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London Mining increases Q1 iron ore production by over 1,000 pct compared to previous quarter - UPDATE



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London Mining (LON:LOND) increased iron ore production in the first quarter of 2012 from the Marampa mine by more than 1,000 per cent compared to the fourth quarter last year, when operations there began.

The company produced 315,000 wet metric tonnes from the mine in Sierra Leone, compared to 20,000 wmt in the previous quarter -  an increase of 1,473 per cent, it said.

Sales stood at 244,000 wmt of a consistent high quality product - with over 65 per cent iron.

The firm said 232,000 dry metric tonnes of concentrate was shipped in five Supramax vessels, four of which went to China and one to Europe. 

The first plant is successfully processing the tailings and weathered ore from Marampa's previous operations and the ramp up continues in line with previous guidance, the firm said.

Construction of the second plant has successfully begun and the ramp up of the two plants is expected to ensure the previous guidance of 1.5 million tonnes per annum (Mtpa) of iron ore concentrate for 2012, 4.2Mtpa in 2013 and 5Mtpa in 2014 is met.

In today's production report and interim management statement, chief executive Graeme Hossie said:

"Over the quarter we have successfully processed the Marampa tailings and weathered ore and shipped consistent high quality product to both European and Chinese steel mills.  

"The logistics from mine to ship have been proven to work as designed and we have now sent seven ships to our customers to date.

"Our pricing reflects our premium quality product and we expect to increase margins following the commissioning of our transhipment platform in Q2 2012."

London also highlighted today, the appointment post period- end of Renato Almeida as its chief marketing officer and said that coking production had started in Colombia.

The first quarter saw 5,800 tonnes produced, which was below expectations due to bad weather, but the firm continues to aim for the 200,000tpa run rate as previously guided by the end of this year.

At the Isua project in Greenland, the bankable feasibilty study for a 15Mtpa operation has been completed, providing the basis to finance and construct a mine.

A 3.5 year payback period was determined on initial 10 and 15 year mine life scenarios, London said, adding it had begun the permitting process, which was expected to take around six months.

Today's statement comes after last month's official opening of the Marampa mine, an event, which put Sierra Leone's iron production back in focus.

In a conference call following today's production report, Hossie said 2012 had started "very well" for the company.

The logistics of transporting the Marampa ore from mine to ship had been proven to work as designed, he pointed out, adding the number showed the firm was "firmly on track to reach our 2012 production targets."

On the markets, he said there had been a little bit of "softening" in Europe, but that demand for the company's high grade product was strong.

Following today's statement, Shore Captal analyst Yuen Low noted that the company's share price had been essentially trending downwards since late last year. 

"However, we note that the 50-day moving average is now starting to level out. We believe there to be potential for the share price to rise significantly later in the year as the company demonstrates its ability to produce to expectations, once the short-term headwinds arising from the latest turmoil in Europe have died down," he said in a note to clients.

As at 12.49 pm, London Mining shares were up 4.11 per cent, to change hands at 272.5 pence.


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