Following LIM’s fund raisings in November 2012 and February 2013, Anglesey Mining’s holding in its associate Labrador Iron Mines (TSX:LIM) has moved from 26% to 15.3% of the issued share capital of LIM. In the November financing Anglesey subscribed C$1.5 million (£935,000) to purchase 1,500,000 LIM shares and now holds 19,289,100 shares. Anglesey currently has the right to purchase on a non-brokered private placement basis up to 3,000,000 units of one LIM share and one-half of a LIM share purchase warrant at a price of $1.065 per unit subject to certain conditions for a limited period. The results of LIM’s operations for the period ended 31 December 2012 are described below.
At the company’s 100% owned Parys Mountain copper-lead-zinc deposit in Anglesey, new JORC-compliant resources were estimated by consultants Micon International based on drilling and other work which was completed in the summer of 2012. Micon are now close to completing a scoping study for Parys Mountain which will help to guide the next steps for the project.
- For the 2012 operating season, LIM met its revised sales target of 1.7 million wet tonnes (1.6 million dry tonnes) of iron ore, representing a 4x increase in sales over the 2011 operating season.
- During the quarter, LIM sold three shipments of iron ore totalling 425,500 dry tonnes and reported revenue of $24.7 million (free on board (“FOB”) Port of Sept-Îles). On the 10 ships sold during the 2012 operating season (FOB Port of Sept-Îles), LIM reported revenue of $95.8 million.
- During the quarter, LIM mined 423,000 tonnes of ore and waste at an average strip ratio of 1.1:1 (waste to ore) prior to the end of the operating season in November, representing a 34% reduction in strip ratio when compared to previous quarters. This brings the year-to-date ore and waste mined to approximately 5 million tonnes.
- Also during the quarter and prior to the end of the operating season, LIM railed 254,000 tonnes of ore to the Port of Sept-Îles, bringing the year-to-date rail volume to just under 1.5 million tonnes.
- In December, LIM completed its largest exploration program ever of 14,000 metres (“m”) of diamond and reverse circulation (“RC”) drilling. LIM anticipates completing several new and updated National Instrument 43-101 (“NI 43-101”) compliant resource estimates resulting from the 2012 exploration program.
“In successfully completing our first full season of production in 2012, we achieved many operational objectives, highlighted by strong operational performance, the installation of a new dry process system at Silver Yards, increased rail volumes to the Port and the sale of 10 shipments of LIM’s iron ore” stated Rod Cooper, President and COO of Labrador Iron Mines. “Over the winter months, we have been hard at work in anticipation of resuming operations in the spring. We plan to leverage the operational experience gained over the past two seasons, combined with strengthened working relationships with key stakeholders, to achieve greater efficiencies and opportunities in the upcoming operating season.”
LIM’s Planning for the 2013 Operating Season
“In planning for our 2013 operating season, we are encouraged by the recent strong recovery in iron ore prices to above $150 per tonne. There are also a number of factors that indicate strong support in the near term that could have a favourable impact on LIM’s early sales revenues in 2013 and we looking forward to resuming operations in the spring.” stated John Kearney, Chairman and CEO.
Iron ore spot prices have rebounded since September 2012, especially in December, and reached a high of approximately US$159 per tonne in early January 2013. The current spot price for iron ore is above US$150 per tonne on a 62% Fe CFR China basis and has risen over 70% since the market low last September.
LIM’s mining operations are seasonal (April to November), with a planned winter closure from December to March. Detailed planning for the upcoming operating season takes place during the winter months.
In advance of the 2013 operating season, LIM carried out the following initiatives:
- For the quarter ended December 31, 2012, a new dry screening unit was delivered to site for installation and use in 2013. This will complement the existing dry classifying system to process (crush and screen) lump and sinter fines products. LIM has transitioned its product mix to produce lump and sinter, exclusively.
- Product inventory at Silver Yards was reduced to a minimum prior to the end of the 2012 season. Run of mine-inventory remaining at Silver Yards will serve as initial wet plant feed during 2013 to allow for operational flexibility.
- A new contractor has been selected to operate the Silver Yards wet beneficiation plant in 2013.
In resuming its planned seasonal mining operations in the spring, LIM will incur regular operating, mining and transportation expenses for the months of April and May, prior to receipt of payment from its first sale of iron ore. As a result, LIM will require working capital of approximately $40 million to fund various operating and re-start expenses ($30 million) and certain planned capital expenditures ($10 million), including the commissioning of Silver Yards Phase 3 and connection to grid power.
- In February 2013, subsequent to the end of the quarter, LIM completed an equity financing for gross proceeds of $29 million. LIM currently intends to commence its 2013 operating season at the beginning of April with a pre-stripping program in March.
- LIM is also actively pursuing financing arrangements to fund various planned expenditures including capital expenditures and infrastructure advances in 2013. LIM has a high degree of confidence that additional working capital or off-take or other financing will be secured on a timely basis to meet the requirements of the 2013 operating season.
- LIM is currently targeting approximately 1.7 to 2.0 million wet tonnes of saleable iron ore production in 2013.
Results of Operations
See LIM’s press release at http://www.labradorironmines.ca/invest_news_and_information.php
In the near term, operations will focus on LIM’s Stage 1 deposits, which include the James Mine (currently operating) and five smaller satellite deposits and some historical stockpiles located within a 15 km radius of the James Mine and the Silver Yards processing plants.
LIM has previously stated that resumption of mining operations in April 2013 for the 2013 operating season will depend on a number of inter-related factors including being reasonably confident that the forecast world iron ore prices will continue at levels of US$110 or higher on a CFR China basis at least for the 2013 operating season (April through November). LIM has been continuously monitoring published iron ore price forecasts provided by investment and industry analysts as well as the futures market for iron ore since the seasonal shutdown of operations in November 2012. Based on this and having regard to increases in such price during December 2012, January and early February 2013, LIM believes that sufficient confidence levels exist to resume normal operations in April 2013.
