Delivering high quality iron ore to the global steel industry · Delivering high quality iron ore to the global steel industry. Drilling on the glacier. Isua, Greenland ... to establish

London Mining Plc Annual Report 2011

Delivering high quality iron ore to the global steel industry

Drilling on the glacier.Isua, Greenland

Front cover Final product stockpile. Marampa mine, Sierra Leone

London Mining PlcAnnual Report 2011

1London Mining PlcAnnual Report 2011

We are a fast-growing, new supplier of iron ore to the global steel industry. In this report we will explain our business, our strategy and how we are performing against these strategic objectives. We also show what makes us different and most importantly, how we are delivering on our promises.

Overview 2-19

Highlights 4Chairman’s statement 5Group overview 6A year in review 8Chief Executive’s strategic review 10Key performance indicators 15Our markets 16

Performance 20-45

Operational review 22Financial review 31Sustainability at London Mining 36Principal risks and uncertainties 42

Governance 46-73

Board of Directors 48Senior management 50Corporate governance report 52Directors’ remuneration report 61Directors’ report 71Statement of Directors’ responsibility 73

Financial statements 74-111

Independent auditors report to the members of London Mining Plc 76Consolidated income statement 78Consolidated balance sheet 79Consolidated statement of changes in equity 80Consolidated cash flow statement 81Notes to the consolidated financial statements 82Company balance sheet 105Company statement of changes in equity 106Company cash flow statement 107Notes to the Company financial statements 108Glossary 110Officers and professional advisers 111

Welcome to the London Mining 2011 annual report

2 London Mining PlcAnnual Report 2011

Overview

Overview


Sierra LeoneAfrica

Marampa

Pride of MarampaThe “Pride of Marampa” transhipment vessel arriving in Freetown in March 2012. It is able to load ocean-going vessels from barges at the rate of 20,000+ tonnes per day.

Page 23 For further information


Highlights

In 2011 we commenced iron ore production in Sierra Leone and continued to develop our other assets in Greenland, Colombia and Saudi Arabia. In 2012 we plan to establish London Mining as a supplier of choice to the global steel industry and to continue to implement our growth plans.

Operational Marampa, Sierra Leone Begins shipment

Marampa, Sierra Leone Construction for expansion to 5Mtpa has commenced

Isua, Greenland Bankable feasibility study complete

Colombia Production begins





Net cash outflow from investing activities USD million

Gross proceeds of equity raise post period USD million

Prepayment offtake agreement signed post period USD million

193

91

45

Net cash inflow from financing USD million

218

Cash at 31 December 2011 USD million

68Financial

Overview


Chairman’s statement

in which we operate are able to see tangible and long-lasting benefits from our activities. We are particularly proud to provide employment and training for over 1,200 Sierra Leoneans. 2012 is significant as we will contribute directly to the economy of Sierra Leone through payments of royalty and taxes to the Government of Sierra Leone; and indirectly through our social development royalty, local employment and local supply chain initiatives.

As we enter a new phase of operations, construction and development we are ever more appreciative of the need to minimise the impact of our operations to the surrounding environment and communities and to keep our employees safe. We continue to aim for zero harm and are pleased to report zero fatalities in 2011. We formed a Health, Safety and Environment committee in 2011, we aim to monitor, report and improve on health and safety performance over the coming year.

Governance and Board We were able to strengthen our Board significantly in 2011 with the appointment of Colin Harris, Benjamin Lee and Luciano Ramos. Colin has been appointed as an independent Non-Executive Director and brings extensive mining experience to London Mining, as an exploration geologist with over 40 years’ industry expertise. Benjamin and Luciano have been vital components of London Mining’s success since joining the Company, including developing and disposing of our asset in Brazil as well as contributing to the financing, construction and ongoing operation of Marampa. Their appointment ensures that the Board is able to benefit fully from their insights and expertise.

Our people Our people are key to delivering on our strategy. We have made two new senior appointments: Claude Perras as Head of Sustainability and Rosh Bardien as Group Head of Human Resources.

OutlookThe people, high quality assets and sound financial footing we now have in place will ensure 2012 will be a year of consolidation for future growth for London Mining as we continue to deliver our production ramp-up and finalise our long term growth plans. We are proud of what we have achieved at Marampa and our other assets in 2011. The Board would like to congratulate Graeme and his team for their hard work this year and for delivering on our strategic goals and moving London Mining from a developer to a producer as we build towards a FTSE listing.

Dr Colin KnightChairman

2011 was a milestone year for London Mining. We moved from being a developer to a producer in December and laid the groundwork to ship our first iron ore from the Marampa mine in January 2012.

2011 was in many ways like 2008 for London Mining in that we developed a mine in a climate of uncertainty in the global financial markets and have once again delivered a new source of iron ore capacity at low capital cost as well as defining a production profile that will contribute to strong upward earnings momentum for several years to come. We believe that demand for iron ore will remain robust due to continued demand for steel from emerging economies. Competition for capital means that existing producers will be in the strongest position to grow as they are able to fund production expansion from cash flow and to provide greater visibility on product specification and volume to customers.

Results and progress Restarting the Marampa mine after almost 40 years of inactivity is a huge achievement for London Mining and for Sierra Leone. The production of high specification iron ore after decades of mine inactivity marked the beginning of our Phase 1 ramp up and forms the basis for our planned phased expansions to over 16Mtpa. Our plan for Marampa evolved significantly in 2011 as we fully defined the opportunities presented by the significant addition of resources. Together with expert insights from our technical team, production growth in the short term can be accelerated through simple optimisation of the processing plant and logistics. The longer term plan to develop Marampa from an operation with capacity of 1.5Mtpa to over 16Mtpa was also defined by the April 2011 prefeasibility study (“PFS”) and we look forward to the completion of a bankable feasibility study (“BFS”) in Q3 2012 for the first increment of this expansion to 9Mtpa.

We continue to build and develop our investment case and we have a clear strategy for growing value. We have been encouraged by the continued support from our shareholders through their participation in the USD 110 million convertible bond issue in January 2011 and in the issuance of USD 91 million of new equity in January 2012. We have also raised to date USD 210 million through alternative sources of finance.

The progress achieved at our projects in Greenland, Colombia and Saudi Arabia is testament to the energy, commitment and expertise of our management teams.

Sustainable development To realise our growth plans we know we must attract and retain talented people and ensure that the communities and countries


Colombia

TubarãoBrazil

NuukGreenland


Risk

Value

3

2

1

London Mining’s activities in the mining lifecycle are as follows:

Resource delineation• Rapid resource growth

2 Feasibility• Resources growth slows or stops

as infill drilling commences• Best concept for development

and financing established

3 Construction• Experienced technical teams

implement concept

4 Commercial production• Production ramp up and

optimisation

5 Expansion and cashflow• Production capacity increase

to fully exploit resource

Mining lifecycle

Group overview

We focus on meeting the demand for high quality iron ore in a way that creates long term value for our business.

IsuaLocation: GreenlandOwnership: 100%Product: Iron ore – pellet feedResources indicated: 380Mt @ 33% Fe Resources inferred:727Mt @ 32% FeTarget: 15MtpaMine life: 10-15 years Potential to expand mine life.

ColombiaLocation: ColombiaOwnership: 100%Product: CokeTarget: 200-400kptaThe region has significant local production of high quality coking coal.

Saudi Arabia

RotterdamNetherlands

FreetownSierra Leone

QingdaoChina

Overview


5

2

What we do We are a fast growing new supplier of high quality iron ore to the global steel industry. We are developing three iron ore mines in Sierra Leone, Greenland and Saudi Arabia, together with an integrated coking operation in Colombia. Production and export have now commenced from our mine in Sierra Leone.

Typically a London Mining asset will have potential for a large resource, a deliverable logistics solution with access to the seaborne market and critically must be capable of producing a consistent product at a sustainable margin.

We focus on building production rapidly and we often have a staged development plan whereby cash flows generated from early production can be used to finance larger scale development.

Our philosophy We aim to provide steelmakers with a high quality, reliable and consistent supply from a growing resource base. We have a responsible approach to doing business and consider all stakeholders in the development of our assets.

MarampaLocation: Sierra LeoneOwnership: 100%Product: Iron ore – sinter/pellet feedResources indicated: Tailings 38Mt @ 22% Fe Primary ore 832Mt @ 32% Fe Resources inferred:Primary ore 208Mt @ 31% FeProduction Commenced: 2011Target: 5Mtpa up to 16MtpaMine life: 25 years plus.Mine located in a region of significant geological potential, a brownfield development asset.

Wadi SawawinLocation: Saudi ArabiaOwnership: 25%Product: Iron ore – DR pelletResources indicated: 248Mt @ 40% Fe Resources inferred: 135Mt @ 39% FeTarget 5-10MtpaMine life: 20 yearsLocated in the north-west corner of Saudi Arabia, close to Tabuk and the Red Sea port of Duba. Process to secure funding is in place.

Nautical miles, NM Rotterdam QingdaoNuuk, Greenland 2,199 (via Panama) 12,303 (via Cape of Good Hope) 14,831

Freetown, Sierra Leone 3,070 11,071

Tubarão, Brazil 4,974 11,086

Key

Iron ore

Coal

1NM = 1.852m


In 2011 we commenced production from Marampa and Colombia and continued to progress our other assets in Greenland and Saudi Arabia.

Marampa primary resource estimated to be 906Mt grading 31.7% Fe

906Mt

Marampa primary resource increased to 971Mt at 31.2% Fe. Total resources including tailings now 1008Mt with 60% in Indicated category

1,008Mt

Scoping study results for 15Mtpa operation at Isua, Greenland

15Mtpa

Coal loading in stockpile, Colombia

Raised through issue of convertible bond

USD 110 million

Bringing Marampa into production in 2011

Results of prefeasibility study for Marampa defines development plan to 16Mtpa

USD 27 million

January February March / April

April MayFebruary March JuneJanuary

9.5Mt offtake agreement signed with Glencore for Marampa including a prepayment facility of USD 27 million

A year in review

Overview


Overview

7,656 metresof resource drilling completed at Isua, Greenland

Royalty agreement signed with Anglo Pacific Group to fund bankable feasibility study at Isua

USD 30 million

Corporate debt facility increased with Standard Chartered from USD 60 million to 90 million

USD 90 million

London Mining delists from Oslo Axess to focus on LSE

London Mining Greenland team and the Chinese delegation in Nuuk

August / September October / November December

“Pride of Marampa” transhipment vessel

First coke production of Colombia

Funding agreement for front end engineering design signed for Wadi Sawawin project with Korean engineering consultancy STX Industries

Production commences at Marampa

DecemberNovemberSeptemberAugustJuly October


potential strategic investors. Our joint venture in the Wadi Sawawin project advanced further in its aims to produce direct reduction (“DR”) quality pellets in Saudi Arabia as we continued to work with National Mining Company, (“NMC”) to conclude the preconstruction engineering design and arrange full financing for the project.

Key events through the yearWe had a busy year and some of the key events are highlighted here:

Our primary focus for 2011 was on financing, developing and implementing an expanded operation at Marampa following confirmation of over 1 billion tonnes of JORC resource of which 81% now falls in the Indicated category. The increased resource formed the basis of a PFS in April which outlined the development plan for a greater than 16Mtpa operation. This plan set out a staged development, starting with reprocessing of tailings from previous operations then moving to mining and processing of weathered ore and then the unweathered primary ore for a large scale-long term mining operation. Test work continued through the year and key findings were incorporated and engineered into the initial plant design. As a result, our Stage 1 plan which originally targeted 1.5Mtpa from tailings has now been expanded to a planned 5Mtpa from a blend of tailings and highly weathered ore. Marampa began production of high specification iron ore in December 2011 and shipments of Marampa concentrate, to both Europe and China, began in January 2012.

Highlights at our other projects included the completion of a BFS demonstrating compelling economics for a 15Mtpa operation in Greenland, commissioning and first production from the coke production unit in Colombia and progressing the Wadi Sawawin project with our joint venture partner NMC.

Through the year, we arranged a variety of financings to support our development activities and the implementation of a larger project at Marampa than originally planned. These included a convertible bond placement of USD 110.0 million, a corporate debt facility of USD 90.7 million with Standard Chartered Bank, initial offtake prepayment facility with Glencore of up to USD 27.0 million, and a 1% royalty arrangement on Isua for USD 30.0 million with Anglo Pacific. In the post period we have secured net proceeds USD 18.4 million of lease financing through Oldendorff for the “Pride of Marampa” Floating Offshore Transhipment Platform (“FOTP”) and gross proceeds of USD 90.7 million through an issue of new common shares and signed a prepayment agreement linked to offtake of USD 45.0 million from Vitol. We are confident of continuing to fund growth in our projects through various methods of finance as may be appropriate for each project. This will be based on identifying clear value creation potential through expansion or implementation and demonstrating the expertise to carry it out. For larger capital projects such as Greenland, we are pursuing strategic partner funding.

With its first production coming on line and an increase in its longer term growth potential, our Marampa mine was a key highlight for us this year. We are very proud of what we are achieving there, but it is part of a bigger story. The start of production at Marampa marks one of many planned high points as we continue to deliver on our promise to provide high quality iron ore supply for the global steel industry in a way that creates long term value for our business and for the communities we live and work in.

Twenty months on from ordering our long lead items for the Marampa mine and logistics system in Sierra Leone, we produced our first ore in December 2011. As well as reaching this milestone we also significantly improved the long term economics of the project through the continuous optimisation of the production plan following a 10-fold increase in historical resources.

The Marampa plant and logistics system is working as designed and began regular shipments of premium specification iron ore sinter feed concentrate from January 2012 as we ramp up to initial installed capacity of 1.5Mtpa.

Marampa is particularly attractive because of its good location and the nature and quality of its ore. It is located only 40km from tidewater, allowing simple and low cost logistics. What is more, the nature of the types of ore present – now clearly identified after 90,000 metres of drilling – allows us to develop it very flexibly in a series of increments towards its ultimate planned yearly capacity of greater than 16Mtpa. As a result, we can produce significant cash flows early and defer other capital expenditure to later stages of development, significantly funded from early cash flow. An additional differentiating factor is that the mine produces high specification product which commands a premium price over more standard products. This high grade is preferred by steel mills who are encountering falling grades from other suppliers.

Through 2011, we have continued to progress our projects elsewhere and to implement our clear strategy for growing value for shareholders by moving good near term projects through the development curve. Colombia became our third producing London Mining asset, after Brazil (which was sold in 2008) and Marampa. In addition, the recently completed BFS for Isua indicates the project is a compelling proposition for

2011 was a breakthrough year for London Mining as we moved from a developer to a producer. We achieved this goal in line with our promise to provide the global steel industry with a new high quality supply of iron ore.

Chief Executive’s strategic review

Overview


Growing our resource base Resource definition Exploration M&A

EvaluationSelection and investment criteria Viable logistics Resource quality and size Product specification Rapid development potential Sustainable margins

Investment metrics ROCE ROE NPV IRR EBITDA

Cash flow and value creation

Key technicalcompetencies Geology and mine

planning Processing

and metallurgy Logistics Engineering

and construction

Development and optimisation Feasibility Construction Production

fund further expansion. All our current iron ore projects are located no further than 110km from deep water suitable for the loading of ocean-going vessels. They have either been previously producing or had significant resource identification and feasibility work carried out and are able to produce a high specification product that is readily saleable on the seaborne iron ore market and are low cost for the type of product they produce.

Staged production growthThis can involve both staged expansion of an operating asset as well as bringing additional projects into production. Building production rapidly to generate cash flow to fund and drive further expansion is our preferred development strategy and is taking place in both our Sierra Leonean and Colombian operations. We see strong feasibility work as the basis for attracting investment to larger capital projects and expansion phases.

Our business modelWe develop mines to supply the global steel industry and aim to become a top 10 global producer of iron ore. To this end, we apply a very simple and practical business model to enable the development of multiple projects. This is based on applying strong operational and technical competencies to assets which meet our evaluation criteria and taking an appropriate financing approach to each asset. As we develop and realise this value for all our stakeholders we intend to both reinvest selectively in further significant value opportunities where we can employ our core competencies and return profits to shareholders.

Growing our resource base of valuable assetsWe select assets with near term production or expansion potential, with viable logistics and long term sustainable margins. Our assets have simple and self determined logistics and some have potential to be brought quickly to production with cash flow often able to

62

Our strategy and business model – growing a sustainable, high quality iron ore supply

Graeme Hossie Chief Executive Officer

USD million Annual tonne capacity for first 5Mtpa of capacity at Marampa


Production

Cap

ital i

nten

sity

(US

D/a

nnua

l ton

ne o

f cap

acity

)

Near term expansion

Bankable feasibility study

Prefeasibility study

450

400

350

300

250

200

150

100

50

0

16Mtpa9Mtpa

15Mtpa

5Mtpa

5Mtpa

1.5Mtpa

Marampa Phase 2

expansionMarampa Phase 1

expansionMarampa expansion

to 5Mtpa

Wadi Sawawin5Mtpa of DR pellets

Average cost of new supply (Source: CRU International)

Marampa first production

Isua

2.3USD billion tonnes

Total attributable iron ore resources

Chief Executive’s strategic reviewcontinued

We finance our projects on a case-by-case basis in the most appropriate way for each asset. This makes sense because each asset has a distinct financing solution and opportunities to optimise value for our shareholders. At Marampa for example, the presence of tailings from former operations and presence of soft, highly weathered ore means that production can be developed quickly for relatively low initial capital expenditure with fast capital payback and then expanded in stages using early cash flow. Marampa also benefits from its ability to produce a premium product enabling us to secure offtake-related financing with pricing related to the spot benchmark. This modular approach at Marampa means we are able to plan on the basis of later expansions being funded from a combination of cash flow, offtake arrangements and debt. There is also potential to accelerate our Phase 2 expansion at Marampa to over 16Mtpa if finance on suitable value accretive terms were provided by a strategic investor. For the Isua project in Greenland, funds to complete drilling and a BFS were raised by selling a project-specific royalty based on the quality and compelling nature of the project.

The right strategic partnerships create important mutually beneficial opportunities to fund and participate in ownership in larger capital projects. At Isua for example, we have involved Chinese engineering groups and have also been actively speaking to potential Chinese funding partners.

Skilled peopleSkilled people and skilled teams are a vital part of our business as they enable us to drive our fast track development capability. Our growth profile, asset base and successful track record has allowed us to attract the highest quality professionals who wish to share in our ambitions to grow and succeed. We have built a world-class technical team with expertise drawn from many of the large diversified mining and engineering companies. The creativity and flexibility of our people has enabled us to move quickly in fast tracking progress and to adapt rapidly to new opportunities. At Marampa for example, our technical team designed a versatile plant and flexible logistics solution which has enabled us to accommodate significant new resources into our short term mine plan much earlier than anticipated and for low additional capital expenditure. What is more, being able to begin production and cash flow early from processing existing tailings has enabled us to get into production and cash flows years earlier than would a typical larger company approach.

London Mining project pipeline – delivering low cost, high quality supply

Overview


Our business plan1. To deliver profitable near term production growth We are focused on delivering high margin (through low cost/high quality) production quickly, within a disciplined framework, to meet the immediate needs of the global steel industry and become a long term supplier of choice for our customers through quality and consistency of product and reliability of supply.

