londonmining.co · 2011. 4. 6. · annual report 2010 developing mines to supply the global steel...

Annual Report 2010Developing mines to supply the global steel industry

Lon

do

n Min

ing

Plc A

nnual Report 2010 D

eveloping mines to supply the global steel industry

London Mining Plc39 Sloane StreetLondonUnited Kingdom SW1X 9LP

T +44 (0) 20 7201 5000F +44 (0) 20 7201 5050

londonmining.co.uk

Officers and professional advisors

Country of registration of parent companyEngland and Wales

Legal formPublic limited company

DirectorsGraeme HossieRachel Rhodes Benjamin Lee (appointed 23 February 2011)Luciano Ramos (appointed 23 February 2011)Dr Colin KnightSir Nicholas Bonsor, Bt DLMalcolm GroatDr Graham Mascall (appointed 1 May 2010)Dr Hans Kristian Schønwandt

Company secretary Rohit Bhoothalingam

AuditorsDeloitte LLPChartered AccountantsLondon

Registered office39 Sloane StreetLondonSW1X 9LP

Registration number05424040

London Mining is focused on identifying, developing and operating scalable mines to become a mid-tier supplier to the global steel industry. London Mining is developing three iron ore Mines in Sierra Leone, Greenland and Saudi Arabia as well as a coking coal operation in the Socha region of Colombia. All London Mining’s assets have deliverable production with potential for expansion. The Company listed on the Oslo Axess on 9 October 2007 and on AIM in London on 6 November 2009.

londonmining.co.uk

Operational and financial review10 Sierra Leone, Marampa 14 Greenland, Isua 16 Saudi Arabia, Wadi Sawawin 18 Colombia 19 China & Chile 20 Corporate responsibility 22 Financial review 26 Principal risks and uncertainties

Corporate governance

28 Board of directors 30 Senior management 32 Directors’ report 35 Corporate governance statement 40 Directors’ remuneration report 45 Statement of directors’ responsibility

Financial statements

46 Independent auditors report to the members of London Mining Plc

48 Consolidated income statement49 Consolidated balance sheet50 Consolidated statement of changes in equity 51 Consolidated cash flow statement52 Notes to the consolidated financial statements 84 Company balance sheet 85 Company statement of changes in equity 86 Company cash flow statement 87 Notes to the Company financial statements

Overview01 Highlights 02 Asset overview04 Chairman’s statement 05 Chief Executive’s statement 08 Our markets

Contents

Overview

1

Marampa, Sierra Leone Fully funded for Phase 1 3.6Mtpa operation, with –first production expected in Q3 2011

Offtake for first 1.8Mtpa signed with Glencore –

All environmental permits received in January 2011 –

Resource of over 900Mt, grading 32% Fe, –increased by 70% since November 2010

Includes over 130Mt of weathered ore that may –be processed and would extend the life of Phase 1

New testwork indicates sinter feed can be –produced from all primary ore

PFS for expansion to 16Mtpa expected by end –of Q2 2011

Scoping studies planned to investigate self funding –options and further expansions

Isua, Greenland PFS results for 15Mtpa project indicates capital –expenditure of USD 2.0 billion

Capital intensity reduced by around 22% to USD –136/annual tonne of capacity

Project estimated to produce post tax NPV – 8 of between USD 2.5 to 4.5 billion

London Mining Colombia First production from coke ovens in Q3 2011, –reaching capacity of 200kt in Q1 2012

Supply agreement for 300ktpa of coking coal –

Corporate Successful placing of USD 110.0 million, 8% –convertible bond notes on 31 January 2011

USD 60.0 million revolving credit facility secured –with Standard Chartered (subject to certain conditions precedent)

Impairments for the year of USD 61.7 million, –primarily relating to CGMR, Chinese JV

Cash as at 31 December 2010 –of USD 76.0 million

HighlightsHighlights for the year ending 31 December 2010

C A N A D A

U N I T E D S TAT E S O F A M E R I C A

M E X I C OCUBA

JAMAICABELIZE

DOMINICANREPUBLICHAITI

PUERTO RICOGUATEMALA

COSTA RICA

NICARAGUAHONDURAS

EL SALVADOR

PANAMA V E N E Z U E L A

TRINIDAD &TOBAGO

GUYANA

SURINAM

FRENCH GUIANA

ECUADOR

B R A Z I L

P E R U

B O L I V I A

PARAGUAY

A R G E N T I N A

URUGUAY

CHILE

FALKLAND/MALVINASISLANDS

NEWZEALAND

FIJI

ICELAND

BAHAMAS

Missouri

Amazon

Mackenz ie

Yu ko nB a c k

Negro

Para

n X

ingu

Madei ra

S�o

Fran

cisc

o

Orinoco

Ar k a n s a s

C o l ora

do

Mi ssissippi

Rio

Grande

C olum

bia

GALAPAGOSISLANDS

Newfoundland

South Georgia

W E S TI N

DI E

S

A L E U T I A N I S L A N D S

North I.

South I.

HAWAIIAN ISLANDS

H u d s o n B a y

Gulf of Mexico

B a f f i n B a y

C a r i b b e a n S e aD e n m a r k S t r a i t

A R C T I C O C E A N

C h u k c h iS e a

B e a u f o r tS e a

B e r i n g S e a

Bering S

trait

G u l f o fA l a s k a

Da

vi s

St r a i t

P A C I F I C

O C E A N

N O R T H

A T L A N T I C

O C E A N

Cabo Falso

GreatBearLake

Great SlaveLake

L. Winnipeg

L. Superior

L a u r e n t i a nP l a t e a u

Mt. McKinley

Mt. Rainier

Aconcagua

Cape Horn

B R O O K S R A N G E

R

OC

KY

MO

UN

TA

IN

SG

re

at

Pl

ai

ns

THE GREAT LAKES

SI E

RR

AM

A D R E

G U I A N A H I G H L A N D S

A m a z o n B a s i n

AN

DE

S

AN

DE

S BR

AZ

I LI A

NH

I GH

L AN

DS

Pa

mp

as

Mt. Cook

A L A S K A

Caracas

La Paz

Rio de Janeiro

Buenos Aires

Santiago

Havana

Mexico City

Los Angeles

San Francisco

New Orleans

Houston

New York

Montreal

S�o Paulo

Montevideo

Lima

BrasÃlia

Bel»m

Salvador

PŸrtoAlegre

Recife

Belo Horizonte

Monterrey

Guadalajara

Managua

Auckland

Christchurch

Cordoba

San Juan

Miami

QuebecOttawa

Toronto

Winnipeg

DetroitBoston

Vancouver Calgary

Portland

Dallas

Washington DC

Chicago

St Louis

Minneapolis

Phoenix

Philadelphia

AtlantaSan Diego

Reykjavik

160° 120° 80° 40°

80°

40°

0°

40°

160° 120° 80° 40°

0 1000 2000 3000 4000 Miles

0 1000 2000 3000 6000 Kilometres4000 5000

2Overview

Operational and financial review



Asset overview

Key facts– Strong development pipeline of projects

– 2.3 billion tonnes of Fe resources – Targeting >30Mtpa production

– Experienced management team with track record of delivery

– Iron ore and coke production to commence in 2011

Strategy– Scalable production

Production can be increased incrementally from existing JORC resources at our three core iron ore projects.

– Deliverable logistics Our three key iron ore projects are all located within 100km of sites suitable for loading ocean going vessels. All our projects have logistics solutions which allow for production to be initiated and expanded at competitive capital intensities.

– Rapid development London Mining has a proven track record of rapidly developing mines and all our projects are all able to be developed by 2015 subject to funding being secured.

Colombia

C H I N A

Hua

n g H

e

Cha

ng J iang

M a n c h u r i a nP l a i n

T I E N S H A N

K U N L A N S H A N

Ta r i m B a s i n

HI M A L A Y A

G r e a tB a s i n

Beijing

Wuhan

Tianjin

Shenyang

P L A T E A UO F T I B E T

NORWAYSWEDEN FINLAND

DENMARKUNITED

KINGDOMIRELAND

FRANCE

BELGIUMNETHERLANDS

LUXEMBOURGGERMANY

ESTONIALATVIALITHUANIA

RUSSIA

P O L A N DBELARUS

U K R A I N E

SPAIN

PORTUGAL

CZECHREP.

AUSTRIASWITZERLAND

ITALY

SLOVENIA

CROATIA

SLOVAKIA

HUNGARY

YUGOSLAVIABULGARIA

ROMANIA

MOLDOVA

ALBANIA

GREECET U R K E Y

CYPRUS

MOROCCO

WESTERNSAHARA

A L G E R I AL I B Y A

TUNISIA

MAURITANIA

SENEGALGAMBIA

GUINEA-BISSAUGUINEA

LIBERIA

M A L I

BURKINAFASO

IVORYCOAST

TOGO

BENI

N

N I G E R I A

N I G E R C H A D

EGYPT

S U D A N

ERITREA

E T H I O P I ACENTRALAFRICANREPUBLIC

CAMEROONEQUATORIAL

GUINEAGABON

CONGO Z A I R E

RWANDABURUNDI

UGANDA KENYASOMALIA

A N G O L A

NAMIBIA

Z A M B I A

TANZANIA

MALAWI

ZIMBABWE

BOTSWANA

MOZAMBIQUE

MADAGASCAR

SWAZILAND

LESOTHOSOUTH AFRICA

MAURITIUS

R…UNION

GEORGIA

ARMENIAAZERBAIJAN

SYRIALEBANON

ISRAELJORDAN

I R A Q I R A N

QATARUNITEDARAB

EMIRATES

OMAN

Y E M E N

I N D I A

AFGHANISTAN

PAKISTAN

TURKMENISTANUZBEKISTAN

KYRGYZSTAN

TAJIKISTAN

K A Z A K H S T A N

SRILANKA

NEPAL BHUTAN

BANGLADESHBURMA

LAOS

THAILAND

CAMBODIA

VIETNAM

M A L A Y S I ABRUNEI

PHILIPPINES

TAIWAN

I N D O N E S I A PAPUANEW

GUINEA SOLOMONISLANDS

FIJIVANUATU

NEW CALEDONIA

A U S T R A L I A

NEWZEALAND

R U S S I A

M O N G O L I A

NORTHKOREA

SOUTH KOREA J A P A N

HONG KONG

ANDORRA

BOSNIA-HERZEGOVINA

GHANA

MACEDONIA

GangesNi l e

Vo l g a

Kasa i

N i ge r

White Nile

Irraw

addy

Yen

i s ey

O b í

I r t y s h

O b íTo

b o lI s

h im

Yen i s ey

A n g a r a

L e n a

A l d a n

Lena

Ko l yma

Do

n

Dnep r

U e l e

U r a l

Congo

I n

du

s

Dv i n a

N

i z h nyaya Tunguska

Ind

i gi r

k a

O r a n g e

North I.

South I.

CANARYISLANDS

EA S T I N D I E S

M EL

AN

ES

IA

A L E U T I A N I S L A N D S

S V A L B A R D

Z E M LYA F R A N T S A I O S I F A

No

v a y aZ e m l y a

S E V E R N A Y A Z E M L Y A

NOVOSIBIRSKIVEOSTROVO

N o r w e g i a n S e a

North Sea

B l a ck S e aR

ed

S

ea

G u l f o fG u i n e a

AralSea

S e a o fO k h o t s k

B e r i n g S e a

S e a o fJ a p a n

EastChina Sea

YellowSea

B a y o fB e n g a l

S o u t hC h i n a

S e a

CelebesSea

C o r a l S e a

T a s m a n S e a

Moz

amb i

que

Cha

nne l

Gulf o f Aden

M e d i t e r r a n e a n S e a

Casp i a n

Sea

Ph

i l i pp

i ne

Se

a


Bering S

trait

B a r e n t s S e a K a r a S e a

L a p t e v S e a

E a s tS i b e r i a n

S e a

C h u k c h iS e a

S O U T H

A T L A N T I C

O C E A N

I N D I A N

O C E A N

P A C I F I C

O C E A N


B a l t ic

S e a

CAUCASUS MTNS.

ANATOLIAN PLATEAU

ETHIOPIANHIGHLANDS

A r a b i a nS e a

TURANIANPLATEAU

L a p p l a n d

QattaraDepression

S a h a r a

CongoBasin

L. Chad

L. Victoria

L. Tanganyika

L. Nyasa

Kilimanjaro

Kalahar iDeser t

Cape of Good Hope

C E N T R A LS I B E R I A NP L A T E A US i b e r i a n

L o w l a n d

K o l y m aL o w l a n d

G o b iD e s e r t

D e c c a n

Great SandyDeser t

L a k eE y r e

B a s i n

Mt. Everest

Mt. Cook

Lake Balkhash

DRAKENSBERG

ATLA

S

MTNS.

ZAGROS

MTNS.

HINDU KUSH

A L P S

UR

AL

MO

UN

TA

I NS

AL

TA

I

SAYAN M T N S .

Lake Baykal

GR

EA

TD

I VI

DI

NG

RA

NG

E

Melbourne

Sydney

Perth

Lagos

Kinshasa

Nairobi

Cape Town

Harare

London

Paris

Madrid

Algiers

Cairo

Istanbul

Berlin

Stockholm

Moscow

Bombay

Calcutta

Irkutsk

Kuwait

Karachi

Delhi

Tehran

Novosibirsk

Tashkent

Rostov

Shanghai

Singapore

Bangkok

Hong Kong

Manila

Tokyo

Khabarovsk

Adelaide

Brisbane

Canberra Auckland

ChristchurchHobart

Oslo

Helsinki

Copenhagen

Luanda

Durban

AlexandriaTripoli

Tíai-pei

Seoul

PusanCassablancaRabat

Lisbon

Barcelona

Madras

Hyderabad

Bangalore

Lahore

Ho Chi Minh

Kuala Lumpur

Johannesburg

Tunis

Rome

Khartoum

Addis Ababa

Dar es Salaam

Baghdad

Sapporo

Osaka

St Peterburg

Volgograd

Kazan Omsk

Yakutsk

Ulaanbaatar

Hanoi

Colombo

Dublin

0° 40° 80° 120° 160°

80°

40°

0°

40°

160° 120° 80° 40° 0° 40° 80° 160°120°

3

MarampaBrownfield development assetOwnership: 100% Product: P1 Sinter Feed / P2 Sinter/PelletYear of first production: 2011Target production: 16MtpaIndicated resources: Tailings 37Mt @ 22%Indicated resources: Primary ore: 379Mt @ 32% FeInferred resources: Primary ore: 527Mt @ 32%

IsuaDevelopment assetOwnership: 100% Product: Pellet FeedYear of first production: 2015Target production: 15MtpaIndicated resources: 114Mt @ 37% FeInferred resources: 837Mt @ 36% Fe

ColombiaCoking coal resource developmentOwnership: 100%Product: Coking coalYear of first production: 2011Target production: 0.4Mtpa

Wadi SawawinDevelopment assetOwnership: 25% Product: DR PelletsYear of first production: 2014Target production: 5MtpaIndicated resources: 248Mt @ 40% Fe*Inferred resources: 134Mt @ 39% Fe* * Quoted on a 100% basis subject to regulatory approval

Sierra Leone

Greenland

Saudi Arabia

Iron OreCoal

4Overview




Chairman’s statement

2010 has been a year of substantial progress for London Mining globally. We are now well positioned to take advantage of the many new opportunities that have arisen from the Group’s technical and corporate advances. London Mining’s growing reputation as a pioneer in the development of iron ore resources in new territories is supported by its strong management team and its well funded balance sheet.

The Group is fully financed to first production at Marampa and for its coke project in Colombia. In 2010 a USD 60.0 million revolving credit facility was arranged with Standard Chartered and in January 2011 London Mining successfully completed a USD 110.0 million convertible bond issue. The issue was over two times subscribed with significant contributions from existing shareholders. This financing was the first time that London Mining has accessed the capital markets since 2007 when it raised funds to fast track development of its mine in Brazil, and reflected the market’s positive view of our abilities and prospects.

We will generate cash flow from our flagship Marampa project by the end of 2011, a key milestone in our goal of becoming a mid tier supplier to the global steel industry. London Mining is confident it can continue to deliver extraordinary returns for its shareholders through the sequential delivery of its milestones.

Of particular note during 2010 was the commencement of construction at London Mining’s Marampa mine following the ratification of its Mining Licence Agreement (“MLA”), by the Sierra Leone Parliament in February 2010. The drilling programme also provided exceptional results, increasing resources ten-fold leading to an equivalent increase in projected production volumes from the licence.

First production from Marampa, expected in Q3 2011, will allow us to increase significantly our contribution to the Sierra Leone economy not only through the creation of jobs and support of local businesses, but also through payments of taxes and revenue royalties. It is anticipated that up to one percent of

revenue will fund corporate responsibility initiatives both locally and nationally as directed by London Mining in conjunction with a board of locally appointed representatives from the community. London Mining has already made significant contributions in Sierra Leone on community projects that add tangible benefits and a lasting legacy to health, education and the environment. As a key investor in Sierra Leone, we are committed to ongoing support for legacy projects linked to the country’s celebration of its 50th Anniversary of independence throughout 2011.

London Mining announced in January 2011 that it had signed a five year offtake agreement for Marampa with Glencore International, covering 9.5 million tons of production from the first phase of the project over five years. The agreement underlines the appetite for the type of high quality ore Marampa will be producing.

Whilst Marampa remains the focus for 2011, London Mining’s other projects are beginning to come to the fore and I expect all of them to gain prominence over the course of 2011 as London Mining looks to secure finance.

We are continuing to develop our coking coal resources and constructing our coke production project in Colombia, with progress on track for first production by the end of 2011.

Isua in Greenland is now recognised as a 15Mtpa operation and in the case of both Isua and Wadi Sawawin in Saudi Arabia, London Mining believes that most value can be delivered for shareholders by bringing in a partner to fund further development of the projects.

I would like to take this opportunity to welcome Luciano Ramos, Chief Operating Officer and Benjamin Lee, Head of Corporate Development to the Board. Both have played integral roles in the London Mining story and I expect them to contribute significantly to the future development of the Group.

Colin KnightChairman

5

Chief Executive’s statement

Building on strong project fundamentals, London Mining has a clear strategy and proven capability to deliver exceptional near term and long term value growth.

2010 has been another year of strong achievement for London Mining in our goal to become a significant new producer of raw materials for the global steel industry. In the past year we have added over 1.0 billion tonnes to our iron ore resource base and advances at our projects in Sierra Leone, Greenland and Saudi Arabia mean that we are now targeting over 30Mt of iron ore production by 2015 from our current iron ore resource base of over 2.3 billion tonnes. We are now in construction on two projects with both coming into production this year. Additionally, we have transformed our Greenland iron ore project into an economically compelling 15Mtpa operation which will complete its bankable feasibility work during 2011.

As a result of our recent highly oversubscribed convertible bond issue, together with the revolving credit facility secured with Standard Chartered, London Mining is fully funded to bring Sierra Leone to 3.6Mtpa and Colombia to 200ktpa of coke production. High margins and the incremental growth potential of these projects allow organic expansion to be significantly or completely self-funded without the requirement for a strategic investor. The progress made and anticipated production growth to 30Mtpa has continued to validate London Mining’s strategy of focusing on projects with deliverable logistics which can be rapidly developed into production and expanded quickly to significant size. Our key projects have now demonstrated these fundamental value aspects and, with first production at Marampa expected in Q3 2011, less than 18 months after approvals were granted in Q1 2010, we are demonstrating our ability to deliver production from our projects in a rapid and cost effective manner.

Development at Marampa continues apace and we are excited about the opportunities presented by near term substantial cash flow and the increasing scope of the planned operation. A year ago Marampa was being considered as a simple 1.5Mtpa tailings reprocessing operation with resource potential for a 5Mtpa mine.

Graeme HossieChief Executive Officer

Group target capacity

20162015

1612.8

6.46.46.4

1.21.80.2 3.53.63.53.6

1515

1515

5

5

55

5

2018201720142012 201320110

5

10

15

20

25

30

35

40

Marampa Phase 1Marampa Phase 2

IsuaWadi Sawawin

Targ

eted

cap

acity

(M

tpa

at y

ear

end)

CEO of London Mining, Graeme Hossie meets the President of Sierra Leone, Ernest Bai Koroma

6Overview




Chief Executive’s statement continued

The success of our Mineral Resource Development programme now means that we have JORC resources ten times the historical resource estimates and a deliverable plan to over 16Mtpa production over a greatly extended mine life. One of the major advantages presented by Marampa relative to many other West African iron ore projects is London Mining’s ability to entirely self fund its development. This is a result of a number of factors including Marampa’s proximity to the coast and simple logistics solution and the presence of higher grade weathered material which greatly reduces the amount of processing required to produce a premium product suitable for sale in all markets. An offtake agreement with Glencore for an initial portion of production has endorsed our ore quality, our production plans and assists with working capital needs as we ramp up to 3.6Mtpa and beyond.

We are also very encouraged by recent developments at Isua in Greenland, with a new scoping study now showing that the resource can support a 15Mtpa operation with greatly reduced capital intensity.

Over the course of 2010 we also acquired 100% of a coke and coking coal business in Colombia. Coking coal complements our iron ore business very well and London Mining Colombia, (formerly International Coal Company, (“ICC”), is forecast to produce its first coke in Q3 2011 and contribute cash flows to our business from early 2012. Our current focus is to significantly develop our resources in Colombia over the course of the year: an agreement has been signed for a concession near our coke ovens and the Company is currently drilling this and other concessions with the expectation of developing coking coal mines both to supply our coke ovens and for direct export of coking coal. We expect to reach full coke capacity of 200ktpa in Q1 2012, followed by a second phase of construction increasing capacity to 400ktpa of coke which will produce cashflow to fund coking coal mine development activity.

Financing for the Wadi Sawawin project in Saudi Arabia is also advancing and we expect further developments over the course of 2011. The agreement signed in July 2010, giving us a 25% free carried interest in the project, greatly improves the internal rate of return (“IRR”) for London Mining and allows us to focus on delivering the technical aspects of the project.

Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

Total Average G

rade (%)JO

RC

Res

ourc

es (

Mt)

0 22%

200 24%

400 26%

600 28%

800 30%

1000 32%

Tailings Primary Ore Average Grade

37

906

533503392

37424233

7

With regard to our markets, tight supply and high China domestic production marginal costs means that “higher for longer” pricing is now being expected for iron ore and for coking coal for the next decade and indeed record prices are currently being experienced. London Mining is in a very favourable position to benefit from this strong pricing both for its near term production and from its near term significant expansion as it targets 30Mtpa in 2015.

London Mining’s key iron ore projects all produce premium high quality low impurity iron ore products. In a market where in situ grade quality is falling for many worldwide producers, both major and China domestic, securing long term sources of quality iron ore supply is becoming more and more important for steelmakers. London Mining expects to enjoy premium pricing and strong demand for its planned production and expansion in all its projects. Combined with low opex and/or capex cost bases, this leads to superior margin and return on investment for years to come.

China, as the most important consumer of iron ore and other commodities, continues to be a key focus of London Mining’s approach to long term development of our assets. We continue to build meaningful links based on London Mining’s high quality assets and products as well as our reputation for technical excellence in mining development. This is driven by a long term commitment to building sustainable partnerships with Chinese interests. An example of this is the involvement of two leading Chinese state owned engineering and construction companies, Sinosteel and CCCC (“China Communications Construction Company”), being involved with the Isua Project in Greenland. This has allowed London Mining to optimise total capex and

construction times making the Isua project stand out in terms of IRR, product quality and speed to significant production volumes in 2015. It is also opening additional potential financing avenues in China.

Whilst continuing to deliver strong shareholder value growth, London Mining at its core focuses on and is led by a philosophy of “win–win” for all stakeholders. These include our employees, the communities and countries in which we operate, the environment, our customers, contractors and partners. In Sierra Leone, we take very seriously the responsibility we have of being a significant provider economic development through both our direct activities and all the indirect benefits from our investment, training, infrastructure development, job creation, and re-development of an iron ore mining industry. We support transparency initiatives and see our pioneering commitment and successful operations in Sierra Leone as an example to attract further international capital for the country’s industrial and economic development. In Greenland, the Isua mine will bring substantial and much needed economic activity and revenue to the country. Again London Mining’s early and continued commitment to this important project for Greenland will build a secure economic future.

Looking forward, in 2011 the company will be focused on delivering its production plans and other key milestones to enable us to achieve our growth objectives. We will also be working on bringing together the required financial resources and partners to fund Greenland and Sierra Leone large scale expansions in 2012. Building on strong project fundamentals, London Mining has a clear strategy and proven capability to deliver exceptional near term and long term value growth.

Barge arriving at Tawfayim river port, Sierra Leone

88Overview




EU27 12.2%

US

A 5

.7%

RO

W 1

9.

4%

SO

UTH

KO

REA

4.1%

UK

RA

INE

2.4%

CH

INA

44.3%

BRAZIL 2.3%

INDIA 4.7%RUSSIA 4.7%

BRIC 58.3%

(Source: World Steel Association)

Our markets

London Mining is planning to produce a range of products to supply the growing demand from the global steel industry.

Steel production growthWorld crude steel production reached 1,413Mt for the year of 2010. This is an increase of 15% compared to 2009 and is a new record for global crude steel production. Commentators broadly see production slowing to single figures in 2011 but demand for steel making inputs is expected to remain strong. China remains the principal producer of crude steel representing 44% of global production (down from 47% as a result of the rebound in market conditions elsewhere) and the major customer for iron ore. Crude steel production is estimated by CRU to exceed 2,050Mt by 2021.

Iron ore supply and demandAs iron ore is an essential ingredient to make steel, the demand for iron ore is directly proportional to the demand for steel. During the period 2005 to 2010, global iron ore demand rose from 1,489Mt to 2,215Mt, mostly due to the strong demand from China. Annual iron ore demand is expected to continue its strong growth over the next 10 years, with CRU estimating Global demand of 2,699Mt by 2021 (Source: CRU). Importantly a significant driver for the global iron ore market is the demand from the seaborne market.

2010 Steel consumption by region

9

IRON ORE

Lump DR pellet feedWadi Sawawin/Isua DR lumpFines

MarampaBF pellet feed

Marampa/Isua

Pellet plantSinter plant Pellet plant

DR pelletsSintered ore BF pellets

Blast furnace

Basic oxygen furnace

Direct Reduced Iron (“DRI”) plant

DRI

Electric arc furnace

Iron ore processing routes

ChinaChina is the biggest importer of iron ore products predominantly for blast furnaces. London Mining will service this market though its operations in Sierra Leone and Greenland.

Middle East and North Africa (“MENA”)The availability of natural gas and absence of any local sources of coking coal means that the iron ore market in the MENA region is almost exclusively for products that can be used in Direct Reduced Iron (“DRI”) plants i.e. premium quality, high grade, low impurity pellets. London Mining, through its Saudi London joint venture, has demonstrated it is able to produce a high quality DR pellet from its Wadi Sawawin operation. Isua can produce a pellet feed product suitable for HYL-type DRI plants.

EuropeThe European market consists almost entirely of blast furnaces with Brazil currently the biggest supplier of lump, sinter and blast furnace pellet feed. Marampa and Isua are ideally placed to enter this market.

CRU estimated global seaborne trade of iron ore was 992Mt in 2010. CRU expects the expansion of the seaborne iron ore market will continue and that by 2021, the seaborne iron ore trade will be 1,475Mt. Chinese demand is pivotal to the growth of the industry with seaborne iron ore imports into China comprising 80% of the increase in global seaborne iron ore imports between 2010 and 2021.

Our marketsLondon Mining is able to produce a number of products to supply its target markets. The Marampa and Isua projects are both capable of producing high quality products that can be easily sold on the seaborne market and the Wadi Sawawin Project is ideally located to access the key domestic market of the Middle East.

In January 2011 London Mining entered into an agreement with Glencore to sell the first 1.8Mtpa of production from its Marampa project on to the seaborne market. The key features of this agreement were the exposure to the developing trend to sell iron ore to a spot related price and secondly that the base case assumes that sales are primarily to be directed into China with upside on pricing if the product is placed into the European market.

10Overview




Port LokoMamyNancy

Rogberi

Tawfayim

Mange

Little Scarcies

Roket

Ribi

Pampana

YawriBay

LunsarMarampa

MasiakaWilberforce

15 miles

25 kilometres

8° 30’ N

13° 00’ W

13° 30’ W

12° 30’ W

12° 00’ W8° 00’ N

Kissy Wellington

Waterloo

BANANAISLANDS

CAPE SHILLING

Kent

Songo

Bradford

Rotifunk

Bauya Moyamba

Mano

Njala

Taiama

Yonibana

Magburaka

Makeni

Lungi PortPepel

Freetown

Barge to ship transhipment

Bargeloader

MARAMPA MINE1.8 to16 MTPA

Barge route

Existing roads

RailCompleted haul road (20 km)

Additional haul road(20 km)

Major city or town Other city or town

Sierra Leone Marampa

Marampa, Sierra Leone (100%)The Marampa mine is a brownfields site formerly operated by the Sierra Leone Development Company (“DELCO”) and William Baird between 1933 and 1975. Marampa reached a peak production of 2.5Mtpa in the 1960s before low iron ore prices forced its closure. Continuing weak market economics, outdated processing technology and civil war prevented redevelopment of the mine until the mining licence was acquired by London Mining in 2006.

London Mining plans to develop Marampa in two phases. Phase 1 considers the processing of tailings from previous operations and highly weathered ore to produce 3.6Mtpa of premium sinter concentrate. Phase 2 is the focus of a prefeasability study (“PFS”) due in Q2 2011 and will consider an expansion to 16Mtpa of pellet feed or sinter concentrates from moderately weathered and unweathered ore. Construction of the first 1.8Mtpa production module for Phase 1 (“1a”) is under way and construction of the second 1.8Mtpa module (“1b”) is expected to commence by the end of 2011.

The current focus at Marampa continues to be the construction and optimisation of Phase 1 to incorporate the new resources reported on 17 January 2011. In the same announcement London Mining reported a move in plant production start date to the end of Q3 2011 mainly as a consequence of a reconfiguration of the plant layout due to the new ore discovery. Export of first concentrate is now expected in Q4 2011. The capital budget for Phase 1a is USD 136.0 million. At the end of December 2010, USD 115.0 million had been committed of which USD 45.0 million had been spent.

Marampa progressed significantly over the course of 2010. Highlights for the project in the period were the maiden JORC resource in January, the ratification of the MLA and commencement of construction in February, delineation of

higher grade weathered material in August and the reporting of almost a billion tonnes of resources at year end. Work also commenced on a PFS for an expanded 16Mtpa operation incorporating all resources which is expected to be completed in Q2 2011. In January 2011, London Mining was awarded all environmental permits required for the Marampa operation.

ResourcesAs announced on 17 January 2011, Snowden Mining Industry Consultants now estimate a total primary resource, excluding tailings, of 906Mt grading 32% Fe comprising 379Mt at 32% Fe in the Indicated category and 527Mt at 32% Fe in the Inferred category. These resources represent an increase of 70% to the total primary resource of 533Mt at 31% Fe reported in November 2010 and a tenfold increase of the historical primary resource of 84Mt grading 37% Fe reported at the time of London Mining’s admission to AIM in November 2009. The new resource also reflects 24Mt of highly weathered ore at 38% Fe and 107Mt of moderately weathered ore at 35% Fe. The focus of the 56,825 metre diamond drilling programme completed in 2010 was to define the parameters of the primary resource to at least the Inferred category in order to determine the optimum production capacity for Phase 2. The additional 20,000 metres of drilling, to be completed in the first half of 2011, is aimed at converting resources from Inferred to Measured and Indicated categories for detailed mine planning purposes. It is expected however, that there will be further additions to the total resource. The tabular nature of the Marampa ore body, homogenous geochemistry of the ore and highly competent geotechnical behaviour of the Marampa pit walls mean that the life of mine strip ratio is expected to allow almost all the currently defined resources to fall within the confines of an open pit and therefore in the final reserve.

11

First ore to ROM pad

Phase 1 progress Mine Detailed mine and tailings plans have now been completed with a strip ratio of 0.9 estimated for weathered ore and 0.02 for tailings with ROM ore comprising 70% tailings and 30% weathered ore. The mineable resource, including the weathered ore, is currently estimated to be 59Mt with a head grade of 26.5% Fe. This mine plan currently only considers weathered material from the Campbelltown and Hospital Ridges, with further material from Masaboin Hill and the north east extension expected to be captured in a revised mine plan. Preliminary mining of tailings and weathered ore will commence in Q2 2011, using equipment already located on site, to establish a run of mine stock pile ahead of plant commissioning.

PlantConstruction of the Phase 1a plant continues although reconfiguration of the plant layout to allow full realisation of the new ore discovery now means first production will commence at the end of Q3 2011 and first commercial export and sales of concentrate will be in Q4 2011. Construction is ongoing with work on all essential concrete footings expected to be completed during Q1 2011. All necessary earthworks are expected to be completed ahead of the start of the wet season in May.

Test work indicates that 100% of highly weathered material and 75% of material considered moderately weathered can be processed in the Phase 1 processing circuit with the installation of a small rod mill; the capital expenditure for which has been included in the Phase 1a cost of USD 136.0 million. It is envisaged that the remaining moderately weathered material will be stockpiled for processing in Phase 2 although this fraction may be increased if it improves the overall economics of the project. A revised optimised production plan for Phase 1 will be released as part of the Phase 2 PFS in Q2 2011, but is not expected to change the production start date.

Commissioning of the plant is expected to be completed in Q3 2011 with first concentrate from the plant also expected by the end of Q3 2011, and shipment of first concentrate within one month of first commissioned production. Ramp up to the full capacity of 1.8Mtpa is expected to take 6 months. Construction of the second 1.8Mtpa module to complete the ramp up to 3.6Mtpa is scheduled to start in Q4 2011 with commissioning expected nine months later. Earthworks for Phase 1b are to be completed as part of the Phase 1a construction programme. In addition, excess WHIMS plant and power generating capacity has been installed as part of the Phase 1a programme and London Mining is investigating further strategies to accelerate Phase 1b.

LogisticsWork on the 25km second section haul road from Rogberi to Lunsar has commenced and is expected to be completed ahead of the wet season in Q2 2011. Construction of the 19km first section between Rogberi and Tawfayim is complete. Bollore Africa has been contracted to provide road haulage and maintenance with mobilisation expected to take six months.

Construction of the port at Tawfayim is scheduled to take place between Q1 and Q3 2011. Ausenco-Sandwell has completed the final designs and is to act as construction manager for the project. The main long lead items for this aspect of operations, namely the jetty and barge loading equipment, have been ordered from Quayquip and Telestack respectively and are under construction. The final design uses a floating jetty which can accommodate river level fluctuations. Jan de Nul, the dredging contractor, has started dredging a navigable channel in the Port Loko River. London Mining is in the final stages of agreeing contracts for barging and transhipment with mobilisation expected in time for first exports in Q4 2011. The use of tidal assistance to optimise barge loads and reduce dredging requirements is being evaluated. The planned loading rates of around 20,000t per day will be unaffected.

12Overview




Concrete footings for Marampa processing plant near completion

Sierra Leone Marampacontinued

Phase 2 prefeasibility studyThe Phase 2 PFS is being reconfigured to reflect the increase in resources, and the targeted production of up to 16Mtpa with the inclusion of some moderately weathered ore is expected to have a significant favourable impact on initial operating cost and metallurgical recovery. The PFS will provide capital expenditure and operating expenditure estimates and will enable a detailed evaluation of the full potential and deliverability of the Marampa project, including mining, processing, waste disposal and logistics plans, as well as time to production. The PFS is due for completion during Q2 2011. Further to the completion of this study London Mining is also to complete a scoping study to determine an early expansion, low capital expenditure stage incorporating moderately weathered ore.

New metallurgical testwork indicates that a fine concentrate suitable for use as either sinter or pellet feed can be produced from all Marampa ores, irrespective of weathering. This is likely to have significant implications to both capital expenditure and operating expenditure as it reduces the amount of grinding and downstream processing required to produce a saleable concentrate.

Mining Lease Agreement (“MLA”) and review of fiscal incentivesA review of the MLA comprising fiscal incentives for Phase 1 by the Sierra Leone Government (“GoSL”) is near to conclusion. Current discussions with the Government review committee (“the Committee”) indicate there should be no material change to the project value as a result of any modifications to the MLA and associated fiscal incentive package and hence the investment programme remains unchanged.

London Mining has also engaged in discussions with the Committee to accelerate the review that was to take place after five years and to agree now what the fiscal regime will be for the five years from 2015. This will provide certainty on the financial modelling, in particular for the expansion of Phase 1 to incorporate the full effect of the weathered ore and the Phase 2 development. It is expected that the resulting package for the second five years should not differ materially from fiscal incentives either awarded recently to other mining companies or from those that have previously been negotiated with companies already having been through this review process. London Mining supports efforts to increase transparency in the mining industry in Sierra Leone, and GoSL remains very supportive of London Mining’s production and investment plans.

Any changes to the MLA will require ratification by Parliament. Were changes not ratified, the existing MLA is still valid for the lease term.

13

Environmental permitting and managementLondon Mining received its full environmental permit for Marampa at the beginning of January 2011. The issuance of the permit followed the formal approval and acceptance by the Sierra Leone Environmental Protection Agency (“SLEPA”) of London Mining’s Environmental Impact Assessment (“EIA”), the EIA having been discussed publically via four public hearings in Sierra Leone, which were attended by members of the public and NGOs. The permit is subject to an annual renewal by SLEPA, which requires ongoing environmental compliance in accordance with the Sierra Leone Environmental Act 2008 and the payment of an annual fee. The EIA meets all local regulations and London Mining is working with an internationally recognised environmental consultant to ensure compliance with international best practice.

Offtake and marketing An offtake agreement for Marampa was signed with the trading house Glencore International AG (“Glencore”) on 26 January 2011. The offtake covered 9.5 million wet metric tonnes (WMT) production from Phase 1a of the Company’s Marampa project. The five year agreement, which included a pre-payment facility

for up to USD 27.0 million, will provide guaranteed offtake and shipping from Sierra Leone for all Phase 1a production, with the option for London Mining to expand the agreement to Phase 1b on the same terms. The offtake will be based on Platts 62% CFR China benchmark, with an upward adjustment for the Fe content of the Company’s 65% Fe sinter feed concentrate, and an incentive to place product at locations such as Europe where there is a net pricing benefit through lower shipping costs. The Agreement accommodates London Mining’s ramp up expectations and is flexible to accommodate varying shipping sizes and frequencies to supply European, Chinese and other markets.

14Overview




GreenlandIsua

Isua, Greenland (100% ownership) Isua is located 150km Northeast of Nuuk and 100km from a proposed deep seawater port. Isua will produce a premium quality 70% Fe pellet feed concentrate with low impurities and benefits from its position in the warmer south-west corner of Greenland which allows for year round shipping.

In March 2010, London Mining reported a JORC resource estimate completed by Snowden Mining Industry Consultants of 951Mt at 36% Fe. A PFS for a 10Mtpa open pit and processing operation from an initial 451Mt open pit mine plan was completed by SNC Lavalin in June 2010. The June 2010 PFS considered a 10Mtpa operation with a 21 year initial mine life and estimated capital expenditure of USD 1.7 billion. In February 2011 London Mining released the results of a 15Mtpa scoping study completed by SNC Lavalin. The scoping study considered a 15Mtpa open pit and processing operation with a 15 year initial mine life for estimated capital expenditure of USD 2.0 billion, representing a 22% reduction in capital intensity. Operating costs increased from USD 27 to USD 29/t mostly due to a 20% increase in fuel costs. The scoping study was based on capital and operational cost estimates to a level of accuracy of -30% to +40% with Chinese contractors CCCC and Sinosteel, providing engineering support and cost estimates for certain capital items.

The 15Mtpa scoping study and detailed work undertaken for the 10Mtpa PFS is to form the basis of a 15Mtpa bankable feasibility study (“BFS”) which has already commenced and is scheduled to be completed by the end of 2011.

Highlights of the two studies are as follows:

Study date

Scoping Study

(15Mtpa) February

2011

PFS (10Mtpa)

June 2010

Annual production (Mtpa) 15 10Mine life (years) 15 21Opex (USD/t concentrate) 29 27Capital expenditure breakdown –

USD millionMine 143 132ROM Crushing 41 34Process Plant 229 165Tailings 11 9Product Delivery 253 202Port 164 132Project Sensitivities 145 137Project Infrastructure 396 358Project Indirect Costs 398 345Subtotal 1,780 1,514Contingency (15%) 267 227Total 2,047 1,741

Capital Intensity (USD/tpa) 136 174

– 100% owned– 951Mt JORC resource with upside – Scoping study now complete on 15Mtpa– Scalable resource with deep water port site

Drilling on the glacier at Isua

15

The post-tax project economics based on new scoping study estimates and an August 2010 price deck provided by Raw Materials Group (“RMG”) are displayed below. The value of the Isua Project is significantly increased if the Isua concentrate is sold into Europe rather than China, based on a significant freight differential of around USD 25/WMT.

100% of product sold

in China

100% of product sold

in Europe

NPV8 (USD billion) 2.5 4.5IRR (%) 23 33Payback period (months) 36 25Average freight (USD/wmt) 33 8Average netback (cdmtu) 120 159

The product specifications provided by London Mining to RMG based on test work by Studien-Gesellschaft für Eisenerz-Afbereitung (“SGA”) were as follows:

Fe (total) % 70.2FeO % 29.8

S % 0.12 +/- 0.06P % 0.09SiO2 % 1.9Al2O3 % 0.05MgO % 0.2CaO % 0.16TiO2 % 0.01Na2O % 0.005K2O % 0.006D80 µm 28.5Blaine value cm2/g 1,650Filter cake moisture % < 9.0

London Mining has now completed three seasons of exploration drilling, further to previous drilling which took place during the 1970s, with drill holes from the 2010 campaign to be included in a new resource estimate as part of further feasibility work. The 2010 drill data will be augmented by a further campaign of 7,000 to 8,000 metres of drilling to be undertaken in 2011 to allow conversion of all necessary resources currently in the Inferred category to be upgraded to Indicated. In addition, all necessary base line data collections, advanced field drilling programmes, EIA and Social Impact Assessment (“SIA”) have been, or are expected to be undertaken to allow completion of a full BFS by the end of 2011 with construction estimated to start in 2012 and first production at the beginning of 2015. London Mining is investigating strategies to fund the BFS programme by selling a minority stake at project level and also plans to introduce a strategic partner to provide funding for construction. A separate listing for Isua is also being considered.

16Overview




Wadi Sawawin, Saudi Arabia (25% ownership) The Wadi Sawawin Project located in the north-west corner of Saudi Arabia, 125km from Tabuk and 60km from the Red Sea port of Duba. Wadi Sawawin is of strategic and economic importance to Saudi Arabia as it will provide a domestic source of Direct Reduction (“DR”) pellets for use in the DRI steel plants which account for 90% of steel production in the Middle East and North African region. The location of Wadi Sawawin will provide it with a competitive advantage over competing Brazilian and European supply through reduced freight rates from its deep water port in the Red Sea and access to low cost Saudi Arabian energy. In addition, the project will assist in the programme of diversification of the economy which is an important element of Saudi Arabian economic policy, and the government is expected to provide low cost funding via the Public Investment Fund (“PIF”) and Saudi Investment Development Fund (“SIDF”).

The process to secure the funding of the Wadi Sawawin project continues. There have been initial positive discussions with the power, water and port authorities in Saudi Arabia regarding the provision of these services. In the event that agreements are reached, this would materially reduce the capital expenditure requirement of the project. London Mining is currently producing 10 tonnes of concentrate at a pilot plant in Perth, Australia to enable DR pellet samples to be produced by pellet plant bidders, and to provide samples to potential offtake providers.

National Mining Company (“NMC”) and London Mining continue to work jointly on the ongoing application to the Deputy Ministry for Mineral Resources for an exploitation licence for the proposed 5Mtpa 20 year operation and there are ongoing discussions.

In July 2010, London Mining announced the results of an updated bankable BFS for the Wadi Sawawin project and a revised agreement with its partner NMC.

Under the terms of the new agreement signed on 20 July 2010, in return for no further material funding requirements and no further dilution from subsequent equity fundings, London Mining will receive a direct interest of 25% in the Wadi Sawawin project through NMC. NMC holds the historical exploitation licence for the Wadi Sawawin project and three adjacent exploration licences. The Chairman of NMC is Prince Nawaf bin Sultan bin Abdul Aziz al Saud, who has provided his full commitment to the project and to this agreement. This agreement supersedes the previous agreement whereby London Mining held a 50% interest in a joint venture company, Saudi London Iron Limited, into which the licences were going to be transferred. Upon closing London Mining will receive shares equal to 25% of the issued share capital of NMC.

The updated BFS further improved the feasibility of the Wadi Sawawin project at 5Mtpa. The key economic parameters, based on the detailed analysis undertaken in the BFS, are:

– 25% stake in joint venture with National Mining Company– 5–10Mtpa (on 100% basis) of DR pellets in key areas of iron

ore demand growth– Strategic location with low energy cost and deep water access– Following BFS, in discussions with offtake partner

Saudi ArabiaWadi Sawawin

17

Total capital expenditure including power and desalination >plant of USD 1.9 billion (a USD 100.0 million reduction versus the previous BFS) Capital expenditure for power and desalination plant >of c.USD 0.3 billionOperating costs of USD 48.3/t pellets (increased from >USD 47.4/t)Project IRR of 13%, which produces an NPV > 8 of USD 932.0 million (increased from 9% and USD 225.0 million) Project IRR of 15% estimated if power and water provided >by a third party (increased from 13%)Project IRR of 18% estimated under 10Mtpa mine scenario >(increased from 15%)

The economics of the project were also positively impacted by the assumption of higher pricing for Brazilian benchmark Tuberao DR quality pellets, which feed directly to higher pricing expectations for Wadi Sawawin DR pellets. In addition, the potential to increase the IRR through further optimisation of the capital expenditure, provision of power, desalination and potentially port facilities by third parties and through the expansion of the mine to 10Mtpa is significant.

The equity IRR will be dependent on the funding structure selected. NMC expects to raise financing to build the project through a combination of funding from local sources (including PIF and SIDF), commercial debt and the provision of offtake arrangements in exchange for an equity stake. The minimum leverage achievable is expected to be 60%.

The current indicated JORC resource of 248Mt grading 39.8% Fe is sufficient for a mine life of 21 years at the run rate of 5Mtpa. In addition, London Mining has inferred resources of 134Mt grading 39.2% Fe (as well as further exploration targets) which may provide the basis for an extension of the mine life at 5Mtpa by over 10 years or an expansion to 10Mtpa. London Mining will continue to undertake sufficient exploration to maintain the licences in good standing until funding is secured. The current resource is based entirely within the Western exploration licence and is contiguous with the current exploration licence. NMC has recently submitted to the Ministry of Petroleum and Mines in Jeddah an application for a revised exploitation licence sufficient for a 5Mpta 20 year mine.

The BFS process was managed by the London Mining project team, based primarily in Oman, who engaged a team of consultants comprising: Worley Parsons (project management, transport, bathymetry and ESHIA studies), Ausenco (mineral processing and plant engineering), Snowden Group (geology and mine planning), AMMTEC (ore variability testing), Corus Consulting (formerly British Steel Consulting Overseas, mineral processing), CIT (drilling contractor), AME Mineral Economics and CRU Strategies (market report) and Southern Mining Consultants (financial analysis). The BFS has been conducted to ensure the operation will meet Equator Principles.

18Overview




Colombia (100% ownership)In March 2010 London Mining acquired the 80% of ICC, (now renamed to London Mining Colombia) that it did not already own for an initial consideration of USD 5.5 million in cash and 3.5 million newly issued London Mining shares, with potential further consideration of up to USD 8.5 million and up to 6.3 million shares payable subject to the satisfaction of performance conditions. The performance conditions were linked to EBITDA and capital expenditure targets for the coke ovens, and to the delivery over time of attractive coking coal and port opportunities.

London Mining is now constructing coke ovens with a capacity of 200ktpa in the Boyaca region of Colombia, a region with significant local production of high quality coking coal. Completion of construction and first coke production is now expected in Q3 2011. This revised timeline is due to severe flooding associated with the La Niña weather system which required significant remedial drainage and some limited redesign. Full capacity of 200ktpa is expected to be reached in Q1 2012, following which the Company expects to commence a second phase of construction, increasing capacity to 400ktpa of coke. The capital expenditure for the first phase is expected to be USD 30.0 million.

The Company has agreed in principle a supply agreement with a local coking coal producer at a small discount to local market prices for up to 300ktpa of low volatility coking coal from mines being developed on neighbouring properties to London Mining’s coke ovens. Following a high-level drilling programme on these properties, London Mining decided to enter into a supply agreement in preference to the original proposed joint venture structure.

The Company is in the process of investigating the potential of further concessions both in proximity to the coke ovens and also in other areas with high coking coal potential. An agreement has been signed for a concession in the vicinity of the coke ovens and which the Company is currently drilling with the expectation of developing a low and mid volatility coking coal mine to supply the coke ovens. In addition, the Company has signed a concession agreement for a property in the Cundinamarca province, which it will be exploring as a joint venture with another party. At the end of December 2010, 2,615 metres of diamond drilling and 3,724 metres of RC drilling had been completed.

The Company is also in a number of discussions with port and transport companies regarding short and medium term export arrangements.

Colombia

– 200ktpa coke production by Q1 2012 – Supply agreement of 300ktpa of coking coal– Coking coal production opportunity under evaluation

Construction of coke ovens, Colombia

19

CGMR pit, China

China & Chile

China Global Mining Resources Joint Venture (“CGMR JV”), China (50% ownership through a joint venture)Mining operations were halted by the mining authorities in Anhui province during the year, for reasons which primarily concerned the continued delay in consolidating the mines situated on the CGMR JV licence. The operator of the other two pits on the CGMR JV licence has recently won a court case which ruled that all current pits on the licence should be integrated into one jointly owned operation without payments being made between the parties. The CGMR JV has appealed this ruling, for which London Mining was advised there was no legal basis.

In addition, the arbitration claim from the original vendors of the XNS mine and Sudan processing plant regarding the timing for payment of deferred consideration of approximately USD 18.0 million (translated at 31 December 2010) remains unresolved, with an initial hearing date now set for April 2011. Given the current inability to operate the mine and the ongoing legal claims and rulings, London Mining has written down its investment in the CGMR JV to USD nil carrying value. London Mining is investigating bringing in a Chinese partner to operate the mine in return for equity in the business.

Chile (50% ownership through a joint venture) As announced on 30 July 2010 London Mining has entered into a joint venture with a Chinese and Chilean based partner to take advantage of iron ore opportunities in the Atacama region of Chile. Under the agreement, London Mining has subscribed for 50% of the shares of the joint venture company, Atacama Mining Resources Corporation (“Atacama”).

At the date of investment, Atacama held options over a number of concessions to iron ore deposits in the Atacama region of Northern Chile, an area of known iron ore resources. Atacama is also actively

exploring a number of new opportunities that could secure alternative options over iron ore concessions that are of great interest to Chinese strategic investors. Atacama has also recently secured an option over port access rights within a short distance of this region and is considering potential for establishing near-term production. Under the terms of the agreement, any prospective iron ore concessions discovered in Chile by London Mining’s partners will be developed through the Joint Venture; London Mining also receives a priority loan return from production and/or any new cash raised by the venture.

Prior to year end, London Mining’s investment in the Joint Venture was USD 11.2 million (net of exploration costs expensed during the year) of which USD 5.0 million was recorded as goodwill and USD 6.2 million was shown as a long term receivable. In accordance with International Financial Reporting Standards, London Mining has written down the goodwill recognised at the date of the agreement to USD nil and has made full provision against the long term receivables. The provision is required because the portfolio of iron ore concessions and logistics opportunities being considered by Atacama has changed since the date of London Mining’s initial investment into the venture. In accordance with accounting standards, the initial investment of USD 11.2 million is not able to be reassigned to new exploration and port concession opportunities now being evaluated or obtained. The provision made against the receivable may be reversed if either new cash is invested into the venture or the venture has a defined resource or reaches production from one of the many new early stage opportunities it is currently negotiating.

The joint venture has received interest from a number of parties for a potential off-take from concessions undergoing early stage exploration in and around this area based on initial sample specifications taken and is currently in negotiations for a possible strategic investor into the project.

20Overview




Corporate responsibility

Relations Officer Saticon Mohammed with the Paramont Chief of Lunsar

Corporate responsibilityLondon Mining plans to apply international best practice, specifically compliance with the IFC Equator Principles at all its projects, where appropriate. The focus of current efforts is the ongoing development and implementation of environment, community and health and safety management plans at Marampa following the completion of the environmental impact assessment and award of the environmental permits in January 2011 and ahead of first production in 2011. Base line work continues in Greenland ahead of the likely completion of a BFS in 2011. The Colombia operations have received all necessary permits to develop and operate coke ovens.

Marampa – Sierra LeoneOnce in production London Mining will pay a 3% royalty to the Government of Sierra Leone, the standard government royalty for iron ore producers, and may contribute up to a further 1% of revenues into a community development fund of which half will be used to fund local projects and half will be contributed towards national initiatives. This fund will be administered by a board comprising London Mining and representatives of all sections of the local community. London Mining intends to focus on projects that leave a legacy investment in health, education and the environment.

During 2010 London Mining committed over USD 0.5 million to several initiatives including: funding of 300 primary and secondary school scholarships; the provision of school libraries and training of teachers in over 50 schools in the Lunsar and Port Loko region; construction of public toilets in Lunsar and Port Loko and the construction of the medical centre in the Military Hospital in Freetown. London Mining has also commenced collaboration with a local technical academy in Lunsar that teaches around 200 local youths, trade skills e.g. engineering; carpentry; electrical etc. London Mining plans to implement a mentoring scheme to provide employment for some of the graduates from this scheme.

London Mining is a responsible corporate entity, and is aware of the key roles it fulfils as an employer; as a partner in developing local communities; and of the impact its operations can have on the environment.

21

Isua – GreenlandLondon Mining has now completed two full seasons of baseline data collection at Isua with the following areas targeted: mine rock geochemistry and lake water chemistry, hydrology, meteorology, studies on glacier and sea ice, regional biodiversity, archaeology and local socioeconomic systems. The social impact study is now in progress, a scoping study has been completed and draft terms of reference have been submitted and several public consultation meetings have now been completed. The Environmental Impact Assessment is expected to start in Q1 2011. Both the environmental and social impact studies are expected to be in place to allow completion of the BFS by the end of 2011.

Colombia In Colombia London Mining is pursuing several important initiatives including focus on mine safety, employment and activities to mitigate any potential adverse environmental impact.

London Mining is working with local miners and local government institutions to set up rescue centres and security support centres. We are creating programs to incentivise the mining safety practice under the highest security standards in the region and have documented such standards in Safety Manuals (in both English and Spanish) for our employees, consultants and third party contractors.

London Mining is also significantly involved in environmental care and sustenance; the purpose is to be a model company in terms of mitigation of environmental impact and the implementation of proper measures in order to benefit the region with employment and sustainability, and at the same time to be environmentally friendly with the region. As part of this scheme London Mining has developed reforestation programs that considered at least 2,000 native plant species, with the support and participation of local school students.

Local employment generation: London Mining also prioritises the hiring of local people in order to improve the economic conditions and ensure area support.

Wadi Sawawin – Saudi ArabiaOperations at Wadi Sawawin are being undertaken to ensure compliance with Kingdom of Saudi Arabia (“KSA”) legislation as well as the Equator Principles. London Mining has a number of policies and management strategies designed to mitigate potential risks to the surrounding environment (including the social setting). These include an HSE management system; safety regulations during construction; safety regulations after preliminary takeover; construction environmental management standards; excavation requirements; Wadi Sawawin HSE management plan; and security requirements. All environmental planning, protection and policy in KSA is to encompass all aspects of Islam and its teachings. Protection, conservation and development of the environment and natural resources are all regarded as mandatory religious duties.

22Overview




Financial review

In the year ended 31 December 2010 the Group has changed to equity accounting for its interest in joint ventures to better reflect the way the Group now manages and reviews such investments. For the year ended 31 December 2009 the Group accounted for investments in joint ventures using the proportionate consolidation method as permitted by IAS 31 Interests in Joint Ventures. Results for the year ended 31 December 2009 have therefore been restated to reflect the change in accounting policy, the effects of which are shown in note 5 to the financial statements. 1. Income statement The principal key performance indicator by which the Group measures the performance of its projects is earnings before interest, tax, depreciation and amortisation (EBITDA1). EBITDA for the year ended 31 December 2010 is a net loss of USD 31.4 million (equivalent year ended 2009 net loss: USD 31.7 million).

It is noted that no amounts are included in EBITDA for joint ventures following the change in accounting policy from proportionate consolidation to equity accounting. EBITDA is stated prior to any impairment of joint ventures or associates. Included in EBITDA for the year ended 31 December 2010 is:

USD 32.4 million (2009: USD 32.5 million) of administration >costs including:

staff related costs of USD 14.0 million (2009: 19.1 –million) comprising:i) USD 1.9 million (2009: USD 4.2 million) charge

arising from the return bonus plan2; this charge reflects the non-cash IFRS 2 charge: cash payments for the return bonus plan during the year were USD 2.9 million (2009 USD 2.0 million) and a further USD 4.2 million is due (subject to the return bonus plan rules), payable over the next three years, of which USD 1.6 million will be covered by proceeds from the exercise of respective options;

First production at Marampa and Colombia fully funded– Cash of USD 76.0 million– USD 110.0 million convertible bond raised in January 2011– USD 60.0 million revolving credit facility available (subject to CP)

Joint ventures now equity accounted (China & Chile)

Group EBITDA loss of USD 31.4 million1 (2009: USD 31.7 million)– Includes USD 5.6 million as Sierra Leone ramps up– Impairments of USD 61.7 million (not included in EBITDA)

– mainly in relation to China

1 Excludes impairments and share of results of joint ventures and associates2 Compensation payments made under the Return Bonus Plan relate to the “Return

of Cash” to shareholders. Full details of the compensation scheme are disclosed in the 2008 annual report. In summary, participants in the Company’s share-based remuneration schemes receive an equivalent compensation payment for the loss of value in awards held at the time of the Return of Cash. The compensation payment vests in accordance with underlying terms of the original award to which it relates.

Chief Financial Officer of London Mining, Rachel Rhodes opening new hospital with the President of Sierra Leone, Ernest Bai Koroma

23

ii) USD 3.9 million (2009: USD 4.8 million) staff costs for Directors and key management. The reduction is due to one off AIM listing and other bonuses paid in 2009;USD 5.4 million of other staff costs (2009: USD 4.8 million). Higher costs reflect the increase due to higher head count following the ramp up of Sierra Leone operations and the acquisition of Colombia during the year, which was previously equity accounted; and

iii) A non-cash charge of USD 2.8 million (2009: USD 5.3 million) of share based payments to staff, Directors and key management. This reduction is due to options vesting in 2010.

Other costs: –i) USD 7.0 million (2009: USD 4.3 million) of

consultancy and legal fees. The increase is a result of fund raising costs, litigation costs in China and higher activity in Sierra Leone and Colombia (which was consolidated during the year);

ii) USD 3.1 million (2009: USD 2.0 million) of travel costs, due to higher activity at all projects, in particular Sierra Leone;

iii) USD 4.0 million (2009: USD 1.7 million) of other Sierra Leone overheads as the operation ramps up to production and also includes USD 0.6 million of corporate and social responsibility costs in relation to the Group’s community investment projects of education, health and the environment; offset by

iv) USD 0.1 million (2009: USD 2.2 million) of AIM listing fees, due to the listing in November 2009.

ImpairmentsThe ongoing legal claims and production cessation in the Group’s Chinese Joint Venture have resulted in a prolonged delay to the fund raising process to acquire and consolidate the neighbouring pits. As a result the Directors have determined until such time there is more certainty around the legal status of the integrated CGMR JV licence and the required fund raising the recoverable amount from the investment should be written down in full.

Therefore, for the year ended 31 December 2010, an impairment of USD 50.0 million has been made in relation to the Chinese operations, of which USD 14.2 million was made in the period to 30 June 2010. This includes an impairment of USD 48.2 million to the Group’s share of the investment in the CGMR JV and an impairment of USD 1.2 million to receivables from the joint venture partner (note 9).

In accordance with International Financial Reporting standards London Mining has written down its net investment in the Chile joint venture to USD nil. The provision is required because the portfolio of iron ore concessions and logistics opportunities being considered by the venture has changed since the initial investment. In accordance with accounting standards the initial investment cost is not able to be reassigned to new exploration and port concessions opportunities now being evaluated or obtained. This has resulted in an impairment of USD 11.6 million.

Loss on disposal of subsidiaryOn 31 March 2010 the Company received net proceeds of USD 0.8 million in relation to the disposal of its investment in Compania Minera Suizo-Mexicana, SA de CV Ltd, (“CMSM”) a Mexican incorporated entity. CMSM has been deconsolidated

from that date and a loss on disposal recognised of USD 0.2 million.

Fair value loss on deferred considerationA cumulative loss for the year to date of USD 5.6 million has been recognised in respect of deferred London Mining share consideration payable on the acquisition of ICC. The loss arose due to the revaluation of deferred share consideration to market value reflecting the increase in the London Mining share price from acquisition to 31 December 2010, (note 25).

TaxationA USD 1.3 million deferred tax asset has been recognised in the year, which relates to Sierra Leone carried forward losses which are expected to be utilised against future taxable profits.

2. Balance sheetIntangible assetsIntangible assets increased from USD 49.3 million at 31 December 2009 to USD 97.2 million at 31 December 2010. This is primarily the result of the acquisition of ICC which has added goodwill of USD 39.7 million and further assets of USD 4.4 million. In addition there has been continued development at projects in Greenland, (USD 10.1 million drilling and feasibility study costs) and Saudi Arabia, (USD 7.3 million). Intangible assets in 2009 included USD 11.5 million related to Sierra Leone which have been transferred to Property, plant and equipment in 2010 in accordance with Group accounting policies when a project moves through to development.

Property, plant and equipmentProperty plant and equipment increased from USD 3.6 million at 31 December 2009 to USD 81.1 million at 31 December 2010. This is due to additions of USD 74.1 million for the Marampa project, of which USD 20.7 million was transferred from intangible assets (including the 2009 Sierra Leone opening intangible asset balance of USD 11.5 million). Further additions of USD 53.4 million have been made during the year, the result of ongoing construction and in particular for contracts and orders for the WHIMS plant, power generators and port facility.

Investment in joint ventures and associate, loans and receivables and assets held for saleThe investments in CGMR JV and Atacama have been written down to a USD nil value as at 31 December 2010 – see note 24.

At 31 December 2009, London Mining had a convertible loan due from DMC Energy (Proprietary) Limited (“DMC Energy”) and a 39.3% associate investment in DMC Coal Mining (Pty) Limited (“DMC Coal”). On 13 January 2010 London Mining converted the loan and equity investment in DMC Coal into an associate investment of 28.0% (now diluted to 27.5%) of the issued share capital of Delta Mining Consolidated Limited (“DMC Group”).

On 23 April 2010, London Mining accepted an offer from Sable Mining Africa Limited (“Sable”) of USD 24.8 million in cash for its interest in DMC Group, (“DMC”) pending regulatory approval. As a result the investment in DMC at 31 December 2010 is classified as held for sale.

24Overview




Under the terms of a downside protection agreement between the CEO and CFO of DMC, London Mining is entitled to an additional amount of USD 15.2 million. Approval was received from The South African Regulatory Bank in respect of enforcement of the downside protection agreement in August 2010. No reversal of the previous USD 6.0 million impairment made in Q2 2009, nor upwards revaluation of the carrying value has been made to reflect the full value of the protection agreement as London Mining is currently in the process of enforcing the downside protection agreement against the CEO and CFO.

Deferred consideration payableThe USD 24.3 million non-current deferred consideration relates to the acquisition of ICC and comprises potential deferred cash and non-cash share consideration, the vesting of which are subject to performance milestones, (note 25).

Movements in equityShare capital and the merger reserve have increased due to the issue of 3.5 million shares as a non-cash transaction as part of the consideration for the acquisition of ICC. Since 31 December 2009 there have been 676,666 shares issued, 500,000 in relation to the exercise of warrants and 176,666 in relation to exercised options by London Mining employees, resulting in a net cash inflow of USD 1.7 million.

The shares held in the employee benefit trust reserve have decreased by USD 8.8 million as a result of:

A reduction of USD 10.0 million as a result of the transfer >of 4.7 million shares held by the trust to the CEO following the vesting and subsequent exercise of his nil-cost share awards. The transfer is at the weighted average cost of the total shares held by the trust;

A reduction of USD 5.5 million from sale proceeds of >1.8 million shares sold on behalf of the CEO to fund part of the tax arising on the exercise of the nil cost share awards, (sales proceeds of USD 5.0 million) and a USD 3.0 million reduction from the sale of 1.0 million shares, (sales proceeds of USD 4.9 million); offset byUSD 9.7 million increase arising from 2.6 million shares >purchased by the Trust during the period.

The warrant and option reserve has decreased by USD 3.0 million during the year due to USD 5.8 million of share based payment charges on exercised options being transferred into retained earnings, which is partially offset by the USD 2.8 million of share based payment charge in the period.

3. Cash flowTotal cash decreased during the year by USD 127.9 million (excluding foreign exchange) to USD 76.0 million

In summary the net decrease in cash during the year resulted from:

USD 29.6 million net outflow from operating activities, >(2009: USD 22.8 million outflow);USD 98.1 million net outflow from investing activities, >(2009: USD 77.7 million outflow); andUSD 0.2 million net outflow from financing activities, >(2009: USD 12.0 million outflow).

Operating cash outflowThe USD 29.6 million operating cash outflow has arisen from the USD 99.6 million net loss for the year adjusted for non-cash and non-operating items, including:

USD 61.7 impairment charges; >USD 5.6 million fair value loss on deferred consideration; >USD 2.8 million share based payment expense; >USD 1.3 million deferred tax credit; >

Financial review continued

25

USD 1.0 million depreciation; >USD 1.0 million share of loss from joint ventures and >associates; andUSD 1.1 million outflow from working capital. >

Investing cash outflowsInvesting cash flows for the year included:

A total of USD 82.3 million spent on intangible assets and >property, plant and equipment, reflecting the ongoing development of projects including:

USD 52.1 million Marampa, Sierra Leone; –USD 10.4 million Wadi Sawawin, Saudi Arabia; –USD 11.3 million Isua, Greenland; and –USD 7.5 million ICC, Colombia. –

USD 6.5 million loans provided to fund acquisition and >exploration in relation to the Chilean joint venture (note 16);USD 5.1 million net cash outflow in respect of the >acquisition of ICC; andUSD 5.5 million payment of previously accrued transaction >costs in relation to the 2008 Brazil disposal stated net of proceeds from the Mexico disposal of USD 0.8 million.

For the year ended 31 December 2009 the investing cash flow included an amount of USD 44.5 million in respect of the acquisition and funding of the CGMR JV (note 16).

Financing cash outflowNet cash outflow from financing activities of USD 0.2 million is a result of:

USD 9.9 million inflow into the employee benefit trust from >the sale of shares;USD 1.7 million inflow from the exercise of warrants and >options; USD 9.7 million outflow from the purchase of shares by >the employment benefit trust; andUSD 2.1 million outflow in relation to arrangement fees >for the revolving credit facility.

4. Liquidity and going concernAt 31 December 2010 the Group had cash of USD 76.0 million and no material drawn down borrowings.

In February 2011 the Company received the proceeds (net of costs) of a USD 110.0 million offering of unsecured convertible bonds, repayable in 2016. The bonds carry a coupon of 8% per annum, payable semi-annually in arrears and will be convertible into London Mining Plc shares at a conversion price of GBP 4.84 per share, representing a 38% premium to the average market price on the date of offering. 100% of the bonds’ principal amount, unless previously converted, redeemed or purchased and cancelled, will be redeemed on maturity. London Mining has the right to redeem all outstanding bonds at par together with accrued interest from three years after the closing date at any time as long as the share price exceeds 130% of the conversion price for more than 20 out of 30 consecutive trading days or if 15% or less of the bonds remains outstanding.

On 15 October 2010 London Mining announced that it had concluded a USD 60.0 million two year revolving credit facility arranged by Standard Chartered Bank, (“SCB”). The facility is subject to certain conditions precedent which the Directors expect to be fully satisfied in Q2 2011.

London Mining has sufficient cash resources in conjunction with the expected receipt of USD 24.8 million proceeds from the sale of DMC, convertible bond and SCB facility to deliver Phase 1a tailings production at Sierra Leone; to accelerate Phase 1b expansion; to fund the Phase 2 bankable feasibility study; and for initial coke production and exploration activity in Colombia in accordance with the Group’s reported timetable.

Production funding for the more capital intensive projects in Greenland and Saudi Arabia will be sought from external funding into these projects directly. London Mining is seeking funds to finance a 15Mtpa BFS in 2011 for the Isua project, with financial and strategic partners being considered. Royal Bank of Canada and Macquarie are advising on the process for selecting a funding partner.

External funding of the CGMR JV is still needed to finance the required consolidation and growth of the Chinese operations. London Mining is investigating bringing in a Chinese partner to operate the mine in return for equity in the business, and it is in discussions with several parties regarding this approach.

The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance and the timing of project commissioning, show that the Group has sufficient committed liquidity even without reliance on the SCB facility, to fund its committed expenditure and will be able to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis.

5. Change in accounting policyFor the year ended 31 December 2010 the Group has changed its accounting policy to account for joint ventures using the equity method rather than the proportionate consolidation method to better reflect the way in which the Group now manages and reviews its investment in joint ventures. Results for the year ended 31 December 2009 and 2010 have been restated to reflect this change in accounting policy.

Previously the Group had recognised revenues, costs, assets and liabilities on a proportionate consolidation basis, these items have now been consolidated into share of results of joint ventures in the income statement and Investment in Joint ventures and associates on the balance sheet (note 5).

6. Related party transactionsRelated party transactions are disclosed in note 32.

7. Forward looking informationThis financial report contains certain forward looking statements with respect to the financial condition, results, operations and business of the Group. These statements and forecasts involve risk and uncertainty because they relate to events that depend on circumstances in the future. There are a number of factors that could cause actual results or developments to differ from those expressed or implied by these forward looking statements.

26Overview




26

Principal risks and uncertainties

London Mining is exposed to a variety of risks and uncertainties which can have a financial, operational or reputational impact on the Group and which may also impact the achievement of social, economic and environmental objectives. The principle risks and uncertainties facing the Group have been categorised into headline risk areas. The Group’s risk management policies and procedures are also discussed in the corporate governance statement on page 38.

Risks

1. Mineral reserves and resources

2. Dependence on licences

5. Environmental risk and hazards

3. Commodity prices

6. Foreign operations

8. Insurance and uninsured risk

4. Government regulations

7. Joint ventures

9. Dependence on key personnel

10. Liquidity and counterparty risk

11. Currency risk

27

Description of risks

There are a number of uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Group’s control. Such estimation is a subjective process, and the accuracy of any reserve or resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation. There can be no assurance that mineral resources can be upgraded to proven or probable mining reserves and recovered.

The Group is dependent on the granting and renewal of mining and exploration licences in order to explore for and produce mineral resources from the assets of the Group and its joint venture companies. Failure to obtain a licence, revocation of an existing licence or failure to renew a licence could have a material adverse effect on the Group’s financial performance.

The Group is exposed to environmental risk, for example in the form of dust suppression, carbon emissions and deforestation. Failure to adequately manage environmental risks could result in fines or penalties, environmental remediation or in certain cases government authorities forcing closure of mines on a temporary or permanent basis.

The market price of the Company’s shares, financial results, exploration, development and operating activities have previously been, and may in the future be, significantly adversely affected by declines in commodity prices.

The Group currently has interests in exploration, development and operating projects in Sierra Leone, Greenland, Colombia, Saudi Arabia, China and Chile. Therefore the activities of the Group are exposed to varying degrees of political and economic risk and other risks and uncertainties.

Although the Group maintains insurance to protect against certain risks in such amounts as it considers reasonable and seeks to ensure that its joint venture companies in which it invests do likewise, such insurance will not cover all the potential risks associated with a mining Group’s operations and may not be adequate to cover any particular liability.

The exploration, development and operating activities of the Group are subject to various laws governing exploration, development, mining, processing, taxes, labour standards and occupational health and safety, toxic substances, transportation on land use, water use, land claims of local people and other matters. Although the Group believes that the activities are currently being carried out in accordance with all applicable laws, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail production or development.

Joint ventures involve special risks. The risks may be associated with the possibility that the Group’s joint venture partners may (i) have economic or business interests or goals that are inconsistent with or opposed to those of the Group, (ii) exercise veto rights so as to block actions that the Group believes to be in its or the joint venture’s best interests, (iii) take action contrary to the Group’s policies or objectives with respect to its investments, or (iv) as a result of financial or other difficulties, be unable or unwilling to fulfil their obligations under the joint venture or other agreements.

The success of the Group is dependent on its senior management. The experience of these individuals will be a factor contributing to the Group’s continued success and growth. The loss of one or more of these individuals could have a material adverse effect on the Group’s business prospects.

Liquidity risk is the risk that the Group and the joint venture companies in which it invests may not be able to meet their liabilities as they fall due and as a result, cease trading. The Group’s policy on overall liquidity is to ensure that there are committed funds in place which, when combined with available cash resources, are sufficient to meet the funding requirements for the foreseeable future. The Group expects its Greenland, Saudi Arabia and Chinese projects to raise external finance to fund development. If this finance is not raised, then the timing of these or other projects may have to be delayed, or the Group may need to raise additional financing or seek to recover its investment through other means.

The Group is also exposed to counterparty risk from customers or holders of cash that could result in financial losses should those counterparties become unable to meet their obligations to the Group. The Group uses multiple banks to diversify its counterparty risk.

The Company’s functional currency is United States Dollars (“USD”). Iron ore sales and the sales of other minerals and metals are typically denominated in USD while the Group’s costs are incurred in several currencies. The Group may undertake hedging activities against these potential fluctuations. However, there are no assurances that hedging strategies, if implemented, would be successful.

28Overview




driven fund raisings and share placings of over USD 400 million, asset and company acquisitions and joint venture partnerships, the establishment of off-take and strategic relationships, the Company’s listings on Oslo Axess and the London AIM, acquisition, growth of and subsequent disposal of the Group’s Brazilian operations and the overall development of the Group’s expanding iron and coal projects and international management team. Prior to founding the Company, Graeme ran a venture development consultancy assisting resource and high growth venture companies and has founded and developed new ventures as principal adviser and executive in several industries including natural resources, media and consumer products. Graeme was previously a management consultant with Bain and Company in London, and in venture capital and innovation consulting with Piper Trust. Graeme holds a business degree from Ivey at the University of Western Ontario.

3. Rachel RhodesChief Financial Officer (age 40)Rachel was appointed to the Board on 4 September 2008 as CFO. She is a member of the Institute of Chartered Accountants in England and Wales, having qualified with Coopers & Lybrand in London in 1996. She has over 15 years’ experience in the mining sector, of which the last five years prior to joining London

Mining were in key financial roles with Anglo American Plc. During this time at Anglo American, Rachel successfully led major corporate transactions, including the financial workstreams on the demerger of Mondi Plc, Anglo’s paper and packaging business, which was dual-listed on the London and Johannesburg stock exchanges and also led the Group’s conversion to International Financial Reporting Standards in 2006. Rachel holds a Master of Arts degree in economics from Cambridge University.

4. Sir Nicholas BonsorDeputy Chairman and Senior Independent Non-Executive Director (age 68)Sir Nicholas was appointed to the Board on 1 September 2007 as a Non-Executive Director and appointed Deputy Chairman in 2010. A barrister specialising in regulatory and commercial law, Sir Nicholas was a member of the British Parliament from 1979 to 1997 where he specialised in foreign affairs and defence, and was chairman of the Defence Select Committee from 1992 to 1995 and Minister of State at the Foreign Office from 1995 to 1997. Sir Nicholas has served on the board of several companies, including Blue Note Mining Inc. (Canada) from 2006 to 2008, and is the Chairman of Egerton International Ltd, Metallon Gold Corporation Plc, and the Oil and Mineral Company Plc. He is a Deputy Lieutenant of Buckinghamshire, a

Board of directors

1. 2.

3. 4.

1. Dr. Colin KnightNon-executive Chairman (age 77)Colin was appointed as a Non-Executive Director and Chairman of the Company on 14 June 2005. He is a mining engineer and economic geologist and, since 1983, has consulted on mining finance and policy on projects worldwide for London stockbrokers and banks, and for the World Bank and Commonwealth Secretariat in developing countries in Africa. After military service in the Royal Engineers, Colin spent some 18 years in the Canadian mining industry, including exploration, operations, mining finance and ultimately consulting. He returned to the UK in 1974, working for the Rio Tinto group in London in European and overseas exploration, budget control, project appraisal and negotiations with joint venture partners and governments. He qualified in mining engineering at the Camborne School of Mines, and holds a degree in economic geology and a PhD from the University of Toronto. Professional associations include FIMM (now FIMMM), CEng, PEng (Canada).

2. Graeme HossieChief Executive Officer (age 46)Graeme co-founded London Mining in 2005 and has been instrumental in building the Group from inception. In his roles developing the Company as Finance Director, Corporate Development Officer and Deputy Managing Director and, since February 2009, as Chief Executive, he has

29

freeman of the City of London (1988), a member of the Chartered Institute of Arbitrators and a fellow of the Royal Society of Arts. Sir Nicholas practised as a barrister from 1967 to 1975 and from 2003 to 2011. Sir Nicholas holds a master of arts degree in jurisprudence from Oxford University.

5. Malcolm GroatNon-Executive Director (age 50)Malcolm was appointed to the Board on 4 September 2008 as a Non-Executive Director having previously held the position of part-time Finance Director from June 2007. Malcolm is a fellow of the Royal Society for the encouragement of Arts, Manufactures and Commerce, a fellow of the Institute of Directors, and a fellow of the Institute of Chartered Accountants in England and Wales. In the mining sector, he serves as director at Nusantara Energy Plc and has served in the past on the boards of Platinum Mining Corporation of India Plc (admitted to AIM, 2005) and Tengri Coal Plc of Mongolia. Prior to working in the mining sector, Malcolm spent a decade in finance roles in large global engineering groups. Before that he qualified with PriceWaterhouse in London and worked internationally in corporate finance. Malcolm holds a Master of Arts degree in Modern History and International Politics from St. Andrews University and an MBA from Warwick University.

6. Dr. Hans Kristian SchønwandtNon-Executive Director (age 70)Hans was appointed as a Non-Executive Director on 4 January 2006. He was the deputy minister, head of the Bureau of Minerals and Petroleum for the Greenland Government from 1998 until he retired in October 2005. Between 1987 and 1998 he was head of the department of economic geology at the Geological Survey of Denmark and Greenland. Hans has a PhD in economic geology from the University of Copenhagen.

7. Graham MascallNon-Executive Director (age 64)Graham was appointed as a Non-Executive Director on 1 May 2010. Graham is currently chief executive officer of the Ncondezi Coal Company, an emerging private junior coal company focused on the Moatize coal basin in the Tete region of Mozambique, as well as having served until recently as a non-executive director of Caledon Resources, a coking coal miner in the Bowen Basin, Queensland. Graham holds a degree from Cambourne School of Mines and McGill University.

8. Luciano RamosChief Operating Officer, Iron Ore Division (age 51)Luciano was appointed as a Director on 23 February 2011. Luciano is a Mining Engineer and has worked for over 26 years in the Brazilian mining industry

including 15 years at CVRD/Vale between 1992 and 2007. He has also worked on international projects in Australia and Chile. Luciano has particular expertise in the following: management and coordination of process engineering at iron, gold, bauxite, kaolin and manganese plants; project implementation for both greenfield and brownfield operations; project coordination for the manufacturing of mineral processing equipment; management of processing operations; and technological research and development.

9. Benjamin LeeCorporate Development Director (age 39)Benjamin was appointed as a Director on 23 February 2011. Benjamin is involved in all financial and strategic aspects of current and future projects. Prior to joining London Mining in early 2009, Benjamin was head of UK Mergers & Acquisitions at Kaupthing Bank from 2007 to 2008. Among a number of transactions completed there, he was the lead adviser to London Mining on the disposal of their Brazilian iron ore mine. Prior to joining Kaupthing, Benjamin worked for 13 years in Mergers & Acquisitions at UBS in London and New York, advising on a wide variety of transactions for large and mid-sized companies. Benjamin graduated from Cambridge University in 1993 with an MA in Economics.

5. 7.

9.

6.

8.

30Overview




London Mining technical team

Felix Kayat Deputy COOFelix Kayat joined London Mining in February 2009. A Chemical Engineer by training, Felix has over 34 years experience in industrial production management, project supervision and construction management, new business development and completion of economic feasibility studies. Before joining London Mining he was employed by MPX Energia in Colombia developing resources and logistics solutions to supply coal from Colombia to Brazil and Chile. Felix spent the formative years of his career with Vale working on iron ore, coal and steel projects in Brazil, China, Colombia and Mozambique.

Thomas Credland Head of Investor RelationsThomas is a geologist and joined London Mining in March 2009. Prior to joining London Mining, he was an institutional equity salesman in the highly successful mining and metals team at Canaccord Adams that raised in excess of $1billion in new equity for a number of high profile iron ore and coal companies. Prior to this, Thomas was a mining analyst for Brook Hunt and Associates, working on their base metal and gold cost studies. Thomas has spent time working in exploration and development most notably at Xstrata’s Windimurra Vanadiam Project in Western Australia. He has a

BSc (Hons) in Geology from the University of Edinburgh and an MSc in Mineral Project Appraisal from the Royal School of Mines at Imperial College.

