and
as such, no changes to the development of the project have been made.
Appointment of new Managing Director for Sierra Leone
In August 2011, Daniel Pop was appointed as Managing Director for Sierra Leone.
A mining engineer with over 18 years experience, Daniel formerly held senior
management positions with Northern Iron, Rio Tinto Iron Ore (Hamersley Iron and
IOC) and BHP Billiton Iron Ore (Area C) and has notable expertise in all aspects
of the production of iron ore.
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. Estimated operating costs increased from
USD 27/t 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 BFS which has already commenced and is scheduled to
be completed by the end of 2011
In August 2011, London Mining announced that it had entered into a royalty
agreement with Anglo Pacific Group plc ("Anglo Pacific") regarding future iron
ore production at Isua.
Under the terms of the royalty agreement, Anglo Pacific paid USD30 million to
London Mining's subsidiary London Mining Greenland A/S ("London Mining
Greenland") (received in August 2011) in return for 1% royalty over all
consideration received from the sale of iron ore concentrate from the Isua
Project. The proceeds received from the transaction are to be used primarily to
fund the BFS on the Isua Project, which has already commenced and is scheduled
to be completed by the end of 2011. In the event London Mining Greenland does
not fulfill certain milestones, of which the earliest is completion of a BFS by
no later than 31 December 2012, Anglo Pacific can demand repayment of the USD30
million, which can be satisfied in cash or London Mining shares at the Company's
discretion.
In addition to the Anglo Pacific royalty, Isua is subject to a payment of
USD0.40/t of ore mined payable to the original vendor of the mine. The
Government of Greenland does not currently levy a royalty on iron ore mines.
The Isua project BFS is considering a 15Mtpa open pit and processing operation
with a 15 year initial mine life. First production is targeted in 2015.
An extensive drilling campaign is ongoing at Isua to upgrade further resources
to the Measured and Indicated categories.
Colombia (100% ownership)
Construction of the first 60 ovens (200kt coking capacity) continues with first
production expected in Q4 2011. The coke test oven has been completed and has
commenced production of coke test batches for marketing purposes and product
optimisation. Capital expenditure is currently expected to be USD 34 million up
from USD 30 million primarily as a result of increased drainage costs as a
result of La Nina and also due to a weaker US currency.
London Mining is close to securing a 10 year deal for port capacity, and is in
discussions regarding haulage and offtake agreements.
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 coking coal
resource potential with 6,177m of drilling completed in the first seven months
of 2011.
Wadi Sawawin, Saudi Arabia (25% ownership)
National Mining Company and London Mining are working jointly to secure the
expansion of the existing exploitation licence to serve the proposed 5Mtpa, 20
year operation The application is with the Deputy Ministry for Mineral Resources
for processing.
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 capital
expenditure 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
currently being transported to Metso in the USA for the production of direct
reduction pellets which will be used to provide samples to potential offtake
partners.
Corporate
Group cash at the end of June 2011 was USD 67.5 million. This includes proceeds
raised from the USD110.0 million 5 year 8.0% convertible bonds that were issued
in February 2011. The issue was oversubscribed and priced at a 38% premium to
the reference share price.
In August 2011, the Company increased its corporate debt facility with Standard
Chartered from USD 60 million to USD 90 million.
The increased facility was secured primarily as a result of the delay in the
receipt of the USD 24.8 million proceeds from the 2010 agreement to sell the
Company's shares in Delta Mining Consolidated to Sable Mining, which is now
expected to complete in Q4 2011, and provides London Mining with the necessary
cash resource to fund the increased pre-production capital expenditure at
Marampa and Colombia and takes into account the slight delay to production start
date, both which were announced in Q1 2011.
Draw down of the increased Standard Chartered facility was subject to the
receipt of a desk top scoping study conducted by an independent engineering
company, SNC Lavalin. The scope of the study included the confirmation of
remaining Phase 1 capital costs for Marampa and estimated operating costs; the
anticipated product profile and production ramp up; the viability of the
logistics route and the expected critical path for completion. This was
completed in August 2011 and as a result the full facility was drawn down, net
of transaction costs, on 10 August 2011
Under the terms of the Standard Chartered facility, London Mining has hedged
513,000 tonnes of 2012 production. The majority of this hedging, which based on
the 62% Fe CIF China instrument, has been concluded at pricing net to London
Mining of USD 148. London Mining expects to realise a grade premium to the
benchmark price as a result of the production of a 65% Fe product at Marampa.
The Oslo delisting is confirmed for 30 September 2011. The delisting is expected
to result in improved liquidity in London and is not expected to result in
significant flowback as only 5,621,903 shares of 113,883,794 total issued shares
are currently registered in Oslo with the majority of shareholders able to hold
AIM listed shares.
We note also that currently the Company provides full interim financial
statements at each quarter. As part of the Oslo delisting, London Mining intends
to move to half yearly interim financial reporting, in line with Main Board
listed companies and will provide operations updates with selected financial
metrics each quarter.
The Group is fully funded to first production and expects to have around USD 50
million residual cash balance at year end.
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 half 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 +44 207 408 7500
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 scaleable
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 an early stage coking coal project in Colombia. All London Mining's
assets have deliverable production with potential for expansion. The Company is
currently listed on the AIM in London and Oslo Axess and trades under the
symbols LOND.L and LOND.NO (Reuters) and LOND LN and LOND NO (Bloomberg). The
Company's shares will be delisted from Oslo Axess on 3 October 2011.
Results for six months ending 30 June 2011 report:
http://hugin.info/137683/R/1541076/471325.pdf
Results for six months ending 30 June 2011 presentation:
http://hugin.info/137683/R/1541076/471326.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#1541076]
Unternehmensinformation / Kurzprofil:
Datum: 25.08.2011 - 08:01 Uhr
Sprache: Deutsch
News-ID 59113
Anzahl Zeichen: 25083
contact information:
Town:
London
Kategorie:
Business News
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