Saturday, February 21, 2009

London Mining Pushes Ahead With Saudi, Greenland Iron Ore Projects

Oslo listed London Mining has announced positive findings from a combined feasibility and market study into the Wadi Sawawin Iron Ore Project in Saudi Arabia.

London Mining and joint venture partner, National Mining Company of Saudi Arabia, considered a Phase I development which will include a 5 million tonne per annum (mtpa) mining and pelletising operation that is planned to be in production by 2012, assuming early financing can be arranged. The joint venture has already signed a strategic memorandum of understanding (MOU) with Saudi Advanced Production for Iron & Steel Ltd for full off-take and financing of development capital.

Highlights from the studies, released this morning, included a net present value (NPV) of US$1.6 billion and capital expenditure (capex) of US$1.8 billion to develop an 11.6 mtpa open pit iron ore mining operation supplying a benefication and pelletizing operation via a 60 kilometre slurry pipeline to produce 5 mtpa of DR pellets for sale via the Red Sea. The study assumed a long term pellet price of US$115/tonne free on board (FOB), however, the study also noted that the price was considered conservative considering a forecast gap of supply/demand in the Middle East and the premium it could fetch for lower transportation cost due to the close proximity to consumers.

The open pit mine would have an initial life of 14 years and benefit from a low stripping ratio (1.25) with payback anticipated to be 6 years. The iron grade of the open pit is expected to average around 41%, with a pellet grade of 67.2%.

“The proposed port and pellet site in Saudi Arabia offers proximity to customers and pelletising cost advantages, such as low natural gas costs, to maximize margins available in DR pellet production. London Mining's and the National Mining Company of Saudi Arabia's objective are to create a globally competitive low cost, premium product operation,” the company stated.

Phase II and III of the project envisages the joint venture shipping additional feed from a second iron ore project in Greenland which would allow pellet production to eventually reach 15-20 mtpa.

"The feasibility results on the first 5 mtpa phase of the Wadi Sawawin project demonstrate that a new, high tonnage, high margin iron mine and pelletizing operation can be established in the Middle East through the London Mining and National Mining Company joint venture. Given the current commercial situation and trends with suppliers, we will be aiming to reduce the final capex spend and also expect upside in pricing due to the ongoing supply gap in the region and globally. The Wadi Sawain project has the ability to establish a significant new DR pellet production hub in a region with growing steel production and a deficit of supply. Through our partners, we anticipate full funding for the project will be made available on attractive financing terms,” summarised Graeme Hossie, Managing Director of London Mining.

No comments: