Aricom buys Russian iron ore licences for $80 mln

Aricom buys Russian iron ore licences for $80 mln

Aricom Plc expects to significantly expand its iron ore reserves in the Russian Far East after paying $80 million to acquire two mining licences adjoining existing projects, the company said on Tuesday.

London-listed Aricom, which launched its first Russian mine last year, will pay a total $45 million in cash and $35 million in shares for the Garinskoye Flanks and Kostenginskoye licences.

“It’s early stages, but they could potentially double our existing reserves and resources,” said Charlie Gordon, Aricom’s investor relations officer.

Aricom, which was spun off from Peter Hambro Mining , says it is betting on strong demand for its Russian iron ore from steel mills in China, which produces over a third of the world’s steel.

The company says it believes it can deliver iron ore to China from its first project, Kuranakh, at less than a quarter of the freight cost from major suppliers Australia and Brazil.

The two new licences are extensions of deposits Aricom plans to bring into production in 2010.

Garinskoye Flanks covers an area of 3,530 sq km around the Garinskoye deposit in Amur region and Kostenginskoye is a 24 sq km area near the K&S project in the Jewish Autonomous Region.

The two deposits, which have previously been explored by Soviet geologists, have combined reserves and resources of 1.245 billion tonnes to Russian classification. They have not yet been audited to Joint Ore Reserves Committee standards.

“They are natural extensions of our existing assets. It could mean a combination of increasing throughput or increasing mine life,” Gordon said. More detailed exploration will follow.

Aricom has said the Garinskoye project would be able to yield about 6 million tonnes of iron ore concentrate a year from 10 million tonnes of ore.

The K&S, or Kimkan and Sutara, project would be able to produce about 4.3 million tonnes of concentrate a year from a similar 10 million tonnes of ore.

Aricom is buying the new licences from Cypriot companies. To part-fund the purchase, it is issuing 21.875 million new shares at 80 pence each, representing a 2 percent dilution on the existing shares.

Half the shares will be locked up for six months and the other half for one year.

Aricom shares traded up 3.8 percent at 1105 GMT.


Share this post