Progress in 2011 During 2011 we began production in Marampa and demonstrated the possibility for a 10-fold increase in production capacity following the completion of a PFS in April and the delineation of over 1 billion tonnes of resources at Marampa, a 30 fold increase on our maiden resource statement for the project in December 2010. We completed construction of our first processing plant and are ramping up production. We have also commenced construction for our second plant to complete the Phase 1 expansion to 5Mtpa.

We moved closer towards establishing a growing coke and coking coal business in Colombia, completing construction of the first phase of coke ovens and beginning initial production started in January 2012. A logistics capability for export has also been secured.

Looking forward We expect to deliver 1.5Mt of iron ore production from Marampa in 2012 and through construction of our second plant grow to 4.2Mt in 2013 and to 5Mt in 2014.

We expect that the BFS for the Marampa expansion to 9Mtpa will be completed in Q3 2012. This will provide us with the opportunity to invest further in the project using cash flow from operations to expand production and generate exceptional financial returns.

We have commenced production from our coke ovens in Colombia from local coking coal supply and will ramp up to 200ktpa by the end of 2012. We are looking to secure coking coal feedstock though our exploration activities to develop integrated production and opportunities for export.

2. To identify further growth opportunities and further assets from which we can leverage growth We have a track record of identifying and acquiring assets that have the potential to be rapidly developed using our experience and technical capability and which provide significant value creation potential by bringing on near term production. We are adept at optimising our assets to reach their economic potential.

Progress in 20112011 has been a year of implementing production and logistics systems and of adding value to existing development projects. We have achieved great success by further developing existing projects, most notably at Marampa. project value and return at Marampa has been greatly enhanced by adding resources, enhancing the near term mining plan and expanding next stage potential.

We have completed a BFS for our Isua project in Greenland which shows the project to have extremely robust fundamentals. Our 2011 drilling campaign at Isua confirmed over a billion tonnes of JORC resources and also delineated further mineralisation potential of between 950 and 1,500Mt including a high grade hematite target of between 150 and 300Mt.

Looking forwardOur current focus is on further developing the operation at Marampa so that it can reach its full economic potential through considered and systematic expansion. We intend to find a funding partner to allow construction of the 15Mtpa operation in Greenland to commence and thereby build a second significant production centre in this stable OECD country. We intend to move our Colombian and Saudi Arabian strategies forward to achieve our near term production aims. In the longer term we continue to assess investment opportunities which best suit strategy, capabilities and experience.

To deliver profitable near term production growth

To identify further growth opportunities and further assets from which we can leverage growth

To build financing capability through multiple means to fund our growth profile

To be a responsible and sustainable business

1

2

3

4

Our business plan to create value

Radial stacker and barge loading at Thofeyim river terminal


Chief Executive’s strategic reviewcontinued

3. To build financing capability through multiple means to fund our growth profile To achieve our optimum growth profile we expect both to build near term significant cash flows for reinvestment and to develop strong relationships with industry customers/partners and financial institutions.

Progress in 2011Our financial capability has been greatly enhanced following the commencement of production at Marampa. The production of high specification product has enabled us to secure low cost debt finance through offtake relationships: Marampa developments this year have enhanced our production profile and we have been encouraged by the continued support from our shareholders through their participation in the USD 110.0 million convertible bond issue in January 2011 and in the issuance of USD 90.7 million of new equity in January 2012. We have also secured USD 30.0 million to fund the development of Isua through a royalty agreement with Anglo Pacific and secured a USD 90.0 million revolving credit facility with Standard Chartered Bank. USD 18.4 million of lease financing for the Pride of Marampa FOTP in 2012 was also provided by Oldendorff and USD 45.0 million offtake related prepayment has been signed with Vitol.

Looking forwardWe are focused on cash flow from near term production opportunities to strengthen our balance sheet and debt capability. We await the results of the BFS for the Marampa expansion to 9Mtpa which will define the capital requirement and availability of product for future offtake agreements. We are also assessing the option to bring on a strategic partner or partners to fund accelerated growth at Marampa and production at Isua. We will continue to evaluate offtake-related funding opportunities for our growing production. We are also confident that by adhering to international best practice we will be able to form partnerships with international finance institutions to develop infrastructure that can benefit multiple stakeholders.

4. To be a responsible and sustainable business Our commitment to sustainable development underpins everything that we do as it is through this that we gain and maintain our licence to operate. We believe that we have the opportunity to bring long term and positive benefits for the communities in which we operate.

Progress in 2011Our ongoing success in Sierra Leone depends on maintaining our good relationships with all stakeholders, including local communities and Government. We are extremely proud of our contribution to the Sierra Leone economy. The economic

benefit of our operations at Marampa will form a very significant part of Sierra Leone’s GDP and our success encourages other companies and financial institutions to invest in the country. Even at this stage we have generated over 1,200 local jobs, with 89% of jobs at Marampa going to Sierra Leoneans. The multiplier effect in the local economy of our economic activity and local procurement is creating widespread new opportunity. We have established a form of equitable treaty with the Government, including an active social investment program, which gives surety to our investment plans and allows Marampa to attain its full economic potential and benefit all stakeholders.

Looking forwardWe commenced royalty payments to the Government of Sierra Leone and began contributions into a social development fund through a revenue-based royalty in Q1 2012. The appointment of Claude Perras as our Head of Sustainability will help give us the capability to develop sustainable production and economic returns whilst delivering tangible benefits to stakeholders. We will achieve this by building partnerships with NGOs, development agencies and government, providing infrastructure investment opportunities for international finance institutions and developing and implementing local content policies. Attaining international best practice standards in addressing the needs of all our stakeholders as well as the application of appropriate community and environmental policy will help build our reputation and credibility to ensure we can secure financing and a social licence to operate in all jurisdictions.

SummaryAt London Mining we have a clear strategy to grow value for all stakeholders – from delivering good financial returns to improving the lives of our communities, from keeping our employees safe and healthy to responsibly contributing to the countries in which we operate. Our disciplined approach to developing our assets has enabled us to plan for the expansion and further development of our assets. We are excited about our future and look forward to continuing to execute our strategy and grow the business for the long term within a disciplined framework.

Graeme Hossie Chief Executive Officer

Blended tailings material from historical operations being fed into the Marampa plant for reprocessing

Overview


Key performance indicators

KPI Definition Relevance to strategy

Operational

Resource and reserve growth (Mt) Million tonnes of attributable resources and reserves

Growing and consolidating our resource base is a key indicator of developing our asset base and building our long term production earnings potential

Installed production capacity (Mtpa) Amount of production that is able to be produced in a 12-month period based on installed mine, processing and export capacity

London Mining selects assets with good logistics with near term production potential. London Mining measures its ability to translate its resource base into production

Project delivery Ability to deliver on time and on budget Measures management’s forecasting capabilities and execution strength

Employees trained Number of employees that have undergone professional training

London Mining is keen to develop and retain a strong workforce to implement and advance its business

EBITDA (USD) Earnings before Interest Tax Depreciation and Amortisation

London Mining is focused on delivering sustainable margins based on the production of premium high quality product at low cost

Cash cost per tonne Cash cost of production delivered freight on Board (FOB)

Provides an indication of operating performance. Is expected to improve as London Mining delivers on its business plan and expands production

EBITDA margin EBITDA divided by total revenue Provides shareholders with a clear view of the underlying profitability of the business

Earnings Per Share (EPS) Retained profit after tax divided by number of outstanding shares

Provides shareholders with an indication of operating performance combined with capital efficiency

HSE

Financial

Lost time injury frequency (LTIF) and fatalities

LTIF is calculated as the number of lost time injuries per million hours worked

London Mining is committed to zero harm to its employees and is an important indicator of management performance

As London Mining moves into production we have started monitoring our performance based on several leading key performance indicators.


Our markets

We are focused on providing new iron ore supplies to meet the growing needs of the global steel industry.

Data: CRU International

2011 Steel consumption by region(%)

58.312.25.72.44.1

19.4

BRIC (58.3%)BRICEU27USA

UkraineSouth Korea

ROW

2.34.74.7

44.3

BrazilRussiaIndia

China

0Mt

500

1,000

1,500

2,000

2,500

2011 2012f 2013f 2014f 2015f 2016f 2021f

Crude steel Production by region

OtherAsia (ex China)North America

Other Europe and CISWestern EuropeChina

The iron ore market is currently dominated by the big four iron ore producers who also account for 60 to 65% of the required future growth in capacity. London Mining aims to become an alternative “supplier of choice” to steel makers by delivering sustainable new sources of production.

Steel production continues to grow Crude steel production continued to grow in 2011, albeit at a slower rate than in 2010. The World Steel Organisation estimates crude steel production to be 1,490Mt – up by 4% from the previous year, compared with a 16% increase in 2010. Looking ahead, CRU International (“CRU”) expects crude steel production to increase to over 2,000Mt by 2021.

Developing regions will continue to drive the bulk of this growth, with strong expectations for expansion in the Middle East, South America and the Commonwealth of Independent States (CIS). The majority of new steel production, however, will come from Asia. Significant amounts of new capacity will come on stream in China, where crude steel production capacity is expected to increase by 60Mt this year.

Iron ore demand and supply ChinaIron ore demand in China stalled in the second half of 2011. Once steel prices began to fall in earnest during the last quarter of 2011, the drop in real ore demand was accentuated by sharp destocking, which drove down ore prices and decreased import volumes. Looking ahead to 2012, the CRU base case economic forecast predicts trends supportive of higher steel consumption, bringing with it rising iron ore consumption and advances in demand for imported ore. However, CRU notes that there are downside risks to these forecasts due to uncertainty in the European Market.

The Middle EastThe Middle East should be one of the fastest growing ore importing regions over the medium term, which could very well benefit London Mining. Steel consumption should continue to increase due to strong energy prices resulting in demand for oil and gas pipelines and a significant expansion in regional DRI capacity, mostly in Saudi Arabia and the UAE. CRU forecast this to add 17Mt to seaborne iron ore trade by 2015, in particular in pellets and pellet feed.

Source: World Steel Association

Overview


Sintered ore BF pellets

Blast furnace

Basic oxygen furnace

Direct Reduced Iron (“DRI”) plant

DRI

Electric arc furnace

Iron ore

Lump DR pellet feedWadi Sawawi

DR lumpFines concentrateMarampa

BF pellet feedMarampa/Isua

Pellet plantSinter plant Pellet plant

DR pellets

Iron ore processing routes

Western EuropeIron ore consumption in Western Europe slowed dramatically in the latter half of 2011, with at least nine blast furnaces idled across the region. Nonetheless, CRU expects iron ore demand to remain stable, with imports of ore in 2012 estimated to be virtually identical to 2011 at 110Mt. Slight improvements are expected by 2015, as imports increase to 120Mt per year. We expect the proximity of our Marampa mine in Sierra Leone to the European market as well as its product specification to allow us to penetrate this market in the medium term. In January 2011 we entered into an agreement with Glencore to sell the first 1.8Mtpa of production from Marampa on to the seaborne market. The agreement assumes that sales will primarily be directed into China, with upside on pricing if the product is placed into the European market.

The longer term outlookLooking further ahead, CRU estimates global iron ore consumption will increase by c380Mtpa over the period 2015 and 2021. This is equivalent to an expected Compound Annual Growth Rate (“CAGR”) of 3.6% over the period 2011 to 2021,

following predicted steel production growth of c680Mtpa between 2011 and 2021.

The net effect is that global seaborne trade is expected to expand by 4% in 2012 and to maintain a consistent growth rate over the medium term of around 6–9% per year.

With Chinese domestic ore supply clearly constrained despite high prices, any further increases in demand over the medium term are likely to feed through directly to import demand. Indeed, the constraints on domestic ore supply mean that import demand is likely to remain above the underlying rate of growth in iron ore consumption.

CRU forecasts growth in global iron ore production of 75Mt over the coming year, equivalent to 4.1% growth year-on-year. This growth is forecast to come mostly from Brazil and Australia but also West Africa. India is forecast to show a 26Mt decrease. CRU’s production forecast for Australia could prove to be too high, given the proposed mining tax. The 30% tax, for which the final go-ahead will be given in 2012, may deter investors from Australian projects.




0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2011 2012f 2013f 2014f 2015f 2016f 2021f

Seaborne iron ore import


Other Europe and CISWestern EuropeChina

Mt

0

500

1,000

1,500

2,000

2,500

2011 2012f 2013f 2014f 2015f 2016f 2021f

OtherSouth AmericaNorth America

Asia (ex China and India)CISIndia

Western Europe China

Total iron oreConsumption by region

Mt

Further significant growth in production is expected in West Africa in 2012. By 2015, CRU predicts total exports of around 26Mt (excluding Mauritania’s output). On a global scale, these volumes are modest. However, we expect greater increases beyond 2015 from several of the large diversified miners. This will potentially have a material impact on the global market balance.

By 2015, CRU expects global exports of iron ore to reach almost 1.5 billion tonnes. Pellet supply will continue to be dominated by Brazil, with significant growth from the Middle East. Lump exports, which are set for slower growth, will primarily originate from Australia, Brazil and South Africa. CRU estimates pellet production will increase from 434Mt in 2011 to 574Mt in 2015, while lump production should increase from 238Mt in 2011 to 287Mt in 2015.

Looking to the longer term, CRU remains bullish about Chinese ore consumption to 2015 as Chinese ore imports are still expected to advance significantly and at a significantly faster pace than in 2010/11. CRU forecasts that by 2015 Chinese imports will increase by 324Mt to almost 1 billion tonnes, nearly 50% higher than in 2011. Growth in Chinese imports should be augmented by higher imports across much of the rest of Asia and the Middle East. Notwithstanding likely weakness in European and Japanese demand going forward, global seaborne trade in iron ore is expected to advance by around 350Mt by 2015.

Our marketscontinued

380MtGrowth in annual demand for iron ore between 2015 and 2021.

Overview



0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Total iron ore export by region


Africa

IndiaBrazilAustralia

2011 2012f 2013f 2014f 2015f 2016f 2021fMt

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

Cumulative production (mt)

price 2015

Marampa

Site

co

sts

c/d

mtu

CRU International price forcast

CRU believes supply will need to ramp up by approximately 380Mt over the next four years, implying that both Australia and Brazil will increase their share of global exports over the medium term. New supply from West Africa, including our Marampa mine in Sierra Leone, will also be in a position to displace higher cost and lower grade ore supply, adding some 40Mt tonnes to global production. Much of the displaced high cost supply is likely to be from China, where CRU expects effective ore supply to decline by 20% from 2011 to 2015, equivalent to 370Mt.

Marampa – delivering a new source of high quality iron ore supply We estimate Marampa’s 2015 site-level costs to be higher than the top quartile existing producers but significantly lower than high cost producers, predominantly located in India and China. Nevertheless, a number of other factors will also affect the relative competitiveness of the project, including freight costs, marketing costs and value-in-use. Freight costs are important in the case of bulk commodities such as iron ore and depend on the location of the final consumer. Regarding value-in-use, we expect to receive a higher price for Marampa’s product than the benchmark price (62% fines delivered to China) chiefly due to its high iron content (66%) but also because of lower impurities.

Marampa’s position on cost curve

New supply from West Africa including our Marampa mine will displace higher cost and lower grade supply.


Performance

Perform

ance


Marampa, Sierra LeoneTranshipment operation from barge to ocean-going vessel. The speed of this operation will double with the commissioning of the “Pride of Marampa” transhipment vessel.


Sierra LeoneAfrica

Marampa


Mt

0

200

400

600

800

1,000

1,200

22

24

26

28

30

32

%

Sierra Leone resource growth

29.8%

30.9%

31.2%

Q4 2009 Q1 2010 Q1 2011 Q4 2011

23.0%

392

775

888

33 42 37

131 152

Average Fe GradeUnweathered ore

Weathered oreTailings

37

Operational review Marampa, Sierra Leone (100% ownership)

Highlights

Production commenced at the mine in December 2011

Product confirmed as high specification sinter concentrate

Over 271,892 wet metric tonnes (“wmt”) of concentrate produced at 26 March 2012

We plan to expand production to 5Mtpa in 2013

A BFS for expansion to 9Mtpa will be completed in Q3 2012

Revised Mining Licence Agreement ratified by Parliament of Sierra Leone

HistoryWe started production at our Marampa mine in December 2011. Marampa was formerly operated by the Sierra Leone Development Company and William Baird between 1933 and 1975. It 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 for over 30 years, until we acquired the mining licence in 2006.

Each truck has a capacity of 72t and will operate all year round off Marampa’s dedicated 40km haul road

Material Classification Tonnes Mt) Fe (%) Al2O3 (%) SiO2 (%) CaO (%) MnO (%) P (%) S (%)

Highly weathered Indicated 54 35.6 6.6 37.3 0.12 0.25 0.04 0.01Moderately weathered Indicated 61 33.2 5.3 41.9 0.56 0.15 0.10 0.01Primary Indicated 537 32.7 4.5 38.3 3.15 0.18 0.16 0.01High Manganese Indicated 180 27.4 5.7 40.4 2.94 2.73 0.08 0.01Primary Indicated Mineral Resources 832 31.8 5.0 39.0 2.72 0.73 0.13 0.01Tailings Indicated 38 22.5 9.0 51.4 0.10 1.05 0.05 0.01Total Indicated Mineral Resources 870 31.4 5.1 39.5 2.60 0.75 0.13 0.01Highly weathered Inferred 21 33.6 7.3 39.4 0.15 0.30 0.06 0.01Moderately weathered Inferred 16 33.2 5.5 41.8 0.51 0.14 0.09 0.01Primary Inferred 150 30.4 5.3 41.2 2.72 0.25 0.18 0.02High Manganese Inferred 21 27.6 5.5 39.1 2.86 3.55 0.09 0.01Total Inferred Mineral Resources 208 30.7 5.5 40.9 2.30 0.58 0.15 0.02Total Mineral Resources 1,078 31.2 5.2 39.8 2.54 0.71 0.13 0.01

Mineral Resources are reported in accordance with the JORC Code 2004.

Summary of Marampa mineral resources as at December 2011 reported at a 15% Fe cutoff

Perform

ance


Major city or townLondon Mining

London Mining haul roadOther city or townBarge routeExisting roadsRail

Port LokoMamyNancy

Rogberi

Thofeyim

RIVERTERMINAL

Rocket

BARGE TO SHIP

MARAMPAMINE

Masiaka

LunsarMarampa

Yonibana

Bradford

Rotifunk

SongoWaterloo

Kissy

Lungi

Little Scarcies

Ribi

TRANSHIPMENT

Sierra Leone15 miles

25 kilometresWilberforce

Freetown

PortPepel

Wellington

Loading of Marampa high grade concentrate into an ocean-going vessel

Marampa, location and logistics

the total capital expenditure for the first 5Mtpa of production is estimated to be USD 310 million, equivalent to installed capital intensity of USD 62/annual tonne of capacity which is very low compared to industry norms.

During the total Phase 1 development, in addition to the capital cost, London Mining will incur and expects to capitalise USD 25 million owners’ team construction salaries, of which USD 14.7 million had been capitalised at year end, and also as required by international accounting standards, London Mining will capitalise all direct preproduction operating overheads prior to reaching commercial production. Separately, the USD 21 million installed cost for the “Pride of Marampa” FOTP has been funded through a USD 19.0 million finance lease arrangement with Oldendorff Carriers GmbH and Co. KG with the balance financed by London Mining.

