LONDON MINING - ACQUISITION OF COLOMBIAN COKING COAL BUSINESS AND NEW APPOINTMENT TO THE BOARD
(Thomson Reuters ONE) -
30 March 2010
London Mining Plc
Quoted on London AIM (LOND LN) and Oslo Axess (LOND NO)
("London Mining" or the "Company")
ACQUISITION OF COLOMBIAN COKING COAL BUSINESS
AND NEW APPOINTMENT TO THE BOARD
Highlights
· Acquisition of remaining 80% of ICC for an initial consideration of USD5.5
million cash and 3.5 million shares
· Potential further consideration of up to USD8.5 million cash and up to 6.3
million shares payable subject to performance conditions
· ICC will be the platform for a London Mining Colombian coking coal business
· ICC consists of coking coal concessions, a low volatile coking coal mine
development project (Invercoal) and a permitted coke oven project
· Targeted production of 250ktpa of coking coal within 18-24 months and up to
400ktpa of coke with first coke production within 12 months
· Expected capex to be approximately USD40m over next 18 months
· London Mining intends to enhance its board through the appointment of Graham
Mascall to the Board as a non-executive director from 1 May, 2010
London Mining, the UK based developer and operator of mines to supply the global
steel industry, today announces that it has acquired the remaining 80% of
International Coal Company ("ICC") that it does not already own for an initial
consideration of USD5.5 million cash and 3.5 million newly issued London Mining
shares, with potential further consideration of up to USD8.5 million and up to
6.3 million shares payable subject to the satisfaction of performance
conditions. The performance conditions are linked to EBITDA and capex targets
for the coke ovens, and to the delivery over time of attractive coking coal and
port opportunities, and are set out in more detail in Appendix I. The newly
issued 3.5 million London Mining shares that form part of the initial
consideration will be issued on closing of the transaction, which is expected
within 15 days of this announcement. The acquisition is conditional on ICC
becoming the registered owner of certain land rights. The sellers are Pacific
Overseas Investments Ltd., SIHL Investments International Corporation, Talman
Alliance and Executive Players Inc.
The acquisition of ICC further supports London Mining's strategy of becoming a
mid-tier supplier to the steel industry, and will provide London Mining with the
platform to develop a Colombian coking coal business. The coking coal industry
in Colombia is currently fragmented and under-invested, and London Mining
believes it is one of the first well-capitalised international investors to
invest in this region. Colombia is an emerging coking coal region, with
production levels at around 3mtpa, and estimated total reserves of 2bn tonnes
(Source : McCloskey).
ICC will provide near-term coke and coking coal production, deliverable
logistics solutions and scalable coking coal production. London Mining's
acquisition of ICC will allow immediate funding of the construction of the coke
ovens following detailed preparatory work already carried out by ICC.
ICC comprises the following assets:
· three coking coal concessions in the Socha coking coal region of Colombia with
an aggregate area of 606 hectares,
· a contract with Invercoal to develop and earn a 51% interest in a 250ktpa low
volatile coking coal mine,
· land, environmental and construction permits and detailed plans to build coke
ovens with a nameplate capacity of 200ktpa, with potential to ramp up to
400ktpa, and
· a management team highly experienced in coking coal and mining operations in
Colombia.
As ICC's assets are not yet operational, there were no profits attributable in
2009 to the USD3.0 million of assets on the balance sheet as at 31 December
2009. ICC's executive management consists of Jairo Caicedo, CEO; Giovanni
Pizarro, COO; and Brain McEwen, Chief Geologist. They are a team experienced in
coal and in Colombia and their biographies are set out in Appendix II. ICC's
Board of Directors comprises Erwin Speckert and Oren Breitman, with Jorge Ruiz
being the registered representative. ICC has 14 employees.
Capex
London Mining expects to invest a total of about USD40m over the next 18 months
in ICC. The capex is intended to be funded primarily from cash on London
Mining's balance sheet and also from initial cashflow from coke production. The
split in capex will be as follows:
· USD23m capex for 200ktpa capacity coke ovens,
· USD12m development capex for London Mining's 51% interest in the 250ktpa
coking coal mine for the Invercoal joint venture, subject to confirmation of
resources, and
· USD5m on exploration around the Socha coal region and overheads.
ICC strategy
The strategy of ICC is to develop and consolidate the region with the aim of
producing over 2mtpa of coking coal in the medium term. To deliver early
cashflow and fund further development, coke ovens with a capacity of 200ktpa
will be constructed over 15 months, with first cashflow expected within 12
months. Expansion to 400ktpa is expected to be funded from ICC's internal cash
flow. The coking coal for the coke ovens will initially be bought in from local
sources, although ultimately ICC's own production from a combination of
development of existing and/or new concessions, joint ventures and acquisitions
is expected to supply the ovens.
