London Mining shares have little or no value, company says

As iron ore prices fall, London Mining plc warned on Wednesday that its stocks currently have ‘little or no value’. The news sparked panic selling which pushed the London-based company’s shares down by over 96% to lows of 12 pence. They later recovered to just 77% down.

The Ebola epidemic in Sierra Leone, where London Mining’s operations are concentrated, has introduced another significant challenge both to the strategic investor process that the firm started in May, and to the everyday operational performance of the business.

Regarding its short-term funding, London Mining said in a statement:

“While the lenders of the Company remain supportive of the process, they are not expected to provide any further short term funding which would be provided by a strategic investor if the discussions are successful. There can be no certainty at this time on the likelihood or timing of such an investment.”

London Mining, which owns the Marampa mine in Sierra Leone, is one of many smaller mining companies that emerged in West Africa during the commodities boom, when demand for iron ore was rising. The aim was to transform the region into a serious competitor to Brazil and Australia.

London Mining

London Mining’s Marampa mine in Sierra Leone. (Photo: London Mining)

However, with mining giants BHP Billiton and Rio Tinto extracting much cheaper ore, and pricing stubbornly staying below the $80-per-tonne mark, the smaller players have suffered.

As part of a financial rescue plan, London Mining’s larger rival African Minerals said in September that it was interested in selling a minority shareholding in its only mine.

Unless a new investor arrives soon, most investors see this as the end of the road for London Mining.

The Ebola outbreak makes it harder to move goods and workers. The epidemic will also make it much more difficult for the company to find a new investors.