Rohit BhoothalingamGeneral Counsel, Company SecretaryRohit joined London Mining in December 2008. Prior to this he was General Counsel at a London based natural resources focussed hedge fund. Prior to this he specialized in various aspects of corporate finance and project finance for large and midsized companies, banks, venture capital and private equity firms at US law firms Wilmer Hale, in New York and London, and Orrick, Herrington & Sutcliffe in New York. Rohit studied law at Cambridge University and holds a Masters in Law from Georgetown University Law Center. He qualified for the New York Bar in 1999.

Xiaogang HuProject Director for Isua, GreenlandXiaogang is an engineer specialising in cold regions with 28 years experience, Dr Xiaogang Hu has been involved extensively in design and construction phases on mining projects in the Canadian Arctic Region. Of particular note is his work on the Voiseys Bay nickel and Diavik diamond projects.

Senior management

31

David OwenProject Director for Marampa, Sierra Leone (previously the Project Director for Wadi Sawawin, Saudi Arabia) David is a civil engineer with over 35 years of experience in oil and gas, power and civil engineering most notably with Lurgi GmbH, Uhde GmbH (part of Thyssen Krupp Group), Technip (Mannesmann Demag Energie und Umwelttechnik) in the Middle East. David’s particular expertise is in contract and procurement management.

Colin ElstonProject Director for Wadi Sawawin, Saudi ArabiaColin is a mechanical engineer with over 40 years of experience in the primary metal industry. He has particular expertise in development and installation of heavy materials handling equipment. Before joining London Mining he was employed by SNC LAVALIN in Canada and Qatar, Aluminium Bahrain BSC, Metpro Machinery Ltd (UK).

Jairo CaicedoProject Director for Socha, ColombiaJairo holds a Masters degree in Industrial Engineering with over 25 years of experience in the international coal industry. Jairo has been involved in senior positions ranging from mining operations, logistics, sales and marketing, and finance and administration, as well as having acted as a senior consultant for Vale and Project Director of the Mining, Energy and Planning Unit of the Colombian Ministry of Mines. Jairo has a breadth of experience in various executive positions, and he is also considered a pioneer in the coking coal and coke industries in Colombia. Jairo has spoken at numerous coal conferences and has authored various publications in regard to the Colombian coal market. Sergio GuedesGeneral Manager for Mineral ResourcesSergio is a geologist with 25 years iron ore experience in Brazil, Australia, Saudi Arabia and West Africa with Vale and Rio Tinto. He has particular expertise in the coordination of geology programmes for resource expansion and mine planning. Sergio holds an MBA from the Dom Cabral Foundation.

Rinaldo NardiGeneral Manager for Mineral Processing and Plant DesignRinaldo is a mining engineer and a Phd in mineral processing. He has over 35 years experience mostly with Vale and Companhia de Projetos Industriais in Brazil. He has particular expertise in management of conceptual engineering, basic engineering, feasibility studies, mineral process development, plant start up and optimisation.

Rubens MendoncaMine PlanningRubens is a mining engineer with over 30 years experience with extensive knowledge of the Brazilian and Chilean mining industries, including legal, social and environmental aspects. He has broad experience in mine planning, operational improvements and consulting. Rubens is a Qualified Person under NI 43-101 and Competent Person under JORC in mineral reserve estimation and open pit mining. Rubens is a member of the AusIMM and CIM.

Marampa mineral resources development team at Marampa, Sierra Leone

32Overview




Directors’ report

The Directors have pleasure in submitting the statutory financial statements for the Group for the year ended 31 December 2010.

Principal activities and business reviewLondon Mining is developing mines to supply the global steel industry. The Group has iron ore exploration and development projects located in Sierra Leone, Saudi Arabia, Greenland, China and Chile and a coal project in Colombia.

A detailed Business Review for the Group as required by section 417 of the Companies Act 2006 can be found in the sections of this Annual Report as listed below. These comment on the operation and development of the business and its future prospects along with details of key performance indicators and the description of the principal risks and uncertainties facing the Group.

Chairman’s Statement on page 4; >Chief Executive’s Statement on pages 5 to 7; >Operational and Financial Review on pages 10 to 27; >

This Business Review and other sections of this Annual Report contain forward looking statements. The extent to which the Company shareholders or anyone may rely on these forward looking statements is set out in section 7 of the Finance Review.

DividendsThe Directors recommend that no final dividend be paid for the year. No interim dividend was paid during the year.

Share capitalThe Company’s authorised and issued share capital as at 31 December 2010, together with details of share allotments and purchases of own shares during the year, are set out in note 23 on pages 69 to 70.

Details of employee share schemes are set out in note 27 on pages 75 to 77.

Going concernThe financial position, cash flows and liquidity position of the Group are set out in the operational and financial review on pages 22 to 25.

The Directors have considered the Group’s cash flow forecasts and are satisfied that the Group’s forecasts and projections (taking account of the items noted in the operational and financial review on page 25 show that the Group has sufficient committed liquidity to fund its committed expenditure and will be able to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing the financial statements.

DirectorsBiographical details of the Directors currently serving on the Board and their dates of appointment are set out on pages 28 and 29.

The Directors who served throughout the year are as follows:

Executive Directors Non-Executive Directors

Graeme Hossie Dr Colin Knight Rachel Rhodes Sir Nicholas Bonsor, Bt DL

Graham Mascall1

Malcolm GroatDr Hans Kristian Schønwandt

1 Appointed on 1 May 2010.

Luciano Ramos and Benjamin Lee were appointed as Executive Directors on 23 February 2011.

Graeme Hossie and Colin Knight will retire by rotation at the forthcoming Annual General Meeting and, being re-eligible offer themselves for re-election. Graham Mascall will be offering himself for election as this will be the first AGM since his appointment on 1 May 2010. Luciano Ramos and Benjamin Lee will also be offering themselves up for election as again this is their first AGM since their appointments on 23 February 2011

The Board believes that each Director seeking re-election is an effective member of the Board and demonstrates commitment to their respective roles.

33

Directors’ interestsThe Directors who held office at 31 December 2010 had the following interests either directly through related parties or entities in which the Directors had a beneficial interest in the Ordinary Shares of the Company:

Name of Director Number

31 December 2010 %

owned

Graeme Hossie 6,839,836 6.01Dr Colin Knight 400,000 0.35Sir Nicholas Bonsor Bt DL 47,000 0.04Dr Hans Kristian Schønwandt 150,000 0.13

Details of Director’s share options and benefits under the Long Term Incentive Plan (LTIP) are set out in the Directors’ remuneration report on page 44. No Director had any dealings in the shares of the Company between 31 December 2010 and 31 March 2011, being a date less than one month prior to the date of the notice convening the Annual General Meeting.

Directors’ indemnitiesThe Group has made qualifying third party indemnity provisions for the benefit of its Directors which were made during the year and remain in force at the date of this report. The Company has purchased Directors and Officers Liability Insurance which remains in place at the date of this report.

Charitable and political contributionsThe Group has made no donations to charitable organisations during the year, but operates an active Corporate Social Responsibility program as set out on pages 20 and 21.

The Group sponsored the attendance of certain members of Sierra Leone’s Ministry of Mineral Resources at mining conferences during the year at a cost to the Group of USD 5,000.

Substantial shareholdingsShareholdings in the Company on 22 March 2011 of 3% or more are as follows:

Shares % owned

F&C Asset Management 9,873,003 8.68Schroder Investment Management 9,208,602 8.09GIC Asset Management 8,485,184 7.46Fidelity Investments 8,389,394 7.37Directors 7,436,836 6.54BlackRock 6,742,440 5.93UBS as principal 5,860,969 5.15Bolder Investment Partners 4,327,278 3.80Investec Asset Management 4,272,381 3.76Quilter 3,749,219 3.30Barclays Wealth 3,539,999 3.11Threadneedle Investments 3,421,629 3.01Pabrai Investment Funds 3,421,200 3.01

34Overview




Supplier payment policyThe Group’s policy is to settle terms of payment with suppliers when agreeing the terms of each transaction, ensure that suppliers are made aware of terms of payment and abide by the terms of payment.

Value of landLand is carried in the financial statements at cost. It is not practical to estimate the market value of land and mineral rights since these depend on commodity prices over the next 20 years or more, which will vary with market conditions.

Disabled employeesApplications for employment by disabled persons are always fully considered bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that the appropriate training is arranged. It is the policy of the Group that career development of disabled persons be, as far as possible, identical to that of other employees.

Post balance sheet eventsPost balance sheet events are set out in note 33 of the financial statements on page 82.

AuditorsEach of the persons who is a Director at the date of approval of this Annual Report confirms that:

so far as the Director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and >the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any >relevant audit information and to establish that the Group’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.

Deloitte LLP has expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

ApprovalThis report was approved by the Board of Directors of the Company and signed on its behalf by:

Rohit BhoothalingamCompany Secretary31 March 2011

Directors’ report continued

35

Corporate governance statement

1. Governance of London Mining PlcLondon Mining Plc (the “Company”) is committed to maintaining high standards of corporate governance.

The Company has adopted a common approach to corporate governance to comply with regulatory obligations associated with its listing on the AIM market of the London Stock Exchange (“AIM”) and the Oslo Axess of the Oslo Stock Exchange (“Oslo Axess”).

Whilst not a mandatory requirement of the Company’s listing on AIM, the Directors have chosen to apply the Combined Code on Corporate Governance published by the UK Financial Reporting Council in June 2008 (the “Combined Code”) to promote good corporate governance, where considered practical for a company of its size and development stage of the mining cycle.

The Directors have also applied section 13.2.2(5) of the Continuing Obligations of Stock Exchange Listed Companies published by the Oslo Stock Exchange. In its application, the Company is exempt from applying the Norwegian Code of Practice for Corporate Governance published on 21 October 2009 (the “Norwegian Code”) on the basis that the Norwegian Code shares common corporate governance themes with the Combined Code.

Adherence to the Combined Code is based on a “comply or explain” principle, whereby companies are expected to comply with the recommendations or explain why they have chosen an alternative approach. Below is a summary of the departures from the Combined Code with an explanation of how the Company’s actual practices contribute to good corporate governance.

2. Combined Code complianceThe Company has scoped out its investments in joint ventures for the purpose of these Corporate Governance disclosures as permitted by the Turnbull Guidance on internal controls.

The Company is in compliance with the provisions of section 1 of the Combined Code as at 31 December 2010 except for:A.1.3. the Non-Executive Directors have not yet met to appraise the Chairman’s performance in the year. The Nomination >Committee did however evaluate the Board, its structure and its committees and made recommendations to the Board. A.6 The Board did not undertake a formal annual evaluation of its own performance and that of its committees and individual >Directors.C.2.1 The Audit Committee has not performed a formal review of the effectiveness of the system of internal controls, >(see section 5 below for mitigating circumstances).

Areas of non-compliance in relation to Director’s remuneration are included in the remuneration report on page 41 at paragraph 4.

3. The Board of Directors3.1 MembershipFollowing the changes described above at the date of this report, the Board consists of nine Directors: four Executive Directors and five Non-Executive Directors including the Chairman. The names, skills, experience and expertise of each Director together with their terms in office are shown in the biographical details on pages 28 and 29.

3.2 Roles and responsibilitiesThe main responsibilities of the Board include but are not limited to:

providing strategic direction for the Company; >overseeing the Company’s systems of internal control, governance and risk management; >evaluating the performance of executive management; and >monitoring and facilitating the operation of the audit, nomination, and remuneration committees. >

The Directors have agreed a formal schedule of matters specifically reserved for the Board which can be viewed in the corporate governance section of the Company’s website at www.londonmining.co.uk. These decisions include but are not limited to the approval of the Company’s annual business plan and budget, major changes to the Company’s corporate structure, approval of the Company’s Annual Report and treasury policy and the approval of major capital expenditure. Responsibility for the day-to-day management of the Company rests with the executive team.

Directors receive timely, regular and appropriate management information to enable them to fulfil their duties and have access to the advice of the Company Secretary. The Board has agreed guidelines for Directors to obtain independent professional advice if they seek it at the Company’s expense.

36Overview




3.3 Board independenceThe Combined Code requires that small companies should have at least two independent non-executive Directors. Three of the Company’s five non-executive Directors, (Dr. Colin Knight, Malcolm Groat and Dr. Hans Schønwandt) are not considered independent. Dr Colin Knight as Chairman is not considered to be independent. Dr. Hans Schønwandt has been a consultant to the Company and is not considered to be independent and Malcolm Groat was an executive Director of the Company (Finance Director) within the last 5 years. The Company considers that whilst Hans Schønwandt and Malcolm Groat are not considered independent, their appointment as non-executive Directors enhances the overall strength of the Board and outweighs any perceived compromise to their independence.

Sir Nicholas Bonsor, Bt DL and Graham Mascall are both considered to be independent having not had any previous connection with the Company prior to their appointments to the Board. The Board is of the opinion that Sir Nicholas Bonsor, Bt DL and Graham Mascall remain independent with regards to their character and judgement. In keeping with the entrepreneurial nature of the Company the Board is keen to ensure that Directors interests are in alignment with the interests of shareholders and, therefore, it has been the Board’s practice to issue share options to Directors. The Board has not considered that this practice impairs the independence of non-executive directors however it is aware that the granting of share options to non-executive Directors is not consistent with the Combined Code. It is therefore the Remuneration Committee’s and the Board’s aim, in 2011, to find a more appropriate way, in future, to remunerate non-executive Directors such that their interests are aligned with the interests of shareholders and also to fulfil the requirements of the UK Corporate Governance Code. As noted below, the Board also intends to appoint further independent non-executive Directors in due course which will strengthen independence of the Board.

3.4 Board Structure and performanceThe Board has, on the recommendation of the nomination committee, reviewed the structure, size and composition of the Board and the effectiveness of Board committees. As a result of this evaluation the Board has reassessed the membership of each of its Committees. The Board has also recognised the need to appoint further Non-Executive Directors and intends to appoint additional independent Non-Executive Directors to the Board in due course.

3.5 Election and re–election of Board membersDirectors are elected by shareholders at the first Annual General Meeting after their appointment and, after that, offer themselves for re-election by a vote of shareholders at least once every three years. Graham Hossie and Colin Knight will retire by rotation at the forthcoming Annual General Meeting and, being re-eligible offer themselves for re-election. Graham Mascall will be offering himself for election as this will be the first AGM since his appointment on 1 May 2010. Luciano Ramos and Benjamin Lee will also be offering themselves for election as this will also be the first AGM since their appointments on 23 February 2011.

3.6 Chairman and Chief Executive OfficerThe roles of the Chairman and Chief Executive Officer are separate and the division of their responsibilities has been formally approved by the Board.

The Combined Code recommends that the Chairman by definition of the role should be independent on appointment. The Chairman was independent on appointment but is no longer deemed independent. However the Board is satisfied that the current composition still contributes to good corporate governance for reasons discussed in the section ‘Board independence’.

4. Committees of the BoardThe Company has the following Board committees in operation: the audit committee, nomination committee, remuneration committee and investment committee. These committees are governed by terms of reference which are agreed by the Board and can be viewed in the corporate governance section of the Company’s website at www.londonmining.co.uk. All Board committees are required to report to the Board of Directors.

4.1 Audit committeeThe audit committee is chaired by Malcom Groat and consists of Sir Nicholas Bonsor, Bt DL, Dr. Colin Knight and Graham Mascall as committee members.

Of the committee members, Graham Mascall and Sir Nicholas Bonsor, Bt DL are considered independent. As a fellow of the Institute of Chartered Accountants in England and Wales who qualified with Price Waterhouse, Malcolm Groat is considered to have recent and relevant financial experience.

Corporate governance statement continued

37

The role of the audit committee is to ensure the integrity of financial reporting, review internal controls and risk management systems, consider the need for and manage the Company’s internal audit function, review with the external auditors the scope and results of their audit, make recommendations to the Board and shareholders in relation to the appointment, reappointment and removal of the Company’s external auditor and to assess the Company’s arrangements for whistle-blowing and detecting fraud.

During 2010, following a review, the audit committee concluded that given the continued growth and development of the Company, an internal audit function would be beneficial to the Company. As such London Mining has established the responsibilities of the Internal Audit function which will be staffed during H1 2011.

The Board has approved a formal whistle-blowing policy that enables employees to raise concerns they may have about workplace fraud or mismanagement on a confidential basis. The Chairman of the audit committee is provided with reports from the whistleblowing system. The whistleblowing policy has been communicated to all of London Mining’s subsidiaries and employees.

The audit committee monitors the relationship with the Company’s external auditors relating to the provision of non-audit services to ensure that auditor objectivity and independence is safeguarded. This is achieved by disclosure of the extent and nature of non-audit services (see note 7 to the Consolidated Financial Statements) and the prohibition of selected services by the external auditor. The audit committee has considered information pertaining to the balance between fees for audit and non-audit work for the Company in 2010 and concluded that the nature and extent of non-audit fees do not present a threat to the external auditor’s objectivity or independence. The appointment of Deloitte LLP as the Group’s external auditors (incumbents since the last tendering process in 2008) is kept under annual review by the audit committee.

The committee’s assessment of the external auditors’ performance and independence underpins its recommendation to the Board to propose to shareholders the re-appointment of Deloitte LLP as auditors until the conclusion of the AGM in 2012. Resolutions to authorise the Board to re-appoint and determine their remuneration will be proposed at the AGM on 13 May 2011.

4.2 Nomination committeeThe nomination committee is chaired by Dr. Colin Knight and consists of Sir Nicholas Bonsor Bt DL, Malcolm Groat and Graham Mascall as committee members. Dr. Hans Schønwandt stepped down as a member of the committee during the year.

The main role of the nomination committee is to review regularly the structure, size and composition of the Board and to give consideration to succession planning for Directors and other Senior Executives. It reviews the leadership needs of the Company, both executive and Non-Executive and consults with external search consultants as required, to fill vacancies as they arise. During the year the Nomination Committee reviewed the structure, size and composition of the Board’s committees and made recommendations to the Board on the composition of these Committees. The Nomination Committee also made recommendations to Board on its own composition.

The nomination committee also reviews the time required to be committed to Company business by Non-Executive Directors and assesses whether they are devoting enough time to fulfil their duties.

The Non-Executive Directors, led by Sir Nicholas Bonsor, Bt DL (Deputy Chairman) are responsible for the appointment and performance evaluation of the Chairman, taking into account the views of the Executive Directors.

4.3 Remuneration committeeThe remuneration committee is chaired by Sir Nicholas Bonsor, Bt DL and consists of Dr. Colin Knight, Malcolm Groat and Graham Mascall as committee members. Dr. Hans Schønwandt stepped down as a member of the committee during the year.

Of the committee members Graham Mascall and Sir Nicholas Bonsor, Bt DL are considered independent.

The remuneration committee is responsible for establishing and developing the remuneration policy for the Company’s executives and key management and for determining specific remuneration packages for Executive Directors. No Director or executive employee is involved in deciding their own remuneration.

The Director’s remuneration report, setting out the Company’s policy on executive remuneration, is set out on pages 40 to 44. A resolution to approve the remuneration report will be proposed at the forthcoming AGM.

38Overview




4.4 Board and committee meetings – frequency and attendance

Board 5 meetings

Audit 5 meetings

Remuneration 4 meetings

Nomination 1 Meeting

Dr. Colin Knight 5/5 5/5 4/4 1/1Graeme Hossie 5/5 31 11 11

Rachel Rhodes 5/5 51 – –Sir Nicholas Bonsor, Bt DL 5/5 4/5 3/4 1/1Graham Mascall2 3/3 2/3 1/3 1/1Malcolm Groat 5/5 4/5 4/4 1/1Dr. Hans Kristian Schønwandt 4/5 – 2/3 0/1

1 Attended by invitation.2 Appointed to the Board on 1 May 2010.

Ten further ad hoc Board meetings convened at short notice were held in the year to deal with ad hoc commercial matters.

4.5 Investment committeeThe Company has also formed a separate investment committee to appraise significant acquisition and project expenditure opportunities.

5. Internal controls & risk managementThe Board is responsible for establishing and maintaining adequate internal controls and risk management systems to safeguard shareholders’ investment and Company assets.

Internal controls are designed and maintained to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of the Company’s published financial statements in accordance with IFRS. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance, and may not detect all misstatements whether caused by error or fraud.

Although Executive and key management understand well the financial, operational and compliance risks of the Group, currently London Mining is not in strict compliance with the Turnbull Guidance in respect of having a formally documented risk matrix which is presented to the Board for discussion. Operational risk is managed at the business unit level and any material risks are regularly discussed with the Board. As part of the Group’s commitment to comply with the Combined Code in all practical aspects, the Group will establish an internal audit function during 2011, one of the key responsibilities of which will be the implementation of formally documented risk management. Details of the Company’s approach to financial risk can be found in note 30 to the financial statements. During the year the Board did not perform a formal review of the effectiveness of internal control and was therefore not in strict compliance with the Combined Code. During 2010 however, executive management implemented a full review of business level controls, with a specific focus in relation to the Sierra Leone operations. This review includes a full assessment of organisational structure and operational readiness as the operation targets production during 2011 and is currently being performed in conjunction with a leading external consultant. Following the completion of this review and recommended actions the Board will perform a full effectiveness review of the systems of internal control in 2011.

Details of risks that the Company is exposed to are set out in the operational and financial review on pages 26 and 27.

Corporate governance statement continued

39

6. Relations with shareholdersThe Company is committed to maintaining the highest standards of disclosure ensuring that all investors and potential investors have the same access to high quality, relevant information in an accessible and timely manner to assist them in making informed decisions. The investor relations department manages the flow of information to all investors and potential investors and regular presentations take place at the time of the quarterly, half year and final results as well as during the rest of the year.

Any concerns raised by a shareholder in relation to the Company and its affairs are communicated to the Board.

Copies of announcements to the stock exchanges on which the Company is listed, investor presentations, interim financial reports, the Annual Report and other relevant information are posted to the Company’s website at www.londonmining.co.ukShareholders will have the opportunity at the forthcoming AGM to put questions to the Board, including the Senior Independent Non-Executive Director and the Chairmen of the audit, remuneration and nomination committees.

40Overview




Directors’ remuneration report

Unaudited informationThis report has been prepared in accordance with Schedule 8 to the Accounting Regulations under the Companies Act 2006. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles relating to Directors’ remuneration in the Combined Code. A resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved.

The Act requires the auditors to report to the Company’s members on certain parts of the Directors’ remuneration report and to state whether in their opinion those parts of the report have been properly prepared in accordance with the Accounting Regulations. The report has therefore been divided into separate sections for audited and unaudited information.

1. Remuneration committeeThe remuneration committee has powers delegated to it by the Board which are reflected in its terms of reference. These terms of reference are available on the Company’s website at www.londonmining.co.uk.

The duties of the remuneration committee include the consideration of all material elements of remuneration policy, remuneration and incentives of Executive Directors and senior employees with reference to independent remuneration research and professional advice in accordance with the Combined Code. The Committee will make recommendations to the Board on the framework for executive remuneration and its cost.

The Board is responsible for implementing the recommendations of the remuneration committee and agreeing the remuneration packages of individual Directors. Directors are not permitted to vote on their own terms and conditions of remuneration. Non-Executive Directors’ fees will be determined by the Chairman and the executive members of the Board.

1.1 Composition of the remuneration committeeThe members of the remuneration committee are:

Sir Nicholas Bonsor, Bt DL (chairman) >Dr Colin Knight >Malcolm Groat >Graham Mascall >

Dr. Hans Schønwandt stepped down as a member of the committee during the year and Graham Mascall was appointed in his place.

None of the remuneration committee members have any personal financial interest (other than as shareholders), conflicts of interest arising from cross-directorships or day-to-day involvement in running the Company.

Under its terms of reference the remuneration committee must meet at least twice each year. During the year ended 31 December 2010, the committee met four times and the following issues were discussed:

Review of the market competitiveness of the remuneration policy and the remuneration arrangements for the Executive Directors and >senior management;Review of the salary levels of Executive Directors and senior management; >Agreement of annual bonuses payable to Executive Directors >Agreement of how the annual bonus plan will operate in 2011; and >Grants of share options awarded to Executive Directors and other employees. >

2. Responsibilities of the remuneration committee and remuneration policyRemuneration policy is designed to attract and retain high calibre Executive Directors and Senior Executives and to motivate them to develop and implement business strategy. Individual remuneration packages are structured to align rewards with the performance of the Company and the interests of shareholders. The Committee is responsible for considering and making recommendations to the Board on:

determining the framework or Board policy for remuneration of the Company’s Executive Directors and key management; >ensuring appropriate incentives to encourage enhanced performance and that individual contributions to the success of the >Company are rewarded in a fair and responsible manner;determining targets for any performance related pay schemes and approving total annual payments made under such schemes; >reviewing the design of all share incentive plans and determine the awards to be made; >ensuring that contractual terms on termination are fair to the individual and the Company and that failure is not rewarded; >ensuring that salaries are set a market competitive level by benchmarking against appropriate competitors; and >ensuring that the overall package reflects market practice and takes into account the levels of remuneration elsewhere in the Group. >

41

3. Components of Executive Directors’ remuneration Executive Directors’ remuneration consists of basic salary, bonus payments, share options and benefits under the Company’s Long Term Incentive Plan (LTIP). None of the Directors serving during the year received any remuneration in respect of post-retirement benefits.

Bonuses are payable based on the remuneration committee’s assessment of the general overall performance of individual Executive Directors and in addition on the attainment of certain pre-set quantitatively measured objectives.

The target annual bonus payable to the Chief Executive Officer that is linked to share price performance targets is up to 100% of annual base salary. Additional special bonuses may be awarded for achievement of significant operational and corporate development milestones at the discretion of the remuneration committee.

The Chief Financial Officer may receive a contractual annual bonus of up to £50,000 at the discretion of the remuneration committee. Additional discretionary bonuses may be awarded to the Chief Financial Officer for the achievement of significant operational and corporate development milestones that the remuneration committee has determined the Chief Financial Officer to have taken an active role in.

The Non-Executive Directors do not receive remuneration in bonuses.

3.1 Share optionsGrants of share options are made to Directors employed directly by the Company and to entities providing the services of Directors in terms of the London Mining Plc No. 1 Share Option Plan and the London Mining Plc No. 2 Share Option Plan respectively.

A Joint Share Option Plan, (“JSOP”) has also been adopted during 2010 and an employee benefit trust (the London Mining Plc Long Term Incentive Trust 2010) was set up to assist in the operation of the JSOP. An Approved Company Share Option Plan (the “CSOP”) was approved by HM Revenue & Customs on 17 May 2010 and approved by the shareholders at the Annual General Meeting held on 30 April 2010.

The remuneration committee has responsibility for supervising the schemes and approving the grant of options under their terms. The grants under the Company’s share option plans and awards under the LTIP fall within the maximum limit of ten percent of share capital that may be awarded for share incentive programmes.

3.2 Long term incentive plan (LTIP)Grants of shares under the Company’s LTIP are made to executive management as approved by the remuneration committee.

A trust deed has been formalised with Fenlight Trustees, an independent company, and a Trust has been established to facilitate the operations of the LTIP. Funds are lent by the Company to the Trust to fund the acquisition of shares.

