OPERATIONS UPDATE

Highlights

Marampa, Sierra Leone

Production

• Successful ramp-up continues, approximately 57,000t concentrate produced as of 16 January 2012
• High product specification of 66.2% Fe, 1.88% silica and 1.02% alumina confirmed
• First barge has been loaded and is awaiting first ship in Freetown Bay
• First shipment confirmed for Europe, ship expected to arrive in Freetown 23 January 2012
• Transhipment vessel expected in Sierra Leone by end of Q1 2012
• Production of 1.5Mt is now targeted in 2012 with 3.5Mt expected in 2013 and 4.6Mt expected in 2014 from Phase 1

Expansion

• Highly weathered material increased by over 350% from 21Mt to 75Mt, to be processed in Phase 1
• Total JORC resources increased to approximately 1,078Mt at 31.2% Fe with 81% in the Indicated category
• Inclusion of gravity circuit potentially increases Phase 1 production capacity to up to 5Mtpa
• Bankable Feasibility Study, expected end Q2 2012, considering low cost expansion of Phase 1 to 9Mtpa

Other projects

• Commissioning of Colombia coke ovens underway with production expected this month
• Greenland BFS expected during Q1 2012
• STX Heavy Industries now assisting with Wadi Sawawin project development

Corporate

• Term sheets received from potential offtake partners for USD45m prepayment linked to Phase 1 expansion
• Cash at end December 2011 of USD70m, including USD15m of restricted cash
• Appointment of Group Head of Sustainability and Group Head of Human Resources

Graeme Hossie, Chief Executive Officer of London Mining said “Production ramp-up continues on schedule and we have now commissioned all aspects of the Marampa logistics required to load seagoing vessels. The availability of a further 54Mt of highly weathered material along with testwork supporting the use of a gravity circuit represents a significant breakthrough in production potential at Marampa with full initial production from Phase 1 now expected to total up to 5Mtpa. The Bankable Feasibility Study for Marampa will now consider an additional expansion of the reconfigured Phase 1 plant to 9Mtpa utilising existing infrastructure with the addition of new crushing, grinding and gravity separation circuits to the processing plant. In addition, I am happy to announce the further expansion of the executive team to support our continued growth.”

Marampa (100% ownership)

Ramp-up of Phase 1 production continues at Marampa with a rate of over 3,500tpd now achieved and a representative sample confirming a high quality specification of 66.2% Fe, 1.88% silica and 1.02% alumina. The 40km haul road is fully operational and loading of barges has commenced. As of 16 January 2012 approximately 57,000t of concentrate had been produced, which is being stockpiled at the barge loading terminal at Thofeyim. Of this, 5,782t has been loaded onto a barge, which has moved down the Port Loko channel and is now moored in Freetown Bay. The first ship has been booked and is expected to arrive in Freetown by the 23 January 2012. The destination of this ship is confirmed for Europe.

Drilling progress and resource upgrade

90,000m of drilling has now been completed on the Marampa primary orebody and a subsequent update to the resource model by Snowden Mining Industry Consultants has resulted in an increase in Primary Mineral Resources of 69.5 Mt from the previous estimate made in March 2011. As a result of this, Primary Mineral Resources for Marampa at the end of December 2011 are now estimated to be approximately 1,040 Mt at 31.5% Fe. The recent resource model update increased the Indicated Primary Mineral Resources from 566 Mt at 31.5% Fe to 832 Mt at 31.8% Fe. Total Mineral Resources at Marampa including Tailings are now estimated to be 1,078 Mt of which 81% is classified as an Indicated Mineral Resource. Of particular note is the increase in highly weathered material by over 350% from 21Mt to 75Mt which can be considered for processing in Phase 1.

Mineral Resources are reported in accordance with the JORC Code 2004.

Summary of Marampa mineral resources as at December 2011 reported at a 15% Fe cutoff

Expansion planning

Based on plant performance from a selection of feed types, a higher proportion of tailings to weathered ore will now be fed into the plant in order to maximize plant recoveries. This will limit plant capacity to 4,100tpd ahead of commissioning of the ball mill in Q3 2012 resulting in a revised production target of 1.5Mt in 2012.  Preliminary studies based on the historical processing method at Marampa and the greater availability of highly weathered ore have shown the inclusion of a gravity circuit could increase Phase 1 production capacity by 25% to 5Mtpa for potentially low capital intensity. Based on the installation of a gravity circuit in Q4 2012 and a duplication of processing capacity, production of 3.5Mt in 2013 and 4.6Mt in 2014 is now targeted.

As a result of changes to achieve 5Mtpa nameplate capacity from the Phase 1 plant, estimated capital cost has increased from USD234m to USD260m, of which USD168m has been spent to date. In order to achieve steady state 5Mtpa export capacity, further investment estimated between USD40m and USD50m is expected to be required to mitigate against infrastructure bottlenecks and to increase plant redundancy. This is assumed to be funded through reinvestment of future cash flows over time.  

During the total Phase 1 development, in addition to the capital cost, London Mining will incur and expects to capitalize USD25m owners’ team construction salaries, of which USD14m has been capitalized to date, and also as required London Mining will capitalize all direct pre-production operating overheads prior to reaching commercial production. Separately, the USD21m installed cost for the offshore transhipment vessel has been funded through a USD19m finance lease arrangement with Oldendorff Carriers GmbH & Co. KG with the balance financed by London Mining.

The estimated operating cost for 5Mtpa is expected to be less than the USD35/t calculated for the 4Mtpa run rate due to the benefits of economies of scale and the allocation of fixed costs to higher production. This assumption is subject to further analysis on the integration of the gravity circuit and ball mill into the existing plant.

