London Mining gets the iron ore out of Sierra Leone

The world’s latest iron-ore mine comes out of a former key producer that is looking to get back on the mining track.

London Mining (LOND-L) has begun producing high specification iron ore at its Marampa project in Sierra Leone, and expects to ship between 20 and 30,000 tonnes of ore by the end of the month.

The mine opening marks not only a significant milestone for the company, but also for the country, which is proving it self to be a source of high specification iron ore once again.

The government of Sierra Leone has stated that expects iron ore mining to be a key contributor to its GDP by next year and the re-opening of Marampa represents the second mine opening in just two months as African Minerals (AMI-L) shipped its first iron ore out of its Tonkolili mine last month.

Sierra Leone’s mineral potential is well known, but war and corruption has long stifled the foreign direct investment the country needs to encourage and foster profitable large scale projects.

Marampa itself was once a contributor to the countries coffers, as the mine was operated by the Sierra Leone Development Company (DELCO) and William Baird between 1933 and 1975, when it was shuttered due to low iron prices.

In its most recent incarnation the mine is scheduled to ramp-up to 160,000 tonnes of iron ore production per month over the first half of next year, and produce a total of 1.8 million tonnes for the entire year.

From there, the first phase of development calls for an increase to 4 million tonnes by 2013. The total capital costs for phase 1 are estimated at US$234 million.

The longer term plan is to boost production up to 16 million tonnes of high specification iron ore per year.

In order to expand the facility to handle such a larger output, London Mining will have to cut more off take deals with steelmakers and metal traders – Glencore (GLEN-L) likely to be chief among them.

The company said it is already in talks with Glencore, amongst others, to complete off take deals that would finance the initial expansion to 4 million tonnes per year.

Glencore has already made a prepayment for December shipment as per the two companies existing off take agreement. That deal calls for Glencore to pay $60 a tonne in advance for the iron ore, with the total capped at $27 million. Any iron ore purchased after that mark will be bought at spot prices.

Iron ore prices have been recovering from their heavy sell off in September and October. The metal’s price dropped as much as 32% over the fall but has recently recovered and was hovering around the US$133.46 a tonne mark at press time.

Marampa has indicated resource of 566 million tonnes grading 31.5% iron and inferred resources of 404 million tonnes grading 30.8% iron.

One of London Mining’s competitive edges is that it produces a high quality iron ore that is sought after in more advanced production facilities such as those found in Europe.

The company has two other iron ore mines, one of which is in Saudi Arabia and the other is in Greenland.