4. Compliance with the Combined CodeDuring the year under review the Company complied with the detailed code provisions set out under Section B of the Combined Code except as follows:

The Combined Code recommends share options and awards should not vest in less than three years. During 2010 options >were awarded to certain employees that could, subject to the meeting of specific performance criteria, vest in less than three years. This is considered appropriate to align employee incentives with Company objectives.The Combined Code recommends that all incentive schemes, including new grants under existing share option schemes, >should be subject to challenging performance criteria reflecting the Company’s objectives. In 2010 a minority portion of share options awarded to certain employees were not subject to specific performance criteria, for each individual employee the majority of awards were however subject to performance criteria. In addition during 2010 options were awarded to Non-Executive Directors which were not subject to any performance criteria as it was not considered appropriate to set performance criteria for Non-Executive Directors on the basis it would compromise their independence. The Directors are eligible for bonuses which are based on the achievement of specific milestones, the limits of which are not >pre–determined in underlying employment contracts. These are determined by the remuneration committee after a detailed appraisal of the Company’s overall performance and achieved milestones during the year. In addition elements of their bonus arrangements do not include specified performance criteria but are awarded based on individual contribution which is assessed and approved by the remuneration committee.The number of share options and awards to which Directors are entitled to be granted are not subject to specific performance >criteria. Awards are based on individual contribution and are assessed and approved by the remuneration committee.

42Overview




Directors’ remuneration report continued

5. Performance graphThe following graph shows the Company’s share price performance compared with the performance of the FTSE AIM All Share index since the date of listing.

Share performance register

4 Nov 09

Sha

re P

rice

(p)

180

220

260

300

340

380

420

460

4 Jan 10 4 Mar 10 4 May 10 4 July 10 4 Sep 10 4 Nov 10 4 Mar 114 Jan 11

London MiningFTSE 350 MiningFTSE Aim All Share

Note: rebased to London Mining share price at IPO

6. Remuneration policy for Non-Executive DirectorsNon-Executive Directors’ remuneration is approved by the Board as a whole on the recommendation of the Chairman and Executive Directors. Remuneration is sufficient to attract and retain high calibre Non-Executive Directors and is compared to Non-Executive Directors’ remuneration of similar sized mining companies.

7. Directors contractsExecutive Directors have indefinite term contracts, with the Chief Executive Officer having a termination period of 12 months and the Chief Financial Officer a termination period of six months. Both contracts provide for a termination payment in excess of 12 months’ salary in the result of change of control of the Company.

43

Audited information

8. Directors’ emoluments and compensationDirectors’ remuneration for the years ended 31 December 2010 and 31 December 2009 is as follows:

Name of DirectorFees/Basic

salary $’000Bonuses

$’000

Employee benefits1

$’000

Compensation under return bonus plan2

$’000

2010 Total

$’000

2009 Total

$’000

ExecutiveChris Brown3 – – – – – 37Graeme Hossie 543 912 7 – 1,462 1,333Rachel Rhodes 355 424 – 520 1,299 1,224Non-ExecutiveSir Nicholas Bonsor, Bt DL 126 – – – 126 199Malcolm Groat 70 – – – 70 89Dr Colin Knight 119 – – – 119 134Dr Graham Mascall4 77 – – – 77 –Dr Hans Kristian Schønwandt 71 – – – 71 77

Aggregate emoluments 1,361 – 7 520 3,093

1 Benefits in kind relate to private medical insurance.2 Compensation under the Return Bonus Plan is given to all participants in the Company share-based remuneration schemes for outstanding share based awards that were

adversely impacted as a result of the 2008 Return of Cash to shareholders. Compensation is granted in accordance with the vesting conditions of the underlying awards. Refer note 7 to the financial statements for more details of the Return Bonus Plan. Amounts are included in the table above on a cash basis.

3 2009 fees are up until date of resignation on 9 February 2009.4 From date of appointment on 1 May 2010.

9. Directors’ share options and warrantsAggregate emoluments disclosed above do not include any amounts for the value of share options and warrants converted to acquire Ordinary Shares granted to, or held by the Directors. Details of the share options and warrants exercised during the year are as follows:

Name of Director

Number of LTIP grants/

share options

Exercise price

$

Market price at exercise

date $

Gains on exercise

2010$’000

Gains on exercise

2009$’000

ExecutiveGraeme Hossie 4,718,884 – 3.99 18,824 –

Aggregate gains 18,824 19

44Overview




The following share options, each to subscribe for one Ordinary Share in the Company were held by Directors (or entities in which they have a beneficial interest) as at 31 December 2010 and 31 December 2009:

Name of Director31 December

2009 Granted Forfeited Exercised31 December

2010Exercise

price Vesting date Expiry Date

ExecutiveGraeme Hossie 1,500,000 – – – 1,500,000 GBP 1.74 12 Jul 2008 11 Jul 2013Graeme Hossie 500,000 – – – 500,000 GBP 1.31 30 Jun 2009 29 Jun 2019Graeme Hossie 500,000 – – – 500,000 GBP 1.31 09 Feb 2010 29 Jun 2019Graeme Hossie 500,000 – – – 500,000 GBP 1.31 09 Feb 2011 29 Jun 2019Rachel Rhodes 166,666 – – – 166,666 GBP 2.37 04 Sep 2009 16 Oct 2018Rachel Rhodes 166,667 – – – 166,667 GBP 2.37 04 Sep 2010 16 Oct 2018Rachel Rhodes 166,667 – – – 166,667 GBP 2.37 04 Sep 2011 16 Oct 2018Rachel Rhodes 166,667 – – – 166,667 GBP 1.31 24 Apr 2010 29 Jun 2019Rachel Rhodes 166,667 – – – 166,667 GBP 1.31 24 Apr 2011 29 Jun 2019Rachel Rhodes 166,666 – – – 166,666 GBP 1.31 24 Apr 2012 29 Jun 2019Non-ExecutiveSir Nicolas Bonsor – 125,000 – – 125,000 GBP 2.04 7 Jun 2013 7 Jun 2020Dr Colin Knight 200,000 – – – 200,000 GBP 1.74 12 Jul 2008 11 Jul 2013Graham Mascall – 75,000 – – 75,000 GBP 2.04 7 Jun 2013 7 Jun 2020Malcolm Groat 100,000 – – – 100,000 GBP 1.74 12 Jul 2008 11 Jul 2013Dr Hans Kristian Schønwandt 150,000 – – – 150,000 GBP 1.74 12 Jul 2008 11 Jul 2013

Total 4,450,000 200,000 – – 4,650,000

The market price of Ordinary Shares on the Oslo Axess stock exchange at 31 December 2010 was NOK 28.3 and the range during the year was NOK 18.4 to NOK 31.0.

The market price of Ordinary Shares on AIM at 31 December 2010 was GBP 3.15 and the range during the year was GBP 1.94 to GBP 3.35.

10. Directors’ LTIP awardsThe following long term incentive plan awards each to subscribe for one Ordinary Share in the Company were held by Directors (or entities in which they have a beneficial interest) as at 31 December 2010 and 31 December 2009:

Name of Director31 December

2009 Granted Forfeited Exercised31 December

2010

ExecutiveGraeme Hossie 4,718,884 – – (4,718,884) –Rachel Rhodes 314,592 – – – 314,592

ApprovalThis report was approved by the Board of Directors of the Company and signed on its behalf by:

Sir Nicholas BonsorChairman of the Remuneration Committee31 March 2011

Directors’ remuneration report continued

45

Statement of directors’ responsibilityFor the year ended 31 December 2010

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the Parent Company financial statements under IFRSs as adopted by the European Union. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

properly select and apply accounting policies; >present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable >information; provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to >understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; andmake an assessment of the Company’s ability to continue as a going concern. >

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement We confirm that to the best of our knowledge:

the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of >the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; andthe management report, which is incorporated into the Directors’ report, includes a fair review of the development and >performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board

Chief Executive Officer Chief Financial OfficerGraeme Hossie Rachel Rhodes31 March 2011 31 March 2011

46Overview




We have audited the financial statements of London Mining Plc for the year ended 31 December 2010 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes 1 to 34, the Parent Company balance sheet, the Parent Company statement of changes in equity, the Parent Company cash flow statement and the related notes 1 to 34. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditorAs explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.Opinion on financial statementsIn our opinion:

the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 >December 2010 and of the Group’s loss for the year then ended;the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; >the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European >Union and as applied in accordance with the provisions of the Companies Act 2006; andthe financial statements have been prepared in accordance with the requirements of the Companies Act 2006. >

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been >received from branches not visited by us; orthe Parent Company financial statements are not in agreement with the accounting records and returns; or >certain disclosures of Directors’ remuneration specified by law are not made; or >we have not received all the information and explanations we require for our audit. >

Independent auditor’s report to the members of London Mining Plc

47

Other mattersIn our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the provisions of the Companies Act 2006 that would have applied were the Company a quoted company.

Although not required to do so, the Directors have voluntarily chosen to make a corporate governance statement detailing the extent of their compliance with the June 2008 Combined Code. We reviewed:

the Directors’ statement, contained within the Directors’ report, in relation to going concern; >the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the June >2008 Combined Code specified for our review; andcertain elements of the report to shareholders by the Board on Directors’ remuneration. >

Christopher Thomas (Senior Statutory Auditor)for and on behalf of Deloitte LLP

Chartered Accountants and Statutory AuditorLondon, United Kingdom31 March 2011

48Overview




Consolidated income statement

Year ended 31 December

Note2010

$’000

2009 Restated1

$’000

Revenue – –Cost of sales – –

Gross profit – –Administrative expenses 7 (32,394) (32,485)

Loss from operations (32,394) (32,485)Impairments and exploration write downs 9 (61,657) (6,000)Loss on disposal of a subsidiary (236) –Fair value loss on deferred consideration (5,565) –Share of results of joint ventures and associates (net of tax) 16 (1,006) 3,437Finance income 10 3,289 2,517Finance costs 11 (3,267) (1,864)

Loss before taxation (100,836) (34,395)Taxation 12 1,258 –

Loss for the year after taxation (99,578) (34,395)

Attributable to:– Equity holders of parent (99,578) (34,355)– non-controlling interest – (40)

(99,578) (34,395)

Basic & diluted loss per share (USD per share)From continuing operations 13 (0.92) (0.33)

(0.92) (0.33)

Consolidated statement of comprehensive incomeLoss for the year (99,578) (34,395)Exchange difference on consolidation of non-USD operations 47 628

Comprehensive loss for the year (99,531) (33,767)

1 2009 restated for change in accounting policy – see note 5.

49

Consolidated balance sheet(as at 31 December)

Note2010

$’000

20091

Restated $’000

Non-current assetsIntangible assets 14 97,241 49,292Property, plant and equipment 15 81,118 3,632Investment in joint ventures and associates 16 – 64,414Non-current inventories 17 – 600Loans and receivables 18 – 24,500Deferred tax asset 19 1,226 –

Total non-current assets 179,585 142,438

Current assetsCurrent inventories 17 600 –Current loans and receivables 18 6,423 2,729Cash and cash equivalents 20 76,038 204,261

83,061 206,990

Assets classified as held for sale 21 28,072 –

Total assets 290,718 349,428

Current liabilitiesCurrent tax liabilities (545) –Trade and other payables 22 (21,482) (20,703)

Total current liabilities (22,027) (20,703)

Net current assets 89,106 186,287

Non-current liabilitiesOther non-current liabilities – (1,134)Deferred consideration payable 25 (24,337) –Deferred tax liabilities 19 – (32)

Total non-current liabilities (24,337) (1,166)

Total liabilities (46,364) (21,869)

Total net assets 244,354 327,559

EquityShare capital 23 411 398Share premium account 21,803 20,094Merger reserve 25 12,000 –Shares held in employee benefit trust (5,411) (14,167)Other reserves 18,589 21,523Retained earnings 196,962 299,312

Equity attributable to equity holders of the parent 244,354 327,160Non-controlling interest – 399

Total equity 244,354 327,559

1 2009 restated for change in accounting policy – see note 5.

The financial statements of London Mining Plc (Company Number 05424040) were approved by the Board of Directors on 31 March 2011 and are signed on their behalf by:

Graeme Hossie Rachel RhodesChief Executive Officer Chief Financial Officer

50Overview




Consolidated statement of changes in equity

Share capital $’000

Share premium account

$’000

Merger Reserve

$’000

Shares held in

employee benefit trust

$’000

Retained earnings

$’000

Warrant and option

reserve1 $’000

Foreign exchange

reserve $’000

Equity attributable

to equity holders of the parent

$’000

Non- controlling

interest $’000

Total equity $’000

Balance at 31 December 2008 398 19,954 – (5,159) 332,858 15,061 4,482 367,594 439 368,033

Changes in equity for the year ended 31 December 2009

Exchange difference on consolidation of non-USD operations – – – (288) – – 916 628 – 628

Issue of share capital – 140 – – – – – 140 – 140Recognition of share-

based payments – – – 2,386 809 1,064 – 4,259 – 4,259Acquisition of shares

for employee benefit trust – – – (11,106) – – – (11,106) – (11,106)

Loss for the year – – – – (34,355) – – (34,355) (40) (34,395)

Balance at 31 December 2009 398 20,094 – (14,167) 299,312 16,125 5,398 327,160 399 327,559


Exchange difference on consolidation of non-USD operations – – – – – – 47 47 – 47

Issue of share capital2 11 – 12,000 – – – – 12,011 – 12,011Recognition of share-

based payments3 2 1,709 – 8,756 (2,772) (2,981) – 4,714 – 4,714Disposal of a

subsidiary – – – – – – – – (399) (399)Loss for the year – – – – (99,578) – – (99,578) – (99,578)

Balance at 31 December 2010 411 21,803 12,000 (5,411) 196,962 13,144 5,445 244,354 – 244,354

1 The warrant and option reserve represents the cumulative charge of unexercised warrants and options granted as equity settled employee benefits and warrants issued for cash.

2 The USD 13.7 million issue of share capital includes the fair value of USD 12.0 million of the 3,500,000 shares issued on the acquisition of the remaining 80% of International Coal Company Limited (“ICC”), (note 25). The merger reserve comprises the non-statutory premium arising on shares issued as consideration for the acquisition where merger relief under the sections 612 and 613 of the Companies Act 2006 applies.

3 676,666 new shares were issued in the year in satisfaction of share options and warrants exercised, with the Group receiving consideration of USD 1.7 million. On March 31 2010, the London Mining Plc Employee Benefit Trust “EBT” transferred 4,718,884 Ordinary Shares at a carrying value of USD 10.0 million to Graeme Hossie, CEO, on the exercise of his nil-cost options over 4,718,884 Ordinary Shares in London Mining, granted under the terms of the London Mining Long Term Incentive Plan (the “LTIP”). The EBT sold 1,837,000 shares it held with a carrying value of USD 5.5 million for consideration of USD 5.0 million in order to fund the settlement of the resulting tax liability. Simultaneous to the exercise of the options, the EBT received back from Graeme Hossie 1,837,722 of the shares passed to him at a value 264.75 pence per share, being the market price on exercise, in settlement of GBP 4.9 million (USD 7.3 million) tax liability met by the Group. The EBT acquired a further 750,000 shares in the period at a total cost of USD 2.4 million. In October and November 2010, the EBT sold a further 975,781 shares with a carrying value of USD 3.0 million for total proceeds of USD 4.9 million.

51

Consolidated cash flow statement


Note2010

$’000

20091 Restated

$’000

Cash flows from operating activitiesCash used by operations 26 (29,716) (23,657)Interest received 252 919Interest paid (116) (16)Income taxes paid – –

Net cash outflow from operating activities (29,580) (22,754)

Cash flows from investing activitiesLoans and investments in joint ventures 24 (6,514) (38,727)Loans to and investments in associates (1,500) (1,000)Other loans and investments net of repayments 24a 2,000 (5,750)Convertible loans issued to third parties 18 – (5,000)Acquisition of subsidiaries net of cash acquired 25 (5,061) –Payments to acquire intangible assets (31,462) (24,771)Purchase of property, plant and equipment (50,798) (1,913)Transaction costs, net of proceeds from sale of subsidiaries2 (4,746) (541)

Net cash outflow from investing activities (98,081) (77,702)

Cash flows from financing activitiesAcquisition of shares by the Employee Benefit Trust (9,749) (11,106)Net proceeds from sale of shares by the Employee Benefit Trust 9,932 –Net cash inflow on share capital issued on exercise of options and warrants 1,711 140Cash outflow on share based payments – (1,060)Finance fees and costs (2,140) –

Net cash outflow from financing activities (246) (12,026)

Net decrease in cash and cash equivalents (127,907) (112,482)Cash and cash equivalents at beginning of year 204,261 316,286Exchange differences (316) 457

Cash and cash equivalents at end of year 76,038 204,261

1 2009 restated for change in accounting policy – see note 5.2 Transaction costs relate to the 2008 disposal of the Brazilian operations.

52Overview




Notes to the consolidated financial statements

1. General informationLondon Mining Plc is a company incorporated in the United Kingdom under the Companies Act and listed on the AIM stock exchange and Oslo Axess stock exchange. The address of the registered office is 39 Sloane Street, London, SW1X 9LP. The nature of the Group’s operations and its principal activities are set out in note 6 and in the operational and financial review on pages 10 to 27.

Going concernThe Directors have a reasonable expectation that the Company and the Group have adequate funding resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the condensed financial statements, (see page 32 of the Directors Report).

2. New and revised International Financial Reporting Standards(a) Adoption of new and revised International Financial Reporting StandardsIn the year ended 2010 the Group has adopted the following new standards:

IFRS 3 Business Combinations (2008)In the current period the Group has adopted IFRS 3 Business Combinations (2008) in accounting for business combinations. The change in accounting policy has been applied prospectively. The May 2010 ICC acquisition has been accounted for in accordance with the revised standard. Goodwill has been measured as the fair value of the consideration transferred less the net recognised amount of the identifiable assets acquired and liabilities assumed at the acquisition date (see note 25). Transaction costs, other than those associated with the issue of equity securities, were expensed as incurred.

IAS 27 Consolidated and Separate Financial Statements (2008)In the current period the Group has adopted IAS 27 Consolidated and Separate Financial Statements (2008) for accounting for non-controlling interests. The change in accounting policy has been applied prospectively and there was no impact on the Group’s results in the current period. From 1 January 2010, acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity of equity holders and therefore no goodwill is recognised.

There are no other standards or interpretations which apply for the first time in the year ended 31 December 2010 which are expected to have a material impact on the Group.

(b) New IFRS accounting standards and interpretations not yet adoptedAt the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not been adopted by the EU):

IFRS 9 Financial Instruments (effective for periods beginning on or after 1 January 2013)IAS 24 (Revised) Related party disclosures (effective for periods beginning on or after 1 July 2011)

The Directors anticipate that the adoption of these standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

3. Significant accounting policies(a) Basis of accountingThe financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The financial statements have also been prepared in accordance with IFRSs adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical cost basis, except for certain financial instruments which are measured at fair value. The principal accounting policies adopted are set out below.

The Group has taken advantage of the exemption under section 405 of the Companies Act 2006 and consequently the income statement of the Parent Company is not presented as part of these financial statements. The net loss recorded by the Parent Company for the financial year amounted to USD 94.3 million (2009 loss: USD 19.0 million).

(b) Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

53

3. Significant accounting policies continuedNon-controlling interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interest’s share of changes in equity since the date of the combination.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition, or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

(c) Investments in joint ventures and associatesA joint venture entity is an entity in which the Group holds a long term interest and shares joint control over the strategic, financial and operating decisions with one or more other ventures under a contractual arrangement.

An associate is an entity over which the Group is in a position to exercise significant influence, but not control, through participation in the financial and operating policy decisions of the investee.

For the year ended 31 December 2010 the Group changed its accounting policy for joint ventures to equity accounting from proportionate consolidation, see note 5.

The results, assets and liabilities of joint ventures and investments in associates are incorporated in the financial statements using the equity method of accounting. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments.

Any excess of the cost of acquisition over the Group’s share of fair values of the identifiable assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. If the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition exceeds the cost of acquisition the difference is credited in the income statement in the period of acquisition.

(d) Foreign currenciesThe functional currency for each entity in the Group is determined as the currency of the primary economic environment in which it operates.

Transactions entered into by Group entities in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when fair value was determined. Exchange differences are recognised in the consolidated income statement in the period in which they arise.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and are recognised in the Group’s foreign exchange reserve. On disposal these exchange differences are recycled to form part of the Group’s calculation of the profit and loss on disposal.

(e) Business combinations and goodwill arising thereonThe acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date.

54Overview




3. Significant accounting policies continuedGoodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities, and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated income statement.

The interest of minority shareholders in the acquiree is initially measured at the non-controlling interest’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

(f) Assets held for saleNon-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than continuing use. This condition is regarded as met only when a sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Disposal groups are groups of assets, and liabilities directly associated with those assets, that are to be disposed of together as a group in a single transaction.

Non-current assets (and disposal groups) classified as held for sale are initially measured at the lower of carrying value and fair value less costs to sell. At subsequent reporting dates non-current assets (and disposal groups) are remeasured to the latest estimate of fair value less costs to sell. As a result of this remeasurement any impairment is recognised by charging to the Consolidated Income Statement, any increase in fair value is applied to reverse previous impairment charges on the non-current assets (or disposal groups) to a maximum of the original amortised cost.

(g) Revenue recognitionRevenue represents the net invoice value of goods and is measured at the fair value of consideration received or receivable, after deducting discounts, volume rebates, value added tax and other sales taxes.

A sale is recognised when the significant risks and rewards of ownership have passed, and when revenue can be measured reliably. This is generally when title and any insurance risk have passed to the customer, and the goods have been delivered to a contractually agreed location.

(h) Finance incomeFinance income comprises interest income on funds invested and foreign exchange gains. Interest income is recognised in the income statement as it accrues, using the effective interest rate method.

(i) Finance costsFinance costs comprise interest payable on borrowings calculated using the effective interest rate method, the accumulation of interest on provisions and foreign exchange losses.

(j) TaxationThe tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The carrying amount of any deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.

Notes to the consolidated financial statementscontinued

55

3. Significant accounting policies continued(k) Intangible assets (exploration and evaluation expenditure)The costs of exploration properties and leases, which include the cost of acquiring prospective properties and exploration rights, are capitalised as intangible assets.

Mineral rights and exploration and evaluation costs arise from expenditure incurred prior to development activities and include the cost of acquiring and maintaining the rights to explore, investigate, examine and evaluate an area for mineralisation. These costs include metallurgical testing, conducting geological and environmental studies, exploratory drilling and sampling, market studies, engineering consulting and other such costs incurred in evaluating the technical feasibility and commercial viability of extracting a mineral resource.

Mineral rights and exploration and evaluation expenditure are capitalised within intangible assets until such time that the activities have reached a stage which permits a reasonable assessment of the existence of commercially exploitable reserves. Once this has occurred, the respective costs previously held as intangible assets are transferred to mineral properties within property, plant and equipment.

Capitalised exploration and evaluation expenditure is assessed for impairment in accordance with the indicators set out in IFRS 6 Exploration for and Evaluation of Mineral Reserves. In circumstances where a property is abandoned, the cumulative costs relating to the property are written off.

(l) Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulated depreciation and impairment losses.

Each item’s estimated useful life is based on the physical life limitation of the specific asset. Estimates of remaining useful lives are made on a regular basis for all mine buildings, plant and equipment, with annual reassessments for major items. Changes in estimates are accounted for prospectively and depreciation commences when the item is available for use.

Capitalisation ceases when commercial levels of production are achieved, at such point mineral properties are depreciated on a units of production basis.

Buildings and plant and equipment are depreciated down to their residual values at varying rates, on a straight line basis over their estimated useful lives or life of the mine, whichever is shorter. Estimated useful lives normally vary from up to 10 years for items of plant and equipment to a maximum of 25 years for buildings. Fixtures and fittings are depreciated over three years.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised. Assets under construction are capitalised and included as work in progress at purchase price plus directly attributable costs to bring the asset into working condition for its intended use. On completion construction in progress is transferred to the appropriate category of property, plant and equipment.

(m) Impairment of tangible and intangible assetsAt each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in the consolidated income statement.

56Overview




3. Significant accounting policies continuedGoodwill arising on business combinations is allocated to the Group of cash generating units (“CGUs”) that are expected to benefit from the synergies of the combination and represents the lowest level at which goodwill is monitored by the Group’s Board of Directors for internal management purposes. The recoverable amount of the CGUs or group of CGUs to which goodwill has been allocated is tested for impairment annually on a consistent date during each financial year, or when events or changes in circumstances indicate that it may be impaired. Any impairment is recognised immediately in the income statement. Impairments of goodwill are not subsequently reversed.

(n) InventoriesInventory is stated at the lower of cost and net realisable value. Cost includes all costs incurred in the normal course of business in bringing each product to its present location and condition. Cost for raw materials and consumables is purchase price and for work in progress and finished goods is the cost of production, including the appropriate proportion of depreciation and overheads. Raw materials and consumables are stated on a first-in first-out (‘FIFO’) basis. The cost of work in progress and finished goods is based on the weighted average cost method. In the case of work in progress and finished goods, cost includes an appropriate share of overheads based on normal operating capacity.

Net realisable value is based on estimated selling price in the ordinary course of business less any further costs expected to be incurred to completion and disposal.

(o) ReceivablesTrade receivables do not carry any interest and are stated at their nominal value net of an appropriate allowance for estimated irrecoverable amounts.

(p) Convertible loans and receivablesIn the consolidated balance sheet, the Group’s financial assets have all been classified as ‘loans and receivables’. These are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method.

Derivatives embedded in financial instruments (including rights to covert loan receivables to equity investments) or non-financial host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of their host contracts and the host contracts themselves are not carried at fair value with unrealised gains or losses reported in the income statement. Changes in the fair value of derivative instruments are recognised immediately in the income statement.

The Company’s financial asset investments include amounts owed by subsidiaries, classified as ‘loans and receivables’ and equity holdings in subsidiaries and associates, which are held at cost less any provision for impairment. Provision is raised against these assets when there is a doubt over future realisation as a result of a known event or circumstance.

(q) Cash and cash equivalentsCash and cash equivalents comprise cash in hand and on demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash.

(r) Borrowings and convertible debtInterest bearing bank borrowings are recorded at the proceeds received, net of direct transaction costs. Finance charges are accounted for on an accruals basis and charged to the income statement using the effective interest method. They are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Convertible bonds are regarded as compound instruments, consisting of a liability and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt and is recorded within borrowings and carried at amortised cost. The difference between the proceeds of issue of the convertible bond and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group is included within equity.

(s) Trade and other payablesTrade and other payables are not interest bearing and are stated at their nominal value or amortised cost.

(t) ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of a past event for which it is probable that an outflow of an economic benefit will occur. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.


57

3. Significant accounting policies continuedThe Group has an obligation to incur restoration, rehabilitation and environmental costs when environmental disturbance is caused by the development or ongoing production of a mining property. These costs are estimated on the basis of a formal closure plan and are subject to regular review. Such costs are discounted to net present value and are provided for and capitalised at the start of each project, as soon as the obligation to incur costs arises. Provision is not made for additional obligations expected to arise from future disturbance and costs of subsequent site damage created on an ongoing basis during production are provided for at their net present values and charged against profits as extraction progresses.

At the time of establishing the provision, a corresponding asset is capitalised and depreciated through operating costs. The provision is discounted to present value and the unwinding of the discount is included in finance costs.

(u) Equity instrumentsEquity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

(v) Share-based payments (including warrants)The Group issues equity-settled share-based payments to certain employees and consultants. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. The fair value is determined at grant date by use of a Black Scholes Model and taking account of market based vesting conditions.

