London Mining (LON:LOND) today announced plans to boost production from its Marampa iron project in Sierra Leone, which should help it reduce operating costs and capital intensity.
The company looks to increase production from Marampa Phase 1 to 1.8 million tonnes per annum (Mtpa) and then to 3.6 Mtpa in 2012.
The mine and processing plan have been modified to accommodate high grade ore and expansion.
Improved headgrade and recoveries may enable reduction in operating cost to less than US$29/tonne from US$32/tonne with further reductions expected from expansion to 3.6 Mtpa, said London Mining.
Additionally, evidence of increased weathered primary ore has indicated potential for Phase 1 to be extended beyond the current mine plan.
Capital expenditure (capex) increased by US$22 million to US$136 million in the third quarter to end-September 2010, including rod mill and extended dedicated haul road to enable additional production capacity. Resulting capital intensity falls from US$76/tonne to US$75/tonne.
Pilot plant testwork by Outotec during the period has produced 1,361 kilograms (kg) of 65.5% iron concentrate suitable for use as sinter feed.
At Phase 2, London Mining plans to announce the pre-feasibility study (PFS) results in Q1 2011.
As announced in the interim report, the total mineral resource at Marampa stands at 533 million tonnes (Mt) of primary ore and 37 Mt of tailings.
A recent drilling campaign has identified an exploration target of 250-350 Mt with a grade of 28 - 32% iron, which is expected to be upgraded to JORC Inferred category by end of year.
Drilling has also allowed 93 Mt of the Ghafal resource to be upgraded to the Indicated category.
The increased resource supports a PFS for an up to 16 Mtpa operation compared to a previous estimate of 9 Mtpa.
As a result, the drilling programme has been expanded to 50,000 metres with a further 10,000 - 15,000 metres to be completed in 2011 with an intention to increase the confidence of existing resource estimates.
London Mining expects to consider a resource of up to 850 Mt in the Phase 2 PFS.
“We are pleased to announce plans to increase production from Marampa Phase 1. This has a significant positive effect on the project both in terms of reduced operating cost and lower capital intensity.
“We are also encouraged by results from our recent drilling campaign.
“We continue to progress mine, plant and logistics work for first production from Marampa in Q2 2011,” said chief executive of London Mining Graeme Hossie.
Cash position at 30 September 2010 stood at US$114 million.
London Mining is planning to raise additional debt finance primarily to fund expanded Marampa Phase 1. Total group borrowings will not exceed US$150 million.