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Iron ore producer London Mining plc (LSE:LOND) has signed a deal to give 2% royalty from the sales of iron ore from its Marampa Mine in Sierra Leone in exchange for US$110 million upfront cash.
BlackRock World Mining Trust plc (LSE:BRWM), a mining and metals securities-focussed investment company, is the other party to the transaction that according to London Mining Chief Executive, Graeme Hossie, represents an endorsement of the company’s “execution capabilities, the quality of the Marampa asset and long term confidence in Sierra Leone.”
According to the terms of the contract, BlackRock is to receive 2% revenue related royalty from the sales of iron ore throughout the life of the Marampa mine, payable every quarter.
Anthony Lea, Chairman of BlackRock World Mining Trust said they are delighted to be partnering with London Mining as the deal is in line with their investment objective.
The 100% owned Marampa mine has produced about 397,000 wet metric tonnes (wmt) of iron ore during the second quarter of 2012, a 26% increase from the first quarter production of 315,000 wmt. London Mining targets to produce 1.5 million tonnes for the full year.
The company intends to expand the mine to a 5 million tonnes per annum (Mtpa) capacity by the second half of 2013 and to a further capacity of 9 Mtpa “at the appropriate time”.
Sales of iron ore reached 350,000 wmt in the second quarter at an average price of US$105/wmt, 36% higher than first quarter sales of 244,000 at a price of US$108/wmt. The fall on prices were partially offset by hedging.
Shares of both London Mining and BlackRock were up 17.3% to 174.25 pence and 2.23% to 550 pence, respectively, by 1:00 PM GMT.
Company Spotlight
London Mining plc was established in 2005 and became public in 2009, trading on the Alternative Investment Market on the London Stock Exchange. The Marampa mine is the company’s producing iron ore project located in Sierra Leone and has two projects in development in Saudi Arabia and Greenland. The company is also engaged in coking (coal) in Colombia.
