London Mining Warns Its Shares Will Have Little or No Value

By Alex MacDonald

LONDON--Sierra Leone iron ore producer London Mining PLC (LOND.LN) warned Wednesday that it is struggling to alleviate its financial strain following a drop in the iron ore price to a five-year low and the ebola outbreak.

The U.K.-listed miner, which operates the Marampa mine in Sierra Leone, said detailed discussions are ongoing with potential strategic investors and the company's group of lenders, but "under the structures currently proposed, the Board believes that there will be little or no value remaining in the equity of the Company and the other listed securities of the Group."

London Mining said its lenders remain supportive of the restructuring process, but will no longer provide any further short-term funding to fill the gap until a deal is secured with a strategic investor. The company added that "there can be no certainty at this time on the likelihood or timing of such an investment."

Iron ore miners in West Africa have been struggling to keep afloat after the iron ore price fell this month to its lowest level since 2009. The outbreak of Ebola in the country has also posed additional challenges, disrupting several of the supply routes to the mines. Fellow peer African Minerals Ltd. (AMI.LN), which operates the Sierra Leone Tonkolili mine, has also hired banks to restructure amid similar challenges.

London Mining said the Ebola outbreak has introduced significant challenges both in terms of securing a strategic investor, a process which began in May, and to the ongoing operational performance of the business. It said the financial strain on London Mining's operations became more severe when commodities trader Glencore PLC (GLEN.LN) refused to make a cash payment last month related to a long-term iron ore purchase agreement.

The company said it is searching for a strategic investor to inject cash into the business so it can expand the production capacity of its Marampa mine in order to become a lower-cost producer in the current weak iron ore price environment.

London Mining shares have fallen 97% since the beginning of the year to 3.1 pence a share, resulting in a market capitalization of GBP4.29 million, or $6.9 million.

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