(w) Return Bonus PlanThe London Mining Return Bonus Plan (the “RBP”) was adopted by the Group on 4 September 2008. Under the RBP, cash bonus awards can be made to participants in the London Mining Plc Share Option Plan, the London Mining Plc No. 1 (employees only) Share Option Plan (together, the “Plans”) and the LTIP if either a special dividend or return of share capital is made by the Company (the “Return of Cash”) after the date of grant of the bonus award but prior to the exercise/vesting of the related option/LTIP award granted under the Plans/LTIP and no compensating adjustment is made to such option/LTIP award to take account of the Return of Cash. Participants in the LTIP have the choice to participate in the RBP or to have a compensatory adjustment made to the number of their underlying awards.

The bonus awards granted under the RBP entitle participants to receive a cash payment equal to the number of Ordinary Shares under the related option/LTIP award multiplied by the aggregate amount due per Ordinary Share under the Return of Cash. The bonus awards vest and lapse in accordance with the terms of the related option/LTIP award held under the Plans/LTIP, and are accounted for in accordance with the Group’s policy for share-based payments, set out above.

4. Critical accounting judgements and key sources of estimation uncertaintyIn the application of the Group’s accounting policies the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors which are considered to be relevant. Actual results may differ from these estimates.

(a) Impairment of assetsThe Group reviews the carrying value of its intangible assets and property, plant and equipment to determine whether there is any indication that those assets are impaired. The recoverable amount of those assets is measured at the higher of their fair value less costs to sell and value in use.

Directors necessarily apply their judgement in estimating the probability, timing and value of underlying cash flows and in selecting appropriate discount rates to be applied within the value in use calculation. Such estimates and forecasts include commodity prices, foreign exchange rates, capital expenditure, future commissioning dates, production targets, operating costs and timings for the granting of licences and permits. Subsequent changes to estimates and assumptions in the value in use calculation could impact the carrying value of the respective assets.

The carrying value is also dependent on the estimate of mining reserves and resources, for which there are inherent uncertainties as the estimation is a subjective process based on the quality and quantity of available data.

58Overview




4. Critical accounting judgements and key sources of estimation uncertainty continued(b) Valuation of share-based paymentsIn order to value options and warrants granted, the Group has made judgements as to the volatility of its own Ordinary Shares, the probable life of the options and warrants granted and the time of exercise of those options and warrants. The Group has also made a judgement as to which methodology to use in valuing the options and warrants. During the year ended 31 December 2010, the Group has changed the share option valuation method used to fair value the share-based payments to Black Scholes. In prior years, the bi-nominal method was applied. This has not had a material impact on these accounts.

(c) Tax provisionsJudgement is required in determining tax positions for the Group as it is subject to tax in several jurisdictions. Assessments are made on the advice of independent tax advisors and through consultation with relevant tax authorities. While the Directors believe that these estimates and forecasts are reasonable, actual results could vary significantly from these estimates.

(d) Estimation of provision for restoration and rehabilitation costs and timing of expenditureEstimating the cost of settling the legal or constructive obligation for rehabilitation, including decommissioning and dismantling equipment and restoring the mine site from damage caused to the environment during the development can be complicated and subjective. These costs are likely to be significant and are likely to be impacted by future regulatory obligations, future technological developments and the future costs of engineers and other skilled labour. Determining the timing of future cash flows and an appropriate discount rate will also impact the provision required.

Where Directors believe that the provisions for restoration and rehabilitation will be significant, the Group obtains third party valuations to estimate the likely cost. These judgements and estimates are based on management’s best knowledge of the relevant facts and circumstances but actual results may differ from the amounts included in the financial statements.

5. Change in accounting policy in respect of joint venturesLondon Mining has chosen to change its accounting policy for joint ventures from proportionate consolidation to equity accounting. This is due to management reassessing the manner in which it manages its joint ventures, as well as the expected amendment to IAS31 ‘Interests in Joint Ventures’ which is expected to eliminate the current choice between using proportionate consolidation or equity accounting, and mandating companies to use equity accounting only.

This choice means that instead of the results of joint ventures being reported on a line-by-line basis in both the income statement and balance sheet, the Group’s share of results of joint ventures and associates (net of tax) are instead disclosed on a single line. This change in accounting policy must also be applied retrospectively and previously reported financial information for 2009 has been restated where appropriate in these financial statements.

The Group had no joint venture investments prior to the acquisition of the joint venture interest in China Global Mining Resources BVI (“CGMR JV”) in 2009, (see note 24a), as a result no comparative financial information for the year ended 2008 has been presented. The change in accounting policy has had no impact on retained earnings, or net assets.


59

5. Change in accounting policy in respect of joint ventures continuedThe necessary restatement of prior period balances has been made in accordance with IAS 31. The presentational differences resulting from this change in accounting policy on the Group’s balance sheet and income statement for the year ended 2009 (which relate wholly to the CGMR JV) are presented below.

Income statement:

2009 $’000

Adjustments $’000

2009Restated

$’000

Revenue 8,878 (8,878) –Cost of sales (6,377) 6,377 –

Gross profit 2,501 (2,501) –Other income 2,330 (2,330) –Administrative expenses (33,423) 938 (32,485)

Loss from operations (28,592) (3,893) (32,485)Impairments (6,000) – (6,000)Group’s share of results of joint ventures and associates (net of tax) (123) 3,560 3,437Finance income 2,893 (376) 2,517Finance costs (2,171) 307 (1,864)

Loss before taxation (33,993) (402) (34,395)Taxation (402) 402 –

Loss for the year after taxation (34,395) – (34,395)

Amounts of revenue, cost of sales, other operating income, (in relation to management fees) administrative expenses, finance income, finance cost and taxation relating to the joint venture investment in China Global Mining Resources Hong Kong (“CGMR”) were previously proportionately consolidated and have now been all classified as the Group’s share of results of joint ventures and associates (net of tax).

Balance sheet:

2009 $’000

Adjustments $’000

2009 Restated

$’000

Non-current assetsProperty, plant and equipment1 48,270 (44,638) 3,632Investment in joint ventures and associates6 14,910 49,504 64,414Loans and receivables2 51,020 (26,520) 24,500Other non-current assets 49,892 – 49,892

Total non-current assets 164,092 (21,654) 142,438

Current assets3 209,226 (2,236) 206,990

Total assets 373,318 (23,890) 349,428

Current liabilitiesCurrent liabilities4 (30,893) 10,190 (20,703)Non-current liabilities5 (14,866) 13,700 (1,166)

Total liabilities (45,759) 23,890 (21,869)

Net assets 327,559 – 327,559

The adjustments relate to:1 Reclassification of the Group’s share of CGMR’s property, plant and equipment. The amount included excess purchase consideration recognised on acquisition of

USD 34.7 million.2 Loans and receivables reclassified include the net USD 17.85 million loan to joint venture, the USD 5.75 million loan to joint venture partner, management fees receivable

USD 2.3 million and share of prepayments of USD 0.6 million, see note 24a.3 Share of cash, debtors and inventories reclassified to investment in joint ventures and associates.4 Current liabilities reclassified include share of deferred consideration, USD 8.7 million, trade and other payables, USD 1.2 million and current tax liabilities USD 0.3 million.5 Non-current liabilities reclassified include deferred tax recognised on acquisition, USD 8.5 million and environmental restoration provisions, USD 1.4 million6 Total reclassifications into investment in joint ventures of USD 49.5 million.

60Overview




6. Segment reportingThe Group operates in five principal geographical areas, Sierra Leone, Greenland, Saudi Arabia, China and Colombia.

Segment revenues and resultsThe following is an analysis of the Group’s results from continuing operations by reportable segment. There is no segmental revenue in the years 2010 or 2009 following the change in joint venture accounting policy. The key segment result presented to the Board of Directors for strategic decision making and allocation of resources is EBITDA. Group EBITDA represents earnings/losses from operations excluding depreciation and amortisation, (and therefore excludes Group’s share of results of joint ventures and associates (net of tax) and impairments). Group EBITDA is analysed below.

The analysis of the Group’s results from continuing operations by reportable segment for the year ended 31 December 2010 is as follows:

Segmental result

Note

Unaudited Year ended

31 December 2010

$’000

Restated Unaudited


2009$’000

Iron ore projects – Sierra Leone (10,258) (4,740) – Greenland (816) (689) – Saudi Arabia (1,009) (1,574) – China – –Coal project – Colombia (2,127) –Unallocated costs including corporate (17,202) (24,718)

Group EBITDA (31,412) (31,721)Depreciation and amortisation (982) (764)

Loss from operations (32,394) (32,485)Impairments1 9 (61,657) (6,000)Loss on disposal of subsidiary (236) –Fair value loss on deferred consideration 25 (5,565) –Share of results of joint ventures and associates2 16 (1,006) 3,437Finance income 10 3,289 2,517Finance costs 11 (3,267) (1,864)

Loss before taxation (100,836) (34,395)

1 Included within impairments are write downs of USD 50.0 million in respect of China, (2009: USD nil) and USD 11.6 million in respect of the Group’s Chilean investments, (note 24).

2 The share of results of joint ventures and associates includes a profit of USD 0.3 million (2009: USD 3.6 million profit) in relation to China.

EBITDA includes unallocated costs for non-cash charges in relation to share based payments (note 7). There are no other material non-cash charges included in EBITDA.


61

6. Segment reporting continuedSegment assets and liabilities

Segment assets Segment liabilities

31 December2010

$’000

Restated31 December

2009$’000

31 December2010

$’000

Restated31 December

2009$’000

Iron ore projectSierra Leone 78,685 15,724 (9,627) (991)Greenland 30,644 21,041 (512) (1,483)Saudi Arabia 23,352 16,039 (789) (2,196)China – 49,504 – –Coal projectColombia 55,136 – (25,623) –

187,817 102,308 (36,551) (4,670)Group investment in joint ventures and associates1 – 14,910 – –Unallocated including corporate 74,829 232,210 (9,813) (17,199)Assets classified as held for sale 28,072 – – –

Total 290,718 349,428 (46,364) (21,869)

1 Excluding the Group’s share of the CGMR JV.

For the purposes of monitoring segment performance and allocating resources between segments, all assets are allocated to reportable segments other than investments in joint ventures and associates (excluding the Group’s net investment in the CGMR JV, which has been included within segment assets) convertible loans, other corporate assets, such as cash, together with the assets held in Mexico at 31 December 2009, as this subsidiary, which was sold on 31 March 2010, was not a reportable segment. These assets are all classified as “unallocated including corporate”. The Group’s net investment in CGMR JV has been included within segmental assets.

All liabilities are allocated to reportable segments other than liabilities held within the corporate head office.

Included in unallocated assets at 31 December 2009 is a total of USD 5.0 million in respect of the Group’s investment in Chile. At 31 December 2010, all loans from London Mining Plc with regards to Chile have been written down to USD nil.

Segment depreciation and additions to non-current assetsDepreciation and amortisation Additions to non-current assets1

Year ended31 December

2010$’000


2009Restated

$’000


2010$’000


2009Restated

$’000

Iron ore projectSierra Leone 499 281 61,281 5,791Greenland 291 338 10,070 13,322Saudi Arabia 20 12 7,266 13,348China – – – 49,504Coal projectColombia 12 – 42,958 –Unallocated including corporate 160 133 731 297

Total 982 764 122,306 82,262

1 The non-current asset additions above comprise additions to intangible assets, property plant and equipment, non-current inventory, and investments in joint ventures and associates, including additions through business combinations, but exclude loans and receivables.

62Overview




6. Segment reporting continuedSegment non-current assets

31 December 2010

$’000

31 December 2009

$’000

Sierra Leone 75,754 14,199Greenland 30,249 20,508Saudi Arabia 22,969 15,734China – 49,504North America – 1,365South America 48,430 4,489South Africa – 10,421United Kingdom 957 1,718

Total 178,359 117,938

Non-current assets stated above exclude loans and receivables and any deferred tax assets.

7. Administrative expensesIncluded in administrative expenses relating to continuing operations are:

2010$’000

20094

Restated$’000

Return Bonus Plan1 1,905 4,230Staff costs (see note 8)

Share-based payments to staff, Directors and key management2 2,821 5,319Directors and key management remuneration excluding share-based payments 3,889 4,765Other staff costs3 5,417 4,819Consultancy and legal fees 7,028 4,301Depreciation and amortisation 982 764Fees payable to the Group’s auditors for the audit of the Group’s statutory accounts 378 126Fees payable to the Group’s auditors for other services to the Group (including AIM listing)4 286 745Fees payable to other audit firms 60 63Operating lease costs – property 787 697AIM listing fees (excluding amounts paid to auditors) 107 2,191

1 Details of the Return Bonus Plan are set out in Note 3(w). Following the approval of the Return of Cash to shareholders of 200 pence per Ordinary Share at the General Meeting held on 10 November 2008, bonus awards were made under the RBP to all optionholders and two LTIP awardholders. Payments are due on vesting of the related option/LTIP award. The USD 1.9 million charge to the income statement in the year ended 31 December 2010 represents the non-cash charge. Cash payments in the year were USD 2.9 million (2009: USD 2.0 million) and a further USD 4.2 million is due (subject to the return bonus plan rules), payable over the next three years, of which USD 1.6 million will be covered by proceeds from the exercise of respective options granted in 2009.

2 The amount in respect of share-based payments is non-cash and relates solely to equity settled arrangements.3 The 2009 other staff costs have been restated be consistent with prior period presentation. This restatement is to include housing, medical, subsistence and other

allowances provided to expatriate employees of the Group.4 Other services undertaken by the Group’s auditors included work performed on the AIM listing of USD nil (2009: USD 273,000), interim audit fees of USD 121,000 (2009

USD 101,000), taxation services of USD 116,000 (2009: USD 257,000) and other services of USD 49,000 (2009: USD 114,000).


63

8. Staff costsThe average monthly number of employees for continuing operations (including Directors) was:

2010Number

2009Number

Marampa (Sierra Leone) 247 201Wadi Sawawin (Saudi Arabia) 8 7Isua (Greenland) 3 2Colombia 15 –Corporate 19 18Technical Services team 5 3

297 231

2010$’000

2009restated

$’000

Staff other than Directors and key management personnel:Wages and salaries 4,785 4,572Social security costs 403 172Contribution to private health schemes 205 75Employer’s liability insurance 24 –Share-based payment expense 143 436

5,560 5,255

Directors’ and key management personnel:Wages and salaries 3,312 4,549Social security costs 570 216Contribution to private health schemes 7 –Share-based payment expense 2,678 4,883

6,567 9,648

Total staff costs 12,127 14,903

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group, being the Directors of the Group, the Head of Corporate Development, the Head of Legal and the Chief Operating Officer of the Group.

In addition to the amounts noted above USD 5.1 million (2009 USD 1.1 million) of staff costs have been capitalised into intangible assets and property, plant and equipment in accordance with Group accounting policies.

9. Impairments

Note2010

$’0002009

$’000

ImpairmentsImpairment of investment in CGMR and joint venture partner1 24a 50,046 –Impairment of investment in Atacama2 24b 11,611 –Impairment of an investment in DMC 16 – 6,000

61,657 6,000

1 Includes impairments of USD 1.2 million in relation to receivables from joint venture partner.2 Includes provision against receivables and exploration write off.

64Overview




10. Finance income

2010$’000

2009Restated

$’000

Finance incomeInterest income from cash and cash equivalents 259 919Interest income from loans receivable 422 342Exchange gains 2,608 1,256

3,289 2,517

11. Finance costs

2010$’000

2009Restated

$’000

Finance costsInterest payable – 16Unwinding of discount on deferred consideration 527 –Financing charges 289 –Exchange losses 2,451 1,848

3,267 1,864

12. Taxation

2010$’000

2009Restated

$’000

Income tax recognised in the income statement:Analysis of charge in year:Current tax – –Deferred tax credit relating to origination and reversal of temporary differences 1,258 –

1,258 –

Analysis of charge in year:Loss before taxation (100,836) (34,395)

Expected tax credit based on rate of corporation tax in UK of 28.0% (2009: 28.0%) 28,234 9,631Expenses not deductible for taxation (14,339) (4,911)Tax effect of associates (1,663) (467)Tax deductible gains on LTIP and option exercises 6,215 –Capital allowances in excess of depreciation 4,415 531Different tax rates applied in foreign jurisdictions (2,227) 71Tax losses not recognised (19,377) (4,855)

1,258 –

13. Earnings per share(a) BasicBasic earnings per share is calculated by dividing the loss attributable to Ordinary Shareholders by the weighted average number of Ordinary Shares outstanding during the year, excluding shares held in the employee benefit trust.

2010$’000

2009$’000

Loss from continuing operations attributable to equity holders of the Company (99,578) (34,355)Weighted average number of Ordinary Shares in issue 108,473,752 103,741,724

Total earnings per share attributable to equity holders of the Company (0.92) (0.33)


65

13. Earnings per share continued(b) DilutedThe outstanding options, warrants and LTIP awards at 31 December 2010 and 2009 represent anti-dilutive potential Ordinary Shares with respect to earnings per share for continuing operations. Therefore, basic and diluted earnings per share is the same for the current and prior year.

14. Intangible assets

NoteSoftware

$’000Goodwill

$’000

Mineral rights and

exploration and

evaluation costs$’000

Total$’000

Cost1 January 2009 – – 20,161 20,161Additions 106 – 30,587 30,693Transfers to other assets – – (217) (217)Transfer to property, plant and equipment 15 – – (1,345) (1,345)

31 December 2009 106 – 49,186 49,292Additions – – 28,647 28,647Acquisition of subsidiary 25 – 39,695 1,723 41,418Disposals (7) – – (7)Disposal of subsidiary – – (1,374) (1,374)Transfer to property, plant and equipment 15 – – (20,702) (20,702)

31 December 2010 99 39,695 57,480 97,274

AmortisationAt 1 January 2009 and 1 January 2010 – – – –

Charge for the year 36 – – 36Disposals (3) – – (3)

31 December 2010 33 – – 33

Net carrying value1 January 2009 – – 20,161 20,161

31 December 2009 106 – 49,186 49,292

31 December 2010 66 39,695 57,480 97,241

Mineral rights and evaluation and exploration costs consist of costs incurred on the exploration of the Group’s Marampa, Isua and Wadi Sawawin projects located in Sierra Leone, Greenland and Saudi Arabia respectively. During October 2010 the existence of commercially exploitable reserves was confirmed in Sierra Leone and the project moved into the mine development phase. The mineral rights and exploration and evaluation costs in Sierra Leone were therefore transferred into mining properties in property, plant and equipment in accordance with the Group’s accounting policies.

The goodwill acquired in the period has arisen on the acquisition of ICC (note 25). This has been allocated fully to the Colombia CGU and forms the entirety of goodwill recognised in the Group. The recoverable amount of Colombia has been assessed by value in use calculations on the basis of latest prices and growth forecasts for commodity prices and exchange rates consistent with external sources of information discounted appropriately at the Group’s weighted average cost of capital applicable to Colombia. Despite confidence that the life of the ovens will be significantly longer, the recoverable amount has been assessed on an asset life limited to 20 years. Management believes that any reasonable possible change in the key assumptions would not cause the carrying amount to exceed the recoverable amount.

During 2009 USD 1.3 million of costs relating to the Isua camp set up in Greenland were transferred out of intangible assets and into property, plant and equipment.

66Overview




14. Intangible assets continuedThe Group has certain licences which will be subject to renewal during 2011 but management has no reason to believe that these will not be renewed in the ordinary course of business. Mineral rights and exploration and evaluation costs will be transferred to property plant and equipment once the technical feasibility and commercial viability of the respective projects is demonstrable. These costs will then be depreciated on a unit of production basis of tonnes mined over the total resource. Software costs capitalised as intangible assets are amortised over three years.

15. Property, plant and equipment (restated)

Note

Mineral properties

Restated$’000

Land and buildingsRestated

$’000

Capital work in progress

Restated$’000

Office equipment

and furnitureRestated

$’000

Plant and equipment

Restated$’000

TotalRestated

$’000

Cost1 January 2009 – – 91 557 948 1,596Additions – 1,486 – 145 283 1,914Transfers from intangible assets 14 – – – – 1,345 1,345

31 December 2009 – 1,486 91 702 2,576 4,855Additions 6,599 – 47,615 342 2,423 56,979Acquisition of subsidiary 25 – 445 272 43 – 760Transfer from intangible assets 20,078 (1,486) 2,110 – – 20,702Disposals – – – (16) (18) (34)Disposal of subsidiary – – – (3) – (3)

31 December 2010 26,677 445 50,088 1,068 4,981 83,259

Depreciation1 January 2009 – – – 106 353 459Charge for the year – – – 209 555 764

31 December 2009 – – – 315 908 1,223Charge for the year – – 12 244 690 946Disposals – – – (8) (18) (26)Disposal of subsidiary – – – (2) – (2)

31 December 2010 – – 12 549 1,580 2,141

Net carrying value1 January 2009 – – 91 451 595 1,137

31 December 2009 – 1,486 91 387 1,668 3,632

31 December 2010 26,677 445 50,076 519 3,401 81,118

A fixed and floating security charge has been pledged over all property, plant and equipment in Sierra Leone as security in respect of the USD 60.0 million facility with Standard Chartered Bank, 2010 USD 49.6 million (2009 USD nil).

USD 1.5 million has been reclassified into mineral properties from land and buildings during 2010 in line with current period presentation.


67

16. Investments in joint ventures and associates

CGMR Restated

$’000

Atacama Restated

$’000

Investment in joint

ventures Restated

$’000

ICC Restated

$’000

DMC Restated

$’000

Investment in associates

Restated $’000

Investment in joint

ventures and associates

Restated $’000

At 31 December 2008 – – – 4,851 15,759 20,610 20,610Acquisitions 44,477 – 44,477 – – – 44,477Additional loans and investments 1,467 – 1,467 – – – 1,467Group share of results of joint ventures and

associates (net of tax) 3,560 – 3,560 (362) 239 (123) 3,437Impairments – – – – (6,000) (6,000) (6,000)Exchange differences – – – – 423 423 423

At 31 December 2009 49,504 – 49,504 4,489 10,421 14,910 64,414Acquisitions and disposals – 5,000 5,000 (4,160) 18,500 14,340 19,340Additional loans and investments 1,074 6,724 7,798 – – – 7,798Share of results of joint ventures and associates

(net of tax) 251 (113) 138 (329) (815) (1,144) (1,006)Loan repayments (2,106) – (2,106) – – – (2,106)Impairments (48,799) (11,611) (60,410) – – – (60,410)Reclassified to assets held for sale – – – – (28,072) (28,072) (28,072)Exchange differences 76 – 76 – (34) (34) 42

At 31 December 2010 – – – – – – –

Joint venture investment in CGMR:The company completed the 50% joint venture in CGMR JV on 23 April 2009 with an initial investment of USD 44.5 million. For the year ended 31 December 2010 the carrying value of the investment has been written down to USD nil, see note 24a.

Joint venture investment in Atacama:On 30 July 2010 the Company entered into a joint venture agreement to acquire 50% of Atacama. In consideration London Mining converted a USD 5.0 million loan, and has provided additional loans of USD 6.7 million. For the year ended 31 December 2010 the carrying value of the investment has been written down to USD nil – see note 24b.

Associate investment in ICC:Following the acquisition of the remaining 80% of ICC (see note 25) the previously held 20% associate investment in ICC has been disposed of and an acquisition of 100% of ICC recognised. The fair value of the associate investment has been taken into account when determining the purchase consideration (note 25).

Associate investment in DMC:Investments in associates held at 31 December 2009 relate to investments made in DMC Coal. In June 2009 an impairment of USD 6.0 million was made following DMC’s management’s decision to not proceed with the Pixley KaSeme coal project.

On 13 January 2010, London Mining converted the USD 18.5 million convertible loan due from DMC Group (see note 18) and its 39.3% net equity investment in DMC Coal into 28.0% of the issued share capital of DMC Group, on a fully diluted basis. The fair value of the 28% holding of DMC Group acquired was deemed to be the fair value of the cost of acquisition, which included the USD 18.5 million convertible loan and the USD 10.4 million share of 39.3% held in DMC Coal. The 28.0% holding was diluted during the three months to 31 March 2010 to 27.5%. The overall carrying value at 31 December 2010 is USD 28.1 million.

On 23 April 2010, London Mining accepted an offer from Sable Mining Africa Limited (“Sable”) for USD 24.8 million in cash for its 27.5% interest in DMC Group. The offer is subject only to regulatory approvals relating to change of control in DMC Group and anti-trust matters. As a result the investment has been reclassified as held for sale.

68Overview




16. Investments in joint ventures and associates continuedAggregated amounts relating to joint ventures and associates are set out below:

Joint ventures

2010 $’000

Joint ventures

2009 $’000

Associates 2010

$’000

Associates 2009

$’000

Total assets – 66,142 – 22,614Total liabilities – (16,638) – (7,704)

Group’s share of net assets – 49,504 – 14,910

Group’s share of revenue 4,971 8,878 – –Group’s share of results (net of tax) 138 3,560 (1,144) (123)

17. Inventories (restated)The USD 0.6 million inventory balances in the 31 December 2010 and 31 December 2009 balance sheet all relates to ore stockpiles within Sierra Leone. This balance has been reclassified to current inventory at 31 December 2010 as the stockpiles are all expected to be utilised within twelve months from 31 December 2010.

18. Loans and receivables

Note2010

$’000

2009 Restated

$’000

Non-currentConvertible loans receivable1 24b – 5,000Convertible loans to associates2 – 19,500

– 24,500

CurrentPrepayments3 5,794 595Receivable from joint venture partner – 342Convertible loan receivable from joint venture partner4 – 1,000Other receivables 629 792

6,423 2,729

6,423 27,229

1 The convertible loan has been converted into 50% of the share capital of Atacama.2 Convertible loans to associates of USD 19.5 million at 31 December 2009 comprised the USD 1.0 million convertible loan advanced to ICC in November 2009 and

USD 18.5 million receivable from the DMC Group, which, along with the Group’s 39.3% share of DMC Coal, has been converted into a 28% holding in DMC Group, see note 16. Following the offer from Sable the investment has been reclassified as held for sale at 31 December 2010.

3 Includes USD 2.1 million of the arrangement fees on the USD 60.0 million Standard Chartered undrawn facility. This will be offset against the loan when the facility is drawn down.4 This loan with the Chinese Joint Venture partner Wits Basin is convertible on demand into shares in Wits Basin at USD 0.10 per share and repayable on demand, with an

interest rate of 8% per annum has been impaired for the year ended 31 December 2010 (note 24a).

19. Deferred tax assets and liabilities

Group

Accelerated capital

allowances Restated

$’000

Tax losses carried

forward Restated

$’000

Total Restated

$’000

31 December 2008 and 31 December 2009 (32) – (32)

Credited/(charged) to the income statement (1,780) 3,038 1,258

31 December 2010 (1,812) 3,038 1,226

At the balance sheet date, the Group has recognised tax losses in Sierra Leone as the Group is anticipating applying all the tax losses incurred in Sierra Leone to taxable profits within the foreseeable future. In addition the Group has further unused losses of USD 170.7 million (2009: USD 101.7 million) available for offset against future taxable profits. All tax losses may be carried forward indefinitely. At the balance sheet date, there are no temporary differences associated with undistributed earnings of subsidiaries or associates.


69

20. Cash and cash equivalents (restated)Included in cash and cash equivalents is an amount of USD 7.8 million of restricted cash. This relates to a letter of credit for the import of manufactured goods into Sierra Leone.

21. Assets classified as held for sale

Note2010

$’0002009

$’000

Investment in DMC 16 28,072 –

Total assets classified as held for sale 28,072 –

The USD 28.1 million investment in DMC Group has been reclassified to investments held for sale at following the Sable offer. The Group’s share of the loss in DMC Group has been included in the London Mining accounts until 23 April 2010, the date of acceptance of the Sable offer, at which point the asset was reclassified as held for sale.

