15 February 2008
The group continues with the development of its two major mineral projects - base metals at Parys Mountain in Wales and iron ore in Labrador, eastern Canada. On 3 December 2007 an initial public offering (IPO) in Toronto in respect of the further development of the group’s Labrador iron ore project was completed and on 2 January 2008 the IPO Agent exercised a 15% over-allotment option. The aggregate amount raised totalled approximately £26.9 million. As a result Labrador Iron Mines Limited (“LIMH”) is now listed on the Toronto exchange and funded for the next two years at least, after which the group expects iron ore production to provide significant cash flows.
Following this flotation, the company now holds just over 50% of LIMH. At the current price of LIMH on the Toronto Stock Exchange ($C5.00) this holding alone is equivalent to over 30 pence per Anglesey share. In addition the Parys Mountain project has a cost on the balance sheet of over £13 million (equivalent to 8.5 pence per Anglesey share) and, in the opinion of the directors, a net present value which is significantly higher than this cost.
Site activities at Parys Mountain have continued with the construction of a fenced enclosure large enough to contain the new decline site, plant site, administration buildings and maintenance area. The freehold of several acres of land adjacent to the Morris Shaft was purchased to facilitate White Rock mining operations; the company already held mining rights over the area.
The second phase White Rock diamond drilling programme has begun. The first hole, a short, large diameter hole for metallurgical testing purpose was commenced in early January and completed on 21 January. A programme of 2 to 3 deeper holes into the White Rock Zone commenced on 26 January. These holes are designed to transfer some of the inferred resource to the indicated category and to provide additional information on the extent and tenor of the resource. This programme should last around two months.
While further work on funding is carried out, the planned commencement of decline construction has not progressed as rapidly as had been anticipated. The price of zinc, which would provide the majority of revenue from the White Rock area, has dropped from 200 cents during the last quarter of 2006 and 170 cents in the summer of 2007 to its current level of 105 cents. This reduction in the zinc price has had a significant affect on the projected revenues from the White Rock area. The effect on the projected returns from the property as a whole is much less, as other metals, principally copper and lead, are more important contributors to revenue outside the White Rock area and have not been subject to equivalent price falls, with the price of lead rising over this period.
The property as a whole has approximately double the metal grade and four times the tonnage of the White Rock area, and the directors are reviewing changes to the development scheduling which will provide a pathway that recognises the substantial positive economics of the total project combined with the benefits to be obtained from early production from White Rock.
The IPO in Canada of the group’s Labrador properties was completed on 3 December 2007 and the related over-allotment provision was exercised on 2 January 2008 resulting in total gross proceeds from the IPO of $C52.8 million – approximately £26.9 million.
Work is now going ahead to staff up the project. A geologist has been employed directly and recruitment consultants have been engaged. Offers of employment have already been made and acceptances received from several senior personnel who will join the company within the next month. Other senior positions, including a project manager, are under consideration; administrative staff are also being recruited.
Working with the area’s First Nation communities is regarded by the company as a very important part of the project and a number of meetings are being held to discuss and explain the plans for the Schefferville project. Following these meetings, it is expected that Memoranda of Understanding to proceed with the project will be signed with the various First Nation communities.
Earth Tech has been commissioned to prepare a permit application for submission to the Provincial government. An application for those properties in the first stage has been prepared and is currently being reviewed prior to formal submission to the provincial authorities. Work will continue to enable submissions for other properties to be made in a timely manner.
A Feasibility Study will be necessary on some of the properties to enable LIM to state its resources and reserves in a compliant format. The Study is not required as part of any decision making process to proceed with the project but is required to meet the requirements of Canadian National Instrument 43-101 relating to mineral companies. Initial discussions have been held with consultants on this study and these will be completed and an order issued to proceed during the late winter.
As explained above the group’s Labrador operations, now 50% owned, have been funded by the Canadian IPO and are expected to proceed rapidly towards production without any further recourse to shareholders. Further funding will be required for the development of Parys Mountain however cash on hand will be adequate for routine expenditures over the next six months.
The successful IPO of the Labrador project means that we can now focus on the steps necessary to bring the Schefferville project into production as soon as possible with a target date for first iron ore sales in 2009. Although there is much to be done, progress to date has been encouraging and is expected to accelerate significantly as the activities described above continue. The market for all types of iron ore is excellent at present and the strong demand from Asia which is driving prices up is forecast to continue.
Prices for base metals have fallen during the last twelve months and this has affected the current financing plans for the next stage of Parys Mountain. However there is now an expectation that those prices seen at the end of 2007 represent the bottom of the current cycle and that ongoing demand from China and other developing nations in Asia will lead to a more positive outlook during the first half of 2008. We expect that this renewed optimism, together with changes to the development scheduling, will enable the financing and redevelopment of Parys Mountain to commence this year.
Anglesey Mining plc is a UK based company listed on the London Stock Exchange with two major projects (in North Wales and Labrador, Canada) under active development towards mining production.
For further information:
Bill Hooley, Chief Executive +(44) 1492 541981
Ian Cuthbertson, Finance Director +(44) 1248 361333
Parkgreen Communications +(44) 20 7851 7480
|Anglesey Mining plc
Parys Mountain, Amlwch,
Anglesey, LL68 9RE, UK
|Phone +44 1248 361333