London - London Mining said it started production of iron ore from its Marampa operation in Sierra Leone and that the first shipment was on track to be completed by the end of this year.
“This is very significant for Sierra Leone as well as for London Mining,” Chief Executive Graeme Hossie told reporters on Friday. “Sierra Leone is now back producing high specification iron ore...they are expecting a big increase in their GDP next year.”
Marampa, which supplied iron ore to Europe, was closed in the mid 1970s.
London Mining's first shipment will follow rival African Minerals which shipped the first iron ore from its Tonkolili mine in Sierra Leone last month.
“Sierra Leone has a huge mineral potential...the country needs foreign investment to help develop those,” Hossie said, noting the support given by the government.
London Mining employs 2,400 workers at Marampa, including contractors, of which about 92 percent are from Sierra Leone.
Production will increase during the first half of 2012 to over 160,000 tonnes a month, with 1.8 million tonnes of production still targeted for 2012.
“The production of high specification iron ore product from our plant at Marampa after decades of mine inactivity marks the beginning of our Phase 1 ramp up and forms the basis for our phased expansions to 16 Mtpa (million tonnes per annum),” said Hossie.
The company expects Phase 1 capacity to increase 11 percent to 4Mtpa in 2013 due to plant optimisation, although its capital costs for Phase 1 have also grown 11 percent to $234 million.
The miner said it is in talks with steelmakers and traders, including Glencore, on further offtake deals that would provide financing to accelerate output to 4Mtpa by the end of 2012.
“At the moment we are in discussions with a number of companies,” said Hossie, adding that the company hopes to conclude those talks over the next two months.
“Our plan is to have a mix of offtakers including both traders and steelmakers,” he said. The company also hopes to have a combination of European and Asian buyers.
The miner produces high quality iron ore which is suitable for Europe and can also be blended to lift lower grade iron ore from Chinese producers.
It expects to ship between 20-30,000 tonnes this month, using smaller ships for the first three months until a larger vessel capable of carrying about 150,000 tonnes is expected to arrive around the end of February.
The miner said it received its first prepayment from Glencore for its scheduled December shipment and expects to receive a further prepayment for its January shipment later this month.
Glencore has paid $60 a tonne in advance for the iron ore, with the total capped at $27 million, and will pay the remainder depending on spot iron ore prices at the time of ship loading. - Reuters