London Mining and its joint-venture partner in the Wadi Sawawin iron-ore project in Saudi Arabia, would, over the next six to 12 months, jointly seek funding of $1.9 billion in capital expenditure (capex) required to build the project, miningweekly.com reported on Thursday in Johannesburg. The iron-ore miner announced on Thursday that an updated bankable feasibility study (BFS) had shown that the project could be developed at $100-million less than the previously anticipated $2-billion. This reduction in project capex and an increase in the long-term price forecasts for the mine's product had positively influenced its internal rate of return (IRR) to in excess of 13 percent. The JV partners were planning to develop the openpit project into a five-million ton a year iron-ore mining and pelletising operation to produce direct reduction (DR) pellets for use by direct-reduction iron (DRI) steel plants in Saudi Arabia. After mining and primary crushing at the mine site, ore would be transported 52 km by road to a beneficiation and pelletising plant on the coast, adjacent to a proposed deep-water port at Duba, and related power and desalination facilities. The beneficiation and pelletising plant would use fine grinding and reverse flotation processes to produce pellets suitable for the Saudi Arabian DRI plants, which account for about 90 percent of steel output in the Middle East and North Africa region, the company said. “The updated BFS has confirmed that the Wadi Sawawin mining and DR pellet project provides a substantial economic opportunity and is of significant importance to steelmaking in the region. The project has been confirmed to be technically and economically sound, with a large, scalable resource base and has strategic and competitive advantages over alternative sources of DR pellet supply,” London Mining CEO Graeme Hossie said. Further, the BFS had also shown potential to further improve the project's IRR through third party provision of power, desalination and port facilities, as well as through an expansion of the project to 10-million tons a year. The project's IRR could increase to 15 percent, if the power and desalination plant infrastructure, which was forecast in the BFS to cost about R300-million, were provided by a third party. Also, should the mine output double to 10-million tons a year, the project IRR would improve to 18 percent. London Mining said construction of the mine and related infrastructure could take 27 months to complete. The iron-ore miner had initially expected to be able to secure funding for the project by the end of this year, with production to start in the second half of 2013. Further, it said that NMC planned to raise the financing through a combination of local sources, commercial debt and the provision of offtake arrangement in exchange for an equity stake. Meanwhile, London Mining said it had signed a new JV agreement with NMC, in terms of which it gain a 25 percent interest in NMC, which held the exploitation license for the project, as well as three adjacent exploration licenses. The 25 percent stake would require no additional funding from London Mining, nor involve further dilution in any future equity funding plans. London Mining and NMC had previously each held a 50 percent interest in Saudi London Iron, into which the exploration and exploitation licenses would have been transferred. “The revised agreement between NMC and London Mining provides clarity over the equity funding structure and will enable [the companies] to work together jointly to secure the funding of the Wadi Sawawin project,” said Hossie. NMC deputy chairperson Matar Faih Al-Ghubiwi added that the project had strategic significance for the Kingdom of Saudi Arabia and that the company was looking forward to moving the project into production.