In addition London Mining entered into an agreement on 19 January 2010 with private investment vehicles of Heine van Niekerk and Pieter Wiese, (CEO and CFO respectively of DMC Group), which, inter alia, guaranteed that London Mining would receive total proceeds of USD 40.0 million in the event of the sale of DMC Group. London Mining has accepted the offer for USD 24.8 million cash from Sable for its 27.5% stake in DMC, and is therefore due under the private agreement a further USD 15.2 million, which it expects to be paid in Sable shares. Approval has been received from The South African Regulatory Bank in respect of enforcement of the downside protection agreement. No reversal of the previous USD 6.0 million impairment made in 2009, nor upwards revaluation of the carrying value has been made to reflect the full value of the protection agreement as London Mining is currently in the process of enforcing the downside protection agreement against the CEO and CFO.

22. Trade and other payables

2010 $’000

2009 Restated

$’000

Current liabilitiesTrade and other payables 4,132 3,485Other taxation and social security 2,331 765Accruals 15,019 16,453

21,482 20,703

Current liabilities include USD 10.4 million (2009: USD 2.2 million) in relation to exploration and evaluation costs for the Group’s Sierra Leone, Greenland and Saudi projects.

The Directors consider the fair value of trade and other payables at 31 December 2010 not to be materially different to their carrying value.

23. Share capital

No. of shares 2010

$’000 No. of shares 2009

$’000

Authorised:Ordinary shares of GBP 0.002 each 200,000,000 730 200,000,000 730Deferred shares of GBP 0.000001 each 120,000,000 – 120,000,000 –C shares of GBP 2.00 each 33,794,785 123,283 33,794,785 123,283

124,013 124,013

Ordinary shares Issued and fully paid:At 1 January 109,583,795 398 109,533,795 398Issued during the year 4,176,666 13 50,000 –

113,760,461 411 109,583,795 398

During the year ended 31 December 2010:3,500,000 (2009: nil) shares were issued on the acquisition of International Coal Company Limited; >176,666 (2009: 50,000) shares were issued following the exercise of options by employees; and >500,000 (2009: nil) shares were issued following the exercise of warrants by a consultant. >

70Overview




23. Share capital continuedEmployee benefit trustThe Company established the EBT as a discretionary trust, for the benefit of employees of the London Mining Group. The independent trustee of the Trust, Fenlight Trustees Limited (the “Trustee”) has agreed to purchase shares in the Company from the market and to use those shares to satisfy certain options or awards made under the terms of the Group’s LTIP and share options plans. During 2010 4,718,884 shares were distributed on the exercise of LTIP awards, 100,000 shares were transferred into a second discretionary trust, 2,587,722 shares were acquired in the year and 2,812,781 shares were sold during the year. The Group’s employee benefit trust had 1,667,000 shares at 31 December 2010 (2009: 6,710,943). During the year a second trust was established to hold 100,000 jointly owned shares with a key management employee. At the year end this trust “Spartacus Trustees” held 100,000 jointly owned shares. These jointly held shares cannot be purchased from the trust by the employee until the third anniversary of the date of joint ownership.

Rights attached to the Ordinary SharesEach Ordinary Share carries rights to one vote at general meetings of the Company.

Rights attached to the deferred shares(a) IncomeThe Deferred Shares shall confer no right to participate in the profits of the Company.

(b) CapitalOn a return of capital on a winding-up (excluding any intra-Group re-organisation on a solvent basis) there shall be paid to the holders of the Deferred Shares the nominal capital paid up or credited as paid up on such Deferred Shares after paying to the holders of the Ordinary Shares the nominal capital paid up or credited as paid up on the Ordinary Shares held by them respectively, together with the sum of GBP 1,000,000 on each Ordinary Share. The holders of the Deferred Shares shall not be entitled to any further right of participation in the assets of the Company.

(c) Attendance and voting at general meetingsThe holders of the Deferred Shares shall not be entitled to receive notice of any general meeting of the Company or to attend, speak or vote at any such meeting.

(d) FormThe Deferred Shares shall not be listed on any stock exchange nor shall any share certificates be issued in respect of such shares. The Deferred Shares shall not be transferable except in accordance with (f) below or with the written consent of the Directors.

(e) Class rightsThe Company may from time to time create, allot and issue further shares, whether ranking pari passu with or in priority to the Deferred Shares, and on such creation, allotment or issue any such further shares (whether or not ranking in any respect in priority to the Deferred Shares) shall be treated as being in accordance with the rights attaching to the Deferred Shares and shall not involve a variation of such rights for any purpose or require the consent of the holders of the Deferred Shares. The reduction by the Company of the capital paid up on the Deferred Shares and the cancellation of such shares shall be in accordance with the rights attaching to the Deferred Shares and shall not involve a variation of such rights for any purpose and the Company shall be authorised at any time to reduce its capital (subject to the confirmation of the Court in accordance with the Companies Acts) without obtaining the consent of the holders of the Deferred Shares.

(f) Transfer and purchaseThe Company may at any time (and from time to time), (subject to the provisions of the Companies Acts) without obtaining the sanction of the holder or holders of the Deferred Shares:(i) Appoint any person to execute on behalf of any holder of Deferred Shares a transfer of all of the Deferred Shares or any part

thereof (and/or an agreement to transfer the same) to the Company or to such person as the Directors may determine (whether or not an officer of (or agent for) the Company), in any case for not more than one penny for all the Deferred Shares then being purchased from him, which payment can be made, if the Directors so determine, to charity; and

(ii) if the Company so elects, cancel all or any of the Deferred Shares so purchased by the Company in accordance with the Companies Acts.

At the date of this report the Company’s Long Term Incentive Trust holds 1,667,000 existing Ordinary Shares as part of the trust fund.


71

24. Acquisitions of joint ventures(A) Investment by London Mining Plc in the CGMR JVOn 23 April 2009, the Company completed a joint venture agreement with Wits Basin Precious Minerals, Inc. (“Wits Basin”) in relation to the 50:50 CGMR JV. The CGMR JV through its wholly owned subsidiary, CGMR, has a 100% interest in two Chinese companies: Xiaonanshan Mining Co Limited (“XNS”) and Nanjing Sudan Mining Co (“Sudan”). Under the terms of the agreement, the Company subscribed USD 38.7 million and made a direct loan to Wits Basin for USD 5.75 million (of which USD 2.0 million was repaid in January 2010), making a total initial investment of USD 44.5 million.

Impairment of CGMR JVFor the year ended 31 December 2010 the Group has made an impairment of USD 50.0 million to the investment in the CGMR JV to write it down to a carrying value of USD nil of which USD 14.2 million was recorded in the period ended 30 June 2010. The USD 50.0 million consists of a USD 48.8 million impairment against the investment in the joint venture and USD 1.2 million impairment of loans receivable from the joint venture partner.

Mining operations continue to be halted by the mining authorities in Anhui province, for reasons which primarily concern the continued delay in consolidating the mines situated on the CGMR licence. The arbitration claim from the original vendors of the XNS mine and Sudan processing plant regarding the timing for payment of deferred consideration of approximately USD 18.0 million (translated at 31 December 2010) remains unresolved, with an initial hearing date set for April 2011. While London Mining is in negotiations with the vendor regarding the arbitration, the outcome is uncertain. In January 2011 The operator of the other two pits on the CGMR licence, Maanshan Binyong Mining Co. Ltd (“Binyong”), has recently won a court case which ruled that integration of CGMR’s XNS pit with the two Binyong pits should be enforced whereby Binyong would receive 60% of the equity in an enlarged XNS. CGMR has appealed this ruling as Chinese legal counsel, based on the evidence available, believes there is no legal basis for the claim, (see note 33).

The ongoing legal claims and production stoppages have resulted in a prolonged delay to the fund raising process to acquire and consolidate the neighbouring pits which was the investment basis of the Group’s interest in the CGMR JV. As a result the Directors have determined that until such time there is more certainty around the legal status of the integrated CGMR JV licence and the required funding process the recoverable amount of the investment should be written down to USD nil.

London Mining is investigating bringing in a Chinese partner to operate the mine in return for equity in the business, and it is in discussions with several parties regarding this approach. London Mining has no intention to commit material new funds to the CGMR JV joint venture, and is minimising the management time spent on this project.

Accounting for the CGMR JV following change in accounting policy and impairmentDuring the year ended 2010 the Group has changed its accounting policy to accounting for joint ventures using the equity method, see note 5. As a result of this change and the impairment, the Group’s consolidated balance sheet shows an investment in joint ventures and associates of USD nil for the year ended 2010, (2009: USD 49.5 million) in respect of the CGMR JV. The consolidated income statement shows a result (profit) from joint venture of USD 0.3 million, (2009 USD 3.6 million).

Accounting for the CGMR JV prior to change in accounting policyNote 5 sets out the presentational change to the Group’s consolidated balance sheet and income statement as a result of the change in accounting policy for joint ventures for the year ended 31 December 2009.

For the year ended 31 December 2009 the Group consolidated 50% of the CGMR JV using proportionate consolidation. For accounting purposes the USD 38.7 million investment was treated as debt due from the joint venture of USD 34.9 million (discounted for the timings of the anticipated cash flows) and an equity contribution to the joint venture of USD 3.8 million (in exchange for the Group’s 50% interest).

Full details of the acquisition accounting for the CGMR JV under the proportionate consolidation method are disclosed in the Group’s 2009 Annual Report.

72Overview




24. Acquisitions of joint ventures continuedResults of the CGMR JVThe Group’s share of the results for the year ended 31 December 2010 is shown below. The results have been equity accounted since the change in accounting policy for joint ventures from proportionate consolidation – see note 5.

Income statement

Share of joint

venture1 $’000

London Mining Plc

$’000

Total profit attributable to Chinese operations

$’000

Revenue 4,971 – 4,971Cost of sales2 (1,976) (1,976)Administrative expenses (2,546) – (2,546)

Profit from operations, before London Mining management fee 449 – 449London Mining management fee (2,333) 3,562 1,229

EBITDA (1,884) 3,562 1,678Depreciation (1,332) (56) (1,388)

(Loss)/profit from operations (3,216) 3,506 290Net finance income (1,167) 1,117 (50)Impairments – (48,799) (48,799)

Loss before taxation (4,383) (44,176) (48,559)Taxation (3) 14 11

Loss for the year (4,386) (44,162) (48,548)

1 Group’s 50% share.2 Excluding depreciation

The Group’s share of the results for the year ended 31 December 2009 since acquisition include:

Income statement

Share of joint

venture1 $’000

London Mining Plc

$’000

Total profit attributable to Chinese operations

$’000

Revenue 8,878 – 8,878Cost of sales2 (4,318) – (4,318)Administrative expenses (938) – (938)

Profit from operations, before London Mining management fee 3,622 – 3,622London Mining management fee (2,025) 4,355 2,330

EBITDA 1,597 4,355 5,952Depreciation (1,898) (161) (2,059)

(Loss)/profit from operations (301) 4,194 3,893Net finance income (682) 751 69

(Loss)/profit before taxation (983) 4,945 3,962Taxation (442) 40 (402)

(Loss)/profit since acquisition (1,425) 4,985 3,560

1 Group’s 50% share since acquisition.2 Excluding depreciation.

(B) Investment in Chile Joint VentureOn 30 July 2010 London Mining entered into a joint venture agreement with a Chinese and Chilean based partner in order to take advantage of several iron ore opportunities in the Atacama region of Chile. The joint venture company, Atacama Mining Resources Corporation (“Atacama”) through its Chilean subsidiary, British Mining Resources Corporation Ltda, (“British Mining”) holds options over concessions to iron ore deposits in the Atacama region of Chile. Under the agreement London Mining subscribed for 50% of the share capital of Atacama.


73

24. Acquisitions of joint ventures continuedIn consideration for the 50% share capital of Atacama, London Mining converted a previously outstanding convertible loan of USD 5.0 million. The full USD 5.0 million was recognised as goodwill within intangible assets on acquisition with the fair value of assets acquired being assessed as having USD nil value.

London Mining has also made available additional loans totalling USD 7.0 million to British Mining to fund acquisitions of a number of concessions in the area and to get exclusive rights from joint venture partners on future iron ore prospects in Chile. This loan will be repaid to London Mining from the earlier of first sales of ore made by the joint venture or third party funding of the joint venture. At 31 December 2010 a total of USD 6.5 million of loans had been drawn down by British Mining.

Impairment Prior to year end, London Mining’s investment in the Joint Venture was USD 11.2 million (net of exploration costs expensed during the year) of which USD 5.0 million was recorded as goodwill and USD 6.2 million was shown as a long term receivable. In accordance with International Financial Reporting Standards, London Mining has written down the goodwill recognised at the date of the agreement to USD nil and has made full provision against the long term receivables. The provision is required because the portfolio of iron ore concessions and logistics opportunities being considered by Atacama has changed since the date of London Mining’s initial investment into the venture. In accordance with accounting standards, the initial investment of USD 11.2 million is not able to be reassigned to new exploration and port concession opportunities now being evaluated or obtained. The provision made against the receivable may be reversed when either new cash is invested into the venture or the venture has a defined resource or reaches production from one of the many new opportunities it is currently negotiating.

The joint venture has received interest from a number of parties for a potential off-take from concessions undergoing early stage exploration in and around this area based on initial sample specifications taken and is currently in negotiations for a possible strategic investor into the project.

Group’s share of results for the Chile joint ventureAs at 31 December 2010 Atacama had net liabilities of USD 1.0 million and in the period since acquisition had recorded a loss of USD 1.0 million (on a 100% basis, which includes the exploration write-off of USD 0.8 million following drilling results on a particular concession).

25. Acquisition of subsidiary, International Coal Company LimitedOn 30 March 2010, London Mining announced the acquisition of the remaining 80% issued share capital of ICC (now ‘London Mining (Colombia) Limited’) for initial consideration of USD 5.5 million cash and 3.5 million newly issued London Mining shares. The acquisition was conditional on various completion requirements which were satisfied on 5 May 2010 when the acquisition was completed and initial consideration transferred.

London Mining now holds 100% of this investment. London Mining (Colombia) Limited (“London Mining Colombia”) is a Cayman Islands incorporated company with operations in Colombia, South America. London Mining Colombia’s strategy is to become a fully integrated developer of coal properties for the international steel and energy markets.

Potential further consideration of up to USD 8.5 million cash and up to 6.3 million shares is payable subject to performance conditions. These conditions include meeting annual or cumulative EBITDA targets in 2011, 2012 and 2013 and the completion of feasibility studies or the acquisition of mining concessions and port opportunities.

74Overview




25. Acquisition of subsidiary, International Coal Company Limited continueda) Consideration paid and assets acquired:The final proforma assets acquired and fair value adjustments are presented below:

Note

Book value

$’000

Provisional fair value

adjustments $’000

Fair value of assets

at acquisition

$’000

Net assets acquired: Goodwill1 – 39,695 39,695Other intangible assets: Mineral resources 14 1,723 – 1,723Property, plant and equipment 15 760 – 760Current receivables 6 – 6Cash 439 – 439Current liabilities (141) – (141)Loan payable to London Mining Plc (2,567) – (2,567)

220 39,695 39,915

Satisfied by:Share of associate2 16 4,160Cash consideration payable at acquisition date 5,500Share consideration paid at acquisition date3 12,011Deferred consideration4 18,244

39,915

Net cash outflow arising on acquisition Cash consideration 5,500Less: cash and cash equivalents acquired (439)

5,061

Total consideration paid for 100% of ICC was USD 39.9 million. Assets acquired were USD 0.2 million with goodwill on acquisition recognised of USD 39.7 million and included in intangible assets. The goodwill is not expected to be deductible for tax purposes.

1 The goodwill arising on the acquisition of ICC is attributable to the acquisition of land; environmental and construction permits; and detailed plans to build coke ovens with a nameplate capacity of 200ktpa and three coking coal concessions in the Socha region of Colombia with an aggregate area of 606 hectares.

2 The Directors consider the fair value of the Group’s previous 20% holding in ICC to equal fair value and as such no gain or loss has been recognised on the initial recording of the transaction.

3 The fair value of the 3,500,000 Ordinary Shares issued as part of the consideration paid for ICC of USD 12.0 million, was determined on the basis of the GBP 2.26 share price at 5 May 2010, translated at the USD 1.52: GBP 1 exchange rate at that date.

4 The fair value of deferred consideration was determined by reviewing the performance criteria and assessing the probability of each milestone being achieved. Total deferred consideration of USD 18.2 million comprises USD 5.0 million cash consideration, discounted to net present value and USD 13.2 million in deferred equity consideration. This was valued based on an expectation of 4,250,000 shares being payable and using the acquisition date share price of GBP 2.26 and has been discounted to net present value.

b) Fair value loss on deferred considerationAt each reporting date the deferred consideration is re-stated to market value based on a re-assessment of the probability of the achievement of individual milestones and the fair value of cash and equity consideration.

For the period from acquisition to 31 December 2010 there has been no change to probabilities. Deferred equity consideration has increased in value as a result of the increase in London Mining Plc’s share price at acquisition of GBP 2.26 to GBP 3.15 at 31 December 2010. This resulted in a cumulative USD 5.6 million fair value loss which has been recorded in the income statement. This fair value loss, together with the USD 528,000 increase in the deferred consideration as a result of the unwinding of the discount has resulted in the deferred consideration liability increasing from USD 18.2 million at acquisition to USD 24.3 million at 31 December 2010.

The potential undiscounted amount of all future payments that London Mining Plc could be required to make under the contingent consideration is USD 5.5 million cash payments and the issuing of USD 36.9 million value of Ordinary Shares, valued at 31 December 2010. The fair value of the contingent cash consideration arrangement of USD 5.0 million was estimated by discounting the expected future payments using a 3.85% discount rate, representing the quoted 12 month USD LIBOR at the time of acquisition.


75

25. Acquisition of subsidiary, International Coal Company Limited continuedAcquisition related costs included in the administrative expenses in London Mining Plc’s consolidated income statement for the year ended 31 December 2010 amounted to USD 193,000 (year ended 31 December 2009 USD 295,000). The future expected costs to be incurred on the issuing of the share capital to the vendors has been estimated to be USD nil.

c) London Mining Colombia performanceLMC contributed a loss of USD 2.6 million to the Group’s loss for the year to 31 December 2010, including a USD 0.3 million Group’s share of the loss of an associate. If the acquisition of ICC had been completed on the first day of the 2010 financial year the Group’s revenue would remain the same, but the Group’s loss would have increased by USD 1.3 million to USD 93.3 million. d) Merger reserveFollowing the issue of the initial 3.5 million shares an amount of USD 12.0 million has been recognised in the merger reserve in relation to the fair value of shares issued over the nominal value, in accordance with Companies Act 2006.

26. Notes to the cash flow statement

Note2010

$’000

2009 Restated

$’000

Reconciliation of the loss for the year to cash outflows from operating activitiesLoss for the year (99,578) (34,395)Adjusted for:Share of results from joint ventures and associates 1,006 (3,437)Fair value loss on deferred consideration 5,565 –Impairments and exploration write downs 61,657 6,000Loss on disposal of a subsidiary 236 –Depreciation and amortisation 982 764Loss on sale of fixed assets 9 –Finance income (3,289) (2,517)Finance costs 3,267 1,864Share-based payments expense 2,821 5,319Tax credit – recognition of a deferred tax asset (1,258) –

(28,582) (26,402)

Increase in non-current receivables (1,074) –Decrease/(increase) in current receivables 327 (1,022)Increase in inventories – (143)(Decrease)/increase in payables (387) 3,910

Cash outflow from operating activities (29,716) (23,657)

27. Share-based paymentsShare options, LTIP awards and warrants (“share based payment awards”) to subscribe for Ordinary Shares in the Company are granted to certain employees, Directors and consultants providing services to the Group. Share based payment awards are exercisable at a price equal to the closing quoted price of the Company’s shares on the date of grant. The vesting period varies from immediate settlement to three years and there may or may not be other vesting/performance conditions. Share based payment awards are forfeited if the employee leaves the Group before the awards vest.

Each employee share based payment award converts into one Ordinary Share on exercise. No amounts are paid or payable by the recipient on receipt of an LTIP award. An amount equal to the share price at the date of grant is payable by the recipient on the exercisable of each option or warrant. The Share based payment awards carry neither rights to dividends nor voting rights and may be exercised at any time from the date of vesting to the date of their expiry.

The number of awards granted is calculated in accordance with the performance-based formula approved by shareholders at a previous Annual General Meeting and is subject to approval by the remuneration committee.

76Overview




27. Share-based payments continuedThe number of options granted is calculated in accordance with the performance-based formula approved by shareholders at a previous Annual General Meeting and is subject to approval by the remuneration committee.

2010 2009

Number

Average exercise price

in pence per share Number


in pence per share

Share optionsAt 1 January 8,250,000 188.28 6,080,000 208.40Granted 1,653,411 200.45 4,120,000 157.94Forfeited (788,334) 131.00 (1,900,000) 187.26Exercised (176,666) 131.00 (50,000) 174.00

At 31 December 8,938,411 170.95 8,250,000 188.28

2010 2009

Number




in pence per share

Jointly held sharesAt 1 January – – – –Granted 100,000 237.00 – –

At 31 December 100,000 237.00 – –

2010 2009

Number




in pence per share

WarrantsAt 1 January 500,000 174.00 500,000 174.00Granted 850,000 309.00 – –Exercised (500,000) 174.00 – –

At 31 December 850,000 309.00 500,000 174.00

Long Term incentive plan awardsAt 1 January 5,683,476 – 10,252,360 –Granted – – 250,000 –Forfeited – – (3,245,923) –Exercised (4,718,884) – (1,572,961) –

At 31 December 964,592 – 5,683,476 –

Of the 8,938,411 outstanding options at 31 December 2010, 5,994,999 were exercisible (2009: 3,826,666). None of the 100,000 JSOP awards were exercisible at 31 December 2010.

Of the 850,000 warrants outstanding at 31 December 2010 none were exercisible. The 500,000 outstanding warrants at 31 December 2009 were all exercisible. Of the 964,592 outstanding LTIP awards at 31 December 2010 none were exercisable (2009: none).


77

27. Share-based payments continuedThe related weighted average share price at the date of exercise for the options and warrants exercised during 2010 was USD 4.72 (2009: USD 3.15). The options outstanding at the end of 31 December 2010 had a weighted average exercise price of USD 2.30 (2009: USD 3.04) and a weighted average remaining contractual life of 5.96 years (2009: 6.42 years). The inputs into the pricing model for all share options granted during the year and the preceding year were as follows:

2010Black

Scholes

2009Binomialmethod

Weighted average fair value of option (USD) 0.61 1.31Weighted average exercise price (USD) 3.10 2.14Expected volatility 38% 50%Expected life 1.80 years 1.45 yearsRisk free rates 0.99% 2.89%Expected dividend yields 0% 0%

During 2010 the Group changed its share based payments valuation model from the binomial method to the Black Scholes method as this method is considered most appropriate for London Mining share options.

The estimated aggregate fair value of the options granted during the year to 31 December 2010 was USD 1.0 million, (2009: USD 5.4 million).

Expected volatility of the options issued during the year to 31 December 2010 was determined by calculating the average volatility of the 90 days prior to the granting of the option. The expected volatility of any options or warrants issued during the prior year were determined on a weighted average basis using the average volatility between the 7 October 2007 date of listing on the Oslo Axess Stock Exchange and the date of grant. See note 7 for the total expense recognised in the income statement for share options and warrants granted to Directors and employees.

Share options and warrants outstanding at 31 December 2010 are as follows:

Expiry date

Exercise price in pence Number

Options granted prior to 201030 June 2011 131.00 100,00030 June 2019 131.00 2,455,00030 June 2019 161.00 100,00012 September 2012 174.00 180,00011 July 2013 174.00 2,450,00016 October 2018 237.00 500,0002 May 2013 309.00 500,00014 May 20131 344.00 1,000,000

7,285,000

Options granted during 20109 June 2020 197.50 500,00024 May 2020 201.25 953,4117 June 2020 204.00 200,000

1,653,411

Options outstanding at 31 December 2010 8,938,411

Warrants granted during 201023 December 2020 309.00 850,000

Warrants outstanding at 31 December 2010 850,000

1 500,000 of these options are subject to various non-market performance conditions and will vest from November 2009 through to 30 September 2013.

78Overview




28. Operating leasesAt 31 December 2010, the Group had the following minimum cumulative commitments under non-cancellable operating leases.

2010 $’000

2009 $’000

Expiry dateWithin one year 579 686One to five years 764 685After five years 2,768 2,933

4,111 4,304

Operating lease commitments after five years largely relate to mining lease obligations.

29. Contingent liabilitiesAs part of the Mining Lease Agreement between London Mining and the Government of Sierra Leone London Mining has entered into a Performance Bond in the form of a letter of credit of USD 1.0 million which shall be encashed if London Mining fails to make substantial progress towards the re-opening of the Marampa. The Directors current expectation is that the Performance Bond will not be encashed.

As part of the acquisition of its Chinese joint venture described in note 24, the vendor has an entitlement to receive further consideration of up to USD 38.6 million under consulting agreements payable subject to continuing employment for up to 8 years and available cash in CGMR after the priority repayment of the Group’s USD 44.5 million initial investment and subsequent ongoing distribution rights. The Group has not recognised any provision for the year ended 31 December 2010 based on the Directors current expectation that the likelihood of the vendor being entitled to a material balance is remote.

As part of the disposal of the Brazilian operations in 2008, London Mining granted certain warranties and indemnities to the purchaser, ArcelorMittal. Having taken appropriate legal advice, the Group believes the likelihood of a material liability arising is remote.

The Company considers no UK tax to be payable on the USD 664.2 million profit arising on the disposal of the Brazilian operations in 2008 since it is anticipated the sale will qualify for the UK substantial shareholdings exemption.

30. Financial instruments, risk management and exposure(a) Financial risk and risk managementThe following disclosures represent the risk management policies and procedures of the Group.

Credit RiskThe Group is principally exposed to credit risk from cash and cash equivalents and deposits held with financial institutions, loans and other receivables. It is Group policy to manage credit risk by:

holding and investing cash in multiple, reputable financial institutions >dealing with creditworthy counterparties >

The Group does not enter into derivatives to manage credit risk.

i) Cash and cash equivalentsThe objective in respect of cash and cash equivalents is to maximise returns whilst minimising risks. To maximise credit protection all cash and cash equivalents are held with a variety of major banks and invested in AAA funds to minimise credit risk.

The policy of the Group is to hold funds at Parent Company level and minimise funds held within operating and service subsidiaries. This reduces credit risk by ensuring funds are held in higher rated funds. A cash call process occurs each month. Each subsidiary submits a monthly cash call with support to be approved and released by the Parent Company.

The Group has a policy of ensuring any significant advance payments against major contracts are protected by bond or escrow.

ii) Loans and receivablesLoans and receivables represent a potential credit risk due to the possibility of default.

Loans and other receivables primarily relate to advance and mobilisation payments to contractors.


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30. Financial instruments, risk management and exposure continuedLiquidity riskThe Group has sufficient cash resources and available financing facilities which provide liquidity to support Group strategy in the medium term.

Certain of the Group’s mining projects require significant additional financing which represents a liquidity risk to the Group. To mitigate this risk bankable feasibility studies are conducted in advance of funds being committed or to support the raising of external finance. Forecast and actual cash flows are monitored to estimate the timing and size of any funding gap. This is updated at least quarterly and presented to the Board. The forecast includes an expectation of when payments for capital contracts will be required.

