London Mining's fast-growing Marampa catches the eye

There have been many changes at London Mining – the international builder of mines to serve the steel industry - since we last looked in depth at the company's project portfolio. There's a clean and fresh new corporate look. The Colombian coke and coking coal project has moved forward apace, under 100% ownership. The new Atacama joint venture in Chile is actively pursuing new iron ore opportunities. The company's global resource of iron ore has climbed to 2.2 billion tonnes.  New customers are on board, with Glencore International signing up for all early output of sinter feed from Sierra Leone. New shareholders are also on board, with Black Rock stakebuilding beyond 11% since the turn of the year. New funding has been raised - $110 million convertible bonds due in 2016, carrying 8% interest. And there's a new ownership structure for Wadi Sawawin, where London Mining now hold a non-dilutable 25% direct interest with partner National Mining Company, with no further material funding contributions required.

But the biggest change has been the stellar growth of potential at Marampa, once a major iron ore producer in Sierra Leone, which is being brought back into production by London Mining. From an historic tailings resource plus a primary iron ore target of 85 million tonnes at 37% Fe just over a year ago, Marampa – like Topsy – has just “growed”. 

Current resources – published in January this year - now stand at 37 million tonnes of tailings running at 22% Fe, and 906 million tonnes of primary ore grading 32% Fe. Which makes Marampa a rather different animal to the mine that was originally planned, necessitating an operational re-think and considerable reworking of mine/plant design and layout. Nonetheless, one of London Mining's core strengths when it comes to mine planning is the ability to think on their feet and swiftly adapt, and first production has been delayed by only three months.

Marampa is being developed in two Phases: the first will still target the surface resources held in tailings from previous operations and will also mine and process highly weathered fresh ore from the primary orebody. The addition of this weathered ore lifts the grade of the plant feed significantly, from the average tailings grade of 22% Fe to 26.5% Fe when blended. Processing is via a simple and cost-effective two-stage WHIMS (Wet High Intensity Magnetic Separation) circuit, with the addition of a rod mill to pre-grind the weathered ore. At the planned metallurgical recovery rate of 88%, output will be a 65% Fe fine sinter feed. 

The total resources attributable to Phase 1 at Marampa are currently 59Mt with a averaged head grade of 26.5% Fe, comprising  a blend of approximately 70% low grade tailings material and 30% higher grade primary ore which is sufficiently weathered to be processed in the Phase 1 plant. The project is designed to start at an output of 1.8 Mt pa, ramping up to 3.6 Mt as Phase 1b comes onstream next year with the addition of the second process plant. Capex for the Phase 1a operation is $136 million, which covers many of the facilities required to accommodate the doubling of production when Phase 1b kicks in during late 2012. Funding for Phase 1b will come from cashflow, and it is currently estimated that a further $63 million will be required. When the construction of Phase 1 is complete, the capital intensity at Marampa will be just $55 per tonne of annual production, and op costs should be below $30 per tonne.

There is further scope at Marampa for extending Phase 1 production beyond the current estimated minelife of 7-8 years: the weathering profile of the primary orebody is some 50m deep, and highly/moderately weathered ore from two areas – Campbelltown Ridge and Masaboin NE – has never been exploited. Currently, just 22 million tonnes of highly weathered ore are recognised in the Phase 1 resource, from a total of 133 Mt of highly/moderately weathered rock. Metallurgical testwork has shown that around 75% of the moderately weathered ore can also be processed through the Phase 1 plant – which offers options for making the best use of overall production capacity during Phase 2.

Phase 1a is now on target to start production in Q3 of this year rather than in the first half, with first exports in Q4, although stockpiling of run-of-mine ore ready for production will commence in Q2 using the company's own fleet.  All the output from Phase 1a – 9.5 million wet metric tonnes (WMT) - is under offtake to Glencore International on the industry-standard Platt's CFR China rate for 62% concentrate, with an uplift for the higher iron content of the 65% sinter feed that Marampa will produce. London Mining can extend this agreement – which also includes a $27 million prepayment facility - on similar terms to cover the output from Phase 1b.

