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London Mining Plc (OSL:LOND) London, 20th August 2008. London Mining is pleased to announce that it has completed the sale of its Brazilian operations to ArcelorMittal (the "Purchaser") for a total cash consideration of US$809.9 million (the "Transaction"). Subsequent to the Transaction, London Mining intends to return approximately US$427 million of the proceeds to shareholders. The Transaction marks the conclusion of the Brazilian strategic review which the Company commenced in April 2008.
Conclusions of Brazilian strategic review The Board of London Mining initiated the strategic review following the receipt of expressions of interest in the Brazilian assets and in response to the high levels of strategic interest in Brazilian iron ore assets. The objective of the review was to determine how best to maximise shareholder value in respect of these assets, principally through an assessment of the relative merits of a sale of all or part of London Mining's Brazilian operations versus the retention of these operations to full production. The Company appointed UBS Investment Bank to conduct the review in conjunction with its existing financial adviser, Kaupthing Singer & Friedlander.
Following a competitive auction process, the Board of London Mining concluded that the Transaction would allow the Company to crystallise the material value it has created since it acquired the Brazilian operations in May 2007 and to benefit from the premium prices currently being offered for attractive iron ore assets in Brazil. The Board is confident that the shareholder value delivered through the Transaction exceeds that which could have been delivered by retaining the asset to full production or selling only part of the share capital. In reaching this decision, the Board took into account the significant resource updates announced in May and July 2008 and the current market capitalisation of the Company.
Further details of the Transaction will be contained in an information document which will be published by London Mining in due course.
Use of proceeds Having considered the post-transaction capital structure of the London Mining group, the availability of profitable investment opportunities in the near/medium-term and the views of its shareholders, the Board intends to return approximately US$427 million of the proceeds from the sale to shareholders, representing approximately US$3.73 per share on a fully diluted basis (approximately NOK 20.22 or GBP 2.00 per share based on current exchange rates). The timing and mechanism of the return of these funds to shareholders will be announced in due course. Excluding the impact of the Transaction, London Mining's current cash balance of US$31.6 million would increase by approximately US$35.4 million if all of the warrants and options currently outstanding were to be exercised.
The Company expects to apply approximately US$105 million of the net proceeds as follows:
* Redemption of outstanding bonds issued by London Mining on 24 April 2007: NOK 414.6 million (approximately US$76.6 million) * Estimated transaction costs of approximately US$25 million * Payment of performance and production bonuses to all of the Management Team of the Brazilian operations: US$3.95 million (See the Appendix to this announcement for details) * The remaining net proceeds will be applied to the development of the Company's existing projects and to the acquisition and development of further iron and coal opportunities, including: * Working capital for the Wadi Sawawin, Isua and Marampa iron ore projects * Potential funding for the balance of the conditional DMC Energy (Pty) Ltd acquisition (see the Company's announcement of 8 August 2008): Up to US$99 million * A project loan to the El Artillero iron ore project in Mexico (see the Company's announcement of 25 June 2008): Up to US$7 million * A possible operating iron ore mine, subject to final due diligence: Approximately US$46 million * A possible coal acquisition in South America currently under consideration: Up to US$75 million
Future plans Since acquiring the Brazilian operations in May 2007 for US$89 million, London Mining has realised a substantial return through applying management expertise and capital investment to deliver a significant increase to the resource base (from 268 million tonnes at 47.2% Fe to 1,059 million tonnes at 37.96% Fe) and the development of modern production facilities to support a scalable production capacity. The Company will remain focussed on delivering value for its shareholders by developing mines around the world for the steel industry. In particular, it will:
* Complete a Definitive Feasibility Study on a 5mtpa concentration and pelletising facility at the Wadi Sawawin project in Saudi Arabia, as well as a major exploration programme on the Isua project in Greenland. The Company expects to make further announcements over the next 12 months on how these major projects will be integrated and how the capital costs will be funded. * Begin production of 3mtpa of iron ore at the Company's Marampa tailings operation in Sierra Leone once Government approvals have been granted to use the port and railway and construction and repairs of the mine, rail and port have been completed. * Develop the Company's El Artillero iron ore mine in Mexico into production. * Complete the assessment of the new iron ore investment opportunity referred to above, with a view to establishing a balanced portfolio of assets with cash flow being generated over time to support the group's development activities. * Continue to diversify London Mining's operations into coal. The Company has already entered into a conditional agreement to subscribe for up to 50.5% of the shares of DMC Energy (Pty) Ltd, with coal assets in Africa, and London Mining's new coal division is actively reviewing other potential acquisitions.
Christopher Brown, Managing Director of London Mining, said "This is an extremely exciting time for the Company as we have delivered on our promise to provide value for our shareholders. Not only are the proceeds received from the sale of the Brazilian operations well in excess of London Mining's current market capitalisation, our planned dividend is well over double our capital raisings in the equity markets so far, all within a year of our listing on the Axess Market of the Oslo Børs. We trust that investors will start to fully recognise our other iron ore and coal assets, as well as the strength of our management and technical teams. We are a fast growing diversified mining house focussed on the carbon steel industry."
The Appendix to this announcement includes further details of the Brazilian operations that are being sold to the Purchaser, an overview of London Mining's remaining assets and details of certain bonus payments to be made.
For further information, please contact: London Mining Plc Christopher Brown, Managing Director +44 (0)20 7201 5000 Graeme Hossie, Corporate Development & Deputy +44 (0)20 7201 5000 Managing Director UBS Investment Bank - Financial adviser Mark Palmer / Simon Lyons +44 (0)20 7567 8000 Kaupthing Singer & Friedlander - Financial adviser Benjamin Lee / Cameron Jack +44 (0)20 3205 5000 Crux Kommunikasjon AS Charlotte Knudsen +47 97 56 19 59 Threadneedle Communications (UK) Laurence Read/Graham Herring +44 (0)20 7653 9850
Notes to Editors: London Mining is incorporated and registered in the UK, and is developing mines to supply the global steel industry. Following the sale of its Brazilian operations, the Company will have operational mining, exploration and development projects located in Sierra Leone, Saudi Arabia, Greenland, Mexico and South Africa, and total iron ore resources of 1.3 billion tonnes containing an estimated 459 million tonnes of iron. In 2007, London Mining raised over US$185 million to advance iron ore production from its projects, and listed on the Oslo Axess, a marketplace regulated by the Oslo Stock Exchange on 9 October 2007. London Mining is trading under the Reuters symbol LOND.OL and Bloomberg symbol LOND:NO.
Please also visit our website www.londonmining.co.uk for more information about London Mining and its operations.