The key logistics for Marampa are now in place for a 5Mtpa operation. The haul road has been activated and the trucking fleet has operated at a run rate of approximately 5kt/day and a stockpile established at Thofeyim. Commissioning of the FOTP commenced in March 2012. Once installed the FOTP will provide transhipping capacity of up to 20kt/day.

PricingBy mid-March we had shipped 243,190wmt of concentrates in five supramax vessels through Glencore to both Chinese and European customers and have realised a significant quality-related premium to the Platts 62% cfr China benchmark after an adjustment for freight and marketing.

Expanding in stagesWe plan to develop Marampa in two phases. In Phase 1 we are processing tailings from previous operations with highly weathered ore to produce 5Mtpa of premium sinter concentrate at a total estimated capital cost of USD 310 million. We are considering a plan to expand production from this plant to 9Mtpa – the BFS will be completed in Q3 2012. An ultimate expansion to over 16Mtpa was considered in PFS completed in April 2011.

Constructing, commissioning and ramping up Phase 1 Production from Marampa’s first processing plant began in December 2011 and we are ramping up to the initial nameplate capacity of 125kt/month or 1.5Mtpa. At 26 March a total of 271,892wmt had been produced from the Marampa plant in accordance with ramp up plans. The integration of a grinding circuit in Q3 2012 will increase production further to 150kt/month and addition of a gravity circuit will enable a further increase in the nameplate capacity to over 200kt/month. A second identical plant will be constructed in 2012 for commissioning in Q1 2013, resulting in combined installed capacity of 5Mtpa. We expect production to be 1.5Mt in 2012, 4.2Mt in 2013 and 5Mt in 2014.

The preproduction capital expenditure was USD 168 million. Capital expenditure for the installation of the second plant and processing optimisation (including retrofitting of milling and gravity circuits in the first plant) is expected to be USD 92 million. With further expenditure to increase plant efficiency and to upgrade and improve logistics of USD 40 to 50 million


Operational reviewcontinued

Development and optimisationGrowth through resource additionsand processing optimisation

June 2008 November 2010 January 2012

Mtpa Mt

Insitu resource iron

0

Base casetailings only21% Fe head grade

Incorporation of new weathered ore resource and ball mill extends mine life and increases capicity

Installation of gravity circuit to increase plant capacity

5.0

3.6

0

50

100

150

200

250

300

3505.0

3.0

2.0

1.0

4.0

1.5

Marampa, Sierra Leone (100% ownership)

continuedSantos Diaz, security response patrol supervisor. Marampa, Sierra Leone

Improving productionWe have been able to significantly improve the production plan for Marampa following an upgrade in resources and the results of metallurgical test work undertaken for the expansion BFS. Following the completion of the 90,000m diamond drilling campaign, a further 54Mt of weathered ore was delineated in December 2011, representing a 350% increase in the previous estimate. In addition it was shown that the inclusion of a gravity circuit to the Phase 1 flow sheet would increase capacity from 3.6Mtpa to 5Mtpa.

Increasing Indicated resourcesWe undertook a further 35,000m of drilling during 2011, concluding our 90,000m campaign in July 2011. This resulted in a 109% increase in Indicated resources over the year, forming the basis for completion of the Marampa BFS in Q2 2012. More significantly, the addition of a further 54Mt of highly weathered material can be considered in the Phase 1 mine plan.

By mid March we had shipped 243,190wMt of concentrates in five supramax vessels through Glencore to both Chinese and European customers and have realised a significant quality-related premium to the Platts 62% cfr China benchmark after an adjustment for freight.

Expanding to 9Mtpa and over 16MtpaA BFS for an expansion of the Phase 1 plant to 9Mtpa will be completed in Q3 2012. The study will consider the processing of all weathered resources and the reconfiguration of the plant to handle harder unweathered material after approximately eight years of operations. The work builds on the PFS completed in April 2011 which considered a three-stage development of Marampa, with an ultimate installed capacity of 16Mtpa.

Reviewing fiscal incentivesWe engaged with a Government of Sierra Leone sponsored committee to consider changes to the fiscal agreement previously ratified by Parliament as part of the February 2010 Mining Lease Agreement (“MLA”). The new MLA was ratified by Parliament on 27 March 2012.

The original MLA set a fiscal regime for five years, starting 1 January 2010 and the recent negotiations permitted the fixing of a fiscal regime for a 10 year period, starting 1 January 2011. This provides a clear stable platform for long term growth as we look to accelerate the expansion and development of the mine to reach our targeted production of over 16Mtpa. Although the corporate tax rate has increased to 25% from 6%, from 1 January 2014, a year earlier than envisaged in the 2010 MLA, there has been no material change to the valuation of the overall project and development continues as planned. The fiscal regime set for the extended period, as expected, is largely in line with fiscal concessions granted to other developing mining companies in the country, incentivises early reinvestment of profits to expand and encourages sustainable long term investment in Sierra Leone.

Perform

ance


Short term production planPhase 1

2012 2014

Mtpa

0

1.0

2.0

3.0

4.0

5.0

6.0

Logistics upgrades and redundancyPlant optimisation

1.5

4.25.0

Current plant in operation 1.5MtAddition of milling circuit (Q3)Addition of gravity (Q4)

2013

Commissioning of duplicate plant with spirals (Q1)Installation and tie-in of second plant ball mill (Q2)

Loading of high specification product on ocean-going vessel. Marampa, Sierra Leone

Gaining and managing environmental permitsWe received our full environmental permit for Marampa at the beginning of January 2011. The permit was issued following the formal approval and acceptance by the Sierra Leone Environmental Protection Agency (“SLEPA”) of London Mining’s Environmental Impact Assessment (“EIA”). The EIA was discussed openly via four public hearings in Sierra Leone, which were attended by members of the public and NGOs. The permit is subject to an administrative 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 we are working with an internationally recognised environmental consultant to ensure compliance with international best practice.

Hedging, offtake and marketingOn 28 March 2012, we signed a USD 45 million prepayment agreement with the Vitol Group regarding the offtake of 2Mwmt of iron ore per annum over five years, commencing in 2013 in parallel with London Mining’s ramp up in production to 5Mtpa. Pricing will be based off the Platts 63.5/63% Index and will include a premium to reflect the Fe content of the product. Subject to certain additional conditions being met, the facility may be increased to USD 55 million, and the offtake contract extended for a further year. The facility is repayable in two tranches over three and five years respectively, with no payments due in the first 12 months.

We signed an offtake agreement for Marampa with the trading house Glencore on 26 January 2011. The offtake covered 9.5Mwmt production from Phase 1. The five year agreement included a prepayment facility for up to USD 27.0 million and provides guaranteed offtake and shipping from Sierra Leone for the first 1.8Mtpa of production. The off-take is based on Platts 62% cfr China benchmark, with an upward adjustment for the Fe content of our 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 our ramp up expectations and is flexible to accommodate varying shipping sizes and frequencies to supply European, Chinese and other markets.

As part of our debt finance facility with Standard Chartered Bank we hedged 513kt of our 2012 production at USD 148/t referenced to 62% Fe China. This price excludes the grade-related premium and freight.


Arctic Circle

Nuuk

Kangerlussuaq

Greenland

Ice affectedwaters

Ice affectedwaters

Open waters

North Atlantic Ocean(Open waters)

IcelandIsua

London MiningAirport

Nuuk

RoadSlurry pipeline

Ice cover

Airstrip

London Mining

10 miles

20 kilometresMine site

Airstrip

Port site


Isua, Greenland (100% ownership)

Drilling at the Isua project, Greenland

Isua, location and logisticsHighlights

15Mtpa premium blast furnace pellet feed with low impurities

Project NPV of USD 1.76 billion with a project IRR of 18.7% on a 10 year initial operation with 3.5 year payback

JORC classified Mineral Resources increased by 10% to 1107Mt with internally diluted grade of 32.6% Fe

82% increase in Indicated resources to 380Mt grading 32.6% Fe

Additional mineralisation potential of between 950Mt and 1,500Mt including a high grade hematite target of between 150Mt and 300Mt

Preparation for permitting to commence and financing process to continue in April 2012

Premium quality potentialLocated 150km north-east of Nuuk and 110km from a proposed deep seawater port, Isua will produce a premium quality 70% Fe pellet feed concentrate with low impurities. Isua benefits from its position in the warmer south-west corner of Greenland which allows for year-round shipping.

In February 2011 we released the results of a scoping study compiled by SNC Lavalin International Inc. (“SLII”), for the Isua iron ore project in Greenland. The scoping study considered an initial 15 year mine life with 15Mtpa open pit, processing plant, pipeline and a deep water port.

A BFS with AACE Class 3 estimates for a 15Mtpa operation was completed in March 2012. A 10 year mine life based on the currently available amount of Indicated resources was considered. A 15 year scenario was also evaluated to demonstrate the greater potential of the asset. The BFS supports the initial findings of the scoping study, provides a more accurate estimate of cost and provides the foundation to finance and construct a mine at Isua. The detailed results of the BFS for the next stage of the project are outlined below.

Resources and mine lifeAs part of the BFS program, 7,656m of drilling was completed during the summer of 2011 which forms the basis for an updated resource statement. Snowden Mining Industry Consultants “Snowden” now estimate a total resource for Isua of 1,107Mt grading 32.3% Fe. This improved result has increased the resource by 10% in resource tonnage from the March 2011 resource statement. The modest reduction in Fe grade is the result of the decision to report internally diluted head grades due to incorporation of waste bearing structures in the block model rather than consideration of a selective mining method.

Perform

ance


Deepwater port location. Isua project, Greenland

The new resource represents a substantial 82% increase in Indicated resources from 209Mt to 380Mt which is sufficient to support a 10 year mine life. Potential to extend the mine life could be achieved though further drilling necessary to convert Inferred resources into the Indicated category.

Summary of the Isua JORC resource at March 2012 reported at a 20% Fe cut-off grade

Category Tonnes (Mt) Fe (%) Al2O3 (%) SiO2 (%) S (%) P (%)

Indicated 380 32.6 2.4 41.8 0.23 0.03Inferred1 727 32.1 2.3 42.3 0.22 0.03Total 1,107 32.3 2.4 42.2 0.22 0.031 83% or 607Mt of the inferred resources are extrapolated beyond the current

drilling coverage

Potential for additional resourceThe 2011 drilling campaign also confirmed additional mineral resource potential originally identified by Rio Tinto in 1997. This area of mineralisation potential is the down dip extrapolation of the Isua banded iron formation (“BIF”). An area of hematite BIF interpreted at the top of the BIF unit forms part of this potential. This area appears to be underlain by the more typical magnetite BIF.

Summary of Isua’s mineralisation potential at December 20112:

Potential mineralisation type

Potential tonnage range (Mt)

Potential grade range (Fe%)

Magnetite BIF 800 to 1200 30-33Hematite BIF 150 to 300 >35

2 Snowden considers this material to be an indication of mineralisation potential only and makes no guarantees that this material can or will be converted to a Mineral Resource or an Ore Reserve at any time in the future following the collection of additional data

BFS results The March 2012 BFS considers a 15Mtpa operation with a mine life of 10 years. The main changes, when compared with the February 2011 scoping study are the reduced mine life as well as increased, albeit more accurate, operating costs and capital expenditure.

The mine life of 10 years is based on the current availability of Indicated resources whereas the scoping study included Inferred resources in its 15 year mine plan. Snowden expects further Indicated resources could be defined if additional infill drilling were undertaken.

The operating cost estimates have increased from an average of USD 30/t to an average of USD 46/t principally as a result of anticipated increased power consumption based on more representative testwork indicating greater hardness of Isua ore than previously considered. The strip ratio has also increased as Inferred resources in the pit are now considered as waste rather than ore in the February scoping study.

Capital expenditure for the project is now estimated at USD 2.350 billion. This represents an increase of 15% from the February 2011 scoping study which estimated the capital cost for a 15Mtpa operation to be USD 2.05 billion. The capital estimate is however constrained within a much narrower degree of confidence, +/– 15% versus –30%/+40% based on more detailed analysis.

Testwork by SGS Lakefield has confirmed the final pellet feed product from Isua to be a premium quality blast furnace grade pellet feed with 70.2% of Fe and less than 2.0% Silica (SiO2) and Alumina (Al2O3). Sulphur levels will be either 0.12% or 0.3% depending on the grade of sulphur in the ore processed.

Financial analysisTwo pricing scenarios were considered in the study. The base case scenario considers the sale of 5Mtpa of low sulphur pellet feed into Europe and 10Mtpa of higher sulphur product into China with a more conservative case assuming the sale of all products into China. Long term market study and price forecasts were undertaken by Raw Materials Group (“RMG”). RMG assume a conservative premium of USD 3 per Fe unit above benchmark with freight costs of USD 34/wmt for capesize shipping to China and USD 9/wmt into Europe. Three scenarios were considered for the purposes of financial modelling. The base case scenario assumes a 10 year mine life and pricing based on sales of product into both Europe and China. Two further scenarios were considered both incorporating Inferred resources into the mineable resource to achieve a 15 year mine life. One of these scenarios assumed the sale of all products into China. The results are shown below.

Highlights of the BFS

Study dateScoping study February 2011

Bankable feasibility study

March 2011

Annual production (Mtpa) 15 15

Mine life (years) 15 10 with possibleextension to 15

Operating cost (USD/t concentrate)

30 46

Capital expenditure (USD billions) 2.05 2.35

Capital Intensity (USD/tpa) 136 157



Drill crew. Isua project, GreenlandIsua, Greenland (100% ownership)

continued

Results of the financial analysis (after tax)

Base caseExtended mine life

100% sales to China

Mine life 10 years 15 years 15 yearsPricing assumption 5Mtpa to Europe 5Mtpa to Europe 15Mtpa to China

10Mtpa to China 10Mtpa to ChinaProject IRR (100% equity) 18.7% 20.9% 19.9%Project NPV (8% discount rate, USD million, 100% equity) 1,755 2,366 2,315Equity IRR (70% debt: 30% equity) 30.1% 31.6% 30.1%Project payback period (years) 3.5 years 3.5 years 3.6 years

Entering into a royalty agreement with Anglo PacificIn August 2011, we announced that we had entered into a royalty agreement with Anglo Pacific Group Plc (“Anglo Pacific”) regarding future iron ore production at Isua. Under the terms of the royalty agreement, Anglo Pacific paid USD 30 million to our subsidiary London Mining Greenland (received in August 2011) in return for 1% royalty over all consideration received from the sale of iron ore concentrate from Isua. We used this money primarily to fund the completion of the BFS on Isua. If we do not fulfil certain milestones, of which the earliest was the completion of a BFS by no later than 31 December 2012, Anglo Pacific can demand repayment of the USD 30.0 million. We can make this repayment in cash or London Mining shares at our discretion.

Next steps – permitting and financingIn order to apply for conversion of its existing exploration licence, we are also required to complete an EIA, a Social Impact Assessment ‘(SIA)’ and a Closure Plan which have been prepared in parallel with the BFS report. We are preparing to commence the permitting process, which includes a technical review and public hearing by the Greenland Government. This process is expected to take six months to complete. At the same time, we will continue to look at all financing options to develop the project. Once financing has been agreed, the EPCM phase will start and construction will begin.

Perform

ance


Buenaventura

North PacificOcean

Caribbean Sea

Bogota

Socha

VenezuelaPanama

Colombia

ECUADOR

Cartagena

Barranquilla

Santa Marta

ECUADOR

Carare RailwayPacific RailwayAtlantic Railway

Major city or town

Magdalena RiverPortsMain Roads/Motorways

London Mining 100 km

Colombia (100% ownership) Coke production, Colombia

Highlights

We expect our coking operation to be producing at 200ktpa by Q4 2012

We continue to carry out exploration work to develop a fully integrated operation

We are exploring concession and joint venture opportunities with local companies

London Mining acquired the remaining 80% of its Colombian operations in March 2010, and has been constructing coking coal ovens in the Boyaca region of Colombia and conducting exploration in the surrounding area and other prospective regions.

We continue to pursue our aim to develop an integrated coking coal and coke operation in Colombia. During 2011, we completed our first coke ovens in Boyaca, and are continuing with construction to achieve a total oven capacity of 200ktpa by Q4 2012. Coking coal stocks have started to be acquired, and supply contracts put in place to provide the coking coal to feed the ovens. A logistics solution to the port of Barranquilla has been developed and port capacity in Barranquilla has been secured for up to 400ktpa of exports over time. The operation is focusing on the oven build out, ramping up production, optimising product specification and commencing transport of coke by road to Barranquilla.

Exploration has been ongoing, with the focus on four concessions in the Socha region close to our ovens. In 2011 over 10,000m of drilling was completed, and we expect to announce a coking coal resource in 2012. The coking coal resources are being defined, which will allow for the development and construction in the future of low and mid volatility coking coal mines to provide feedstock for the coke ovens. Vertical integration will enable us to capture increased margins and allow for greater control of the process and product quality, and in addition will facilitate the expansion to 400ktpa oven capacity.

We have built up a strong platform in Colombia, with a full operations team for the ovens and a strong group of geologists undertaking exploration, backed up by the country office in Bogota. We have been on the ground in Colombia for over four years and have developed a network of relationships which will drive forward the growth of the business through identifying profitable opportunities.

We recorded a USD 10.1 million impairment to goodwill in relation to our Colombia operations as a result of delays to production and increased capital cost caused by heavy rains, landslides, road blockages and certain design changes.

Colombia, location and logistics



Wadi Sawawin outcrop, Saudi Arabia

To Tabuk

To Duba

Exploitation LicenceML31/M

Western GroupEL65/K

Eastern GroupEL64/K

Wadi AlhamraEL66/K

SAUDI ARABIA

M

Exploration LicenceMining LicenceHighwayDirt Road

Red Sea

Mine Site

Duba

Access Roadand proposedRail/Conveyorroute

Al Muwayih

Old Pilot Plant site and proposedPort/PelletPlant site

London Mining HighwayOther Facilities

Scale5 miles10 kms

Highlights

Total resource of 382Mt grading 40% Fe.

Bankable feasibility for 5Mtpa mine, pellet plant and port completed and financing discussions underway.

The Wadi Sawawin project is 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. Wadi Sawawin’s location will provide it with a competitive advantage over competing Brazilian and European supply thanks to 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 with the program to diversify the economy which is an important element of Saudi Arabian economic policy. The government is expected to provide low cost funding via the Public Investment Fund (“PIF”) and Saudi Investment Development Fund.

Following the successful completion of a BFS in June 2010, we have been working with our joint venture partners NMC to secure the necessary finance to construct the Wadi Sawawin iron ore complex. On 19th November 2011, NMC signed an agreement with STX Heavy Industries (“STX”) of Korea to carry out the Front End Engineering and Design (“FEED”) works to conclude the final estimates and the total installed cost and to continue the program of assistance to arrange full financing for Wadi Sawawin. We are working with STX to undertake the final preconstruction design and procurement preparation.

Wadi Sawawin, location and logistics

Wadi Sawawin, Saudi Arabia (25% ownership)

Perform

ance


Financial review Rachel Rhodes

Chief Financial Officer

Highlights:

Fully funded for expansion at Marampa to 5Mtpa and Colombia first production

Group EBITDA loss of USD 40.5 million (2010 USD 31.4 million)

USD 218.0 million net cash inflow from financing and USD 192.9 million net cash out flow from investing activities

Financial information is presented in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. Earnings are assessed on the basis of EBITDA (earnings before interest, taxation, depreciation and amortisation) before exceptional items that due to their nature or frequency are presented separately on the face of the income statement.

