London Mining (LOND) continues to steadily increase production from its new Marampa iron ore mine in Sierra Leone. Marampa generated operating profits of $8m (£5.3m) for 2012, but there’s plenty more still to come, with revenues from Marampa expected to nearly quadruple over the next two years.
Nevertheless, when administrative expenses and one-off write-downs of non-core assets are included, London Mining turned in a post tax loss of $108m for the year - mainly driven by a $66.3m impairment on its Colombian coking coal operation. Much more important is that the Marampa expansion remains on track and on budget. London Mining expects to produce between 3.3 and 3.6 million tonnes of iron ore (mtpa) in 2013 - up from 1.5 mtpa in 2012 - rising to 5 mtpa in 2014.
The volume increase should help to drive down operating costs - many of which are fixed - with London Mining guiding for $50 a tonne in 2014 from $78 a tonne in 2012. That should safeguard earnings from a volatile iron ore price, which fell as low as $86 a tonne in mid-2012, but has since rebounded as high as $160 a tonne.
Broker Liberum Capital forecasts cash profits of $105m this year to produce adjusted EPS of 22p, rising to $168m and 35p, respectively, in 2014.
LONDON MINING (LOND) | ||||
|---|---|---|---|---|
| ORD PRICE: | 137p | MARKET VALUE: | £190m | |
| TOUCH: | 136-137p | 12-MONTH HIGH: | 305p | LOW: 112p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 141¢** | NET DEBT: | 79% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | nil | -83 | -81 | nil |
| 2009 | nil | -34 | -33 | nil |
| 2010 | nil | -101 | -92 | nil |
| 2011* | nil | -41 | -54 | nil |
| 2012 | 121 | -58 | -21 | nil |
| % change | - | - | - | - |
*Restated **Includes intangible assets of $93m, or 67¢ a share £1=$1.51 | ||||
