More Trouble for London Mining
September 26, 2014
London Mining, Plc warned shareholders it did not have enough sufficient cash to operate it only mine. The news sent shares in the company falling 59% to a record low for the iron ore company. Currently London Mining, Plc operates one mine in Marampa, Sierra Leone but a number of factors have led to ongoing problems for the mine.
Mines operating in West Africa have had to deal with the deadly outbreak of the Ebola virus, record low prices for iron due to over-supply and weak demand from China, the world’s top consumer. London Mining, Plc is in talks with investors for funds but it could take several weeks for to implement.
The financial troubles have been exacerbated by a payment dispute involving Glencore Plc which could end an iron ore supply contract.
An analyst at Investec Securities wrote in a note, "London Mining was always going to be struggling at current iron ore prices, but the prepayment dispute with Glencore certainly appears to have tipped it over the edge".
London Mining, Plc was already having trouble competing with companies that flooded the market with low-cost iron ore from Australia including Rio Tinto Plc, BHP Billiton Plc and Brazil’s Vale.
So far, London Mining has trimmed its full-year production forecast and deferred extension and all non-essential capital expenses on the mine in Sierra Leone. The company has agreed to a $30 million revolving, two-year pre-export financing facility with Afreximbank that requires approval from existing lenders.