In 2011 the Group received over USD 220 million from financing activities and successfully funded the Marampa project to first production (in December 2011), the Colombia project to first production (in January 2012) and the completion of a BFS for the Isua project for a 15Mtpa operation, (completed March 2012). The post year-end receipt of net equity proceeds of USD 87.3 million (February 2012), of net USD 18.4 million proceeds (January 2012) from a finance lease arrangement to fund the FOTP “Pride of Marampa” and USD 45 million prepayment offtake agreement (March 2012) strengthens the Company’s financial position and provides the necessary financing to expand production at Marampa to 5Mtpa and at Colombia to 200ktpa.

1. Earnings summary

USD million

Year ended 31 December

2011


2010

EBITDA (40.5) (31.4)Depreciation (1.4) (1.0)Loss from operations (41.9) (32.4)Impairments (13.4) (61.7)Fair value gain/ (loss) on deferred consideration

14.7 (5.6)

Net finance (loss)/ income (1.0) –Other items – (1.2)Taxation (18.4) 1.3Loss for the year (60.0) (99.6)

EBITDAEBITDA loss for the year increased by USD 9.1 million to USD 40.5 million, (2010: USD 31.4 million). The increase was the result of: higher corporate costs (USD 4.2 million) due to increased head count, project travel and legal costs; increased activity at Marampa (USD 2.6 million) as operations ramp up; increased Isua costs (USD 0.7 million) as BFS work was being undertaken; increased Colombia cost (USD 2.0 million) reflecting a full year’s consolidation and higher activity; offset by lower activity at the Saudi project (USD 0.3 million).

EBITDA comprises Group administration expenses excluding depreciation and including:• USD 4.6 million (2010: USD 3.9 million) key management

remuneration. The increase is due to an increase in salaries, bonuses and an increase in the size of the Board.

• USD 10.7 million (2010: USD 5.4 million) other staff costs. The increase results from higher staff count across all key locations as the Group transforms from developer to operator.

• USD 2.0 million (2010: USD 4.7 million) non-cash share based payment and return bonus plan charges, the decrease being the result of options and awards having vested in previous years.

• USD 10.5 million (2010: USD 7.0 million) consulting and legal fees. The increase reflects in particular fundraising activity during the year. During 2011 the Group opened a China representative office at an expected annual running cost of USD 1.0 million. In addition, 2011 also includes an expensed one off item of USD 2.0 million in respect of loans and litigation costs associated with the Group’s investment in China (written down to a carrying value of USD nil for the year ended 31 December 2010).

• USD 3.5 million project travel costs (2010: USD 3.1 million).• USD 4.8 million other operating Sierra Leone overheads

(2010: USD 4.0 million) increasing as the operation moved into production during the year.


Impairment and fair value gain on deferred considerationThe Group has recorded a USD 10.1 million impairment to goodwill in relation to the Colombia project as a result of delays to production and increased capital cost caused by heavy rains, landslides and road blockages and certain design changes. These operational issues have also contributed to the recognition of a USD 14.7 million fair value gain in the income statement for deferred consideration that was released because it is no longer assessed as being payable. At the time of acquisition deferred consideration was previously recognised in goodwill at a value of USD 10.1 million which has now been released. See note 9 to the financial statements.

Management’s focus is to optimise the operating performance and design of the Phase 1 ovens (200ktpa) prior to an assessment of an expansion to increase production to 400ktpa.

A further impairment charge of USD 3.3 million has been made to assets held for sale in relation to the DMC investment which brings the residual carrying value to USD nil. At 31 December 2010 the investment was held at a carrying value of USD 28.1 million and in October 2011 the Group received cash proceeds of USD 24.8 million from the sale of DMC shares. Management continues to pursue further recovery of the investment up to an additional USD 15.2 million under a downside protection agreement signed with the Chief Executive Officer and Chief Financial Officer of DMC but due to the uncertainty around the timing of the recovery, has determined to impair the residual carrying value of USD 3.3 million.

TaxationA tax charge of USD 18.4 million has arisen on the recognition of a deferred tax liability of USD 27.3 million for accelerated capital allowances in Sierra Leone due to differences in the tax rates between deduction and realisation. This is largely due to the revised tax rates in the new MLA, increasing the corporation tax rate from 6% (when tax allowances are taken)to 25% (when timing differences reverse) with effect from 1 January 2014. This has been partially offset by the recognition of deferred tax assets for carry forward losses in Sierra Leone, (USD 6.7 million) and Colombia, (USD 2.2 million) which are expected to be utilised against future taxable profits.

2. Balance sheetNon-current assets

USD million


2011


2010

Sierra Leone 281.0 76.5Colombia 60.5 48.4Greenland 60.2 30.2Saudi Arabia 25.3 23.0Other 0.5 0.3Total Intangible assets and PPE 427.5 178.4Deferred tax asset 2.2 1.2Total non-current assets 429.7 179.6

Sierra Leone asset split:

USD million


2011


2010

Development project cost 213.0 48.2JORC resource and drilling 25.2 16.1Mineral property and acquisition cost

9.7 3.9

Capitalised borrowing costs 15.0 –Other assets 18.1 8.3Total non-current assets 281.0 76.5

Sierra Leone development project detail:

USD million


2011


2010

Phase 1 (preproduction) 167.3 45.3 Transhipment vessel 15.0 –Preproduction owner’s team 14.7 1.5 Capitalised overheads 12.6 1.1 Phase 1 (post-production) 3.4 0.3 Total Sierra Leone assets 213.0 48.2

Financial reviewcontinued

Perform

ance


Non-current assets have increased by USD 250.1 million to USD 429.7 million (2010: USD 179.6 million) driven by the development of the Marampa project to first production in the year. Total Marampa additions were USD 204.5 million and included:• USD 164.8 million capital costs for Phase 1 in relation to

completion of the process plant, port facilities and dredging, infrastructure and roads and capitalised salaries.

• USD 9.1 million in relation to drilling and resource definition. • USD 5.8 million mineral property development and payments

due to the GoSL, (USD 2.5 million), levied under the MLA for the acquisition of incremental tailings, following the resolution of the mining lease boundary in 2009.

• USD 15.0 million of capitalised borrowing costs representing finance charges in relation to the convertible bond and the Standard Chartered Bank debt facility.

• USD 9.8 million other costs including expansion studies, consulting and environmental provision, software, vehicles and other assets.

Greenland additions of USD 30.3 million related to the BFS for a 15Mtpa operation, (completed in March 2012) which was primarily funded by the royalty agreement signed with Anglo Pacific, see below.

In addition there has been continued development at the Colombia project with USD 16.1 million additions in respect of the oven project (first production achieved January 2012) and ongoing exploration of coal licences (USD 6.3 million) – prior to the impairment of USD 10.1 million noted above.

Liabilities

USD million


2011


2010

Trade, other and tax payables 61.5 22.0Current borrowings 92.1 –Deferred consideration payable 7.6 –Current liabilities 161.2 22.0Non-current borrowing 90.5 –Deferred consideration payable 3 24.4Deferred tax and provisions 20.8 –Other non-current liabilities 28.8 –Non-current liabilities 143.1 24.4Total liabilities 304.3 46.4

i) Trade and other payablesTrade and other payables at 31 December 2011 include USD 11.2 million in relation to the acquisition of the FOTP, “Pride of Marampa”, which was paid and financed in January 2012 following the receipt of proceeds of USD 18.4 million from the finance lease agreement signed with Oldendorff, (see note 34 to the financial statements). Also included are prepayments for Marampa sales of USD 8.1 million under the terms of the facility provided by Glencore. The remaining balance relates largely to outstanding creditors for the Phase 1a construction project at Marampa which was completed at the end of the year.

ii) BorrowingsDuring the year the Group issued unsecured convertible loan notes with a par value of USD 110.0 million and made a drawdown of USD 90.0 million from a secured revolving credit facility held with Standard Chartered Bank. The facility tenure is for two years, ending in October 2012, with an extension option of 12 months. The ability to exercise the extension is subject to certain conditions which are under management’s control, in addition to credit committee approval from Standard Chartered Bank. Although management expects to receive the necessary credit approval and roll the loan for 12 months, the loan is presented as current liability in accordance with International Accounting Standards. Full details of borrowings are provided in note 24 to the financial statements.


Financial reviewcontinued

iii) Deferred consideration payableThe USD 10.6 million of deferred consideration relates to the acquisition of Colombia and comprises potential deferred cash and non-cash share consideration, the vesting of which are subject to performance milestones. Following delayed production and other operational matters, the fair value of consideration payable has reduced, see note 9 to the financial statements.

iv) Deferred tax and provisionsA net deferred tax liability of USD 19.4 million has been recognised in Sierra Leone, comprising of accelerated capital allowances of USD 27.3 million, net of a deferred tax asset of USD 6.7 million for carry forward losses. A restoration and decommissioning provision of USD 1.4 million has been recorded representing the present value of closure costs at the end of the Sierra Leone mine life.

v) Other non-current liabilitiesIn August 2011 the Group entered into a royalty agreement with Anglo Pacific regarding the Isua project in Greenland. Under the terms the Group received gross proceeds of USD 30.0 million in return for 1% royalty over all sales of iron ore concentrate from the project. The USD 30.0 million has no interest accruing and is only repayable if certain development milestone targets are not met. Upon commercial production the liability will be extinguished and treated as a partial disposal of the Group’s economic interest in the project, in consideration of a royalty.

3. Cash flowTotal cash reduced by USD 8.2 million to USD 67.8 million.

USD million


2011


2010

Net cash flow from operating activities

(34.4) (29.5)

Net cash from investing activities (192.9) (98.1)Net cash from financing activities 218.4 (0.4)Decrease in cash (8.9) (128.0)Exchange differences 0.7 (0.3)Opening cash 76.0 204.3Closing cash 67.8 76.0

i) Operating activities

USD million


2011


2010

EBITDA loss (40.5) (31.4)Non-cash share-based charges 1.6 2.8Movement in receivables (2.9) (0.7)Movement in inventory (6.2) –Movement in payables 13.4 (0.4)Interest received 0.2 0.2Net cash flow from operating activities

(34.4) (29.5)

Cash outflow from operating activities was USD 34.4 million, an increase of USD 4.9 million. This increase primarily related to an increased EBITDA loss due to higher activity across key projects as noted above, as well as build up of inventory at Marampa and Colombia prior to first commercial revenues expected in Q1 2012. This has been offset by an increase in payables, which includes USD 8.1 million of prepaid revenue in respect of Marampa sales, (under the terms of the Glencore facility agreement).

ii) Investing activitiesNet cash flow from investing activities was USD 192.9 million (2010: USD 98.1 million). Included in this amount is the receipt of proceeds of USD 24.8 million from the sale of the DMC assets held for sale. Capital investment in projects was USD 217.6 million and included:• USD 166.6 million for the Marampa project.• USD 26.3 million for the Isua project BFS.• USD 20.8 million for Colombia development covering the oven

project (USD 14.5 million) and exploration (USD 6.3 million).


Perform

ance

35

iii) Financing activitiesDuring 2011 the Group had net cash inflow from financing activities of USD 218.4 million (2010: outflow USD 0.4 million). The source of financing during the year included:• USD 105.1 million net proceeds from the convertible bond

raise in January 2011;• USD 87.3 million net proceeds from the credit facility with

Standard Chartered Bank;• USD 28.4 million net proceeds from the royalty agreement

signed with Anglo Pacific;• USD 2.1 million recovery of stamp duty, paid in respect of the

Oslo listing; less• (USD 4.9 million) interest expense including USD 4.4 million

interest paid in relation to convertible loan notes.

4. Liquidity and going concernAt 31 December 2011 the Group had cash on hand of USD 67.8 million. In 2012 London Mining has received further funding from an equity placing of USD 87.3 million (net after fees), USD 18.4 million from a finance lease facility and USD 45 million offtake prepayment agreement with Vitol Group, signed on 28 March 2012.

London Mining has sufficient cash resources to; accelerate Marampa Phase 1 production to 5Mtpa (with target production of 1.5Mt in 2012 and 4.2Mt in 2013); to fund the Marampa Phase 1 BFS for an expansion to 9Mtpa and for initial coke production and exploration activity in Colombia.

Project funding for the more capital intensive projects in Greenland and Saudi Arabia will be sought from external sources into these projects directly, with financial and strategic partners being considered.

During 2011 management drew down its entire USD 90.0 million credit facility with Standard Chartered Bank. The facility tenure is for two years, ending on 31 October 2012, with an extension option of 12 months. The ability to exercise the extension option is subject to certain conditions which are under management’s and USD 45 million offtake prepayment agreement with Vitol Group, signed on 28 March 2012.

control, in addition to Standard Chartered Bank’s credit committee approval. Management expects to receive the necessary credit approval from the lender to extend the facility, due to forecast cash generation and profitability at the Sierra Leone operations in the second half of 2012 and into 2013. In the unlikely event consent is not given by the lenders to the extension, the loan would become repayable in October 2012 and management would need to seek alternative solutions to refinance the facility, such as additional offtake, or debt funding, at that time.

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 to fund its committed expenditure, that all relevant covenants on its Standard Chartered Bank facility will be met and that it will be able to continue in operational existence for the foreseeable future. Accordingly the Group continues to adopt the going concern basis.

5. Treasury management and financial instrumentsA condition of entering into the SCB facility, (fully drawndown in 2011) required the Group to enter into a commodity price derivative representing one third of 2012 production (513Kt). It remains Group policy not to hedge commodity prices other than for specific strategic reasons including the securing of financing.

Details of treasury management and financial instruments are disclosed within note 31 to the financial statements.

6. Related party transactionsRelated party transactions are disclosed in note 33.

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.


Innovation Capital efficiency Risk management Growth enhancement Total shareholder return

Environmental regulation Global climate change Access to potable water Crisis management Environmental justice

Economic

Social Environmental

Eco-efficientEquitable

Sustainable

Endurable Human rights Community outreach Labour relations

Job creation Skills enhancement Local economical impacts Community investment Business ethics

Clean air, water and land Emissions and

waste reduction Biodiversity

Resource efficiency Lifecycle management

Sustainability at London Mining Recognising the importance of sustainabilityWe are looking to the future and how we will live and work together with the communities and organisations around our operations now and in the years ahead. We recognise the importance of exploring fully all the options that will enable us to meet our long term responsibility for our resources and surroundings. This genuine commitment to sustainability is a key part of the way we will contribute, endure and prosper.

We carefully manage the environmental, economic and social dimensions of our operations to ensure sustainable outcomes. Healthy environments provide the foundation for vital goods and services. Sustainable economics support future financial actions. Social sustainability reinforces the acceptability of our operations to local and global communities.

We also focus on the health, safety and environment (“HSE”) aspect of our mining operations. We manage this as a separate area of sustainability as we recognise the importance and specific requirements of keeping our workforce safe and able to continue their daily tasks.

Developing and implementing a sustainability framework for London Mining In 2011 we appointed Claude Perras as Head of Sustainability. The purpose of his role is to develop a Group-level sustainability vision, framework and governance process. The framework will enable us to provide greater oversight and, in turn, control of our resources at both corporate and project levels. It will also increase our ability to predict and deal with both risk and opportunity, while maintaining the drive and focus of the individuals and teams around the world.

As we continue to develop our mining assets, we are ever more aware of how important sustainability is to our operations. It is at the heart of how we develop a lasting business, make a long term contribution and deliver value.

Three pillars of sustainability

Perform

ance


Project sustainabilitycommittee

Investment anddevelopment

External bodies: International Finance Institutions, developm

ent agencies and N

on-Governm

ent Organisations.

Communication,monitoring and

reporting

Communication,monitoring and

reporting

Identification of risk and opportunities

Corporate / Group level

Global environment, community and economy

Developm

ent

Em

ployment

Pro

curement

Operations / projects

Corporate sustainability advisory committee

Head of sustainability

External andcivil societyBoard

Policy / vision

Local environmental, Local communities, Local economy

We have begun to implement the framework by putting into practice reporting systems at all sites and developing policies to help our employees ensure all actions are in line with Group strategy.

The proposed governance structure will consist of a corporate sustainability advisory committee, with members from the Board and representatives from civil society. A similar advisory committee will also be established in each country of operations.

Social Marampa, Sierra Leone We believe engaging stakeholders is crucial to the success of every project. To this end, at Marampa we manage our communication channels with local communities through a dedicated steering committee made up of representatives from major demographic groups in the region. The committee meets

regularly to discuss any issues they are experiencing and to learn about the project’s development. This two-way exchange of information is very important for both parties. It helps both sides gain a better understanding of the mutual risks and opportunities surrounding the project. This allows for a more open and flexible working relationship with the local communities. We have also set up a public information centre in the neighbouring town of Lunsar where people are able to access information about our operations.

We are constantly looking for practical ways to increase the local content of all our projects. We currently employ around 1,200 local people at the mine site and our office in Freetown. We are training and improving the skills of our employees to ensure a sustainable future work force for the mine while creating a newly skilled generation of Sierra Leoneans to fuel the country’s growing economy. We have also modified our

London Mining are assisting with school fees, uniforms and books for over 750 local children

750+750 local school scholarships in Sierra Leone

Our sustainability framework


Sustainability at London Miningcontinued

1,200 jobs for local people

procurement processes in order to enable local businesses to have increased ability with larger international organisations to supply the site. This has included breaking down larger orders into smaller, more manageable pieces and reducing the turnaround time for invoices to allow for smaller businesses with tighter working capital considerations.

To assist in the educational needs of the local communities, we have created scholarship programmes in schools within the Marampa and Maforki Chiefdoms in Port Loko. In all, over 750 scholarships have been awarded to children in both primary and secondary schools in the chiefdoms. Beneficiaries were selected on the basis of their family circumstances and/or academic performance.

Isua, GreenlandSince 2009 to 2011, we consulted Greenlandic local communities, civil organisations and governmental agencies as part of a comprehensive communication plan. It involved a wide range of communications tools, formats and actions, including:• Field workshops with local communities, civil organisations

and governmental agencies;• Public information meetings covered by the local media;• A dedicated London Mining website for the Greenland and Isua

project, where technical reports are made available to the public;• A public information centre which we set up in the capital city

of Nuuk, where people are invited to obtain project information in Greenlandic and other languages; and

• Isua Advisory Committee which we set up to gather leaders of local civil organisations such as Labour Union, Fishermen’s Association, Employers’ Association and others.

We will present the details of these consultations to the Bureau of Metals and Petroleum in a SIA which is expected in Q2 2012.

The issues raised in this report will be monitored, recorded and communicated with stakeholders throughout the life of the mine. This will help us ensure that local communities are kept up to date with operations so they can better understand what is happening at the mine site. This two-way flow of information will help to secure our social license and help keep operations running smoothly.

ColombiaWe are planning a study into the feasibility of supporting local businesses to build new accommodation in Socha, Colombia that can be leased to mine staff. Currently there is a shortage of accommodation near the mine site, so workers have to spend a long time travelling between the site and lodgings. The aim is to work together to produce a solution that benefits everyone going forward – the local businesses, our business and our people.

