TIDMLOND
RNS Number : 5761M
London Mining Plc
17 July 2014
London Mining Plc
Quoted on London AIM (LOND LN)
("London Mining" or the "Company")
17 July 2014
Q2 2014 PRODUCTION REPORT
Production increased 30% from Q1 2014
Full year guidance of 4.9 to 5.4Mwmt maintained
Strategic discussions progressing
Highlights
Marampa, Sierra Leone (100% owned)
Operations
-- Q2 production of 1.2Mwmt, a 30% increase on Q1 2014
-- 2014 production guidance of 4.9 to 5.4Mwmt/a maintained
-- Rolling 30 day average rate of 15.3kwmt/day achieved (5.6Mwmt/a)
-- Exceeds nominal capacity of 14.8kwmt/day (5.4Mwmt/a annualised)
-- Product grade of over 64% Fe now consistently achieved
-- Optimisation and debottlenecking should allow plant to
operate at 110 to 120% of nominal capacity (5.9Mwmt/a to
6.5Mwmt/a)
-- Sold grade of 63.4% in Q2 2014, a 0.3% increase on Q1 2014,
depleting lower grade stocks accumulated during commissioning
-- Stockpile of 64% Fe concentrate equivalent to c.1 month's production in place
-- Sales volumes 6% lower Q on Q due to repairs made to
transhipment vessel and a "one-off" loading issue
-- Despite lower benchmark pricing, realised pricing improved by
7% to USD86/dmt as a result of improved grade, lower freight and
hedging
Financing and strategic partner process
-- USD17.5 million prepayment facility in place with Vitol for
500kt of unallocated production
-- In active and constructive discussions for an additional
short term working capital tranche of up to USD25 million with
existing secured lenders
-- Progress being made in securing a strategic partner
investment with the process expected to be complete before end of
2014
Commenting on the results Graeme Hossie, CEO, said: "We
completed the ramp up of the processing plant upgrades in Q2,
achieving an annualised run rate of 5.4Mwmt/a and product grades
over 64% Fe in June. We are now focussed on increasing production
rates by 10 to 20% above current nominal capacity through
debottlenecking and plant optimisation. We reiterate production
guidance of 4.9 to 5.4Mwmt for 2014 and intend to deliver a
positive outcome for shareholders from our strategic partner
process before the end of 2014."
Operations
Q2 2014 summary
Q2 2014 % change Q1 2014 Q2 2013
----------------------------------------------- -------- --------- -------- --------
Concentrate produced (wmt) 1,166 +30 900 963
Sales (wmt) 830 -5 877 1,014
Average concentrate grade sold (Fe%) 63.4 +0.3 63.1 64.2
Average concentrate moisture content sold (%) 9.0 +0.1 8.9 7.5
Average FOB price* including hedges (USD/dmt) 86 +7 80 97
Average freight (USD/wmt) 30 -12 34 33
----------------------------------------------- -------- --------- -------- --------
*Free on board ("FOB") prices are net of freight and grade
premium as at loading, but exclude marketing related fees.
Mining and production
Mined volumes for the first half of the year were 14Mwmt, a 55%
increase year on year, and four months ROM stocks were in place
ahead of the wet season. Improved performance, following the onset
of the first rains, is also in evidence following construction of
all-weather haul roads and improvements to drainage in mining
areas. As a result, the pre wet season ROM stocks have been
maintained.
Concentrate production was 1,166kwmt in Q1 2014, an increase of
30% on the previous quarter, which included a record month of
production in June as ramp up of the plant upgrades was completed.
A rolling 30 day average of 15.3kwmt/day has been attained, with 22
of the last 30 days in excess of nominal capacity (14.8kwmt/a or
5.4Mwmt/a annualised) and a peak daily production rate of 18kt was
also achieved. Average produced grade for June increased to over
64% Fe. Recent performance has benefited from many plant
maintenance initiatives undertaken this year.
A low cost optimisation programme to redirect excess milled high
grade material from the spirals circuit to the magnetic separation
plants will be in place in July and is expected to allow the plants
to consistently operate at 110 to 120% of nominal capacity
(equivalent to 5.9 to 6.5Mwmt/a annualised).
Production guidance of 4.9 to 5.4Mwmt/a for the year is
reiterated.
Stocks of 64% Fe material equivalent to approximately one
month's production were in place at the end of June. Several
measures have been introduced in 2014 to allow more accurate
reconciliation of concentrate stockpiles including: installation of
a weighbridge, additional conveyor belt weightometers, more
conservative density assumptions than used in 2013 and improved
controls in volume and density survey processes.
Logistics and sales
Sales volumes were 830kt, 5% less than Q1 2014, as a result of
lower exports in June as geared vessels with lower loading rates
(on freight rates of less than USD30/wmt) were employed to allow
maintenance and repairs to be carried out on the Pride of Marampa
Floating Offshore Transhipment Platform (FOTP) to improve
performance.
Although concentrate presented for export has remained below the
approved transportable moisture limit (TML) of 10.9% concentrate
sales were also impacted by a dispute related to the interpretation
of TML of by a single vessel in June. This impacted loading rates
but has not been repeated with concurrent or subsequent shipments.