LIM is currently targeting approximately 1.7 to 2.0 million wet tonnes of saleable iron ore production in 2013. Cash operating costs in 2013, consisting of mining, processing, rail and transportation and site general and administrative costs, are expected to be approximately $65 to $70 per tonne of product sold, unloaded at the Port.
LIM Third Quarter Financial Review
During the fiscal third quarter ended December 31, 2012, LIM sold three shipments totalling 425,500 dry tonnes of iron ore and recognized revenue of $24.7 million (FOB Port of Sept-Îles) from the sale of these shipments. Revenue for the third quarter was negatively impacted by low realized iron ore prices (i.e. CFR China spot price less value-in-use adjustments).
For the quarter ended December 31, 2012, LIM reported a loss of $16.1 million, or $0.19 per share, which included a depletion and depreciation charge of $5.1 million or $0.06 per share. The depreciation and depletion figure represents a period charge, primarily on a units-of-production basis, of the cost of the James mine (including capitalized stripping and dewatering), Silver Yards processing plant, transportation equipment, and infrastructure and site administration properties associated with the James mine operations.
During the quarter, LIM invested approximately $13.5 million in property, plant and equipment, which consisted mainly of investments in the Silver Yards Phase 3 processing plant, grid connection infrastructure and expansion of the mine accommodation camp.
For the nine months ended December 31, 2012, LIM sold ten shipments totalling 1.6 million dry tonnes of iron ore and recognized revenue of $95.8 million (FOB Port of Sept-Iles). LIM reported a loss of $58.4 million, or $0.79 per share, including a depletion and depreciation charge of $29.3 million, or $0.40 per share for the nine months ended December 31, 2012.
At December 31, 2012, LIM had current assets of $48.5 million, including inventories with a carrying value of $12.8 million and accounts receivable and prepaid expenses of $24.1 million. At December 31, 2012, there were a total of $10.2 million unrestricted cash and cash equivalents and an additional $7.6 million in restricted cash.
Current liabilities, consisting of accounts payable and accrued liabilities, the premium liability recognized on the issuance of flow-through shares and the current portion of finance lease obligations and rehabilitation provision, were in aggregate $47.8 million at December 31, 2012. During the quarter, LIM completed a bought deal public offering for gross proceeds of $30 million. In February 2013, LIM completed an equity financing for gross proceeds of $29 million.
The new JORC-compliant resources estimated by Micon International are summarised as follows:
Details of the estimation methods for these resources are set out on the company’s website and at http://angleseymining.co.uk/news/?p=342.
This new estimate follows a previous report by Micon in 2007 that dealt only with the White Rock deposit. The current estimate includes all the known contiguous deposits on site and is reported on a JORC Code-compliant basis. With the exception of the 2007 White Rock estimate, the previous resource was historical (estimated in 1990) and was not JORC Code-compliant. In now reporting all estimates on a JORC Code-compliant basis the project has been brought up to date and put in a position to be properly recognised for future funding.
Anglesey is particularly pleased with the work on the Garth Daniel Zone and the Northern Zone. The Garth Daniel zone had been partially identified in 1990 but benefitted from a further drilling programme in 2005 and 2006. The current estimate draws all this information together. The Northern Zone was previously poorly identified and without any significant continuity. Micon has now shown such continuity to exist and has defined a major resource for two discreet overlapping structures.
There are several other areas on Parys Mountain that have had exploration and drilling carried out on them that have not been included in these estimates. These include the area between the Deep Engine Zone and Garth Daniel, and the area around the Pearl Engine House that was drilled earlier this year. These and other targets will be subject to additional exploration in the future, and it is hoped that additional data will enable further continuity to be demonstrated with subsequent additions to the resource base. Anglesey believes there is ample scope for significant additions to the resources reported here.
At the appropriate time it is planned to carry out additional development and drilling to bring some or all of the Inferred mineral resource in to the Indicated mineral resource category. This will be dependent on funding and, in some cases, underground access to these areas.
The scoping study on the potential future development of Parys Mountain being produced by Micon is well advanced.
Summary and outlook
Anglesey is encouraged by the recent rise in iron ore price particularly over the last two months. This now stands at over $150 per tonne CFR China for 62% sinter fines. If this persists then Anglesey believes that LIM could enjoy a very successful year in 2013.
Base metal prices have held their own over the last six months and the forecasts particularly for the zinc market during the next two to three years appear to be encouraging for Parys Mountain.
About Anglesey Mining plc
Anglesey currently holds 19,289,100 shares in LIM which comprise 15.3% of LIM’s outstanding share capital after the offering (19.6% prior to the offering). Toronto-listed Labrador Iron Mines Holdings Limited is producing high grade hematite from its James pit, one of LIM’s twenty direct shipping iron ore deposits in western Labrador and north-eastern Quebec.
Anglesey is also carrying out exploration and development work at its 100% owned Parys Mountain zinc-copper-lead deposit in North Wales, UK where a JORC Code-compliant resource of 2.1mt at 6.9% combined base metals in the indicated category and 4.1mt at 5.0% combined in the inferred category was published in November 2012.
For further information, please contact:
Bill Hooley, Chief Executive +44 (0)1492 541981;
Ian Cuthbertson, Finance Director +44 (0)1248 361333;
Samantha Harrison / Klara Kaczmarek: RFC Ambrian +44 (0)20 3440 6800;
Emily Fenton / Jos Simson: Tavistock Communications +44 (0)20 7920 3155