It is the policy of the Group not to enter into capital contracts such that commitments exceed available funds at any time.

The Group has additional financing facilities at its disposal to further reduce liquidity risk as set out below.

On 15 October 2010 the Group concluded a USD 60.0 million two year revolving credit facility with Standard Chartered Bank. The facility is subject to the satisfaction of certain conditions precedent including security being taken over certain shares and assets of London Mining and certain of its subsidiaries.

On 31 January 2011 the Group announced the raising of a USD 110.0 million through an offering of senior, unsecured convertible loans, (see note 33).

The maturities of the Group’s non-derivative financial liabilities are shown in the table below.

Less than 1 month $’000

1-3 months

$’000

3 months to 1 year $’000

1-5 years $’000

Total $’000

At 31 December 2010 12,853 3,995 1,887 5,537 24,272

All financial liabilities are non-interest bearing.

Market riski) Commodity price riskCash flows are forecast using forecast prices for iron ore and coal. Sensitivities are performed using a variety of commodity price assumptions to highlight commodity price risk.

The Group has not used any commodity price derivatives in this or the prior year.

On 26 January 2011 the Group entered into an offtake agreement that will cover 9.5 million of wet metric ton production from the Marampa project, directly correlated to the benchmark CFR China price (note 33).

The Group has not historically hedged future sales. This policy may change subject to future financing arrangements and terms.

ii) Exchange rate riskThe functional currency of all Group subsidiaries is the USD. Although the majority of the Group’s transactions are recorded in USD, some operating costs and investments are incurred in British Pounds, Chinese Renminbi, Australian Dollar, Canadian Dollar, Colombian Pesos, EURO, and Danish Kroner.

The Group manages foreign exchange risk by holding cash balances in USD and GBP for respective supplier payments. It is anticipated that future commercial transactions for the Group will be in USD which is the same as the functional currency of the Company and its subsidiaries.

At balance sheet date, the Group held GBP 10.4 million (2009: GBP 2.2 million) in its cash at bank balance. A movement of 5% strengthening or weakening of the USD to GBP would respectively decrease or increase the Group’s profit before tax by USD 0.8 million (2009: USD 0.2 million) based on the Group’s current GBP cash balance.

80Overview




30. Financial instruments, risk management and exposure continuedAt balance sheet date, the Group held GBP 0.2 million (2009 GBP 7.8 million) in trade and other payables. A movement of 5% strengthening or weakening of the USD to GBP not have a significant impact on the 2010 Group’s result (2009: USD 0.6 million) based on the Group’s current payables balance. The Group has no other material currency exposures.

The Group policy is to negotiate contract terms where possible in USD to reduce exchange rate risk. A portion of the Group’s capital cost will be incurred in currencies which are not denominated in USD. This gives rise to an exchange rate risk in that the rate at the time of entering into a contract can be different to when payments are made.

The Group has not used any exchange rate derivatives in this or the prior period.

iii) Interest rate riskFluctuations in interest rates impact on the value of cash investments and financing activities, giving rise to interest rate risks. The Group has no loans or receivables which have floating interest rates.

As at 31 December 2010 the Group had no drawn borrowings and therefore no exposure to interest rates. The Standard Chartered facility of USD 60.0 million has a floating interest rate. The USD 110.0 million convertible loan has a fixed interest rate of 8.00% (more detail on this is provided in note 33).

iv) Capital risk managementThe Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

Capital managed by the Group at December 2010 consists of cash and cash equivalents and equity attributable to equity holders of the parent. The capital structure is reviewed by management through regular internal and quarterly financial reporting and forecasting. As at 31 December 2010 equity attributable to equity holders of the parent is USD 244.4 million, (2009 USD 327.2 million) whilst cash and cash equivalents amount to USD 76.0 million, (2009 USD 204.3 million).

The Group is not subject to any externally imposed capital requirements.

(b) Potential impact of market risksi) Credit riskThe Group’s maximum exposure to credit risk at 31 December 2010 was USD 104 million (2009: USD 278 million). The Group’s financial assets do not represent a concentration of material exposure of credit risk.

The Group does not have any financial assets that are past due or impaired except those noted in note 9:

ii) Liquidity riskAt 31 December 2010, the Group’s financial liabilities consisted primarily of trade and other payables and non-current deferred consideration payable on the acquisition of London Mining (Colombia), and an amount of USD 3.8 million (2009: USD 4.9 million) accrued in respect of the Return Bonus plan, as discussed in note 7.

iii) Sensitivity analysisFinancial instruments affected by market risk include cash and cash equivalents, loans and receivables and trade payables. Any change in market variables, (exchange rates, interest rates and commodity prices) will have an immaterial effect on these instruments.


81

30. Financial instruments, risk management and exposure continued(c) Classification of financial instrumentsWith the exception of the investment in DMC, which is held at amortised cost less impairments and is classified as an asset held for sale, the carrying amounts of the Group’s financial assets and liabilities are a reasonable approximation of fair value.

2010 $’000

2009 $’000

Non-current Financial assets: Convertible loan receivable from joint venture partner – 1,000Convertible loan receivable from associate partner – 18,500Non-current loan receivable from third party – 5,000Non-convertible loan receivable from joint venture partner – 5,750Loan receivable from joint venture – 40,078

Current Financial assets: Cash and cash equivalents 76,038 204,261Assets held for sale 28,072 –Convertible loan receivable from joint venture partner – –Receivable from Joint venture partner – 1,342Receivable from Joint venture – 1,466Other receivables 106 311

104,216 277,708

With the exception of the Group’s investment in DMC, which is classified as an available-for-sale financial asset, the Group classifies all financial assets as loans and receivables.

2010 $’000

2009 $’000

Financial liabilities:At fair value through profit and lossNon-current deferred consideration payable 5,121 –At amortised cost:Current trade and other payables 19,151 19,938Non-current and other trade payables – 1,136

24,272 21,074

The value of the deferred consideration payable is based on the share price of London Mining Plc at 31 December 2010 and would be therefore be considered a level 1 hierarchy fair value measurement under the requirements of IFRS 7 ‘Financial Instruments: Disclosure’ (see note 25 for more information).

The change in the fair value of the deferred consideration payable on the acquisition of London Mining Colombia) is fully attributable to market risk.

31. Capital Commitments

2010 $’000

2009 $’000

Commitments for the acquisition of intangible assets 578 1,561Commitments for the acquisition of property, plant and equipment 29,148 53

Total 29,726 1,614

The Group’s share of the capital commitments of its joint ventures is USD nil.

82Overview




32. Related party transactionsAt 31 December 2010 the Directors of the Group and their related parties, and entities in which they had a beneficial interest, controlled 6.5% (2009: 3.97%) of the Ordinary Shares of the Company.

The Group has a related party relationship with its subsidiaries, joint venture and its associates. Transactions between Group entities are eliminated on consolidation and are not included in this note.

On 30 March 2010, London Mining announced the acquisition of the remaining 80% issued share capital of ICC (now ‘London Mining (Colombia) Limited’) for initial consideration of USD 5.5 million cash and 3.5 million newly issued London Mining shares. The acquisition was conditional on various completion requirements which were satisfied on 5 May 2010 when the acquisition was completed and initial consideration transferred. G Hossie, the Chief Executive Officer of London Mining Plc had a beneficial interest of 12% in ICC, and therefore received 15% of the consideration paid for the remaining 80% acquired. As a consequence of this interest, Mr Hossie does not represent London Mining on the London Mining Colombia board and does not participate in any decisions of the London Mining Board in relation to London Mining Colombia. As at 31 December 2010, the Group recognises deferred contingent consideration due to former shareholders of ICC, including G Hossie, of USD 24.3 million. G Hossie, London Mining’s CEO, would receive 15% of the deferred consideration payable, which at 31 December 2010 totals USD 3.6 million.

On 30 July 2010 London Mining entered into a joint venture agreement with Chinese and Chilean based partner Atacama to explore iron ore opportunities in Chile. In consideration for the 50% share capital of Atacama, London Mining converted a previously outstanding convertible loan of USD 5.0 million. London Mining has also made available additional loans totalling USD 7.0 million to Atacama’s subsidiary, British Mining, to fund acquisitions of a number of concessions in the area and to get exclusive rights from joint venture partners on future iron ore prospects in Chile. At December 2010 a total of USD 6.5 million of loans had been drawn down by British Mining.

Key management personnel compensation is disclosed in note 8.

33. Events after the balance sheet dateCourt ruling regarding CGMR licenseThe operator of the other two pits on the CGMR license, Maanshan Binyong Mining Co. Ltd (“Binyong”), has recently won a court case which ruled that integration of CGMR’s XNS pit with the two Binyong pits should be enforced whereby Binyong would receive 60% of the equity in an enlarged XNS, the Company which holds the CGMR JV mining licence. This would integrate all current pits on the licence into one operation without payments being made between the parties. London Mining and the CGMR group received legal advice from Chinese counsel throughout the court process that based on the evidence available; there was no legal basis for the claim. The CGMR JV intends to appeal this ruling.

Off take agreementOn 26 January 2011 London Mining signed an offtake agreement with the trading house Glencore International AG (“Glencore”). The offtake will cover 9.5 million wet metric tonne production from Phase 1a of the Company’s Marampa project. The five year agreement, which includes a pre-payment facility for up to USD 27 million, will provide guaranteed offtake and shipping from Sierra Leone for all Phase 1a production, with the option for London Mining to expand the agreement to Phase 1b on the same terms. The offtake will be priced at around Platts 62% CFR China benchmark, with an upward adjustment for the iron content of the Company’s 65% iron sinter feed concentrate, and an incentive to place product at locations such as Europe where there is a net pricing benefit through lower shipping costs. The offtake accommodates London Mining’s ramp up expectations and is flexible to accommodate varying shipping sizes and frequencies to supply European, Chinese and other markets.

FundingOn 17 February 2011 the Company received the proceeds of a USD 110.0 million, (net of costs) offering of unsecured convertible bonds, repayable in 2016. The bonds carry a coupon of 8% per annum, payable semi-annually in arrears and will be convertible into London Mining Plc shares at a conversion price of GBP 4.84 per share, representing a 38% premium to the average market price on the date of offering. 100% of the convertible bonds’ principal amount unless previously converted, redeemed or purchased and cancelled, will be redeemed on maturity. London Mining has the right to redeem all outstanding bonds at par together with accrued interest from three years after the closing date at any time as long as the share price exceeds 130% of the conversion price for more than 20 out of 30 consecutive trading days or, if 15% or less of the bonds remain outstanding. The Bonds have been issued by the Company’s, newly incorporated, wholly-owned subsidiary London Mining (Jersey) Plc and will be guaranteed by the Company. If the convertible bond is fully converted into shares, it would result in the issue of London Mining Ordinary Shares representing 12% of the share capital as at 31 December 2010.


83

34. Composition of the Group Ownership interest

Country of incorporation Principal activity2010

%2009

%

Subsidiaries:London Mining (Colombia) Limited Cayman Islands Investment holding company 100 –International Coal Company Limited Canada Administrative company 100 –Angus Trading Limited British Virgin Islands Mining 100 –London Mining Company Limited Sierra Leone Mining 100 100London Mining Logistics Company Ltd Sierra Leone Dormant 100 100MIL Participacoes Societarias Ltda Brazil Administrative company 100 100Rannerdale Limited Isle of Man Investment holding company 100 100Lexshell 824 Investments (Proprietary)

Limited South Africa Administrative company 100 –London Mining Greenland A/S Greenland Mining 100 100Anglo Mexican Mining Limited British Virgin Islands Dormant 55 55Compania Minera Suizo-Mexicana,

SA de CV Ltd Mexico Mining – 54London Mining Services Limited British Virgin Islands Administrative company 100 –London Mining Construction Limited British Virgin Islands Administrative company 100 –London Mining (West Africa No.1 Limited) British Virgin Islands Administrative company 100 –London Mining (West Africa No.2 Limited) British Virgin Islands Administrative company 100 –

Associates:Delta Mining Consolidated Limited South Africa Mining 27.51 –DMC Energy (Pty) Limited South Africa Mining 27.51 –DMC Energy Swaziland Mining 27.51 –Torbanite One Limited Isle of Man Investment holding company 27.51 100Springbok flats Energy (Pty) Limited South Africa Mining 14.03 –Ashante Mineral Resources (Pty) Limited South Africa Mining 19.26 –Ashante Coal (Pty) Limited South Africa Mining 19.26 –Moretele II Communities Energy (Pty) Ltd South Africa Mining 9.82 –DMC Coal Mining (Pty) Ltd South Africa Mining 19.16 39.3London Mining (Colombia) Limited Cayman Islands Mining – 20.0

Joint ventures:China Global Mining Resources

(BVI) Limited British Virgin Islands Investment holding company 50 50China Global Mining Resources Limited Hong Kong Investment holding company 50 50Maanshan Xiaonanshan Mining Co Limited People’s Republic of China Mining 50 50Nanjing Sudan Mining Co Limited People’s Republic of China Mining 50 50London Mining (Middle East) Limited British Virgin Islands Mining 100 –Saudi London Iron Limited Saudi Arabia Mining 50 50Atacama Mining Resources Corporation British Virgin Islands Mining 50 –British Mining Resources Corporation

Limitida Chile Mining 49.5 –

84Overview




Company balance sheet

As at 31 December

Note2010

$’0002009

$’000

Non-current assetsIntangible assets 1 28,250 20,300Property, plant and equipment 187 332Investment in subsidiaries 2 42,966 2,767Investment in joint ventures 2 – 3,756Investment in associates 2 – 5,081Loans and receivables 3 – 51,827Amounts owed by subsidiaries 165,582 91,569

Total non-current assets 236,985 175,632

Current assetsCurrent loans and receivables 3 2,622 3,911Cash and cash equivalents 71,928 200,427

Total current assets 74,550 204,338

Total assets 311,535 379,970

Current liabilitiesTrade and other payables 4 (10,603) (18,254)

(10,603) (18,254)

Net current assets 63,947 186,084

Non-current liabilitiesDeferred consideration payable (24,337) –Other non-current liabilities 4 – (1,136)

(24,337) (1,136)

Total liabilities (34,940) (19,390)

Total net assets 276,595 360,580

EquityShare capital 411 398Share premium account 21,803 20,094Merger reserve 12,000 –Other reserves 13,985 16,966Retained earnings 228,396 323,122

Total equity 276,595 360,580

The financial statements of London Mining Plc (Company Number 05424040) were approved by the Board of Directors on 31 March 2011 and are signed on their behalf by:

Graeme Hossie Rachel RhodesChief Executive Officer Chief Financial Officer

85

Company statement of changes in equity

Sharecapital $’000

Sharepremiumaccount

$’000

Merger Reserve

$’000

RetainedEarnings

$’000

1 Warrant and option

reserve $’000

2 Foreign exchange

reserve $’000

Total equity $’000

Balance at 31 December 2008 398 19,954 – 337,886 15,405 497 374,140


Recognition of share-based payments – – – 4,255 1,064 – 5,319Issue of share capital (net of expenses) on exercise

of options – 140 – – – – 140Loss for the year – – – (19,019) – – (19,019)

Balance at 31 December 2009 398 20,094 – 323,122 16,469 497 360,580


Issue of share capital 11 – 12,000 – – – 12,011Recognition of share-based payments3 2 1,709 – (420) (2,981) – (1,690)Loss for the year – – – (94,306) – – (94,306)

Balance at 31 December 2010 411 21,803 12,000 228,396 13,488 497 276,595

1 The warrant and option reserve represents the cumulative charge of unexercised warrants and options granted as equity settled employee benefits and warrants issued for cash.

2 The issue of share capital includes the fair value of USD 12.0 million of the 3,500,000 shares issued on the acquisition of the remaining 80% of International Coal Company Limited (“ICC”), (note 25). The merger reserve comprises the non-statutory premium arising on shares issued as consideration for the acquisition where merger relief under the sections 612 and 613 of the Companies Act 2006 applies.

3 On March 31 2010, Graeme Hossie, CEO exercised his nil-cost options over 4,718,884 Ordinary Shares in London Mining, granted under the terms of the London Mining Long Term Incentive Plan (the “LTIP”). The USD 0.4 million transferred from the warrant and option reserve to the retained earnings reserve includes the total USD 4,445,000 of share based payment charges taken through the income statement in relation to these LTIP awards offset against an impairment in the loan to the EDT as a result of this exercise.

86Overview




Company cash flow statement


Note2010

$’0002009

$’000

Cash flows from operating activitiesCash used by operations 5 (16,192) (18,458)Interest received 235 967Interest paid (121) (16)

Net cash outflow from operating activities (16,078) (17,507)

Cash flows from investing activitiesLoans and investments in joint ventures (6,514) (38,727)Loans and investments in associates (1,500) (1,000)Other loans and investments net of repayments 2,000 (5,750)Convertible loans issued to joint ventures – (5,000)Loans to subsidiaries (84,920) (32,565)Acquisition of subsidiaries (5,500) –Investments in subsidiaries – (52)Payments to acquire intangible assets (10,443) (10,784)Purchase of property, plant and equipment (8) (56)Transaction costs, net of proceeds from sale of subsidiaries1 (4,744) (541)

Net cash outflow from investing activities (111,629) (94,475)

Cash flows from financing activitiesNet cash inflow on share capital issued on exercise of options and warrants 1,711 140Finance fees and costs (2,140) –

Net cash (outflow)/inflow from financing activities (429) 140

Net decrease in cash and cash equivalents (128,136) (111,842)Cash and cash equivalents at beginning of year 200,427 312,035Exchange differences (363) 234

Cash and cash equivalents at end of year 71,928 200,427

1 Transaction costs relate to the 2008 disposal of the Brazilian operations.

87

Notes to the Company financial statements

1. Intangible assets

Software $’000

Mineral rights and

exploration and

evaluation costs $’000

Total $’000

Cost1 January 2009 – 13,204 13,204Additions 106 14,616 14,722Transfers to other assets – (217) (217)Intra-Group transfers – (7,409) (7,409)

Cost at 31 December 2009 106 20,194 20,300

Additions – 7,990 7,990Disposals (7) – (7)

Cost at 31 December 2010 99 28,184 28,283

Amortisation1 January 2009 – – –Charge for the year – – –

Amortisation at 31 December 2009 – – –

Charge for the year (36) – (36)Disposals 3 – 3

Amortisation at 31 December 2010 (33) – (33)

Net book value 31 December 2010 66 28,184 28,250

Net book value at 31 December 2009 106 20,194 20,300

2. Investments

Investments in

Subsidiaries $’000

Investments in Joint

Ventures $’000

Investments in

Associates $’000

1 January 2009 2,378 – 5,255Equity injected into subsidiary 389 – –Equity portion of loan paid on acquisition of CGMR (BVI) Ltd – 3,756 –Transfer to subsidiary – – (174)

31 December 2009 2,767 3,756 5,081

Equity injected into subsidiary 4 – –Subscription for 50% of Atacama Mining Resources Corporation – 5,000 –Impairment of Atacama Mining Resources Corporation – (5,000) –Impairment of CGMR (BVI) Ltd – (3,756) –Impairment of subsidiaries (641) – –Acquisition of London Mining Colombia 40,836 – (5,081)

31 December 2010 42,966 – –

88Overview




3. Loans and receivables

2010 $’000

2009 $’000

Non-currentLoan from joint venture partner – 5,750Receivable from joint venture – 35,722Management fee receivable from joint venture – 4,355Convertible loans receivable – 6,000

Total non-current loans and receivables – 51,827

CurrentPrepayments 2,364 343Convertible loan receivable from Joint venture partner – 1,000Accrued interest receivable from Joint venture partner – 342Receivable from Joint venture – 1,466Other receivables 258 760

Total current loans and receivables 2,622 3,911

Total loans and receivables 2,622 55,738

The 2009 USD 35.7 million represents the loan receivable from CGMR BVI representing the original USD 34.9 million debt due, as noted above, accreted for the period to 31 December 2009 for the timings of the anticipated cash inflows (included in investment in joint ventures and associates note 16). These investments were fully impaired in 2010.

4. Trade and other payables2010

$’0002009

$’000

Current Trade and other payables 1,911 2,941Other taxation and social security 113 455Accruals 8,579 14,858

Total current trade and other payables 10,603 18,254

Non-Current Deferred consideration payable 24,337 –Accruals – 1,136

Total non-current trade and other payables 24,337 1,136

Notes to the Company financial statements continued

89

5. Notes to the cash flow statement2010

$’0002009

$’000

Reconciliation of loss for the year to cash outflows from operating activitiesLoss for the year (94,306) (19,019)Adjusted for: Fair value loss on deferred consideration 5,565 –Impairments 73,492 –Loss on disposal of a subsidiary 343 –Depreciation 180 144Loss on sale of fixed assets 9 –Finance income (4,995) (4,449)Finance costs 3,786 1,841Share-based payments expense 2,817 4,982

(13,109) (16,501)Increase in non-current receivables (3,514) (4,355)Decrease/(increase) in current receivables 956 (924)(Decrease)/increase in payables (525) 3,322

Cash outflow from operating activities (16,192) (18,458)

90

Notes

91

Notes

92

Notes

Officers and professional advisors

Country of registration of parent companyEngland and Wales

Legal formPublic limited company

DirectorsGraeme HossieRachel Rhodes Benjamin Lee (appointed 23 February 2011)Luciano Ramos (appointed 23 February 2011)Dr Colin KnightSir Nicholas Bonsor, Bt DLMalcolm GroatDr Graham Mascall (appointed 1 May 2010)Dr Hans Kristian Schønwandt

Company secretary Rohit Bhoothalingam

AuditorsDeloitte LLPChartered AccountantsLondon

Registered office39 Sloane StreetLondonSW1X 9LP

Registration number05424040

London Mining is focused on identifying, developing and operating scalable mines to become a mid-tier supplier to the global steel industry. London Mining is developing three iron ore Mines in Sierra Leone, Greenland and Saudi Arabia as well as a coking coal operation in the Socha region of Colombia. All London Mining’s assets have deliverable production with potential for expansion. The Company listed on the Oslo Axess on 9 October 2007 and on AIM in London on 6 November 2009.

londonmining.co.uk

Operational and financial review10 Sierra Leone, Marampa 14 Greenland, Isua 16 Saudi Arabia, Wadi Sawawin 18 Colombia 19 China & Chile 20 Corporate responsibility 22 Financial review 26 Principal risks and uncertainties


28 Board of directors 30 Senior management 32 Directors’ report 35 Corporate governance statement 40 Directors’ remuneration report 45 Statement of directors’ responsibility


46 Independent auditors report to the members of London Mining Plc

48 Consolidated income statement49 Consolidated balance sheet50 Consolidated statement of changes in equity 51 Consolidated cash flow statement52 Notes to the consolidated financial statements 84 Company balance sheet 85 Company statement of changes in equity 86 Company cash flow statement 87 Notes to the Company financial statements

Overview01 Highlights 02 Asset overview04 Chairman’s statement 05 Chief Executive’s statement 08 Our markets

Contents

Overview

Annual Report 2010Developing mines to supply the global steel industry

Lon

do

n Min

ing

Plc A

nnual Report 2010 D

eveloping mines to supply the global steel industry

London Mining Plc39 Sloane StreetLondonUnited Kingdom SW1X 9LP

T +44 (0) 20 7201 5000F +44 (0) 20 7201 5050

londonmining.co.uk

Valley D

Valley B

Valley A

East Swamp

K & RSwamp

Chendata

Catchment

Batabana

Hospital Swamp

HamletSwamp

MasaboinUltimate Pit

NorthSwamp

GolfCourse

GhafalUltimate Pit

Campbell Town Ridge

Hospit

al Ridg

e

WasteDump

Lake

WasteDump

LakeSidePond

WasteDump

WaterSource

TailingsROMStockpile

ROMStockpile

CommunicationTower

GeneralW/S &core shed

Piers

Foundation

Treatment

Old Stores

Old MaintenanceWorks

Old PowerHouse

ProposedTransformer

Admincomplex

NewCanteen

MRD TechServices lab

SecurityPoint

WasteDump

Proposed site forstaff quarters

Proposed site forstaff quarters

To Katik

LunsarTown

Primary Ore deposite

Tailings boundaries

Tenament boundary

Proposed haul road

Existing roads

Proposed new Tailings facilities

Potable water distribution network

Proposed pipeline

Existing building

Proposed fence

Proposed power line (11 Kv)

0 500 1000 metres

Valley ABatabana

Hospital Swamp

Inset Map

ROMStockpile

Conc.Stockpile

PowerPlant

Laydown &Container

StorageFacility

Conc.Batching

Area

Car park

Offices

Con

stru

ctio

nW

aste

Marampa timeline

Masaboin HillIndicated: 275Mt @ 31.8% Fe

Inferred: 157Mt @ 32.6% Fe

Ghafal HillIndicated: 93Mt @ 30.2% FeInferred : 60Mt @ 30.0% Fe

Campbelltown RidgeIndicated: 11Mt @ 34.9% FeInferred: 11Mt @ 31.8% Fe

Tailings37Mt @ 22% Fe

Hospital Ridge Inferred: 63Mt @ 32.7% Fe

Comprising:Tailings 37Mt @ 22% FeHighly weathered 24Mt @ 37% FeModerately weathered 107Mt @ 35% FeUnweathered 681Mt @ 32% FeHigh Manganese 94Mt @ 23% Fe

Masaboin NE Inferred: 237Mt @ 31.5% Fe

londonmining.co.uk

Sierra Leone

Marampa

943Mtof JORC resources

Years of mine life

20+

PFS for expansion to 16Mtpa completed

All environmental permits received

Full feasibility study to commence

20,000m JORC campaign in H1 to upgrade infrared

Mechanical completion of first 1.8Mtpa plant commission starts

Stockpiling of ROM material using own fleet

Private haul road extension completed

First production from Phase 1 (Q3)

First export of concentrate (Q4)

Expansion to 3.6Mtpa commences

Q4

Q3

2011

Q2

Q1

Project highlightsPhase 1 Phase 2

Production capacity 3.6Mtpa Up to 16Mtpa

Ore type Tailingsweathered

Moderately weatheredUnweathered

Product 65% Fe Sinter concentrate Pellet feed and/or 65% Fe sinter concentrate

Mine life 7–8 years 20+ years

Marampa mining location

Port LokoMamyNancy

Rogberi

Tawfayim

Mange

Little Scarcies

Roket

Ribi

Pampana

YawriBay

LunsarMarampa

MasiakaWilberforce

15 miles

25 kilometres

8° 30’ N

13° 00’ W

13° 30’ W

12° 30’ W

12° 00’ W8° 00’ N

Kissy Wellington

Waterloo

BANANAISLANDS

CAPE SHILLING

Kent

Songo

Bradford

Rotifunk

Bauya Moyamba

Mano

Njala

Taiama

Yonibana

Magburaka

Makeni

Lungi PortPepel

Freetown

Barge to ship transhipment

Bargeloader

MARAMPA MINE1.8 to16 MTPA

Barge route

Existing roads

RailCompleted haul road (20 km)

Additional haul road(20 km)

Major city or town Other city or town

Marampa mining historyThe Marampa mine is a 13.82km2 brownfields site formerly operated by the Sierra Leone Development Company (DELCO) and William Baird between 1933 and 1975. Marampa reached a peak production of 2.5Mtpa in the 1960s before low iron ore prices forced its closure. Continuing weak market economics and civil war prevented redevelopment of the mine until the mining licence was acquired by London Mining in 2006.

londonmining.co · 2011. 4. 6. · annual report 2010 developing mines to supply the global steel...

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