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 concentrate) 9 5 10 1
5
10
1
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
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
(%) (%) (%) (%) (%) (%)
Hospital Ridge Highly weathered 1.4 44.8 4.01 29.00 0.11 0.03 0.01
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
Campbell Town Ridge Highly weathered 3.6 42.3 4.52 31.69 0.01 0.03 0.01
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
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
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
