Operationally, London Mining (LOND) had a very good year. Production at its flagship Marampa iron-ore mine in Sierra Leonne surged 108 per cent as the company expanded capacity to 5.4m wet metric tonnes per year. That expansion cost around $340m (£203m), about $29m higher than at least one analyst anticipated, but is already delivering substantial benefits of scale. Operating costs fell 21 per cent to $57 a tonne, shipping costs fell 21 per cent as volumes increased, and corporate overheads decreased by 36 per cent. That helped London Mining deliver a group-wide operating profit for the first time.
Unfortunately, net debt climbed to $265m from $173m, and increased borrowing costs of $33m from servicing the debt completely wiped out the operating profit. Depreciation charges totalling $31.5m ($13m in 2012) skewed the bottom line further.
Looking ahead, London Mining expects output to rise by around 50 per cent in 2014. But the big question is what will happen to iron-ore prices? Nearly everyone expects prices to fall as the market enters a surplus, although there are differing views on the timing and the quantum of the fall. Iron-ore prices have already fallen from $135 a tonne at the year-end to $116. Broker Credit Suisse expects adjusted pre-tax profits of $94m this year, giving adjusted EPS of 45¢, falling to $69m and 31¢ in 2015.
LONDON MINING (LOND) | ||||
|---|---|---|---|---|
| ORD PRICE: | 89p | MARKET VALUE: | £123m | |
| TOUCH: | 88-89p | 12-MONTH HIGH: | 164p | LOW: 86p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 126¢* | NET DEBT: | 152% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | nil | -34 | -33 | nil |
| 2010 | nil | -101 | -92 | nil |
| 2011 | nil | -41 | -54 | nil |
| 2012 | 121 | -58 | -21 | nil |
| 2013 | 299 | -19 | -15 | nil |
| % change | +147 | - | - | - |
*Includes intangible assets of $96m, or 69¢ a share £1=$1.67 | ||||
