London Mining prefeasibility study for Isua project shows significant economies of scale

London Mining’s (LON:LOND) new prefeasibility study for the wholly-owned Isua magnetite project in Greenland, identified significant economies of scale, and the involvement of Chinese construction groups is anticipated to deliver significant cost savings. The study considers a 21-year 10Mtpa high-grade concentrate operation.

The prefeasibility study builds on the 5Mtpa study published in February and the 951Mt at 36% Fe open-pit resource, announced in March. London Mining said it now intends to seek partners to fund and develop the project.

"We have now shown that Isua has the technical and economic properties to supply the seaborne market with 10Mtpa of premium iron ore concentrate for over 20 years. We are particularly excited about the opportunity to develop further mutually beneficial relationships with Chinese partners in order to fund and build Isua," London Mining chief executive Graeme Hossie commented.
The new prefeasibility study incorporates budgetary quotes from Sinosteel and China Communications Construction Co, to deliver a total project capital cost of US$1.74bn with an average operating unit cost per tonne of concentrate of USD27.13/t, if a combination of local, western and Chinese labour is utilised.

The large proportion of fixed cost infrastructure items including port, access road and pipeline results in Isua achieving greatly reduced capital intensity if a 10Mtpa operation is considered.

According to London Mining, a full feasibility study could be complete by the end of 2011, with construction starting in 2012 and first production at the beginning of 2015. “This timeline will be confirmed once financing has been secured and a construction partner selected,” the company stated.

The company is also planning additional resource and environmental works this year, including a further 12,000m of drilling for a combined cost of US$10m.

London Mining highlighted that recent test-work has confirmed that the Isua ore can produce a concentrate with a specification of 70.2% Fe, 1.9% SiO2, 0.05% Al2O3 and 0.12+/-0.06%S. “This product has potential for application as a premium blast furnace pellet feed for sale into the European and Chinese steel markets or as a direct reduced pellet feed for use in HYL type direct reduced iron production in the Middle East."

The Isua magnetite project is located 150km Northeast of Nuuk, and 100km from a proposed deep seawater port. Isua benefits from its position in the warmer south-west corner of Greenland, enabling shipping all year round.

In March 2010 London Mining reported a total open pit resource of 951Mt at 36% Fe, which resulted inter alia in London Mining targeting 10Mtpa production.

London Mining has four principal iron ore assets: Isua, the Marampa Project in Sierra Leone, Wadi Sawawin in Saudi Arabia, and a 50% stake in a joint venture in China.

At the Marampa project, the company recently tripled the resource base to 392 Mt (million tonnes) at 31% Fe (iron) in May, marking an overall increase of 300%. Total indicated resource for tailings orebody at Marampa is estimated as 42 Mt at 21% Fe. Phase 1 remains on track for first shipment in Q2 2011 with ability to expand to 3 Mtpa within 12 months. The mining license agreement for the project has already been ratified by the parliament of Sierra Leone.

The company said that the resource along with initial metallurgical testwork underpinned its confidence in an operation producing 8 Mtpa (million tonnes per annum) of high quality ore and concentrate.