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JOHANNESBURG (miningweekly.com) – Sierra Leone-focused iron-ore explorer London Mining on Monday embarked on a search for a potential strategic partner as it deferred its Marampa operation’s life-of-mine (LoM) extension capital programme by two years.
The Aim-listed group said a process was currently being initiated to secure a strategic minority partner for Marampa by the end of 2014 in an effort to reduce debt and fund its accelerated growth plan on the back of ongoing pricing volatility.
“[A partnership could result in the] potential for the LoM extension [project] to achieve eight-million wet metric tonnes (wmt) a year for incremental capital cost of around $110-million,” commented London Mining CEO Graeme Hossie.
He noted that the expansion to eight-million wet metric tonnes could be accelerated to late 2016, resulting in significant capital and operating cost savings and delivering higher net asset value.
Further, to increase financial flexibility, London Mining had deferred $175-million of its 40-year LoM extension capital programme from 2016 to 2019 by prioritising the mining and processing of weathered ore through the modified plant.
A LoM study completed in September last year showed that, based on probable reserves of over 500-million tonnes, a $240-million processing plant upgrade would extend the flagship operation’s life to over 40 years.
“This [the mining of tailings and weathered ore] allows [the] deferral of $175-million of the $240-million LoM extension capital programme, while maintaining 6.5-million-wet-metric-tonnes-a-year production capacity for five years from the second half of 2015 and continuing the downward operating cost trajectory from current levels [of between $42/t and $45/t over the LoM] to the $39/t to 42/t level envisaged for the 40-year LoM extension,” explained Hossie.
This formed part of London Mining’s ongoing expenditure review in the current weak iron-ore pricing environment.
However, for Marampa to maintain the nominal 6.5-million-tonnes-a-year production rate post tailings depletion, the plant would be reconfigured at a cost of $35-million during 2016 to incorporate a new crushing and screening circuit, explained Hossie.
Further, regrind mills would also be installed in 2016, at a cost of $30-million, and would be incorporated into the LoM flow sheet for unweathered ore after depletion of the weathered ore.
The installation of a primary crusher, semi-autogenous grinding mill and additional regrind mills were expected by 2019.
“We expect that the increased free cash flow generated from this capital deferral [will] allow us to reduce debt and interest costs,” Hossie said.
Meanwhile, the group reiterated its production guidance for 2014 of between 4.9-million wet metric tonnes to 5.4-million wet metric tonnes, after the first quarter of the year performed in line with expectations, with the mine delivering 17% more output quarter-on-quarter at 900 000 wmt.
The second quarter of production was expected to show increased volume following consistent availability and operation of the spirals and milling circuits, with significantly increased volume expected to be achieved from the third quarter when programmes to improve plant availability were fully embedded.