London Mining shares collapse on funding fears
Iron ore producer London Mining’s (LON:LOND) shares hit record lows on Monday as the firm warned it did not have sufficient cash to operate its only mine.
The company stock was down 54% to 11.25 pence at 2:35 pm GMT, hitting an all time low of 10 pence (a 59% loss) during morning trading. It has lost 90% of its value since the start of the year.
The announcement comes barely a week after the miner revealed it might end an iron ore supply contract with Glencore (LON:GLEN) over a pricing dispute.
The owner of the Marampa mine in Sierra Leone, however, said it was in talks with a potential strategic investor. If successful this would significantly dilute existing shareholders and require a new capital structure, but would take a number of weeks to implement.
The miner is just one of the most recent casualties in the iron ore market. Companies big and small are suffering from record low prices for iron ore in the face of oversupply and weak demand from key consumer China.
Adding to the company’s issues is the Ebola outbreak in western Africa, which London Mining said last month was starting to hit its supply chain and its expected output this year from Marampa.
The company has already trimmed its full-year iron ore production forecast, deferred a $175 million extension plan for the mine by two years and put off $20 million of non-essential capital expenditure because of weak prices.
Image courtesy of London Mining.