London Mining and Saudi-based National Mining Company have announced the formation of their 50:50 held joint venture company, Saudi London Iron Limited ("SLI"), with registration number 1/1026 issued by the Saudi Arabian General Investment authority (SAGIA). SLI is targeting production of up to 20mtpa of DRI pellets from facilities near Tabuk in North-western Saudi Arabia to supply steel production in Saudi Arabia.
A bankable feasibility study for the first 5mtpa pellets with feedstock from the Wadi Sawawin open pit mining project is currently underway and expected to be completed by the end of this year.
Both London Mining and National Mining Company also announced that a Strategic Memorandum of Understanding has been signed between by SLI with Saudi Advanced Production for Iron & Steel Ltd. ("SAPIS") with the following key terms:
- SAPIS to purchase the entire production of SLI for the lifetime of the mining rights. Prices will be based on the international iron ore pellet price (Vale benchmark for Europe) plus a premium to be agreed to reflect transportation savings due to the location advantage for local customer supply.
- SAPIS to secure a developer to invest all capital required to bring Wadi Sawawin and Greenland projects into production. SAPIS has confirmed that it has secured a developer to fund both projects subject to Bankable Feasibility Studies. An equitable arrangement will be determined to bring Greenland into the SLI group.
- SAPIS to secure provision of all ancillary utilities required for the mining and pelletising operation as well as a jetty/port operation required by SLI and ensure the supply of such services at normal industrial tariffs.
Long term low cost debt funding shall be provided and be recovered from sales of product to SAPIS.
Christopher Brown, Managing Director of London Mining, said "The formation of the Saudi company is an important milestone for progressing the SLI joint venture. Now that SLI has also been able to secure the Strategic MoU with SAPIS, the significant capex requirements of these large projects can be funded with low cost capital and this will enable us to move forward rapidly with the first phase of our 20mtpa production target. We believe there are substantial benefits for London Mining in producing pellets in Saudi Arabia due to low cost natural gas, infrastructure, cheap capital and a captive market for pellets by steel makers in the Gulf Region."
