Anglesey Mining PLC LIM Operations Update and Outlook


 
TIDMAYM 
 
Anglesey Mining plc LSE:AYM 
 
4 September 2012 
 
Labrador Iron Mines Operations Update and Outlook 
 
  * 1.2 million tonnes of iron ore sold in year to date 
 
  * Capital programs deferred in weak iron ore market 
 
Anglesey Mining's 26% owned associate Labrador Iron Mines Holdings Limited 
(TSX: LIM) today provides an update on its Schefferville Area iron ore mining 
operations and guidance on capital spending programs for the balance of 2012. 
 
August Operational Highlights 
 
  * Three shipments of iron ore sold in August totalling 520,000 wet tonnes. 
 
  * Year to date, LIM has sold seven shipments totalling 1.2 million wet tonnes 
    of iron ore. 
 
  * In August, 275,000 wet tonnes were railed to the Port of Sept-Îles bringing 
    the year to date total rail volume to 1.1 million wet tonnes. 
 
  * Construction of the Phase 3 expansion of the Silver Yards process plant 
    substantially completed, with all civil, structural and mechanical works 
    essentially in place. 
 
  * LIM remains on track to meet its sales target of 2 million tonnes of iron 
    ore in 2012. 
 
Iron Ore Sales and Market Conditions 
 
In August, LIM sold three cape-size shipments totalling 520,000 wet tonnes of 
iron ore in challenging market conditions. 
 
Iron ore spot prices suffered a sharp decline in August, dropping more than 20% 
in the past four weeks to US$90 per tonne on a 62% Fe CFR China basis. Port 
inventories in China remain very high, with Chinese steel mills liquidating 
inventories and traders withdrawing from the spot market. It has been reported 
that some cargos offered for sale have been withdrawn and sales by some 
companies have had prices re-negotiated. Non-standard or off-spec products, 
including LIM's direct rail ore ("DRO"), have been difficult to sell, resulting 
in delays and/or lower than expected prices. 
 
Currently, LIM's iron ore is re-sold by the Iron Ore Company of Canada ("IOC") 
through the Rio Tinto marketing organization on the Chinese spot market. LIM's 
association and arrangements with IOC and Rio Tinto enabled the placement and 
sale of LIM iron ore, which otherwise might have been difficult. The sale of 
LIM iron ore in August was made under provisional pricing arrangements and 
subject to final settlement, which occurs approximately one month after the 
ship has departed the Port. The aggregate realized price of the three shipments 
sold under these arrangements, consistent with forward swap pricing for 
September, is expected to average about $30 - 40 per tonne less than LIM's Q1 
realized price of $122 per tonne on a CFR China basis. 
 
Market commentators are speculating that the current iron ore spot price is at 
or near a bottom, as the current spot price is below the assumed marginal cost 
of domestic Chinese production and is currently creating an unsustainable 
spread between domestic and imported iron ore prices. LIM continues to believe, 
in line with market consensus, that a recovery in iron ore prices is likely as 
Chinese steel mills restock and anticipates prices recovering to higher levels 
later in the year. 
 
Going forward, LIM plans to produce only standard sinter fines and lump and 
will continue to work closely with IOC and Rio Tinto to monitor market 
conditions to seek to achieve the most favourable sales outcomes under 
difficult market conditions. 
 
 
 
2012 Capital Spending 
 
In response to challenging market conditions and the sharp decline in spot iron 
ore prices, LIM has undertaken a critical review of its capital spending for 
the balance of 2012 and has implemented the following measures: 
 
  * All capital expenditure programs relating to the Silver Yards processing 
    plant and development of the Houston deposits have been deferred; 
 
  * The 2012 exploration program has been reduced to $5 million from the 
    original budget of $8.6 million; 
 
  * About $52 million of planned capital investment has been deferred into 2013 
    in order to prudently manage LIM's cash resources and requirements. 
 
LIM's original 2012 budget for its capital investment programs totalled 
approximately $112 million, of which $54 million has been spent or committed to 
date and $6 million has been permanently cancelled. 
 
Capital expenditure programs relating to the Silver Yards processing plant have 
been suspended. Construction of the Phase 3 expansion of the process plant is 
substantially complete, with the main remaining items being the installation of 
electrical equipment and instrumentation work. Commissioning of the Phase 3 
plant is now planned for April and May 2013 as part of the seasonal start-up. 
 
Connection to the hydro grid power has also been deferred and is now planned 
for completion in time for the plant start-up in spring 2013. 
 
LIM has completed the expansion of the Bean Lake accommodation camp, which has 
been doubled in size and is now operating with 140 rooms, with no further 
capital investment required on the camp. 
 
John Kearney, Chairman and CEO, commented: "During this period of weakness and 
uncertainty in the iron ore market, it is essential that we remain disciplined 
in our cash management and capital spending programs and reduce operating 
costs. Consequently, consistent with announcements made by major iron ore 
companies, we have suspended some capital investment programs and deferred 
others in order to focus our resources on maximizing production in the 
short-term. This decision reflects a disciplined and pragmatic approach as we 
weather the current challenging market conditions." 
 
