UPDATE: London Mining Cuts Net Loss As Production Ramps Up

London Mining PLC (LOND.LN), a U.K.-listed minerals exploration and mining company, said Thursday it had cut its full-year net loss by almost half in 2011 as the company benefited from a goodwill impairment from its Colombia project and began producing iron ore from its flagship Sierra Leone project for the first time.

The company reported a net loss of $60.03 million in 2011, compared with a net loss of $99.58 million the previous year. Since shipments from the company's Marampa project only began in February 2012, the company did not report a sales figure for 2011.

The $10.1 million Colombia impairment was received as a result of delays to production and increased capital cost caused by heavy rains, landslides and road blockages and certain design changes. The company also reported a $14.7 million gain as these operational issues meant a previously-agreed "deferred consideration" was no longer payable.

London Mining also said it signed a $45 million offtake-related prepayment loan agreement with Swiss trading giant Vitol Group Wednesday, a deal that sees the company now fully-funded to expand capacity at its Marampa project to 5 million metric tons per annum.

The agreement is for 2 million wet metric tons of iron ore per annum over five years. Subject to certain additional conditions being met, the facility may be increased to $55 million, and the offtake contract extended for a further year.

London Mining signed a similar five-year offtake agreement with Glencore (GLEN.LN) in late January. The deal includes a pre-payment facility for up to $27.0 million and provides guaranteed off-take and shipping from Sierra Leone for the first 1.8 million tons a year of production.

Glencore and U.K.-listed miner Xstrata PLC (XTA.LN) recently proposed a merger to shareholders.

"We think both Glencore and Vitol are strong and reliable partners and we can expand our relationships with them as we grow, not just at Marampa," London Mining Chief Executive Graeme Hossie told journalists in a conference call Thursday.

According to Hossie, "in excess of five legitimate parties" were chasing the latest offtake agreement, a group that included other large trading groups and banks.

London Mining started production at its Sierra Leone Marampa project in December last year and made its first shipment from the region in February. The project is due to produce 1.5 million tons of the steelmaking raw ingredient in 2012, rising to 4.2 million tons in 2013 and 5 million tons in 2014.

The company is looking at expanding into other West African countries in the vicinity of Sierra Leone, including Mauritania, Hossie said.

London Mining's results Thursday were "better than we expected," said analysts at Liberum Capital.

"London Mining has successfully navigated the path from developer to producer, and with ramp-up on schedule shares seem anomalous at the market valuation," it said, rating the company as 'buy.'

At 1129 GMT, London Mining's shares were up 4.2% or 11 pence at 285p.

-By Francesca Freeman, Dow Jones Newswires; +44 (0)20 7842 9412; francesca.freeman@dowjones.com

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