In close coordination with government and donors, we aim to develop a skill and vocational training program to meet labour requirements for the next five years in line with our local employment policy.

EnvironmentalMarampa, Sierra LeoneWe carry out thorough environmental monitoring to ensure any changes resulting from the mining operations would be quickly discovered and can be acted upon to minimise the disturbance to local habitats and communities.

We take weekly water samples at 26 sites around the concession. The sites have been chosen in collaboration with the Community Relations team to ensure that representative samples are taken with respect to possible effects on local people and their farm land. The samples are thoroughly tested for any chemical or physical changes. To date, only two samples have been shown to be influenced by our operations and we have taken the relevant actions to rectify the changes identified by the sample.

We monitor ambient dust around the site, haul road and surrounding areas. All readings have been below international standards but dust monitoring and dampening remains an area of focus during the dry season.

Isua, GreenlandWe have completed two full seasons of baseline data collection at Isua targeting the following areas: mine rock geochemistry and lake water chemistry, hydrology, meteorology, studies on glacier and sea ice, regional biodiversity, archaeology and local socio-economic systems. This will ensure we can base our future monitoring on reliable data. We will be able to detect any impacts quickly and confidently, which in turn will allow us to react promptly and appropriately and to continue operating in such a sensitive environment.

ColombiaColombia is the most progressive country on climate change in Latin America and the green growth agenda is a key priority for the Colombian Government. We have signed up for the Guia Del Sistema de Seguridad, Salud Ocupational y Ambiente para Contratista of the Consejo Colombiano de Seguridad, which includes guidance on environmental practices. A detailed project ESIA will be carried out in 2012 and will be submitted to our management as soon as possible to ensure any environmental and social impacts are addressed quickly and in line with international best practice.

Perform

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London Mining work with local communities to understand their needs and concerns

EconomicMarampa, Sierra LeoneIron ore mining is predicted to contribute to a GDP growth of 50% in Sierra Leone in 2012. The start of production at Marampa in January 2012 has resulted in the first royalty payment to the Government of Sierra Leone and to the Marampa community development fund. The community development fund will be used for both regional and national development projects.

We have held initial meetings with several international finance institutions and bilateral development agencies including the African Development Bank, the World Bank, UK Department for International Development (DIFD), German Technical Co-operation (GIZ) and the United States Agency for International Development (USAID), on future co-financing of projects in the countries in which we operate. This includes, for example, co-funding of research and the production of an in-depth report on Sierra Leone’s employment and skills market. This information will help us focus our community projects on developing the future of Sierra Leone in a long term and sustainable way.

We are engaging with the German Technical Co-operation, Government of Sierra Leone, USAID, UK Department for International Development and the United Nations Development Program to develop a skills and vocational training program and a capacity building program for local businesses. Our aim is to meet our requirements for operational expansion over the next five years while at the same time enhancing local employment and procurement.

We are also engaging with the Sierra Leone Ministry of Finance and Economic Development, the African Development Bank and World Bank on infrastructure planning schemes. This includes a study into the development of a deep sea port.

We are talking with the Sierra Leone National Registration Office to arrange a site visit to get the local workforce supplied with National ID cards. This will not only enable us to have accurate and reliable data on the individuals working at our site, it will also mean these individuals can register to vote in elections.

Case studiesSierra Leone

Many of our uniforms are made by a local business outside Freetown, this operation uses a combination of imported and locally sourced materials and 100% local labour to provide shirts, overalls and jackets to our employees. This synergy cuts down on shipping costs and feeds revenue directly back in to the local private sector. The company we use is in the process of rebuilding its capabilities after it was ambushed to make uniforms for the rebels during the civil war. We also source other clothing such as hats and belts from local business and are in the process of trialling other suppliers for equipment procurement.

80 drivers used for logistics at the site and in Freetown have been trained in defensive driving to UK standards and receive certificates.

We have signed an agreement with the Lunsar Pig Rearers Association, to whom we deliver our food waste daily, creating a sustainable and hygienic way to dispose of the food waste from the site whilst assisting local businesses.

At Port Thofeyim Patricia Sonkoi, widow of the former Paramount Chief of the Maforki district, has been contracted in replacement of an imported contractor to feed the workers at the barging site. Her and her team of family members and local workers prepare traditional local dishes, using 100% regionally sourced produce.

London Mining uses locally owned and run passenger boats to travel around the region, a necessary part of the transfer between the airport and the office in the capital. This has encouraged boat operators to improve health and safety standards to attract international passengers creating a service that attracts local and overseas passengers.


Sustainability at London Miningcontinued

Constant environmental monitoring ensures we minimise our impact on local habitats and communities

Isua, GreenlandOur Isua project is predicted to employ around 480 local people. This number will build over the first five years of the mine life as local people are trained in the skills to take the place of overseas workers. These overseas workers will initially help to provide the knowledge and capacity to train the Greenlandic in the necessary operations. We aim to hire as many local people as possible who have shown the ability to learn and develop to take positions of responsibility. As the Greenlandic workforce grows, so does the contribution from our project into the local economy. This in turn increases our economic support of Greenland’s public and private sector.

ColombiaWorking closely with international development banks and the Colombian Government (Bancoldex), we are studying the feasibility of developing a capacity building program for local businesses to support our growth plans and the local economy.

Health and Safety Marampa, Sierra LeoneIt is vital we educate our workforce in an environment with no existing safety culture. To this end, all workers go through a safety induction before joining the team. On completing the training, they are given full personal protection equipment relevant to their work. Each worker wears a badge with basic safety rules and responsibilities on it and has had these points explained to them in detail. Every safety breach or event is recorded. Incidents are infrequent and decreasing.

ColombiaWe are developing a policy and management plan for occupational health for our Colombia operations. It is designed to comply with the Colombian Government’s HSE guidelines: the Guia Del Sistema de Seguridad, Salud Ocupational y Ambiente para Contratista of the Consejo Colombiano de Seguridad. We expect the plan to be completed and approved by our management in Q2 2012. The plan will include guidance on working standards relating to external and internal incidences relevant to all aspects of personal and environmental safety. There will be particular focus on risks and events specific to our Colombian operations.

Where possible procurement for operations and expansion over the next five years will draw directly from local private sector growth thus promoting local private sector growth. As part of this commitment, we are looking into the opportunity of supporting a local business initative to build now accomodation in Socha that can be leased to mine staff.

Perform

ance


London Mining

Aboriginal people

Employees

Shareholders

Gov

ernm

ent

Com

mun

ity

Development agencies

Special interests

Customers

Academia

Supp

liers

Unions

Development plan and local

priorities

Every employee on site undergoes an HSE induction and is given a certificate on completion of their training

Planning for the futureOur priorities for 2012 are to understand where we are and where we want to be, by consulting our shareholders, employees, communities and other key stakeholders. To realise this goal we will review the main sustainable development trends in the mining sector and identify best industry practices.

In doing this, we will align ourselves with our peers and identify where we are currently performing well and where we need to improve. We will use this clear understanding of our current position as a foundation to define future action – choosing strategic priorities and concrete actions to realise our vision and address social expectations while upholding our commitments to sustainability and international standards.

Our vision is to maximise value for all stakeholders and to become a top 10 supplier to the steel industry within the next five years. We will do this through partnerships that create an environment conducive to investment and ensure local economic, environmental and social conditions are improved through our operating presence.

Globally, we face a number of challenges:• Increased shareholder and stakeholder activism;• A greater connection between grassroots NGOs and

international movements; • Increased competition due to globalisation;• Greater capital and credit constraints leading to risk aversion

from global financial institutions; and• Growing resource nationalism, putting at risk new mine

development which requires long term capital commitment.

Differentiation in today’s commodity markets comes from being the Company of choice globally.

In order to improve financial return, as well as mitigate the potential strategic threats posed by these challenges, we will work to embed sustainability in our core global business. We plan to:• Leverage partnership funding and expertise to ensure

sustainability projects are collaborative;• Ensure sustainability is embedded within future business

development projects and current capital investment projects in its regions;

• Ensure that all sustainability indicators are jointly agreed upon, monitored and evaluated with key stakeholders; and

• Partner with organisations that appreciate cross-sectoral collaboration as opportunities for value-creation.

London Mining as co-facilitator, co-initiator and supporter


The Group’s risk management policies and procedures are also discussed in the Governance section on page 46.

Principal risks and uncertainties have been categorised into key areas with a designated risk owner:

1. Commercial and business strategy Risk that business strategy is not optimal, cannot be implemented appropriately or is not communicated adequately to stakeholders

Owner: Chief Executive Officer

2. Operational and technical Risks which impact production and output, covering exploration, development and production

Owner: Chief Operating Officer

3. Financial Financial risks include liquidity risk, market risk, credit risk and foreign exchange risk

Owner: Chief Financial Officer

4. Legal and regulatory Risks that create loss arising from uncertainty of legal actions or uncertainty in application of laws and regulations

Owner: Group Legal Counsel

5. Health, safety and environment Workplace hazards to employees or the environment that could result in liability for the Group or have an adverse impact on output

Owner: Head of Sustainability

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.

Perform

ance


1. Commercial and business strategy Business strategy and planning

Risk cause: That chosen business strategy, in terms of acquisition and investment, funding strategy and resource allocation is not optimal or does not consider all appropriate options.

Impact: Shareholder return could be adversely affected if investments or acquisitions do not deliver expected value.

Mitigation: The Board is responsible for determining business strategy and appropriate authority is delegated to executive and project management.

Business strategy is reviewed regularly to ensure all strategic options are duly considered and appraised.

Investment decisions are based on financial and strategic metrics and are assessed and prioritised accordingly.

Key personnel

Risk cause: Strong competition for experienced mining personnel, combined with failure to maintain competitive remuneration may lead to loss of critical personnel or inability to recruit suitable candidates.

Impact: The Group’s success may be impaired if it cannot retain continued services of key management and certain technical personnel.

Mitigation: Regular reviews of remuneration and incentive plans are carried out in order to attract, retain and incentivise key employees.

Staff succession planning

Risk cause: Failure to adequately prepare for planned and unplanned staff departures.

Impact: Significant and sudden loss of knowledge/skills; reduced efficiency and effectiveness; delayed project delivery or business development.

Mitigation: Succession planning is an important issue on the Board’s agenda.

2. Operating and technicalProject delivery and performance

Risk cause: The development of Group projects may not meet project budgets’ timescales due to a number of factors, some of which are outside of the Group’s control.

These include technical uncertainties, regulatory requirements, infrastructure constraints availability of inputs and adverse weather conditions.

Impact: Failure to effectively deliver projects could increase costs and/or delay production and profitability.

Mitigation: The Group has experienced management teams in place for each project. Feasibility studies are performed to reduce technical risk and to identify project risk factors.

Project performance is monitored through reporting and regular management meetings.

Development progress and cost control is captured and monitored through appropriate software and is subject to review and challenge.

Reserves and resources

Risk cause: There are inherent uncertainties in estimating mineral reserves and resources.

Impact: There is no guarantee that estimated mineral resources can be recovered through mining activities. If the Group cannot access reserves and resources, future profitability maybe impacted.

Mitigation: Reserves and resources are estimated using industry standard methodologies which reduce the risk of significant variation.


2. Operating and technical continuedExploration

Risk cause: Exploration is by nature a speculative activity with no guarantee of success.

Impact: Failure to discover new mineral resources of sufficient economic value could adverse the Group’s financial position.

Mitigation: The Group has experienced exploration teams supported by specialist contractors. Exploration programs are targeted to maximise the opportunity for resource development.

Export logistics

Risk cause: Revenues are dependent on secure logistics to deliver product to market, in particular the barging and transhipment solution at Marampa. Logistics could be impacted by marine risks including poor navigation, inadequate dredging, adverse weather and marine traffic.

Impact: Disruption to logistics could impact the ability to get product to market and materially affect revenues and profitability.

Mitigation: Logistics arrangements are carefully planned and reviewed. Specialist contractors with appropriate experience have been engaged to operate logistics solutions and their performance monitored regularly.

Supply risks

Risk cause: The inability to obtain key materials or equipment in a timely manner to operational locations. Certain key items have long lead times to replace.

Impact: Production could be delayed or shutdown which would significantly impact cash flow and profitability.

Mitigation: The Group works closely with key suppliers in order to prevent delays in delivery of equipment.

Contingency plans are in place to address issues around key bottlenecks.

3. FinancialLiquidity

Risk cause: The Group may not be able to secure sufficient financing to meet liabilities as they fall due and as a result, cease trading.

The Group must comply with all covenants to ensure loan facilities are not in default.

Volatility in capital and credit markets could reduce the Group’s ability to raise finance and to service current debt and obligations.

Impact: If the Group is unable to raise adequate funding this may mean the Group is unable to develop and/or meet its operational commitments and business strategy. This could result in delays to development and reduced profitability.

Mitigation: The Group seeks to monitor its cash flow forecasts closely and regularly reforecasts its cash flows to ensure there are sufficient committed funds in place to meet all committed expenditures for the foreseeable future.

Business plans are periodically reviewed and monitored by the Board.

Capital intensive projects such as Greenland and Saudi Arabia will require external financing to fund development.

Commodity price volatility

Risk cause: The commodity prices for iron ore and coal are strongly influenced by macroeconomic factors.

Impact: The Group’s share price and financial results could be adversely affected by declines in commodity prices.

Mitigation: The Group does not typically implement hedge or price management strategies, but did hedge a portion of 2012 production in conjunction with entering into a loan facility.

Currency fluctuations

Risk cause: The Company’s functional currency is USD. Revenues from iron and coal are denominated in USD while the Group’s costs are incurred in several currencies

Impact: Fluctuations in exchange rates, specifically the Colombian Peso and GBP sterling, may adversely impact costs and financial results.

Mitigation: Group policy is to negotiate all contracts and costs where possible in USD.

The Group does undertake certain hedging strategies, but there is no assurance hedging strategies will be successful.

Principal risks and uncertaintiescontinued

Perform

ance


3. Financial continuedCost control

Risk cause: the Group has an active investment program across its operations and in particular at Marampa.

Operating costs generally include inputs which are susceptible to inflationary and supply and demand pressures, including fuel, labour and equipment costs.

Impact: Failure to deliver capital investment programs on budget or timescale may have an adverse impact on profitability.

Mitigation: Capital program progress and operating cost performance is monitored continually through budgets, reports and management meetings.

Insurance

Risk cause: Policy cover may not provide sufficient coverage for all potential insurance risks which may arise.

Impact: The Group may suffer financial losses if uninsured risks materialise.

Mitigation: Insurance policies are monitored on a regular basis in conjunction with insurance specialists. Insurance risk workshops are performed at key operations.

4. Legal and regulatoryLicences and permits

Risk cause: The Group is dependent on the granting and renewal of mining and exploration licences in order to explore for and produce mineral resources.

Impact: Failure to obtain a licence or permit renewal could have a material adverse impact on the Group’s operations and expansion plans and adversely impact share price and financial performance.

Mitigation: There are established processes in place to monitor licences and permits on an ongoing basis and processes are in place to ensure compliance with all licences and permits.

Country specific risks

Risk cause: The Group is exposed to political and regulatory developments in the countries we operate, including Sierra Leone, Colombia, Greenland and Saudi Arabia. Local political developments or changes in fiscal or mining regulations are beyond the Group’s control.

Impact: Potential impacts could include political instability and civil unrest, nullification of existing agreements, licences or permits, expropriation of assets, imposition of increase royalties or taxes, or restrictions on exports.

Mitigation: The Group monitors political and regulatory developments and seeks to positively influence significant changes through active dialogue with governments, international agencies, NGOs and all other appropriate parties.

The Group mitigates this risk by ensuring compliance with all local laws and legislation.

Bribery and corruption

Risk cause: The Group operates in jurisdictions where the perceived risk of corruption is high.

Impact: Financial loss could result from fraudulent acts, and reputational damage from failure to comply with legislation.

Mitigation: The Group has documented principles relating to business conduct and adopts a zero tolerance approach to deviations and has a whistle-blowing procedure in place. An anti-corruption training program was completed during the year.

5. Health, safety and environmentalHealth, safety and environment

Risk cause: Mining is an inherently hazardous industry due to the nature of operations and working conditions.

Impact: In addition to personal injury, fatality and damage to the environment, impacts include fines and penalties, liability to third parties, impairment to reputation and industrial action.

Mitigation: The Group is in compliance with all laws and regulations. A zero tolerance approach is adopted in respect of all health and safety matters.

The Group has appointed a Head of Sustainability.

Social and community

Risk cause: Disputes may arise with local communities in close proximity to the Group’s operations, including the Marampa operation which involves resettlement of communities.

Impact: Failure to properly engage and manage local communities could result in prolonged disputes which could cause project delay and reputational damage.

Mitigation: The Group has established a comprehensive process for proactively engaging community involvement activities surrounding all of our projects and for dealing promptly with any potential disputes.


Governance

47

Governance


Sierra LeoneAfrica

Marampa

Marampa, Sierra Leone Overlooking former mine workings on Masaboin Hill. Marampa comprises of a resource of over 1 billion tonnes of iron ore.



Board of Directors 1 2 31 333311111111111111 22221 2 31

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 Rhodes Chief Financial Officer (Age 41)Rachel was appointed to the Board on 4 September 2008 as Chief Financial Officer and during her time at London Mining has successfully listed the Company on AIM and been integral in raising Group finance of over USD 250 million. She is a member of the Institute of Chartered Accountants in England and Wales, having qualified with Coopers and Lybrand in London in 1996. She has over 15 years’ experience in the mining sector, including five years in key financial roles within Anglo American Plc where she successfully led major corporate transactions. Rachel holds a Master of Arts degree in Economics from Cambridge University.

4. Luciano Ramos Chief Operating Officer, Iron Ore Division (Age 52)Luciano is a Mining Engineer and has worked for over 28 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 co-ordination of process engineering at iron, gold, bauxite, kaolin and manganese plants; project implementation for both greenfield and brownfield operations; project co-ordination for the manufacturing of mineral processing equipment; management of processing operations; and technological research and development.

5. Benjamin LeeCorporate Development Director (Age 40)Benjamin is involved in all financing and strategic aspects of current and future projects. Prior to joining London Mining in early 2009, Benjamin was head of UK Mergers and Acquisitions at Kaupthing Bank in London 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 and 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 and has a Master of Arts degree in Economics.

1. Dr Colin Knight Non-Executive Chairman (Age 78)Colin was appointed as a Non-Executive Director and Chairman of London Mining 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. Colin 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 in European Professional associations include FIMM (now FIMMM), CEng., PEng (Canada).

2. Graeme Hossie Chief Executive Officer (Age 47)Graeme co-founded London Mining in early 2005 and has been instrumental in building the Group from its first inception to its current status as one of the leading emerging new producers for the global steel industry. He has driven the overall development of the Group’s expanding iron and coal projects and international management team as well as fund raisings and share placings of over USD 600 million, asset and Company acquisitions, the establishment of offtake and strategic relationships, and the IPOs on Oslo Axess and the London AIM stock exchanges. Graeme led the acquisition in 2007, successful development plan (10-fold production growth) and subsequent disposal in 2008 of the Group’s Brazilian operations for 1,200% return on investment leading to full Group debt repayment, a GBP 220 million special shareholder dividend and ongoing capital investment program to develop the Group’s other projects, in particular the Sierra Leone operation which began production, exports and 5Mtpa ramp up within 22 months of receiving Government and full Parliamentary approvals to develop the greenfield site. Prior to founding London Mining, Graeme ran a venture development consultancy assisting natural resource industry 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.