The vessel has since recommenced loading and we are working with
the customer, shipping company and the Professional and Indemnity
Club to prevent a reoccurrence of this issue.
Other improvements to logistics ahead of the wet season include
improvements to barge loading facilities increasing the
instantaneous loading rate by 25% to an annualised installed
capacity of 8.8Mwmt/a and the addition of two new pusher barges
which arrived in Q2. Significant cost benefits from the more
efficient barging format, which uses less fuel than the two tug per
barge solution employed in the first two years of operation and
have half the cycle time, will be realised from Q3 2014. Critical
path items are underway to allow loading of larger cape size
vessels in the inner harbour in Q1 2015.
Realised pricing was improved from Q1 due to reduced penalty
fees and demurrage with a significant gain realised due to hedging.
As expected, freight rates for smaller Supramax and Panamax vessel
classes were significantly lower in Q2, resulting in an average
USD4/wmt saving compared with Q1 2014.
0.7Mdmt of Q2 sales were hedged at USD119/dmt CFR versus an
average spot price of USD104/dmt. 0.8Mdmt of 2014 sales are now
hedged at an average price of USD105/dmt CFR. Reported pricing on a
quarterly basis may be impacted by the actual realised price for
the portion of sales which are priced based on the CFR iron price
two months post loading, which for H1 2014 will have a material
impact due to the deterioration in iron ore pricing over the
period. First deliveries into the Cargill offtake contract, which
have the potential to realise a USD4-5/dmt improvement for 64 to
65% Fe concentrate on other Marampa offtake agreements, will
commence in Q3 2014.
Health and safety
Following the outbreak of Ebola virus in the east of Sierra
Leone, preventative measures have been put in place at our
operation such as isolation facilities, screening, education
programmes for our employees and communities and relocation
protocols. The health and safety of our employees is our priority
and we are working closely with government and health agencies to
keep our people healthy. It is not expected that the outbreak will
affect production.
Q2 2014 Q1 2014 Q4 2013 Q2 2013
--------------------------------- -------- -------- ------- --------
Fatalities 0 0 0 0
-------- -------- ------- --------
LTI 1 1 0 0
-------- -------- ------- --------
All Injuries 24 18 30 12
-------- -------- ------- --------
LTIFR (12mth rolling average) 0.45 0.33 0.21 0.46
---------------------------------
AIFR (12 month rolling average) 9.5 8.2 8.4 8.7
--------------------------------- -------- -------- ------- --------
Financing and strategic partner process
As disclosed in May, following the fall in iron ore price, and
with the pricing environment remaining uncertain, the Company has
been managing its cash flow tightly whilst working to increase its
financial headroom. A new USD17.5million facility has been arranged
and drawn down from Vitol as a partial prepayment on 500kt of
future unallocated exports. The Company is also in active and
constructive discussions with its lending banks for an additional
short term working capital tranche of up to USD25 million, maturing
towards the end of 2014. The combination of these two measures
would satisfy expected short term liquidity and headroom
requirements under current conditions.
London Mining is continuing to review opportunities to secure a
strategic investor to reduce debt, fund future capital expenditure
and accelerate potential growth plans. The process is underway and
is expected to be complete before the end of 2014.
Audio webcast and conference call
There will be an audio webcast and conference call for analysts
and investors hosted by Graeme Hossie (CEO), Benjamin Lee (CFO) and
Jim North (COO) at 8.30am BST today.
The presentation will be available via a live and on-demand
audio webcast, a link to the audio webcast can be found on London
Mining's website here:
http://www.londonmining.com/investors/reports-and-presentations/.
The webcast will include audio from the conference call. You
will not be able to post questions through the audio webcast.
Please use the following numbers and Conference ID to dial in to
the conference call:
International dial-in +44(0)20 3427 1916
UK Toll Free 0800 279 4992
USA Toll Free 1877 280 2342
Confirmation code 3526060
For more information, please visit www.londonmining.com or
contact:
London Mining Plc
Graeme Hossie, Chief Executive Officer
Benjamin Lee, Chief Financial Officer
Thomas Credland, Head of Investor Relations +44 (0)20 7408 7500
Liberum Capital (Nominated Adviser/Broker)
Richard Crawley / Tom Fyson +44 (0)20 3100 2000
J.P. Morgan Cazenove (Broker)
Ben Davies / Ignacio Borrell +44 (0)20 7742 4000
Brunswick Group LLP
Carole Cable / David Litterick +44 (0)20 7404 5959
About London Mining
London Mining is an expanding producer of high specification
iron ore concentrate for the global steel industry and is focused
on identifying, developing and operating sustainable mines. London
Mining commenced production from its 100% owned Marampa Mine in
Sierra Leone in 2011, producing 3.4Mwmt/a in 2013 and plans to
expand the mine to a capacity of 6.5Mwmt/a. Marampa has sufficient
resources to support a staged expansion to 20Mwmt/a. London Mining
has also completed bankable feasibility studies outlining plans for
a further 20Mwmt/a of iron ore production by developing mines in
Greenland and Saudi Arabia. The Company listed on AIM in London on
6 November 2009. It trades under the symbols LOND.L (Reuters) and
LOND LN (Bloomberg). More information about London Mining can be
found at www.londonmining.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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