London Mining, the debt laden West Africa focused iron ore group, has lost nearly 80% of its value as it warned a proposed restructuring could potentially leave shareholders with nothing.
The company has been hit by weak iron ore prices due to oversupply and weak demand from China, along with problems brought by the spread of the Ebola virus.
It said continued to be in talks with strategic investors and its lenders remained supportive, although they were not expected to provide any further short-term funding. That would come from the strategic investors if the talks were successful. But it warned:
There can be no certainty at this time on the likelihood or timing of such an investment.
Under the structures currently being proposed, the board believes there will be little or no value remaining in the equity of the company and the other listed securities of the group.
With the iron ore price at its lowest level since 2009, the Marampa operations have been put under considerable financial strain. In addition the outbreak of Ebola in Sierra Leone has introduced significant challenges both to the strategic investor process...and to the ongoing operational performance of the business.
The capital that is needed from such an investor is significant and the proposals currently contemplate funding of the life of mine expansion and a cash injection into Marampa to allow the mine to continue operating.
The news has sent London Mining shares tumbling 2.38p to just 0.72p, and Shore Capital analyst Yuen Low said:
Nothing that we didn't know already, but we expect the shares to fall further as a result (despite the drastic decline seen in the last couple of weeks or so).
London Mining also admitted that the regional Ebola outbreak has "introduced significant challenges" both to the strategic investor process (we imagine strategic investors are too afraid to conduct due diligence visits), and to ongoing operational performance (which had previously been reported to be essentially unaffected).
Meawhile Numis said:
This looks like the end of the road for London Mining unless a new investor charges to the rescue. This seems unlikely but we believe there is value for be had at the asset level for an acquirer to take the project out for a song if it goes into administration, clear out the debt and effectively take the operations off-line to re optimise and wait for prices and ebola to recover.
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