London Mining in dispute with Glencore over iron ore payments

23 September 2014 (Last Updated September 23rd, 2014 18:30)

UK-based London Mining has announced that it is in a dispute with Glencore over payments relating to iron ore mined in Sierra Leone, Africa.

UK-based London Mining has announced that it is in a dispute with Glencore over payments relating to iron ore mined in Sierra Leone, Africa.

According to London Mining, the company had requested Glencore to make an advanced payment for iron ore mined at the Sierra Leone mine, which Glencore refused.

London Mining CEO Graeme Hossie was quoted by Financial Times as saying: "With Glencore, a certain percentage of every sale is paid in advance, up to a limit of $27m...the dispute is around some of those payments."

"The company is considering options under the agreement, including termination of the five-year deal, which began in 2012."

Following Glencore's refusal, the company is considering options under the agreement, including termination of the five-year deal, which began in 2012 and covers the production of around two million wet tonnes of iron ore a year.

Meanwhile, the company is in discussions with lenders to provide short-term replacement liquidity.

London Mining said in a statement that: "[The company] has signed a termsheet with Afreximbank for a $30m revolving two year pre-export financing facility on terms which are similar to those for London Mining's original corporate facilities.

"The facility has received credit approval from Afreximbank but is subject to credit approval by the company's existing lenders. All these discussions are on-going, although there is no certainty at this time that arrangements can be put in place for such replacement financing. The company's lenders remain supportive."

London Mining has recently joined other small iron ore firms affected by the low prices of raw material used for making steel, which fell from an average of $135 a tonne in 2013 to below $80 a tonne at the start of this week.

The company has already reduced its full-year iron ore production capacity, extended its $175m expansion plan for Marampa mine by two years and cancelled $20m of non-essential capital expenditure.

Following the dispute, the shares of both the firms have fallen.

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