49

Governance


4 5 6 7 8 96666666666666666666 77777777 888 99999999999995555555444444444444 555555555555554 5 6 7 8 9

8. Graham MascallNon-Executive Director (Age 65)Graham was appointed as a Non-Executive Director on 1 May 2010. Graham is currently Chief Executive Officer of AIM-listed Ncondezi Coal Company Limited, an emerging coal company focused on the Moatize coal basin in the Tete region of Mozambique. Graham is also on the Boards of Gemfields Resources and Walter Energy, 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 degrees from the Camborne School of Mines (Mining Engineering) and McGill University (Mineral Economics).

9. Colin HarrisNon-Executive Director (Age 65)Colin has been working as an exploration geologist for over 40 years and has a wealth of experience in the generation, exploration and evaluation of projects covering a variety of commodities and deposit styles in over 25 countries mainly in Africa and Europe. He has worked for major international mining companies including Anglo American, Cominco and more recently Rio Tinto. During his 18 years at Rio Tinto Colin managed multi-million dollar programmes which in the past 15 years included the evaluation of iron ore deposits in Greenland, Scandinavia, Mali, Mauritania, Algeria, Morocco, Liberia, Senegal, Sierra Leone, etc and more importantly between 1998 and 2008 heading up the team evaluating the world-class Simandou iron ore project in the Republic of Guinea. Colin resigned from Rio Tinto in 2008 and joined the Zanaga team later in the year as project Director. He stepped down as project Direct of the Zanaga project after the exercise of the Xstrata Call Option. Colin is also a Non-Executive Director of AIM-listed Ncondezi Coal Company Limited and AIM-listed London Mining Plc.

6. Sir Nicholas Bonsor Deputy Chairman and Senior Non-Executive Director (Age 69)Sir Nicholas was appointed to the Board on 1 September 2007 as a Non-Executive Director. A barrister, he practised in a Common Law Chambers from 1967 to 1975 and as a specialist in regulatory and commercial law from 2003 to 2011. Sir Nicholas was a member of 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 Council of Lloyd’s 1987-91 and on the Boards of several companies including Blue Note Mining inc and Forest Gate inc (Canada); he is currently chairman of Cassidy Gold inc, Metallon Gold Plc and Tomco Energy Plc. He is a Deputy Lieutenant of Buckinghamshire, a 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 holds a Master of Arts degree in Jurisprudence from Oxford University.

7. Malcolm Groat Non-Executive Director (Age 51)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 Price Waterhouse 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.


Senior management

3. Thomas Credland Head of Investor RelationsThomas has over 10 years’ experience in mining and capital markets. A geologist by training, Thomas joined London Mining in April 2009. Prior to joining London Mining, he was part of the mining and metals team at Canaccord Adams that raised in excess of USD 1billion in new equity for a number of 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 in Western Australia. He holds a Bachelor of Science (Honours) degree in Geology from the University of Edinburgh and a Master of Science degree in Mineral project Appraisal from the Royal School of Mines at Imperial College.

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

1. Rosh BardienHead of Group Human ResourcesRosh has over 15 years’ experience in the field of human resources and industrial relations of which eight years has been spent in the mining industry. Rosh previously worked for Riversdale Mining, an Australian company, with operations in Africa. Prior to that she held the HR Director role for one of Mvelaphanda’s subsidiaries – Royal Sechaba. She has been responsible for setting up world class training facilities, managing and implementing corporate leadership programmes, negotiating collective agreements and managing and maintaining industrial peace, implementing organisational structure and design processes and implementing human resources management information systems globally.

2. Rohit BhoothalingamHead of Legal, Company SecretaryRohit joined London Mining in December 2008 and has overall responsibility for the Group legal and company secretarial functions. Prior to this he was General Counsel at a London based natural resources focused hedge fund. Prior to this he specialised in various aspects of corporate finance and project finance advising large and mid-sized companies, banks, venture capital and private equity firms at US law firms Wilmer Hale, in London and New York, and Orrick, Herrington and Sutcliffe in New York. Rohit studied law at Cambridge University, holds a Masters in Law from Georgetown University Law Center and is a member of the New York Bar.

51

Governance


8. Rinaldo NardiGeneral Manager for Mineral Processing and Plant Design Rinaldo is a mining engineer and a Ph.D in mineral processing. Rinaldo has over 37 years’ experience mostly with Vale and Companhia de Projetos Industriais in Brazil. Rinaldo has particular expertise in management of conceptual engineering, basic engineering, feasibility studies, mineral process development, plant start up and optimisation.

9. Claude Perras Head of SustainabilityClaude brings over 25 years’ experience in senior management in global corporations and international development organisations including NGOs. Previously with Rio Tinto, where he was Director of Sustainable Development and Community Relations, Claude has broad international skills having gained significant mining experience in Canada, Africa, the Americas, the Asia Pacific region, and Eastern Europe. He has in-depth understanding of strategies and mechanisms within sustainability development, stakeholder engagement and community-based socioeconomic development within the mining industry and NGO sector. Claude has a Master’s degree in Management from McGill University, Montreal; a Bachelor’s degree in Social Science with double major in Politics and Economics from the University of Ottawa and a Diploma in Social Development from the Coady International Institute of Antigonish, Nova Scotia.

10. Daniel Pop Managing Director, Sierra LeoneDaniel is a mining engineer and has over 18 years’ experience. Daniel formerly held senior management positions with Northern Iron, Rio Tinto Iron Ore (Hamersley Iron and IOC) and BHP Billiton Iron Ore (Area C) and has notable expertise in all aspects of the production of iron ore.

5. Sergio Guedes General Manager for Mineral ResourcesSergio joined London Mining in April 2009. Sergio is a geologist with 27 years of experience in iron ore and other commodities in Brazil, Australia, Saudi Arabia, Greenland and West Africa with Vale, Rio Tinto and London Mining. He has particular expertise in the co-ordination of geology programmes for resource expansion and mine planning. Sergio holds an MBA from the Dom Cabral Foundation.

6. Xiaogang Hu Project Director for Isua, GreenlandXiaogang joined London Mining in October 2009. Xiaogang is a senior cold region’s specialist with 28 years of experience. Xiaogang has been involved extensively in design and construction phases on northern mining projects in permafrost regions. Of particular note is his work on the Diavik diamond mine, Raglan nickel mine and Voiseys Bay nickel mine. Before joining London Mining, Xiaogang held senior technical and management positions in large engineering firms Amec Plc. and SNC Lavalin Inc. Xiaogang obtained his B. Eng. from Sichuan University in China and earned his Ph.D. from McGill University in Canada.

7. 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. Rubens 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.


Dear ShareholderAs an AIM-listed company, London Mining is not required to follow the UK Corporate Governance Code (the Code). It has however endeavoured to follow the principles and provisions of the Code keeping in mind its size, structure and the need for an entrepreneurial outlook. Since the Company listed its shares on AIM in November 2009 the corporate governance structure of the Company has evolved with the progress and development of the Company. London Mining has now progressed from being a developer to a producer of iron ore and the Board recognises that this key development brings with it enhanced shareholder expectations with respect to governance.

Given the Company’s current shareholder base, shareholder feedback and the Company’s aims to become a premium listed company the Board is committed to further enhancing its corporate governance structure and, in particular, focusing on those matters brought to its attention by its shareholders.

Whilst the Code allows companies to explain their reasons for non-compliance with any of its provisions, London Mining wishes to minimise its areas of non-compliance with the Code and has formulated a plan for addressing the key areas of non-compliance.

The key components of the plan are: Changes to Board structure and composition— Appoint two new additional independent Non-Executive

Directors in 2012— New independent Non-Executive Directors will be expected

to chair the audit and remuneration committees— Make changes to the Board committees to ensure that

they contain at least a majority of independent Non-Executive Directors and are in accordance with the Code.

Independence of current Non-Executive Directors— Implement a plan that will equitably dispense with options

issued to current Non-Executive Directors (that are considered by the Board to be independent) to ensure wider acceptance of the Board’s view that they are independent

— No further grants of share options will be made to Non-Executive Directors.

New executive remuneration policy in line with ABI guidelines— Strategic objectives linked to individual key

performance indicators— Strongly align executive remuneration with enhanced

shareholder expectations— Underpin a pay-for-performance culture.

We look forward to a continuing and productive dialogue with you this year.



Corporate governance report t

n

53

Governance


Governance of London MiningLondon Mining is committed to maintaining the highest standards of corporate governance. This section of the Annual Report sets out the corporate governance framework for the Company and how it has evolved since London Mining listed its shares on the AIM Market of the London Stock Exchange in November 2009.

The Code sets out the standards for good practice in relation to corporate governance in the form of a set of principles and provisions. Under the AIM rules London Mining is not required to comply with the Code nor state whether it departs from it. The Board has however chosen to apply the Code to promote good governance where it is considered practical for a company of its size and development.

Board balance and independenceThe UK Code requires that companies below the FTSE 350 should have at least two independent Non-Executive Directors. Colin Harris, appointed as a Non-Executive Director on 12 May 2011, is considered by the Board to be independent. Sir Nicholas Bonsor and Graham Mascall are also considered by the Board 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 and Graham Mascall remain independent with regards to their character and judgment. In the past, in keeping with the entrepreneurial nature of the Company, the Board was keen to ensure that Directors’ interests were aligned with the interests of shareholders. Therefore, in earlier years it was the Board’s practice to issue a small number of share options to Directors, including Non-Executive Directors. The Board did not believe that this practice impaired 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 Code. Non-Executive Directors are therefore no longer granted options and Colin Harris does not hold share options. To address shareholder concerns with respect to share options held by Sir Nicholas Bonsor and Graham Mascall the Board has worked with shareholders to establish a way to equitably dispense with the options held by Sir Nicholas Bonsor and Graham Mascall to enable shareholders to be more comfortable with their independence. Accordingly, the Board intends to cancel the options held by these Non-Executive

Directors in consideration for the payment of a fairly valued cash sum and to allow these Non-Executive Directors to use the proceeds to subscribe for shares in the Company on the basis that they hold such shares for a period of two years. An independent consultant will be appointed to carry out the valuation of the options and oversee the procedure. The Company will disclose full details of the process once approved.

One of the Company’s Non-Executive Directors, (excluding the Chairman) is not considered independent. Malcolm Groat was an Executive Director of the Company (Part-time Finance Director) in 2008. The Company considers that whilst Malcolm Groat is not considered independent, his appointment as a Non-Executive Director with extensive financial, accounting and mining expertise and experience enhances the overall strength of the Board and outweighs any perceived compromise to his independence.

Not independent Independent

Graeme Hossie Sir Nicholas Bonsor

Rachel Rhodes Graham Mascall

Benjamin Lee Colin Harris

Luciano Ramos

Dr Colin Knight (Chairman)

Malcolm Groat

Dr Hans Kristian Schønwandt (retired 23 March 2012)

The Company intends to appoint two additional independent Non-Executive Directors in 2012 and is currently in the process of identifying suitable candidates that will have the independence, expertise and suitability to chair the audit and remuneration committees, respectively. When making these appointments the Board intends to recognise the importance of considering a wide range of diverse candidates. Further details of the plans for these appointments and their impact on the membership of the Board committees are set out later in this report.

London Mining is committed to maintaining the highest standards of corporate governance.


Professional backgroundThe professional backgrounds of the Board can be summarised as follows:

Mining/GeologyBanking/FinanceAccounting

Legal/political

The role and structure of the Board The Board consists of nine Directors, made up of the Chairman, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Corporate Development Director and four Non-Executive Directors. Biographies of all the Board members appear on pages 48 and 49 of this Annual Report.

The Board is collectively responsible for the long term success of the Company and has ultimate responsibility for the management, direction and performance of the Group and its businesses. The Board is required to exercise objective judgement on all corporate matters and is accountable to shareholders for the proper conduct of the business.

The Board has also delegated authority for specific matters to the nomination committee, the remuneration committee, the audit committee and the Health, Safety and Environment committee. Further information on each of these committees is set out on pages 56 and 59 of this Corporate Governance Report.

There are, however, a number of matters which are reserved for Board approval. These are set out in a formal schedule, approved by the Board and include, but are not limited to, the following matters: • Regular review of long term objectives and strategic

direction of overall business;• Approval of the annual business plan;• Review the performance of the business in the light of its

strategic objectives;• Responsibility for the overall management of the Group;• Changes relating to the Company’s share capital or

corporate structure;• Approval of major capital expenditure, acquisitions

and divestments, expansion or diversification;

• Maintaining and monitoring the Group’s system of internal control and risk management;

• Approval of the recommendations of the audit committee, including remuneration and appointment of the Company’s auditors;

• Consideration of recommendations from the remuneration and nomination committees; and

• Approval of communications with shareholders including approval of the Interim Statement, Annual Report and Accounts and other major public announcements.

A copy of the schedule of matters reserved for the Board is available on the Company’s website at: www.londonmining.co.uk

Chairman and Chief ExecutiveThe division of responsibilities between the Chairman and Chief Executive are set out in writing and summarised below:

Chairman – Dr Colin Knight Chief Executive Officer – Graeme Hossie

• Lead and manage the Board

• Develop strategic and operational objectives for the Company

• Ensure information flow and effective communication with shareholders

• Plan and direct the Group’s activities to achieve targets

• Run the Board and set its agenda, timing and culture of debate at meetings

• Ensure the implementation of Board decisions

• Take the lead in providing a properly constructed induction program for new Directors

• Recruit, select and develop the executive team

• Take the lead in identifying and meeting the development needs of individual Directors and address the development needs of the Board as a whole

• Maintain and develop organisational culture, values and reputation

Senior independent DirectorSir Nicholas Bonsor is currently the Deputy Chairman and Senior independent Non-Executive Director and is available to address shareholders’ concerns on governance and, if necessary, other issues that have not been resolved through the normal channels of communication with the Chairman, or Chief Executive Officer, or Chief Financial Officer, or in cases when such communications would be inappropriate.

Corporate governance reportcontinued

55

Governance


Board processThe Board holds at least six scheduled Board meetings a year following a timetable of subject matter to consider, set at the beginning of each year. The Board also meets on an ad hoc basis in response to the needs of the business. A table of attendance of members of the Board and Board committees at meetings held during 2011 is set out on page 57.

The Directors receive appropriate briefing papers on substantive items, circulated prior to each Board meeting to give the Directors adequate time to prepare for the meeting and to enable any Director who is unable to attend the meeting to have an opportunity to review the matters to be discussed and, if necessary, to provide comments to the Chairman in advance of the meeting. The Directors also receive regular updates on financial information between Board meetings. All Directors have the right to have their concerns about the running of the Company, or a proposed action which cannot be resolved, recorded in the minutes.

Board developmentPrograms of continuing professional development are arranged as required, taking into account the individual qualifications and experience of the Directors. The Chairman is responsible for ensuring induction and training programs are provided and the Company Secretary is tasked with organising such programs. Individual Directors, with the support of the Company Secretary, are also expected to take responsibility for identifying their own training needs and to ensure that they are adequately informed about the Group and their responsibilities as a Director. Due to the current plans to enhance corporate governance in 2012, the Board requested that they receive further training in this area. A comprehensive corporate governance workshop and training program has been organised for the Board in May 2012. The workshop will be run by an external consultant and will update and refresh the Board on current and key corporate governance matters.

As part of their role the Executive Directors are on site on a regular basis. During 2011 a number of the Non-Executive Directors attended site visits to Sierra Leone, Colombia, China and Greenland.

Board adviceAll Directors have access to the advice and services of the Head of Legal and Company Secretary, who is responsible to the Board for ensuring that the correct Board procedures are followed and that Board members receive legal and company secretarial advice. Both the appointment and removal of the Company Secretary are a matter for the Board as a whole. All Directors also have access to the Group’s professional advisers whom they can consult at the Company’s expense should they consider this necessary in order to better discharge their responsibilities.

Conflicts of interestIn accordance with the Company’s Articles of Association, the Board is permitted to consider and if it sees fit, to authorise situations where a Director has an interest that conflicts, or may possibly conflict, with the interests of the Company. A schedule of conflicts or potential conflicts for each Director is reviewed at least annually. A Director who had a conflict of interest would not be counted in a quorum or counted in a vote when the Board considered the matter in which the Director had an interest.

Board evaluationPrism Cosec is currently advising the Company on a number of aspects of corporate governance and company secretarial matters. As part of this work Prism Cosec have carried out an Evaluation of the Board and its three principal committees (the audit committee, the remuneration committee and the nomination committee) conducted using a detailed and confidential questionnaire. The questionnaire included questions about the effectiveness of the executive and the Non-Executive Directors and the Board as a whole. The results of the evaluation were collated in a form which did not identify individual comments (so as to ensure candid feedback), and the collated feedback was reviewed by the Chairman and the Company Secretary and discussed by the Board. The main conclusions from the evaluation were that the Board continued to operate as an effective body which provided strong entrepreneurial leadership. A number of comments related to the structure and composition of the Board and enhancing corporate governance and this will be addressed as part of the Company’s corporate governance developments planned for 2012. In particular, the Board requested further Board briefings on corporate governance to be arranged to ensure the corporate governance of the Company develops in line with the growing profile of the Company.

Re-election of Directors at the Annual General Meeting Directors are elected by shareholders at the first Annual General Meeting ‘(AGM)’ after their appointment and, after that, offer themselves up for re-election at regular intervals by a vote of shareholders at least once every three years. The Company intends to continue with this practice but will review this regularly. If the Company becomes a member of the FTSE 350 the Directors will offer themselves for annual re-election. Rachel Rhodes and Malcolm Groat will retire by rotation at the forthcoming AGM and, being eligible, offer themselves for re-election. Colin Harris will be offering himself for election as this will be the first AGM since his appointment on 12 May 2011.

The Board has ultimate responsibility for the management, direction and performance of the Group and its businesses.



The Company intends to appoint two additional independent Non-Executive Directors in 2012, these proposed additions will ensure that the Board committees are in full Compliance with the Code as follows:

Audit committee – members will be independent Non-Executive Directors in accordance with Code Provision C.3.1;

Remuneration committee – members will be independent Non-Executive Directors in accordance with Code Provision D. 2.1;

Nomination committee – majority of members will be independent Non-Executive Directors compliant with Code Provision B.2.1.

Audit committeeThe audit committee is chaired by Malcolm Groat. Other members of the committee are Dr Colin Knight, Sir Nicholas Bonsor, Colin Harris and Graham Mascall. As a fellow of the Institute of Chartered Accountants in England and Wales who

qualified with Price Waterhouse in London, and holds an MBA, Malcolm Groat has recent and relevant financial experience. He also has a full and comprehensive financial background and experience both inside and outside of mining, including global listed businesses both AIM and FTSE 250. He has previous experience as an audit committee chair in a business with over 10,000 shareholders and he currently serves as finance Director of a UK-based mining company. He is therefore, at present, considered by the Board to be the best candidate for chairman of the audit committee. The Chief Financial Officer, Rachel Rhodes, the Finance Controller and the Head of Internal audit have all attended committee meetings by invitation. The Company’s auditors, Deloitte LLP also attend by invitation.

