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10 May 2012
London Mining Plc (LOND.L) Closing Price: 262p Rating: Buy
Good first quarter, with sales of 244kt of high grade concentrate, versus our 1H12E of 500kt.

Actual production in the 1Q was 315kt, indicating good ramp-up progress.

The Marampa expansion program is still progressing as planned, with previous guidance maintained.

The relatively low average received price of US$108/t reflects high freight charges (US$39t), which should reduce to cUS$25/t as larger vessels are loaded from mid-year.

Maintain Buy.
* LOND delivered a pleasing 1Q12A production result, with sales of 244kt of high grade concentrate, versus our 1H12E of 500kt.

Actual production in the 1Q was 315kt, indicating the good ramp-up rate of the first plant, which currently has nameplate capacity of 1.5mtpa (ramping up to 1.8mtpa in the 3Q12) * The Marampa expansion program is still progressing as planned, with previous guidance maintained: 1.5mtpa in 2012, 4.2mtpa in 2013 and 5mtpa in 2014.

LOND still expects to be commissioning the second Marampa plant in the 1Q13.

The bankable feasibility study (BFS) looking at an expansion to 9mtpa is due for completion in the 3Q12. * The average received price for the quarter of US$108/t reflects high freight charges (US$39t), which should reduce to cUS$25/t as larger vessels are loaded from mid-year, once the transshipment vessel completes its commissioning. * Production of coke in Columbia of 5,800t remains below expectations, although LOND is still aiming for a 200ktpa run rate by the end of 2012. * Given the retained Marampa guidance, our earnings forecasts remain unchanged. * During the past quarter, LOND released the findings of the Isua BFS, which, while broadly in line with our assumptions, incorporated a substantial increase in operating costs relative to our expectations (US$46/t versus our assumed US$35/t). * We retain a Buy recommendation.

Our target price, which is based on an equity diluted NPV valuation in line with our sector standard methodology, has reduced from 394p to 378p.

This reflects a moderate reduction in our underlying NPV for the company, incorporating the higher anticipated operating costs (and hence lower NPV) for Isua.
Hunter Hillcoat +44 (0) 20 7597 5182
Louise Collinge +44 (0) 20 7597 5779
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