London Mining’s Marampa project potential impresses broker
The modular nature of London Mining’s (LON:LOND) Marampa iron ore operation in Sierra Leone sets it apart from other new-build iron ore projects, according to broker Liberum.
After a visit to the site, Liberum said it was impressed with the simplicity and modularity of the asset, with London having the ability to fund and bolt on small chunks of production.
“This is being demonstrated with the initial first plant ramp up to 2.5mtpa, expansion to 5mtpa with the construction of the 1b facility, and ultimately to 9mtpa by 2015 through the construction of a Phase 2 plant,” Liberum said.
It also means London does not have the huge start-up costs associated with other new mine projects.
The feasibility study for a 9mtpa operation is due in the third quarter, with the final capex number expected to be in the realm of $500m-$600m.
Taking the mid-point delivers capex per tonne of capacity of $137/t, materially higher than Phase 1 ($62/t) but still more capitally efficient than most new build DSO projects in the Pilbara, Australia, the broker said.
Liberum said it has changed its assumptions due to higher than anticipated costs in 2012 (c.$65/t) and changes to the mining agreement in Sierra Leone and especially the tax rate.
Its estimate of free cash flow for 2012 has been reduced by 16 per cent. There is a 31 per cent reduction for 2013 and 16 per cent for 2014.
Liberum has kept its buy stance, saying that on 1.9 times EV/EBITDA in 2012 and 0.8 times in 2013 it is comfortably the cheapest cash producing stock in its coverage universe.
Philip Whiterow
Stay with Sierra Express Media, for your trusted place in news!
© 2012, https:. All rights reserved.