Invercoal joint venture
The joint venture with Invercoal, a Colombian company with existing mining
operations and concessions, aims to develop a 250ktpa coking coal mining
operation which is expected to produce low volatile coking coal. It will be an
underground mine using a rotary head continuous miner, with access to the coal
seam by adit. The proposed mine is within two kilometres of ICC's coke oven
project.
The coking coal will go for export and will be used to supply the ICC coke
ovens. The joint venture contract provides for ICC to invest up to USD12
million to develop the mine with a targeted mine life of over 14 years,
resulting in a 51% interest for ICC. An initial confirmatory exploration phase
is expected to take six months, with mine development taking 12 months following
the expected exploration results. The Invercoal joint venture operations are
expected to be operated by an underground mining contractor. ICC has held talks
with Mineria Pollaca S.A, a Colombian-based, Polish-majority owned underground
mining specialist.
Logistics
ICC's operations are located approximately 250km from Bogata, approximately
1,000km from Atlantic ports and 1,000km from the Pacific port of Buenaventura.
ICC is well advanced in negotiations to secure port access at the Atlantic ports
and is in discussions regarding related trucking arrangements. Whilst ICC's
proposed logistics solution is adequate for the initial forecast volumes, there
are opportunities to expand transport volumes and reduce costs through the
development of a port, river barging solutions and potentially rail transport
over time.
Management
ICC's senior management team will be augmented by Felix Kayat, London Mining's
Deputy COO. Felix has extensive experience in coal mining and development and in
Colombia from his time spent with MPX Colombia as well as from his 10 years with
Vale.
Related party
Graeme Hossie, CEO of London Mining, has a 12% interest in ICC, and will be
receiving his pro rata share of the consideration. With the exception of Graeme
Hossie, the independent directors of London Mining plc, having consulted with
Liberum Capital Limited, its nominated adviser and broker, consider the terms of
the transaction to be fair and reasonable in so far as its shareholders are
concerned. Liberum Capital Limited has provided the Board with a fairness
opinion in relation to the transaction.
Board changes
London Mining intends to enhance its Board and is pleased to announce the
appointment of Graham Mascall as non-executive director from 1 May 2010. Graham
is currently Chief Executive Officer of the Ncondezi Coal Company, an emerging
private junior coal company focused on the Moatize coal basin in the Tete region
of Mozambique, as well as having served until recently as a non-executive
director of Caledon Resources, a coking coal miner in the Bowen Basin,
Queensland.
Other coal interests
London Mining has converted its interest in DMC Coal in to a 27.5% stake in the
parent company DMC Consolidated Limited. London Mining has been reviewing its
options with regards to optimising the value of its investment in DMC and as
part of that process is in discussions regarding a possible transaction. There
can be no certainty that any transaction will occur.
Colin Knight, Chairman of London Mining plc, said,"The acquisition of the ICC
coking coal and coke platform is another step in London Mining's stated goal of
becoming a mid tier supplier of materials to the global steel industry. ICC's
business fulfils our key criteria of being scalable, having deliverable
logistics and being quick to first production."
Graeme Hossie, CEO of London Mining plc, said,"The Socha region is a highly
prospective but relatively underdeveloped coking coal province. We expect cash
flow within 12 months and our initial investment will allow us to consolidate
our position in the region as we aim to build production of over 2mtpa in the
medium term."
You are invited to join a conference call at 09:00am UK time on Tuesday 30 March
2010 hosted by Graeme Hossie, Chief Executive Officer; Felix Kayat, Deputy Chief
Operating Officer and Benjamin Lee, Head of Corporate Development.
The presentation will be available via webcast at www.londonmining.co.uk
download from 7am.
The full release including appendix is attached and can also be found
atwww.londonmining.co.uk
For more information, please contact:
London Mining Plc
Graeme Hossie, Chief Executive Officer +44 20 7201 5000
Rachel Rhodes, Finance Director
Benjamin Lee, Head of Corporate Development
Thomas Credland, Head of Investor Relations
Liberum Capital Limited (Nominated Advisor/Broker) +44 20 3100 2000
Clayton Bush/Ellen Francis
Brunswick Group
Carole Cable/Daniel Thöle +44 20 7404 5959
Crux Kommunikasjon AS +47 97 56 19 59
Charlotte Knudsen
The Company's website can be found atwww.londonmining.co.uk
About London Mining
London Mining is focused on identifying, developing and operating scaleable
mines to become a mid-tier supplier to the global steel industry. Its four
principal assets in Sierra Leone, Saudi Arabia, Greenland and China all have
deliverable production with potential for expansion. The Company listed on the
Oslo Axess on 9 October 2007 and on AIM in London on 6 November 2009. It trades
under the symbols LOND.L and LOND.NO (Reuters) and LOND LN and LOND NO
(Bloomberg).
[HUG#1399116]
ACQUISITION OF COLOMBIAN COKING COAL BUSINESS: http://hugin.info/137683/R/1399116/354725.pdf
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Datum: 30.03.2010 - 03:23 Uhr
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