London Mining Has Plenty Of Irons In The Fire When It Comes To Future Growth And Cash Flow
By Alastair Ford
minesite.com
London Mining’s investors will have plenty of newsflow to look forward to over the next 12 months, according to managing director Graeme Hossie, as momentum builds on several of the company’s key iron ore projects. Marampa in Sierra Leone should be close to production by this time next year, while a bankable study on the company’s Saudi asset will have long been in the bag, and a preliminary study on the Greenland property will be close to completion. The roster of investors might well have changed significantly too over the same 12 months, as by then the Oslo-listed company should also be well established on Aim. Indeed, it ought to cut quite a dash there, as it will be one of the junior market’s larger miners, and, which is something of a rarity, it will boast a fair amount of cashflow too.
The cashflow comes from London Mining’s Chinese asset at Xiaonanshang, which, says Graeme, is about a three hour drive from Shanghai. This project is fairly small at the moment, having produced around 101,000 tonnes of 61 per cent concentrate between the time it was acquired in March and the end of the second quarter in June. But both London Mining and its joint venture partners there have big plans. For an indication of where the Chinese operations stand in the priority list it’s noticeable that when you click onto the company’s website what you are greeted with is an expanding map of China – not Sierra Leone, Saudi Arabia or Greenland, nor indeed South Africa or Columbia where the company also has coal assets – and this is clearly where the focus for long term growth will be.
“Being in China gives us direct exposure and intelligence in this market. We have a strategy of building strong relations with important Chinese companies, and they’ve noticed that we’re in the country”. By which he means that London Mining is showing up on Chinese radars as a company that doesn’t just want to suck US dollars out of China, but which is also prepared to put some back in. That should stand it in good stead when the company comes to implement a key part of its Chinese growth strategy – a consolidation of other iron ore projects in the vicinity of Xiaonanshang to create a serious presence in the local market. And once that consolidation has been achieved a Hong Kong listing for the Chinese assets is mooted, and ABN Amro has been appointed to offer advice on such a move, though at this stage it’s hard to know exactly what shape or form that will take. New money will likely come in though, which will spread the financial risk, and, on the flip side of the same coin, hopefully bring in some influential local investors.
Talking of advice and advisors, GMP and Liberum – two names not to be trifled with at the more junior end of the market - been appointed to help London Mining with its Aim listing. Graeme wouldn’t be specific on the timing of the Aim listing, but did at least imply that it’s all moving ahead in a reasonably orderly fashion. The market’s expecting further detail fairly soon, although the next notable event on the company’s calendar isn’t until mid November, when the third quarter results are due out. One detail that is known is that the company isn’t planning to raise any new funds in conjunction with this additional listing in London.
Graeme talks of adding liquidity with the new listing, but seems to be hoping that this will come from the release of some significant tranches of shares onto the Aim market by existing investors. Whether this will be enough to overcome Aim’s own traditional across-the-board lack of liquidity remains to be seen. In its favour, London Mining’s not made many mistakes to date, and the Norwegian listing’s worked well so far. It will be interesting to see which market sets the share price, and perhaps worth noting that some Aim-traded miners with additional share listings in minor foreign markets have actually found such an overseas listing to be a useful buffer against the sometimes relentless pressure of London’s short sellers.
Graeme will no doubt have much more to say on all things London Mining as the newsflow builds as autumn rolls on. Once the particulars of the Aim listing are set in stone, and once the final bureaucratic tick in the box comes in from Sierra Leone, then the floodgates may well open as far as news is concerned. Anyone expecting a re-rating at that point may not be disappointed, although it’s worth noting that, according to data available on the Oslo bourse’s excellent website, shares in London Mining have already more than doubled to over NOK20.00 since January. It’s been a good year so far, but it’s not over yet. |
