London Mining is pleased to announce that, further to its press
release made on 22 August 2008, it has now entered into a conditional
subscription agreement with Wits Basin Precious Minerals Inc ("Wits
Basin") to become a joint venture partner for its iron ore projects
in the People's Republic of China ("PRC"). Under the subscription
agreement it has agreed to subscribe USD 39.25 million for 50% of the
shares in the joint venture company, China Global Mining Resources
(BVI) Limited ("CGMR BVI"). It has also agreed to make a loan of USD
5.75 million to Wits Basin. The subscription and loan will be funded
from London Mining's existing cash resources.
CGMR BVI has entered into certain escrow arrangements in the PRC in
respect of the acquisition of two Chinese companies: Xiaonanshan
Mining Co limited ("XNS") and Nanjing Sudan Mining Co limited
("Sudan"). The two companies operate iron ore mining and processing
operations near Maanshan in the Anhui and Jiangsu Provinces in the
PRC. It is a condition of completion of the acquisitions that CGMR
will also be granted the right to acquire a further iron ore mining
company, Maanshan Zhaoyuan Mining Co Ltd ("Matang"), which is owned
by the sellers of XNS and Sudan.
Cost reduction and expansion of the existing operations (targeting a
run rate of 1.2mtpa production capacity during 2011), combined with a
more focussed marketing strategy are expected to ensure operating
margins remain strong despite the near term outlook for lower
commodity prices. The close proximity to local steel mills of the
mines enables premium pricing due to the low transportation costs.
The completion of the subscription agreement with Wits Basin and the
acquisition of XNS and Sudan are subject to certain closing
conditions, including the receipt of business licences and permits
relating to the transfer and the operation of the mining properties.
It is anticipated that the acquisition of XNS and Sudan will complete
by the end of the first quarter of this year.
Christopher Brown, Managing Director of London Mining said "This
joint venture with Wits Basin is of great strategic importance to us
and it should help to regenerate interest in our company. We will be
one of the first western companies to own a profitable iron ore mine
in China, a country which is the largest importer of iron ore in the
world. The concentrates are of good grade and we expect premium
pricing compared to other exporting producers to China, due to the
much shorter transport distances to local steel mills. This deal not
only is expected to give us solid cash flows, but also to give our
company access to market intelligence on what really is happening to
iron ore markets in China, as well as further iron ore mining
opportunities in the region."
For further information, please contact:
London Mining Plc
Christopher Brown, Managing Director +44 (0)20 7201 5000
Graeme Hossie, Corporate Development & Deputy
Managing, Director, +44 (0) 20 7201 5000
+44 (0)20 7201 5000
Crux Kommunikasjon AS
Charlotte Knudsen +47 97 56 19 59
+44 (0)20 7653 9855
Threadneedle Communications (UK)
Laurence Read/Graham Herring,
Notes to the Editors:
London Mining is incorporated and registered in the UK, and is
developing mines to supply the global steel industry. The Company has
operational mining, exploration and development projects located in
Sierra Leone, Saudi Arabia, Greenland, Mexico and South Africa, and
has total iron ore resources of 1.3 billion tonnes containing an
estimated 45 million tonnes of iron. In 2007, London Mining raised
over USD 185 million to advance iron ore production from its
projects, and listed on the Oslo Axess, a marketplace regulated by
the Oslo Stock Exchange on 9 October 2007. In August 2008 London
Mining sold its Brazilian operations to Arcelor Mittal for USD 810
million and returned USD 344 million to shareholders and USD 60
million to bond holders. The balance of funds received is being
allocated to existing and new projects. London Mining is trading
under the Reuters symbol LOND.OL and Bloomberg symbol LOND:NO.
Please also visit our website www.londonmining.co.uk for more
information about London Mining and its operations.
Wits Basin is a minerals exploration and development company holding
interests in three exploration projects and currently does not claim
to have any mineral reserves on any project. Its common stock trades
on the Over-the-Counter Bulletin Board under the symbol "WITM."
To find out more about Wits Basin Precious Minerals Inc.
(OTCBB:WITM) visit Wits Basin's website at www.witsbasin.com.
The XNS mine is located approximately 44km southwest of Nanjing and
24km ESE of Maanshan, in the Anhui Province. The magnetite iron ore
mineralisation occurs within a dioritic porphyry body, which has
intruded into andesite and may be covered by tuffaceous breccia and
tuff. The open pit mine currently mines approximately 1.2-1.5 million
tpa of ore and a similar amount of waste, with mining and stripping
costs estimated at 20-25Yuan RMB/t (USD 2.92-3.65/t). Resources have
been estimated at 31.2million tonnes of magnetite ore averaging
23.64% Total Fe by No. 322 Geological Brigade to Chinese standards
(not JORC) in March 2007.
Low grade ores and waste are crushed and magnetically concentrated on
site at the preliminary concentrator, before being trucked with
higher grade ores approximately 7km on a concrete paved road to the
Sudan No.1 and No.2 concentration plants, located in the Jiangsu
Province, where there is sufficient tailings capacity. The ore is
then concentrated on a 3-3.5:1 basis to produce approximately
400,000tpa of 62-63% Fe product. The close proximity to local steel
mills enables premium pricing due to the low transportation costs. In
2008, sales revenues peaked at USD 130/t and in early 2009 average
around USD 85/t, with total operating costs averaging around USD
50-60/t of concentrates.
CGMR has engaged a highly professional management team that includes
Mr William Green, Mr Loong Keat Tan, and Dr Clyde L Smith to manage
the operations. Mr Green is a graduate of the University of
Pennsylvania's Wharton School of Business and has more than 15 years
of business experience in Asia. Mr Tan will guide the mining
operations: a former mining executive who served Rio Tinto for 21
years as General Manager of various projects including Hamersley
Iron's Mount Tom Price Mine in Western Australia and Bougainville
Copper Ltd.'s mine in Papua New Guinea. Mr Tan also served Rio Tinto
as head of their Hong Kong and Beijing offices. Dr Smith, who will
guide geologic studies, is an experienced mining industry geologist
who has been responsible for discovery of five ore deposits in
Canada, the U.S., and Mexico.
As at 29 October 2008, XNS and Sudan had approximately 400 employees.
CGMR intends to create additional value by reducing costs through
operating efficiencies and executing expansion plans, with a run rate
target for XNS of 1.2 mtpa production capacity during 2011. Further
production increases and efficiencies would arise from the addition
of a new mining operation at Matang, located about 9km WSW of the
Sudan plant. Matang has a 21.88million tonnes magnetite resource
averaging 25.15% Total Fe estimated by No. 322 Geological Brigade to
Chinese standards (not JORC) in December 2003.
Under the terms of the acquisition of XNS and Sudan, the sellers, Mr
Lu Benzhao and Ms Lu Tinglan, receive consideration of approximately
USD 42.25 million in cash (subject to adjustment) in return for 100%
of the share capitals of XNS and Sudan. Of this consideration, up to
approximately USD 17.48 million can be deferred. One of the sellers
will also receive up to a further USD 53.95 million (subject to
adjustment) in compensation under a consulting agreement with CGMR
BVI, of which USD 10 million is payable on completion and the balance
is payable subject to available cash from the operations of the
acquired entities. Under the joint venture arrangements London Mining
will receive priority dividends from CGMR BVI until its USD 45
million initial investment is repaid. Mr Lu Benzhao will initially
remain as a director of XNS and Sudan. The fee is still to be agreed
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.