London Mining’s Marampa Expansion Meets Cold Reception

PUBLISHED: 08 Nov 2012 @ 14:21 | Comments (0) | More info about Kenneth G. Mondero

Big words and ambitious plans by London Mining plc (LSE:LOND) met cold reception from investors on the London Stock Exchange today as share price dropped after the iron ore producer unveiled its expansion plans for its flagship Marampa mine in Sierra Leone.

After reaffirming that the said mine is on track to deliver 1.5 million tonnes of iron ore by the end of the year, the company set the third quarter of 2013 for Marampa to deliver five million tonnes per annum capacity.

But beyond the target expansion, London Mining said it is economically feasible for the mine to achieve nine million tonnes per annum production for 26 more years.

“We are developing our expansion plans for Marampa to determine the optimal approach to develop the 1.1 billion tonne resource in order to ensure a sustainable operation and the best return for London Mining shareholders,” the AIM-listed firm’s Chief Executive, Graeme Hossie, said in a statement.

Further Expansion

Such a plan, however, does not come without a price. London Mining estimates it will have to spend about US$860 million in the first five years and another US$550 million thereafter to extend the total mine life to 30 years.

A third party assessment of the 14-square kilometre acreage 125 kilometres north of the capital puts the net present value of the high grade iron ore at US$1.3 billion at 10% discount, with an internal rate of return of 35% and payback achievable within two years.

But while that has not come to reality yet, London Mining further considers an expansion to 16 Mtpa.

“We continue to progress plans to achieve a large volume, low cost operation,” Mr. Hossie said.

Meanwhile, production slowed down in the period between July and September 2012 compared to the second quarter of the current year, as well as lower sales, due to a deferment of one shipment.

Shares dropped as much as 11% earlier and were at 131.25 pence a share by 1:30 PM GMT, down 8.5% from yesterday’s close of 143.50 pence.

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