Minesite Article10 Oct 2014 18:19
Anyone who’s been watching the mining equity markets of late, and with a particular eye on iron ore and the collapsing price, will know that there has been a flurry of press releases out from London Mining – the one-time star turn that made millionaires out of many investors by flipping a South American asset some years ago and returning most of the cash to shareholders.
No prizes for guessing the general tenor of the latest news, although the press releases themselves do have a faintly schizophrenic air about them.
“London Mining is an expanding producer of high specification iron ore concentrate”, runs the descriptive paragraph at the bottom of an announcement about a dispute with Glencore. That was just a taste of things to come.
“The company is on track to produce five million wet tonnes per annum” reads the blurb accompanying the subsequent news that “the company does not have sufficient liquidity to enable it to continue to trade through this period without raising further finance”.
And, when on 8th October London Mining told the market that it looks very likely that equity shareholders will be almost completely wiped out, it also added merrily that it still aspires to increase production to 6.5 million wet tonnes per year following the next phase of expansion.
Stakeholders were no doubt cheered to be reliably informed that Marampa has a 40 year mine life. Those holding the senior debt can hardly be licking their lips at the prospect of securing the asset itself, surrounded as it is by the almost equally moribund African Minerals, ebola, and a general malaise in the iron ore markets all round.
Perhaps an onward sale to a Chinese investor might mitigate some of the pain
As for equity shareholders, the shares are now suspended, and it looks as though they’ve lost everything.
Among that less than august group are, according to the company’s website, GIC, Schroders, Standard Life, Morgan Stanley, Fidelity, Investec and Majedie. So, if you’ve lost your shirt, take some comfort, some of the biggest names in mining investment have too.
Also licking its wounds was Blackrock World Mining, the share price of which has now fallen by more than 25 per cent since mid August. Blackrock’s exposure was via a convertible loan and royalty deal which will stand behind the senior debt and now looks unlikely to be recovered.
The royalty deal that well-known investment house Anglo Pacific did with London Mining over an asset in Greenland now also looks extremely questionable.
But how has it come to this?
London Mining cites iron ore prices at their lowest since 2009 and Ebola as the two principal causes. No mention of the huge write-downs on failed coal assets in China and Central America, or the cash drain of a Rolls Royce head office operation in London complete with expensive advisors and the highest paid finance director on Aim.
And all that was in p
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