Diversified iron ore developer London Mining said Monday it produced 900,000 mt of iron ore from the Marampa operation in Sierra Leone in the first quarter, up 17% from Q4 2013, while it looked for a minority investor to help it cope with low iron ore prices.
London Mining saw some improvement in grades of iron ore processed following plant upgrades installed in Q4 and expects higher output in Q2, the company said in a statement.
It sold 817,000 mt of iron ore concentrate in Q1 at an average grade of 63.1% Fe at $80/dry mt FOB, down 25% from 1.162 million mt in Q4 at the same iron content sold at $84/dmt. The lower sales followed full drawdown of concentrate stockpiles in December, it said. In Q1 2013, London Mining sold 589,000 mt at 63.5% Fe.
"Q1 production was in line with our expectations during commissioning with volumes continuing to increase and grade now improving," London Mining CEO Graeme Hossie said in the statement.
The company said the modules had not been delivering the full product consistency expected but improved enough to help maintain its 4.9-5.4 million mt output guidance range for 2014. It also kept its current 6.5 million mt/year production capacity.
At the end of March, 1.01 million dmt of 2014 sales remain hedged at an average price of $118/dmt CFR China while deliveries into a five-year 1 million mt/year offtake contract with Cargill will commence in the second half of 2014, it said. It loaded a baby Capesize in March, while dredging completing later this year will allow loadings of Capesizes, it said.
The company said it was deferring until 2019 a $175 million program for spending related to achieving a 40-year mine life at Marampa, originally due for 2016, to help cut debt. It was prioritizing mining and processing of weathered ore through a modified plant in the meantime.
There is potential for the life of mine extension to achieve 8 million mt/year capacity with additional $110 million investment, aiding a unit operating cost reduction to below the current $39-42/mt estimate, it said.
The company said it has four months of run-of-mine stocks in place ahead of the wet season.
It said it had initiated a process to secure this year a strategic partner for a minority interest at the Marampa asset level to reduce debt and fund an accelerated growth plan.
"In order to de-lever and fund our growth plans, the board has decided now is the right time to secure a strategic partner at the Marampa asset level and we are beginning a process to identify the right partner and financing options for London Mining," Hossie said.
