The Wadi Sawawin iron ore deposits are located in the Northern Hijaz region of the Kingdom of Saudi Arabia approximately 125km from Tabuk and 60km from the Red Sea port of Duba. The formations were discovered in 1953 and during the following 40 years they were investigated by various authorities, principally British Steel Consultants Ltd. Wadi Sawawin is of strategic and economic importance to Saudi Arabia as it will provide a domestic source of Direct Reduction (“DR”) pellets for use in the DRI steel plants which account for 90% of steel production in the Middle East and North African region.  The location of Wadi Sawawin will provide it with a competitive advantage over competing Brazilian and European supply through reduced freight rates from its deep water port in the Red Sea and access to low cost Saudi Arabian energy.  In addition, the project will assist in the programme of diversification of the economy which is an important element of Saudi Arabian economic policy, and the government is expected to provide low cost funding via the Public Investment Fund ("PIF") and Saudi Investment Development Fund ("SIDF").

In July 2010, London Mining announced the results of an updated bankable feasibility study (“BFS”) for the Wadi Sawawin project and a revised agreement with our partner National Mining Company (“NMC”).

The updated BFS has resulted in a material rise in the project IRR to over 13%, based on the reduction in capex and the increase in long term price forecasts. Potential opportunities for further improvement through 3rd party provision of the power, desalination and potentially port facilities and through the expansion of the project to 10Mtpa will continue to be investigated in conjunction with National Mining Company. The results of the revised BFS will be presented to the Ministry Of Petroleum and Mines in Jeddah, who continue to be supportive of the project. 

Under the terms of the new agreement signed on 20 July 2010, in return for no further material funding requirements and no further dilution in subsequent equity fundings, London Mining will receive a direct interest of 25% of the Wadi Sawawin project through NMC. NMC holds the historic exploitation licence for the Wadi Sawawin project and three adjacent exploration licences.  The Chairman of NMC is Prince Nawaf bin Sultan bin Abdul Aziz al Saud, who has provided his full commitment to the project and to this agreement. This agreement supersedes the previous agreement whereby London Mining held a 50% interest in a joint venture company, Saudi London Iron, into which the licences were going to be transferred.  The transaction is expected to close in Q4 2010 following the receipt of the necessary government approvals, upon which London Mining will receive shares equal to 25% of the issued share capital of NMC.  NMC and London Mining will be working jointly to secure the funding of the Wadi Sawawin project, whichis expected in the next 6-12 months.

The updated BFS further improves the feasibility of the Wadi Sawawin project at 5Mtpa and extends the mine life to 20 years. The key economic parameters, based on the detailed analysis undertaken in the BFS, are:
• total capex including power and desalination plant of USD1.9bn (a USD100m reduction versus the previous BFS)
• capex for power and desalination plant of c.USD0.3bn
• operating costs of USD48.3/t pellets (increased from USD47.4/t)
• project IRR of 13%, which produces an NPV8 of USD932m (increased from 9% and USD225m)
• project IRR of 15% estimated if power and water provided by a third party (increased from 13%)
• project IRR of 18% estimated under 10Mtpa mine scenario (increased from 15%