London Mining raises output costs, lowers guidance on ebola crisis
Sierra Leone-focused iron ore miner London Mining has lowered output guidance and increased the expected costs of production, the miner said in its second-quarter results on Thursday August 21.
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It cited the outbreak of the deadly ebola virus which is currently sweeping across West Africa.
The UK-listed miner, which operates the Marampa iron ore project in western Sierra Leone, slashed its production guidance for the year by 300,000 tonnes, to 4.9-5.1 million tonnes from 4.9-5.4 million tonnes, it said.
The downward revision in output expectations was due to the slower-than-expected ramp-up of operations and the likely consequences of the ebola virus outbreak, London Mining said.
“Operating costs of about $50 per wet metric tonne [wmt] for the full year [are expected],” the miner said. This will be in addition to extra costs of as much as $1 per tonne due to ebola.
Ebola is a deadly virus for which there is no known vaccine or proven cure. It broke out in the neighbouring country of Guinea earlier this year and has since spread to Sierra Leone, Liberia and Nigeria.
More than 1,000 people have died of the disease to date, with the number thought to be infected exceeding 2,000.
Airlines have restricted or halted flights to the affected countries, causing logistical problems for miners operating in the region.
“We are supporting emergency measures in line with government guidelines, and have allowed for inefficiencies that the outbreak will cause to our operations in our guidance,” London Mining ceo Graeme Hossie told Steel First on August 21.
None of London Mining’s employees have been diagnosed with or died from the virus, and the miner was taking measures to prevent the spread of the disease through its workforce or the neighbouring community, Hossie said.
Higher output, sales
The miner reported a loss of more than $100 million in the first half of 2014, with a 5% increase in sales volumes offset by tumbling iron ore prices.
Metal Bulletin’s 62% Fe iron ore index has fallen from more than $130 per tonne to just above $90 per tonne in the third week of August.
London Mining had taken measures to reduce capital expenditure and cut costs, Hossie said, including reducing the number of expatriate employees in Sierra Leone by more than 40%.
“We have taken measures to make sure we can manage to operate at these price levels,” he added.
The miner started production at Marampa in late 2011, and saw output increase by 24% year-on-year in the first half of 2014 to 2.1 million wmt. Export volumes rose to 1.7 million wmt.
Talks with possible strategic partners are continuing, Hossie said, adding that the miner expected to conclude the process by the end of this year.
It was too early to say what structure any such partnership would take, he said.