Under its terms of reference, the audit committee is required to meet at least three times a year or more frequently as circumstances require. The audit committee reports on its activities to the Board meeting immediately following its meetings.

The Board committeesTerms of reference for each of the following committees with the exception of the HSE committee are available on the Company’s website, www.londonmining.co.uk. All the Non-Executive Directors are on the audit, remuneration and nomination committees.

Structure of the Board and its committees

Board Audit Remuneration Nomination HSE Executive committee

Dr Colin Knight (Chair)

Malcolm Groat (Chair)

Sir Nicholas Bonsor (Chair)

Dr Colin Knight (Chair)

Graham Mascall (Chair)

Graeme Hossie

Graeme Hossie Dr Colin Knight Dr Colin Knight Sir Nicholas Bonsor Graeme Hossie Rachel Rhodes

Rachel Rhodes Sir Nicholas Bonsor Malcolm Groat Malcolm Groat Rachel Rhodes Benjamin Lee*

Benjamin Lee* Colin Harris* Colin Harris* Colin Harris* Colin Harris* Luciano Ramos*

Luciano Ramos* Graham Mascall Graham Mascall Graham Mascall Luciano Ramos* Rohit Bhoothalingam

Sir Nicholas Bonsor Thomas Credland

Malcolm Groat

Colin Harris*

Graham Mascall

Dr Hans Kristian Schønwandt**

* Appointed during the year.

** Retired from the Board on 23 March 2012.

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Governance


Audit committee continuedThe primary responsibilities of the audit committee are:• To ensure the integrity of financial statements of the

Company including its annual, half yearly and quarterly reports and any other formal announcement relating to its financial performance and reviewing of significant financial reporting issues and judgements which they contain;

• Review and challenge the consistency of and any changes to accounting policies;

• Review and challenge the going concern assumption and capital adequacy;

• Keep under review the effectiveness of the Company’s internal controls and risk management systems;

• Consider the need for and manage the effectiveness of 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, removal, engagement and fees in relation to the Company’s external auditor; and

• To assess the Company’s arrangements for whistle-blowing and detecting fraud.

Attendance at meetings of the Board and Board committees

Scheduled Board (6 Meetings)

Audit committee (4 Meetings)

Remuneration (9 Meetings)

Nomination committee (1 meeting)

Health, Safety & Environment committee

(1 meeting)

Executive Directors

Graeme Hossie 6/6 – – – 0/1

Rachel Rhodes 6/6 – – – 1/1

Benjamin Lee* 5/5 – – – –

Luciano Ramos* 4/5 – – – 1/1

Non-Executive Directors

Dr Colin Knight 6/6 4/4 9/9 1/1 –

Sir Nicholas Bonsor 6/6 3/4 9/9 1/1 –

Malcolm Groat 6/6 4/4 7/9 1/1 –

Colin Harris* 4/5 2/3 4/7 1/1 0/1

Graham Mascall 6/6 3/4 8/9 1/1 1/1

Dr Hans Kristian Schønwandt** 1/6 – – – –

* Appointed during the year.

** Retired from the Board on 23 March 2012.

There were 11 further ad hoc Board and Board committee meetings called at short notice to deal with minor commercial matters, share issues and exercises of share options.

Committee activitiesIn 2011 the audit committee met four times. During the year, the committees’ activities included following:• Reviewing and approving the external audit plans;• Key accounting judgements including going concern and

liquidity;• Accounting treatments regarding finance raised during the year;• Considering the accounting value of assets;• Consideration of the preliminary, interim and quarterly

announcements; and• Reviewing internal controls and external audit effectiveness.

Relationships with external auditorsThe 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 6 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 performed for the Group in 2011 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 reappointment of Deloitte LLP as the Group’s external auditors is reviewed on an annual basis by the audit committee. The committee’s assessment of the external auditors’ performance and independence underpins its recommendation to reappoint Deloitte LLP as auditors until the conclusion of the AGM in 2013. Resolutions to authorise the Board to reappoint the auditors and to determine their remuneration for the year ending 31 December 2012 will be proposed at the AGM on 23 May 2012.

Risk management and internal controlThe Board is responsible for establishing and maintaining adequate internal controls and risk management systems to safeguard shareholders’ investment and Company assets.

i) Risk identification and evaluationA comprehensive and structured risk management process was introduced for material business units during the year and will continue to be further developed during 2012. A Risk Management Policy has been established to provide a broad framework for identifying and managing major areas of risk. The Board has ultimate responsibility for setting the Group’s approach to risk to support its strategy and objectives and executive management have responsibility for ongoing risk review and management. The basic approach incorporated:• Identifying and evaluating risks: risks that could have a

significant impact were identified into broad categories and evaluated, (for likelihood and impact) and subsequently ranked. This was achieved through risk workshops and discussions with key personnel at both project and Corporate level and, where applicable, utilising external expertise.

• Designing and implementing responses: appropriate controls and mitigation responses were documented and developed on formal risk registers at a local and Group level. Risk registers will be regularly monitored to ensure effective implementation.

• Reporting risks: a summary risk register was produced and reviewed by executive management and reported to the Board. The summary risk register will be reviewed annually by the Board.

Details of the risks the Company is exposed to are set out in the Operational and Financial Reviews on pages 22 to 35.

ii) Control environmentThe system of internal control has been designed to manage and mitigate rather than eliminate risk and provide reasonable assurance against material misstatement or loss.

A review of the effectiveness of the internal control systems of the Group’s material business units was conducted during the year. The Board conducted this review by considering reports from management on key risks, key controls and mitigations and management representations.

The Board also receives assurance from the audit committee which considers all matters reported to it by internal and external audit. The Board has not identified nor been advised of any failings or weaknesses which it has determined to be significant.

The system of internal control continues to develop as the Company transitions from development and exploration into operations and expansion which creates new and additional risks. A number of control initiatives are planned and in progress to address such operational risks and will form part of the review of the effectiveness of control in 2012.

Internal auditDuring the year the Group established an Internal audit function. Internal audit supported the Group by developing policies and procedures around risk management, anti-fraud, anti-bribery and corruption and by performing an assessment of the effectiveness of controls. Internal audit will continue to support the Group in the development of risk management and internal control with particular focus on operational controls as the Group moves from development into a producing operation.

UK Bribery Act and whistle-blowingWhistle-blowingA formal whistle-blowing policy that enables employees to raise concerns they may have about workplace fraud or mismanagement on a confidential basis is in place. Safecall Limited provides a confidential hotline and email service through which employees can report their concerns. The Chairman of the audit committee is provided with reports from the whistle-blowing system. The whistle-blowing policy has been communicated to all of London Mining’s subsidiaries, employees and contractors. The existence of the whistle-blowing hotline has also been advertised through the use of posters on-site in Sierra Leone and Colombia and public sponsorship by the Chief Executive Officer and project Directors.


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UK Bribery Act and trainingThe Company has undertaken an extensive review of its policies and procedures in order to ensure compliance with the requirements of the UK Bribery Act. One element of this review focused on the leadership given by the Board and to continue a culture of compliance driven by the “tone at the top”. As a result, a Bribery Act steering committee was set up with key Board members including the Chief Executive Officer as members. The committee met frequently during the year to administer and agree the necessary policies and procedures, review key risk areas identified by the Company and through a report prepared by Deloitte, and to ensure the key aspects of the Company’s policies and procedures are understood by new and existing employees, consultants, joint venture partners and other key associates. The Company’s auditors (Deloitte LLP) and legal advisers (Travers Smith) assisted in an initial risk assessment exercise to help the Company assess the existing governance arrangements and controls of the Company, outline clear objectives and goals and develop policies and procedures to ensure full compliance. A Bribery Act Operating committee comprising of key executive management at head office and operating subsidiary levels was also formed. The operating committee was tasked with overseeing implementation of policies, monitoring risk, testing controls and determining priority actions to ensure compliance.

Health, Safety and Environment committeeAlthough ultimate responsibility for Health, Safety and Environment matters remains with the Board, during 2011 a Health, Safety and Environment committee was formed to give an additional focus on Health, Safety and Environment matters now that the Company is in production at two of its projects. The Health, Safety and Environment committee will assist the Board in obtaining assurance that appropriate systems are in place to deal with the management of safety, health and environmental risks. Under its terms of reference the committee will meet at least twice a year and has met once since its formation in June 2011. The members of the Health, Safety and Environment committee are Graham Mascall (Chairman of the committee), Graeme Hossie, Rachel Rhodes, Colin Harris and Luciano Ramos. The Chairman of the committee will attend the AGM.

Details of the Company’s sustainability initiatives can be found on pages 36 to 41.

Nomination committeeThe members of the nomination committee are Dr Colin Knight (committee Chairman), Sir Nicholas Bonsor, Malcolm Groat, Colin Harris and Graham Mascall.

Under its terms of reference, the nomination committee is responsible for reviewing the structure, size and composition, including the skills, knowledge and experience of the Board and make recommendations to the Board about adjustments. The committee also considers succession planning for Directors and other senior executives. When making an appointment, the committee is required by its terms of reference to evaluate the balance of skills, knowledge and experience on the Board and consider candidates on merit and against objective criteria, taking care that appointees have enough time available to devote to the position. In searching for new independent Non-Executive Directors in 2012 the nomination committee’s mandate will be to identify individuals with outstanding credentials in creating value for shareholders and wide international experience. The mandate will also recognise the importance of considering a diverse range of candidates to augment the Board’s diversity. The committee met once during the year to discuss succession planning and new appointments.

Remuneration committeeThe members of the remuneration committee are Sir Nicholas Bonsor (Chairman of the committee), Dr Colin Knight, Malcolm Groat, Colin Harris and Graham Mascall.

Under its terms of reference, the remuneration committee is required to meet at least twice a year or more frequently as circumstances require. In 2011 the remuneration committee met nine times, primarily to develop a new executive remuneration policy in line with ABI guidelines. To assist in the creation of this new executive remuneration policy the committee sought the advice of KPMG LLP to provide guidance on market practice, to establish a pay for performance remuneration structure, to position the senior team with respect to their peers and make recommendations based on their analysis. The committee has worked closely with KPMG throughout 2011 to formulate an appropriate executive remuneration policy. Details of this policy and the committee’s activities are contained in the Directors’ remuneration report set out on pages 61 to 70. The remuneration committee reports on its activities to the Board meeting immediately following its meetings.


Executive committeeLondon Mining established an executive committee during 2011 which focuses on monitoring the Company’s business, reviewing investments, progress against agreed plans and targets and making recommendations to the Board. The executive committee comprises the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the Corporate Development Director, the Head of Investor Relations, the Head of Legal, the Head of Sustainability and the Head of Human Resources.

The executive committee meets on a bi-monthly basis. The executive committee members receive papers in advance of the meetings. Agenda items for each meeting include operation reviews, financial reviews, management accounts and financial performance, update on projects, use of funds and funding requirements, legal matters and corporate governance.

Relations with investors The 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. The Company has consulted with a number of its major shareholders on its new remuneration policy and listened to shareholders’ views regarding corporate governance matters.

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 or has been listed, investor presentations, interim financial reports, the Annual Report and other relevant information are posted to the Company’s website at www.londonmining.co.uk

The Annual General Meeting The Notice of AGM will be dispatched to shareholders, together with explanatory notes or a circular on items of special business, at least 20 working days before the meeting. Separate resolutions will be proposed on each substantially separate issue including a resolution relating to the Report and Accounts.

The Chairmen of the audit, remuneration and nomination committees normally attend the AGM and are available to answer questions. All Directors usually attend the meeting.

The Board welcomes questions from shareholders who have an opportunity to raise issues informally or formally before or at the AGM.

For each resolution the proxy appointment forms provide shareholders with the option to direct their proxy vote either for or against the resolution or to withhold their vote. The Company will ensure that the proxy form and any announcement of the results of a vote will make it clear that a ‘vote withheld’ is not a vote in law and will not be counted in the calculation of the proportion of the votes for and against the resolution.

All valid proxy appointments are properly recorded and counted. For each resolution, after the vote has been taken, information on the number of proxy votes for and against the resolution, and the number of shares in respect of which the vote was withheld, are given at the meeting and are made available on the Company’s website at www.londonmining.co.uk

UK Corporate Governance Code complianceAs an AIM-listed company, London Mining is not required to follow the Code however the Board have chosen to apply the Code in so far as it is appropriate for a company of its size and development.

Areas of non-compliance with the Code relate to the membership of the Board committees and the remuneration policy. Details of the areas of non-compliance relating to the remuneration policy along with improvements made are set out in the Directors’ remuneration report on pages 61 to 70.

Code Provision C.3.1 requires a company below FTSE 350 to establish an audit committee of at least two independent Non-Executive Directors. The audit committee of London Mining includes Malcolm Groat as its Chairman. Malcolm Groat is not considered independent due to his short period as a part-time Finance Director to the Company in 2008. Malcom does however have extensive, recent and relevant financial as well as mining experience enhancing the strength of the audit committee and is therefore a necessary and valued member of the committee.

Code Provision D.2.1 requires a company below FTSE 350 to establish a remuneration committee of at least two independent Non-Executive Directors. Malcolm Groat is also a member of the remuneration committee. Malcolm’s extensive accounting and mining experience is also considered by the Board to lend strength to the remuneration committee.


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Dear ShareholderIt is with pleasure that I introduce the Directors’ remuneration report for the year ended 31 December 2011. This report has been prepared by the remuneration committee and approved by the Board.

The Company is going through a critical stage in its evolution with the commencement of first production at the Marampa mine in Sierra Leone in December 2011 and first shipment in January 2012. It is therefore critical that the Company’s approach to remuneration evolves with the Company to support the recruitment, retention, incentivisation and motivation of key management and staff.

As an entrepreneurial exploration and development company London Mining has followed a remuneration policy that has suited its entrepreneurial needs rewarding key management for individual operational objectives attained over shorter periods. This has suited the Company in obtaining its strategic development objectives and in aligning its goals with shareholder interests. As the Company progresses from being a developer to a producer of iron ore, more empirical measures of performance for key management need to be used to clearly demonstrate the alignment of remuneration with ongoing strategic corporate objectives and with enhanced shareholder expectations. The committee recognises, however, that there is a competitive market for successful executives with experience in the mining industry and that the provision of appropriate rewards for superior performance is important for the continued growth of the business.

In response to the Company’s development needs and also shareholder feedback received since our last remuneration report, the remuneration committee’s key priority in 2011 was to overhaul the Company’s remuneration structure for key management. The remuneration committee’s aim was to implement a coherent, appropriate and relevant remuneration policy for the Company’s key management.

To assist in the creation of this new executive remuneration policy, the committee sought the advice of KPMG LLP to provide guidance on market practice, to establish a pay for performance remuneration structure, to position key management with respect to their peers and make recommendations based on their analysis. The committee has worked closely with KPMG throughout 2011 to formulate an appropriate executive remuneration policy. Shareholders have also been consulted throughout the process of the policy development. The key details of this new policy are set out in this report, and the framework which will be used in 2012 to create a Group-wide remuneration structure.

Annual General MeetingAs usual the shareholders will be asked to vote on the Directors’ remuneration report at the AGM in May 2012 and I will be available then to answer any questions on the committee’s activities.

Signed on behalf of the Board of Directors:

Sir Nicholas BonsorChairman of the remuneration committee 28 March 2012

This report is produced in accordance with the Companies Act 2006 and Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. Although not required to as an AIM-listed company, London Mining has endeavoured to follow the requirements of the UK Corporate Governance Code (the ‘Code’). Derogations from the Code are contained within this report. This report contains both auditable and non-auditable information. The information subject to audit is set out in tables a to c on pages 69 to 70.

Directors’ remuneration report

Sir Nicholas Bonsor Chairman of the

remuneration committee

Bonsor an of the mmittee


• Within the terms of the agreed policy determine the total individual remuneration package of each Executive Director and other senior executives including bonuses, incentive payments and share options/ awards;

• Oversee any major changes in employee benefits structures throughout the Company;

• Ensure all provisions regarding disclosure of remuneration are fulfilled; and

• Establish the selection criteria, select, appoint and set the terms of reference for remuneration consultants who advise the committee.

The committee met nine times during the year and its principal activities were:• To approve the payment of 2010 bonuses and salary

increases for 2011, including increases for all UK employees; • Replacing performance conditions that were no longer relevant

due to strategic target changes for Benjamin Lee’s options;• Extending the service agreement for Luciano Ramos and

considering bonus proposals and performance targets under the new service agreement;

• Appoint KPMG LLP to carry out a benchmarking and performance measurement exercise and provide guidance on a remuneration policy;

• Consider share option awards for 2011 to senior executives and other employees;

• Consider the Company’s headroom limits for share options;• Review, discuss and approve for recommendation to the

Board a new executive remuneration policy; and• Consider future plans for pensions across the Group.

Non-audited information

Membership of the remuneration committeeThe members of the committee, all of whom are Non-Executive Directors are as follows:

Committee member

Sir Nicholas Bonsor (Chairman)Dr Colin KnightMalcolm GroatGraham MascallColin Harris*

* Appointed as a member on 23 November 2011.

The Chief Executive Officer and the Head of Human Resources attended some committee meetings by invitation, but neither were present when the committee discussed issues relating to their own remuneration.

Role of the remuneration committee

The remuneration committee is a formal committee of the Board. Its remit is set out in terms of reference formally adopted by the Board in 2009 and which are reviewed annually by the committee. A copy of the terms of reference can be found on the Company’s website: www.londonmining.co.uk

The principal responsibilities of the remuneration committee are:• To determine and agree with the Board the framework or

broad policy for the remuneration of the Company’s key management;

• To review the on-going appropriateness and relevance of the remuneration policy;

• To approve the design of, and determine targets for, any performance related pay schemes and approve the total annual payments made under such schemes;

• Review the design of share incentive plans for approval by the Board and shareholders. Determine each year whether awards will be made and the overall amount of the awards, the individual awards to Executive Directors and other senior executives and the performance targets;

Directors’ remuneration reportcontinued

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London Mining PlcAnnual Report 2011 63

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Components of Executive Directors’ remuneration 1 January 2011–31 December 2011 Base salaryBase salaries are reviewed annually by the committee and take account of relevant benchmark data, and pay quantum and structure more generally throughout the Group. None of the Directors serving during the year received any remuneration in respect of post-retirement benefits.

Annual bonusFor the year ending 31 December 2011, the performance measures for the annual bonus arrangements have been based on a balanced scorecard approach. The metrics of the balanced scorecard were people, process, financial and client/external. 2011 achievements were measured in the context of targets and stretch measures and key performance indicators. The KPIs under these metrics on which the Chief Financial Officer, Chief Operating Officer and Corporate Development Director were measured on included health and safety, production targets, adherence to budget and funding initiatives. A weighting was applied to each metric depending on the role of the individual.

In determining the Chief Executive Officer’s bonus the remuneration committee assessed his personal KPIs relating to securing funding, pipeline growth, moving the Company from developer to operator, driving the safety policy, investor relations and enhancing the executive team.

The maximum bonus potential for 2011, payable for exceptional levels of performance, was set at 150% of base salary for the Executive Directors. Not all targets for 2011 were met; accordingly, approximately half of the maximum bonus was paid to the Executive Directors for 2011. Details of the actual amounts paid for 2011 are set out in the Directors’ remuneration table on page 69.

