UPDATE 1-Iron ore miner London Mining agrees offtake with Cargill
LONDON, March 6 (Reuters) - Sierra Leone-focused London Mining said on Thursday it has signed an offtake agreement with commodity trading giant Cargill, as it posted core profit below analysts' expectations.
As part of the agreement Cargill will receive 1 million tonnes of iron ore concentrate from London Mining's Marampa mine in Sierra Leone for five years.
The trader will make a pre-payment to the miner of $20 million.
London Mining had previous signed offtake agreements with two other large commodity traders, Glencore and Vitol, for a total of nearly four million tonnes a year.
"The earnings are in line with our expectations but slightly below consensus so that might be seen as a negative. But we are encouraged by the new offtake with Cargill, which takes up their offtakes to 5 million tonnes per year now or almost all of their production, and the fact that Cargill is paying them $20 million," said Investec analyst Hunter Hillcoat.
The London-listed miner produced about 3.4 million tonnes of iron ore last year and it targets further growth to between 4.9 and 5.4 million wet tonnes in 2014.
It expects to reach full capacity of 6.5 million wet tonnes in the second half of 2015.
The company's EBITDA - earnings before interest, tax, depreciation and amortisation - totalled $54.1 million, below analysts' consensus of $77 million, according to a Thomson Reuters I/B/E/S poll.
It posted pre-tax loss of $19.2 million for 2013, compared with a loss of $58 million the year before.
Operating costs fell by 21 percent in 2013 to $57 per wet tonne and the miner targets a further reduction to $50 per tonne or below this year.
The company, which also has projects in Greenland, Saudi Arabia and Colombia, said it is considering selling its Colombian coking coal assets for up to $5 million.
Shares in London Mining were up 0.3 percent by 0859 GMT, underperforming a mining sector which was up 1.5 percent.
The company, which like other iron ore producers is grappling with softening iron ore prices, has seen its share price fall by more than 20 percent of so far this year.
It has also been hit by production constraints related to the wet season in Sierra Leone, when mining and hauling becomes more difficult.