London Mining (LON:LOND) reported the results of the prefeasibility study (PFS) for the staged expansion of its Marampa iron ore project in Sierra Leone.
The study by Ausenco with assistance from Snowden, PSI, Vector and the London Mining technical team envisages a three stage expansion plan to 16 million tonnes per annum (Mtpa) with average capital intensity of US$148 per tonne of capacity.
The company is currently developing Phase 1a and Phase 1b of the Marampa project, involving the reprocessing of tailings from the previous operation to produce 3.6 Mtpa of iron ore.
Phase 2 will see an expansion of Marampa. Phase 2a will be the initial expansion of 8 Mtpa for an estimated capital cost of US$659 million. The utilisation of softer weathered material and use of expanded existing haul road and barging capacity produces a low capital intensity of US$82/t of capacity.
London Mining plans to start construction work for Phase 2a in the first half of 2012 with first production in the third quarter of 2014. The low capital cost of Phase 2a provides London Mining with a number of options to finance the expansion.
Phase 2b will be further expansion of up to 8 Mtpa of pellet feed, to a total of 16 Mtpa, based on the mining and processing of the unweathered portion of the Marampa ore body for an estimated capital cost of US$1.187 billion. The higher capital intensity of US$148/t of capacity reflects the processing of harder ore as well as the construction of a pipeline, a coal fired power station and a new port.
Finally, Phase 2c will reconfigure Phase 2a to allow processing of hard rock, by adding regrinding and flotation capacity to the sinter concentrate circuit to allow for processing of unweathered ore once soft weathered ore has been depleted.
The estimated capital cost of 2c is US$523 million, equivalent to US$65/t of capacity. This phase will utilise Phase 2b logistics but require an expansion of the new port and power facilities.
The new production plan extends the life of Marampa until 2036. The production plan generates a post-tax net project value for the Marampa expansion of US$ 2.2 billion with an IRR of 28.8 percent. This is based the assumption that 100 percent of product will be sold to China with price forecasts provided by AME Mineral Economics.
London Mining CEO Graeme Hossie said: "We are very excited about this breakthrough result which allows London Mining to build quickly from our fully funded Phase 1 operation which will commence this year.
"The incremental nature of the expansion plans which are scheduled to begin once we are generating substantial cash flow, provide London Mining with a route to grow production from the resource at Marampa and capitalises on the advantages provided by the presence of soft, higher grade weathered material and existing infrastructure."
Ausenco and London Mining will proceed with work to gain a detailed understanding of the primary ore's mineralogy and variability, and an enhanced understanding of the overall logistics.
These and other key workstreams, including baseline studies for the environmental impact assessment on areas that are not currently permitted as part of Phase 1, will be carried out prior to the commencement of the bankable feasibility study (BFS) recommended by Ausenco, to allow completion of a BFS and project funding in the first half of 2012.
In January, the company unveiled a 70 percent increase in the resource base of Marampa. It now boasts 906 million tonnes of iron ore at 32 percent iron, with 379 million tonnes in the indicated category and 527 million tonnes inferred.
Development of Phase 1 continues on time and on budget. London Mining will provide a detailed update in May 2011.