The bankable feasibility study (“BFS”) focusing on the second stage expansion at Marampa is now considering the expansion of the existing Phase 1 processing facility instead of development of new processing and power plants previously outlined as Phase 2a in the April 2011 prefeasibility study. The BFS, which is expected to be completed in Q2 2012, will consider reconfiguration of the Phase 1 processing plant to incorporate additional crushing, grinding and gravity circuits in series with two stage WHIMS processing. This is expected to allow expansion of production at Marampa to 9Mtpa of 65% sinter concentrate. The expansion BFS will be completed in Q2 2012, following which a second bankable feasibility study will consider the further expansion to 17Mtpa.

Isua, Greenland (100% owned)

Work continues to finalise the bankable feasibility study for Isua which is now expected towards the end of Q1 2012.

London Mining Colombia (100% owned)

Commissioning of the coke ovens has commenced with first production expected in January. London Mining continues to expect to reach the 200ktpa coke production run rate in Q3 2012.

Wadi Sawawin, Saudi Arabia (25% owned)

As announced on the 23 November 2011, London Mining’s partner in the Wadi Sawawin Project, National Mining Company (“NMC”) has signed an agreement with STX Heavy Industries (“STX”) to conclude the pre-construction engineering design and continue the programme of assisting arranging the full financing for the Wadi Sawawin Project in Saudi Arabia. London Mining will work with STX to undertake the final pre-construction design and procurement preparation.

Corporate

Cash at end December 2011 was USD70m, of which approximately USD55m is unrestricted cash.  Restricted cash comprises USD15 m to be held back under the terms of the Standard Chartered revolving corporate facility until certain covenants are satisfied.

London Mining is in discussion with three potential offtake partners for expanded Phase 1 production  and has received term sheets for a USD45m prepayment.

London Mining is pleased to announce the appointment of Claude Perras as Group Head of Sustainability and Rosh Bardien as Group Head of Human Resources. Claude joins from Rio Tinto Alcan, where he was Director of Sustainable Development and Community Relations, and has over 25 years’ experience within global corporations and international development organisations including NGOs. Rosh joins from Riversdale Mining where she was Head of Human Resources. She has 15 years’ experience in human resources, industrial relations, transformation, community development, resettlement and change management, and has spent the past eight years working in the mining industry in Africa.

On 16 December 2011, London Mining announced that it had been served with a claim by Fraser Turner Limited, seeking declarations relating to its alleged entitlement to receive an additional royalty payment in respect of iron ore sold from Marampa under the terms of a Facilitation Agreement dated 28 February 2007.  As announced, London Mining intends to vigorously defend the claim. Since 16 December 2011, there have been no material developments on this matter.

On 16 January 2012, London Mining announced that it had noted an announcement made by Wits Basin Precious Minerals Inc ("Wits Basin") (its joint venture partner in China Global Mining Resources (BVI) Limited ("CGMR")) in which Wits Basin reported that it had filed an answer and counterclaim in the Minnesota court against London Mining's action to seek recovery of the repayment of the USD1m loan (plus interest and costs) now due from Wits Basin.  London Mining has now received notification of the answer and counterclaim from Wits Basin which asserts that repayment of the loan is not yet due and includes a number of unfounded allegations relating to the operation of the CGMR joint venture and a claim against London Mining of at least USD650m for loss of value in the CGMR joint venture. London Mining strongly believes that the answer and counterclaim are merely a tactic to avoid repayment of the USD1m loan and are completely without merit. London Mining also believes that there is no valid defence against repayment of the USD1m loan which is now due and payable. Accordingly it intends to purse its original claim for repayment of the USD1m loan (plus interests and costs) and vigorously defend the counterclaim.  

London Mining will be hosting a webcast and conference call for the Operations update 2012 today at 8.30am GMT (UK). Details for the webcast and conference call can be found on London Mining's homepage, www.londonmining.co.uk.

Russell Turner, Principal Consultant, Snowden Mining Industry Consultants MAIG, who has 10 years experience in Iron Ore and is familiar with the deposit types in question in order to be considered as a competent person in accordance with the JORC code requirements, has reviewed and approved the information that relate specifically to the resources figures contained within this announcement.

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About London Mining

London Mining is focused on identifying, developing and operating mines to become a mid-tier supplier to the global steel industry. London Mining is producing high specification iron ore from its Marampa Mine in Sierra Leone and developing two other iron ore mines in Greenland and Saudi Arabia as well as a coking operation in Colombia. All London Mining's assets have deliverable production with potential for expansion. The Company listed on AIM in London on 6 November 2009. It trades under the symbols LOND.L (Reuters) and LOND LN (Bloomberg). More information about London Mining can be found at www.londonmining.co.uk

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Forward-looking statementsThis announcement contains certain forward-looking statements relating to the business, financial performance and results of the Company and members of its Group and/or the industry in which it or they operate. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", "expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this announcement, including assumptions, opinions and views of the Company, members of its Group or cited from third party sources are solely opinions and forecasts which are uncertain and subject to risks, including that the predictions, forecasts, projections and other forward-looking statements will not be achieved. You should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. Such forward-looking statements speak only as of the date on which they are made. None of the Company, members of its Group or any such person's officers, directors, employees, agents, representatives or advisers or any other person makes any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. Any statements (including targets, projections or expectations or financial performance) regarding the financial position of the Company, its subsidiary or associated companies or its or their affiliates or their results are not and do not constitute a profit forecast for any period, nor should any statements be interpreted to give any indication of the future results or financial position of the Group.

Operations update presentation – January 2012

Full announcement including glossary of technical terms