James Mine and Silver Yards 
 
The James mine operated at a rate of 28,000 tonnes per day (ore and waste) 
during August. The ore in the James deposits continues to be soft and higher 
grade and lends itself to simple processing that does not require washing. 
Consequently, for the balance of 2012, LIM plans to utilize its new lower cost 
dry classifying system to produce lump and sinter and will not use the higher 
cost wet processing plant, which is now being winterised. The dry process 
stream has a design capacity of 1,000 tonnes per hour (20,000 tonnes per day) 
with a mass yield approaching 100%. 
 
The James ore continues to be generally free digging, not requiring the use of 
explosives, and the higher grade experienced in the upper benches of the mine 
continues to be encountered as the mine gets deeper and accesses the lower 
levels. As previously reported, the bulk density of the James ore is lower than 
originally anticipated resulting in most of the deposit being of a higher grade 
but lower tonnage than predicted by the geological model. This also results in 
a lower strip ratio and less waste being moved in the James mine pit, and lower 
operating costs, in turn reducing the environmental footprint. 
 
"Despite the many operational achievements to date, our current second quarter 
is being impacted by the rapid drop in spot iron ore prices" commented Rod 
Cooper, LIM's President and COO. "We have been quick to respond and adjustments 
have been made with revised strategies in the pit, process plant and rail 
transport to optimize production at the lowest possible cost." 
 
LIM remains on track to meet its 2012 sales target of 2 million tonnes of iron 
ore at a cash operating cost of $60 - $65 per tonne unloaded at the Port and, 
subject to market conditions, plans for the sale of five or six more cape-size 
shipments over the next four months before the seasonal shut down in November. 
All remaining sales during 2012 are planned to be sinter fine and lump 
products. 
 
Houston Development 
 
All major capital expenditure programs relating to the development of the 
Houston deposits have been deferred. LIM will continue to process applications 
for permits and regulatory approvals required for the construction of mine 
infrastructure and related facilities to enable the development and 
construction at the Houston deposits. Ongoing drill programs and hydrological 
and metallurgical testing will be continued in 2012 in order to generate 
technical information required for detailed mine planning. 
 
Commencement of full construction activities at Houston is now planned for 
2013, subject to continuous assessment of market conditions and receipt of the 
remaining permits, with initial production of Houston ore targeted for the 
first half of 2014. 
 
The delay in the development of Houston is currently expected to result in 
LIM's production target for 2013 being revised to a level similar to 2012, at 
about 2 million tonnes of iron ore, rather than the expanded 3 million tonnes 
previously anticipated. 
 
However, when in production, Houston is expected to more than double LIM's 
current iron ore production and will represent LIM's main expansion project in 
future years. 
 
Exploration 
 
The 2012 exploration budget has been reduced to $5 million from the $8.6 
million originally budgeted. As of the end of August, approximately 4,000 
metres ("m") of reverse circulation ("RC") and diamond drilling has been 
completed. Although exploration spending has been reduced, the overall 2012 
exploration program is still expected to achieve more than 10,000 m of drilling 
as a result of cost efficiencies and improved productivity. 
 
For the remainder of 2012 the exploration program will focus on the following 
drilling priorities: James South Extension (core); Stockpiles (RC); Taconite 
(core): James Main and South - Metallurgical (core): Houston (geotechnical, 
core and RC). 
 
About Labrador Iron Mines Holdings Limited 
 
Labrador Iron Mines is Canada's newest iron ore producer. It owns a portfolio 
of direct shipping iron ore operations and projects located in the prolific 
Labrador Trough. The first full production season commenced in April 2012 with 
a sales target of 2 million tonnes of iron ore for the 2012 year. 
 
LIM is focused on a strategic and robust growth plan arising from its portfolio 
of 20 iron ore deposits in Labrador and Quebec, all within 50 kilometres of the 
town of Schefferville. The James Mine is connected by a direct rail link to the 
Port of Sept-Iles, Québec. The area also benefits from established 
infrastructure including the town, airport hydro power and railway service. 
Starting with the James Mine and leading to the development of the expanding 
Houston flagship project, the objective is to provide shareholders with 
long-term value as production and sales ramp up towards 5 million tonnes per 
year. 
 
LIM is currently the only independently-owned Canadian iron ore producer listed 
on the Toronto Stock Exchange and trades under the symbol LIM. 
 
About Anglesey Mining plc 
 
Anglesey holds 26% of Toronto-listed Labrador Iron Mines Holdings Limited which 
is now producing iron ore from its James deposit, one of LIM's twenty direct 
shipping iron ore deposits in western Labrador and north-eastern Quebec. 
 
Anglesey is also carrying out development and exploration work at its 100% 
owned Parys Mountain zinc-copper-lead deposit in North Wales, UK where there is 
estimated to be a total historical resource in excess of 7 million tonnes at 
over 9% combined copper, lead and zinc. 
 
For further information, please contact: 
 
Bill Hooley, Chief Executive +44 (0)1492 541981; 
 
Ian Cuthbertson, Finance Director +44 (0)1248 361333; 
 
Samantha Harrison / Klara Kaczmarek: RFC Ambrian +44 (0)2076 344700; 
 
Emily Fenton / Jos Simson: Tavistock Communications +44 (0)20 7920 3155 
 
 
 
END
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