Construction is underway, with structural steelwork and concrete in place, the WHIMS plants already on site, and the power plant nearing Phase 1 output capacity. Earthworks will be complete by the start of the rainy season. Offsite activity is continuing apace, with haul road construction, river dredging, river port/stockyard construction, barge loading and transhipment facilities and port surveying well advanced in readiness for the start-up of Phase 1a. All operational permitting – including the haul road extension needed in readiness for Phase 1b - is in place, following the award of the final piece of the jigsaw, the environmental permit, in January. 

Concurrent with production from Phase 1, London Mining are rapidly progressing the development of Phase 2, which will mine the primary orebody at Marampa, now estimated to contain in excess of 900Mt of iron ore at a grade of 32% Fe. A pre-feasibility study for Phase 2 has been completed and outines a two stage development of the primary ore production of firstly a low-capex expansion of an additional 8mtpa processing the rest of the weathered ore into 65% Fe sinter feed beginning in 2014, followed by second phase to produce 8mtpa of 65% premium blast furnace pellet feed in 2016the. Logistics for the expanded sinter feed phase are a simple upgrade to Phase 1 infrastructure to handle the additional output.   Pellet feed logistics will see a 50km pipeline replacing the road haulage and a second river port which will be constructed closer to Freetown at Makori. 

Also in place is the all-important funding of Phase 1a and the initial stages of Phase 1b before self-funding can kick in. The company concluded negotiations for a $60 million two year revolving credit facility arranged by Standard  Chartered Bank last October, and in January issued convertible bonds with an 8% coupon to the value of $110 million. The bonds mature in 2016, with conversion prices set at a premium of 38% to the volume weighted average price of the shares during the period of the bond offer. 

This funding – together with the company's cash reserves – will also bring the coke project in Colombia into production and cash-flow generation this year. Now wholly owned by the company, and renamed London Mining Colombia, the project is located in an area of abundant coking coal production in the Boyaca region of Colombia. Coke ovens with a target output of 200ktpa are under construction at the moment, at a capital cost of $30 million, and completion of construction and first coke production is now expected in Q3 2011, with full capacity expected to be reached in Q1 2012. Once in production – utilising locally produced raw coking coal under offtake of 300ktpa – the company plans to construct additional capacity bring annual output up to 400kt of coke. Local coal  concessions are also being sought so that London Mining can mine its own raw materials

In development, with production targeted for 2015 and 2014 respectively, London Mining has two major iron ore resources at the wholly owned Isua project  in Greenland, and at Wadi Sawawin, where they hold a 25% interest via partner National Mining Company, in Saudi Arabia. Isua, which is currently undergoing a full feasibility study, holds resources of almost a billion tonnes of iron ore at 36% Fe, and will produce, on current estimates, 15mtpa of premium quality 70% Fe pellet feed destined for blast furnaces.  At Wadi Sawawin, the project resources amount to almost 400 million tonnes at 39% Fe, and the BFS forecasts output of 5Mtpa initially, potentially growing to 10Mtpa, over at least 20 years of minelife.  

Also in the portfolio is the new 50/50 Atacama exploration JV, where iron ore opportunities 

in the Atacama region of Chile are being sought with a local partner, and continuing negotiations to restart mining by China Global Mining Resources,  the company's iron ore production JV with Wits Basin.

It's a busy company with a crammed development schedule. But London Mining are no stranger to hard and fast work, and the dedicated professional management teams allocated to each project make sure that priorities are maintained and work programmes are executed – barring force majeure! - on time and to budget. And the final move to maximise management efficiency is now planned for July, when the company will delist – subject to shareholder approval - from the Oslo Axess market, where it began life back in 2007, and will become 100% London listed on the AIM market. 

London Mining - London based – London listed – but with a global business and a global view, serving a global industry.