Deferred sharesIn 2010 the full bonuses considered by the remuneration committee were not in fact approved and paid, notwithstanding the fact that the Executive Directors had met all the relevant objectives. The remuneration committee were mindful of the effects on cash flow at a critical time in the Company’s development in the lead up to becoming a producer and therefore a portion of the bonuses were not approved. During 2011 no LTIPs or share options were granted to Executive Directors whilst the remuneration committee considered the development of a new remuneration policy with appropriate corporate performance metrics for the vesting of options and LTIPs. The remuneration committee has therefore agreed, as part of the Executive Directors bonus for 2011, a share amount equal to 100% of 2010 base salaries to be issued in London Mining shares in 2012. These deferred shares will vest in two years, subject to the risk of forfeiture should an Executive Director leave the Company in this period.

Long Term Incentive Plan (LTIP)The LTIP allows the committee to make awards which are a conditional right to receive shares in the Company for nil consideration. An award will normally vest, i.e. become exercisable, on the third anniversary of its grant provided that the grantee remains in continuous employment with the Company over this period. Current LTIPs held by Executive Directors are subject to them remaining in continuous employment with the Company over a three year period from the date of grant. All future grants under the LTIP will be subject to meeting predetermined total shareholder return targets measured over three years from the date of grant and the grantee remaining in continuous employment with the Company over a three year period from the date of grant.

No LTIPs were granted to Executive Directors during 2011.

The new remuneration policy will strongly align executive remuneration with shareholders’ interests.



Share option awardsIn the past some share options have been granted that could potentially (subject to performance criteria) vest in less than three years. In future share options granted to employees will be subject to them remaining in continuous employment with the Company over a three year period and satisfying further performance criteria. No options were granted to Executive Directors during 2011.

Directors’ contractsThe Executive Directors have indefinite term contracts and the notice periods are set out below. With the exception of Luciano Ramos the Executive Directors’ contracts provide for a termination payment in excess of 12 months’ salary in the result of a change of control.

Dates of the service agreements are:

NameDate of original agreement Notice period

Graeme Hossie 24 May 2007 12 monthsRachel Rhodes 17 June 2008 6 monthsBenjamin Lee 30 March 2009 6 monthsLuciano Ramos 21 Aug 2006 6 months

Outside appointmentsSubject to Board approval, Executive Directors are permitted to

accept outside appointments on external Boards or committees so long as these are not deemed to interfere with the business of the Company. Any fees in respect of those appointments are retained by the Executive Directors concerned. Graeme Hossie is the founder and a Director of Venture Development Partners Limited a family-owned company, for which he receives a small annual fee. He is also founder and a Director of Steribottle Limited and Steribottle Global Limited, companies producing single-use feeding bottles. No fees are received for these Directorships. None of the other Executive Directors hold any outside appointments.

Non-Executive DirectorsDetails of the Non-Executive Director Letters of Appointment are summarised below:

Non-Executive DirectorEffective date of letter of appointment Unexpired term

Dr Colin Knight 2 November 2009 26 monthsSir Nicholas Bonsor 2 November 2009 14 monthsMalcolm Groat 2 November 2009 14 monthsColin Harris 12 May 2011 2 monthsGraham Mascall 1 May 2010 26 months

Copies of all Executive Directors’ service contracts and the Letters of Appointment of the Non-Executive Directors are available for inspection during normal business hours at the registered office of the Company.

65

Governance


Sha

re p

rice

in G

BP

(re

base

d)

Nov 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jun 11 Sep 11 Dec 11

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

London Mining PlcFTSE 350 / Mining (rebased)FTSE AIM All Share (rebased)

London Mining relative performance since AIM admission

Non-Executive Directors’ feesThe remuneration of the Non-Executive Directors (other than the Chairman) is a matter for the Chairman and the Executive Directors. Fees are designed to ensure that the Company attracts and retains high calibre individuals. They are reviewed on an annual basis and account is taken of the level of fees paid by other companies of a similar size and complexity. Non-Executive Directors do not participate in any annual bonus plan or pension arrangements. The Company repays the reasonable expenses that Non-Executive Directors incur in carrying out their duties as Directors.

Non-Executive Directors and share optionsIn the past, as an entrepreneurial AIM company, London Mining has awarded some of its Non-Executive Directors’ share options. The Corporate Governance Report on pages 52 to 60 sets out the intended treatment for the options granted to Non-Executive Directors to address shareholder concerns with respect to Non-Executive Directors’ holding options. In future Non-Executive Directors will not participate in any LTIP or share option arrangements.

Performance graphThe following graph shows the Company’s share price performance compared with the performance of the FTSE AIM All share index and the FTSE 350/mining.

The remuneration policy links remuneration with the strategy and objectives of the business.


Remuneration Policy – a new start for 2012During 2011 KPMG LLP were appointed to assist the committee in developing an appropriate design for the future structure of executive remuneration. Other services provided to the Company by KPMG include tax advice and audits of a subsidiary of the Company in Sierra Leone. In formulating the proposals, benchmarking against mining and other peer group companies was utilised using publicly available information.

The Company’s new executive remuneration policy is focused on providing a level of remuneration which attracts, retains, incentivises and motivates Directors and senior executives of sufficient calibre to achieve the Group’s strategic goals and enhance shareholder value, whilst ensuring that remuneration is consistent with best practice and provides an appropriate alignment with personal and business performance and shareholder interests.

The key objectives of the new executive remuneration policy are to:

Strongly align executive remuneration with shareholders’ interests and link remuneration with the strategy and objectives of the business; Underpin a pay-for-performance culture; and Support the retention, motivation and recruitment of talented people who are performance driven, commercially astute and creative.

Components of Executive Directors’ remuneration commencing 1 January 2012The remuneration committee have agreed with the Board the following policy for executive remuneration which will be applied for 2012 onwards.

Executive remuneration will be made up of fixed pay and performance-related pay (annual and long term):

Base salary – Base salary will be targeted at between median and upper quartile of the Company’s peers based on independent benchmarking reports although flexibility will be retained. The remuneration committee aims to pay competitive base salaries having regard to market practice, internal relativities, performance and affordability. Salaries for key management below Board level are benchmarked against appropriate market comparisons and taken into account by the committee when considering the remuneration of the Executive Directors.

Annual bonus with KPIs – The payout range for the annual bonus will be 50% of salary at threshold performance up to 150% at the maximum for Executive Directors for outstanding performance based on stretch targets. For other members of key management the bonus will be 50% of salary at threshold performance, with discretion to pay up to a maximum of 100% of salary in exceptional circumstances. Any bonus will be paid in cash following the end of the financial year.

Individual KPIs will be designed to incentivise performance and reward achievement in line with corporate strategy targets. KPIs will be both financial and non-financial including financial performance against EBITDA forecasts and budget, production targets, strategic development, HSE and developing community initiatives.

Share incentives – LTIPs – Annual grants will be made with three year performance measurement periods and continued employment. Additional grants to secure or retain executives and to compensate for forgone share awards in other companies on being recruited to London Mining or in renewing contracts with reference to market may be made from time to time as the remuneration committee determines appropriate. Awards will be at the remuneration committee’s discretion and based on the market practice of the Company’s peer group. All awards will have corporate performance measures. The remuneration committee initially considered corporate performance measures such as earnings, share price and operational targets but concluded that all of these measures in the near term would be represented within the Total Shareholder Return (“TSR”) metric and that the setting of specific other targets risked not aligning management incentives with shareholder interests during a ramp up period. The committee believes that TSR is the most appropriate metric given the current stage of the Company’s growth. Considerable thought has been



Governance

Base pay

Benefits Only medical insurance provided

Annual bonus with KPIs KPIs will be both financial

and non-financial

Long Term Incentive Plan (LTIP) (Share settled)

Based on meeting relative TSR metric and continued employment over three years

Value Sharing Plan (LTIP Multiplier)Used only if maximum vesting

under LTIP is exceeded

Components of remuneration

Fixed payPerformance-related pay

Annual Long term (delivered over three years)

given to the peer group to ensure an accurate relative performance measure. The committee will continually review corporate performance measures and the TSR comparator index in future years.

The companies to be used for the TSR measurement index for grants in 2012 are set out below:

A. West African miners (45%)B. FTSE 250 single commodity mining companies (45%) C. FTSE 100 (10%)

African Minerals African Barrick Gold AntofagastaBellzone Mining Allied Gold Mining Anglo AmericanEquatorial Resources Aquarius Platinum BHP BillitonSundance Resources Ferrexpo FresnilloZanaga Iron Ore Company Gem Diamonds ENRCAfferro Mining Hochschild Mining XstrataCape Lambert Resources Kenmare Resources Glencore

New World Resources Randgold ResourcesPetropavlovsk Rio TintoTalvivara Mining Company Vedanta Resources

Using relative TSR as a performance condition is consistent with market practice. TSR has been selected as a performance condition to support the drive for long term shareholder value. TSR is measured over a three year period from the date of grant of the LTIP award.

Performance criteria for future LTIP awards are as set out below:

Performance level TSR% (vesting levels)

Below median 0Median 25 Upper quartile 100 Top 10% LTIP multiplier of 2 times

total grant amount

The number of awards vesting after the three year period will be determined based on a straight-line basis between median and top 10%.

Value sharing plan – A value sharing plan (LTIP multiplier) will be available if the TSR performance is within the top 10% at which point the level of the initial awards made may be increased to up to 2 times the original award.

Other benefits – At present the Company does not provide pension, car, housing or other benefits to UK employees, other than medical insurance. The Company will be considering pension arrangements over the next year.

The committee believes that TSR is the most appropriate metric given the current stage of growth.


Figure 2 – Stretch targets

Base pay

Annual bonusLTIP

LTIP multiplier

Figure 1 – Target

Base pay

Annual bonusLTIP

LTIP multiplier


The new remuneration policy is also aligned to the strategy and nature of the Company, reflecting the importance of total shareholder return and the long term nature of the Company’s business.

The committee has considered whether there are any aspects of the remuneration policy which could inadvertently encourage executives to take inappropriate risks and has concluded that the policy is appropriate in this regard.

The chart below highlights the strong emphasis on performance-related pay within Executive Directors’ remuneration.

Chief Executive Officer target pay mix – Target (fig 1) and stretch targets (fig 2).

Summary of performance-related elements of salary for 2012 onwards

Element Purpose Framework Performance conditions

Annual Bonus Incentivise executive performance on an annual basis – measured against key financial and non-financial metrics as well as a set of demanding individual objectives.

Awards range between 50% – 150% of base salary for Executive Directors for achievement of performance milestones and 50%–100% for key management.

• Measured annually• Based on financial and non-financial

KPIs with a scorecard approach• KPIs agreed by the committee at

the beginning of the year.

LTIP Recognise and reward executives for the creation of shareholder value over the longer term.

Awards will be at the remuneration committee’s discretion and based on market practice of the Company’s peer group.

• Performance is assessed over three financial years

• Based on relative TSR of the Company against a select group of industry peers.

LTIP multiplier Recognise and reward executives for the creation of shareholder value over the longer term for outstanding performance.

A multiplier of 2 is applied to awards made under the LTIP in the event of out performance (top 10% of peer group). Further adjustments may be considered in exceptional TSR circumstances.

• Performance is assessed over three financial years. It is only applied if out performance is achieved with respect to relative TSR.

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Audited information

Directors’ remuneration The following table gives details of Directors’ remuneration for the period 1 January to 31 December 2011:

a) Directors’ remunerationDirectors’ remuneration for the years ended 31 December 2011 and 31 December 2010 is as follows:

Name of DirectorFees/Basic salary

$’000Bonuses

$’000 Other benefits1

$’000

Compensation under return bonus plan2

$’0002011 Total

$’0002010 Total

$’000

ExecutiveGraeme Hossie 622 635 4 – 1,261 1,462Rachel Rhodes 420 346 – 529 1,295 1,299Luciano Ramos3 384 464 128 1,311 2,287 –Benjamin Lee3 278 304 2 – 584 –Non-ExecutiveSir Nicholas Bonsor 121 – – – 121 126Malcolm Groat 94 – – – 94 70Dr Colin Knight 123 – – – 123 139Graham Mascall4 121 – – – 121 77

Colin Harris5 112 – – – 112 –Dr Hans Kristian Schønwandt 69 – – – 69 71Aggregate emoluments 2,344 1,749 134 1,840 6,067 3,244

1 Other benefits relate to payments in lieu of contractual holiday entitlement and medical benefits.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 to 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 From date of appointment on 23 February 2011.4 From date of appointment on 1 May 2010.5 From date of appointment on 12 May 2011.

b) Current holdings in the LTIPs by Executive Directors are as follows:

DirectorShare awards held at 1 January 2011

Share awards granted during the year

Share awards exercised during the year Vesting Date

Share awards held at 31 December 2011

Graeme Hossie – – – – –Rachel Rhodes 314,592 – – 04 Sept 2011 314,592

Benjamin Lee 100,000 – – 01 Apr 2012 100,000Luciano Ramos 400,000 – 400,000 – –

The new remuneration policy is aligned to the strategy and nature of the Company in its current stage of development.



c) Directors’ Share Option AwardsThe 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 2011 and 31 December 2010:

Name of Director 31 December

2010 Granted Lapsed Exercised31 December

2011Exercise

price Vesting date* Expiry Date

Executive

Graeme Hossie 1,500,000 – – – 1,500,000 GBP 1.74 12 Jul 2007 11 Jul 2013 500,000 – – – 500,000 GBP 1.31 30 Jun 2009 29 Jun 2019 500,000 – – – 500,000 GBP 1.31 9 Feb 2010 29 Jun 2019 500,000 – – – 500,000 GBP 1.31 9 Feb 2011 29 Jun 2019

Rachel Rhodes 166,666 – – – 166,666 GBP 2.37 4 Sep 2009 16 Oct 2018 166,667 – – – 166,667 GBP 2.37 4 Sep 2010 16 Oct 2018 166,667 – – – 166,667 GBP 2.37 4 Sep 2011 16 Oct 2018 166,667 – – – 166,667 GBP 1.31 24 Apr 2010 29 Jun 2019 166,667 – – – 166,667 GBP 1.31 24 Apr 2011 29 Jun 2019 166,666 – – – 166,666 GBP 1.31 24 Apr 2012 29 Jun 2019

Benjamin Lee# 43,333 – – – 43,333 GBP 1.31 1 Apr 2010 29 Jun 2019 83,333 – – – 83,333 GBP 1.31 1 Apr 2011 29 Jun 2019 83,333 – – – 83,333 GBP 1.31 1 Apr 2012 29 Jun 2019

375,000 – – – 375,000 GBP 1.975 10 Jun 2010 9 Jun 2020125,000 – – – 125,000 GBP 1.975 10 Jun 2013 9 Jun 2020

Luciano Ramos 500,000 – – – 500,000 GBP 1.74 3 May 2007 12 Jul 2013

500,000 – – – 500,000 GBP 3.09 3 May 2009 3 May 2013500,000 – – – 500,000 GBP 3.44 15 May 2010 15 May 2013500,000 – – – 500,000 GBP 3.44 15 May 2011 15 May 2013

Non-Executive

Sir Nicolas Bonsor 125,000 – – – 125,000 GBP 2.04 7 Jun 2013 7 Jun 2020Dr Colin Knight 200,000 – – 40,000 160,000 GBP 1.74 12 Jul 2007 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 2013Total 7,359,999 – – 40,000 7,319,999

* Some vesting dates are subject to satisfying performance conditions.

# In addition Benjamin Lee was awarded 100,000 share options under the Company’s Joint Share Ownership Plan (“JSOP”) on 10 June 2010. The market value of the Company’s shares at the time of grant was GBP 1.975 the threshold is GBP 2.37. The JSOP award is subject to performance conditions.

The market price of Ordinary Shares on AIM at 31 December 2011 was GBP 2.965 and the range during the year was GBP 2.785 to GBP 4.365.

Signed on behalf of the Board of Directors

Sir Nicholas BonsorChairman of the remuneration committee

71

Governance


Directors’ report

The Directors have pleasure in submitting the statutory financial statements for the Group for the year ended 31 December 2011.

Principal activities and business reviewLondon Mining is producing from its Marampa mine in Sierra Leone and developing two other iron ore mines in Saudi Arabia and Greenland as well as a coking coal operation in Colombia. All London Mining’s assets have deliverable production with potential for expansion.

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 5;• Chief Executive’s Strategic Review on pages 10 to 14;• Key Performance Indicators on page 15;• Operational and Financial Reviews on pages 22 to 35;• Principle risks and uncertainties on pages 42 to 45;

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 Financial 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 2011, together with details of share allotments and purchases of own shares during the year, are set out in note 26 on pages 97 and 98.

Details of employee share schemes are set out in note 28 on pages 99 and 100.

Going concernThe financial position, cash flows and liquidity position of the Group are set out in the Financial Review on pages 31 to 35.

Following an equity placing of USD 87.3 million (net after fees) in 2012, London Mining has sufficient committed liquidity to fund its committed expenditure. During 2011 management drew down its entire USD 90.0 million credit facility with Standard Chartered Bank. The facility is repayable in October 2012, with an extension option of 12 months. The ability to exercise the extension option is subject to certain conditions

which are under management’s control, in addition to credit approval from Standard Chartered Bank. Management expects to receive the necessary credit committee approval due to forecast cash generation and profitability at the Sierra Leone operations in the second half of 2012 and in to 2013. In the unlikely event consent is not given by the lenders to the extension, the loan would become repayable in October 2012 and management would need to seek alternative solutions to refinance the facility, such as additional offtake, or debt funding, at that time.

The Directors have considered the Group’s cash flow forecasts and projections, taking account of reasonably possible changes in trading performance and the timing of project commissioning and are satisfied 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 48 and 49.

The Directors who served throughout the year are as follows:

Executive Directors Non-Executive Directors

Graeme Hossie Dr Colin KnightRachel Rhodes Sir Nicholas BonsorBen Lee1 Colin Harris2

Luciano Ramos1 Graham MascallMalcolm GroatDr Hans Kristian Schønwandt3

1 Appointed on 23 February 2011.2 Appointed on 12 May 2011.3 Retired 23 March 2012.

Rachel Rhodes and Malcolm Groat will retire by rotation at the forthcoming AGM and, being eligible offer themselves for re-election. Colin Harris will be offering himself for election as this will be the first AGM since his appointment on 12 May 2011.The Board believes that each Director seeking re- election is an effective member of the Board and demonstrates commitment to their respective roles.

Directors’ interestsThe Directors who held office at 31 December 2011 had the following interests either directly or through related parties or entities in which the Directors had a beneficial interest in the Ordinary Shares of the Company:


Name of Director Number % owned1

Graeme Hossie 6,839,836 5.00 Dr Colin Knight 440,000 0.32

Luciano Ramos 759,667 0.56

Benjamin Lee 50,000 0.03

Sir Nicholas Bonsor 47,000 0.03 Dr Hans Kristian Schønwandt 150,000 0.12

1 Based on isued share capital at 28 March 2012.

Details of Directors’ share options and benefits under the Long Term Incentive Plan (LTIP) are set out in the Directors’ remuneration report on pages 69 and 70. No Director had any dealings in the shares of the Company between 31 December 2011 and 28 March 2012, being a date less than one month prior to the date of the notice convening the AGM.

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 sustainability initiatives as set out on pages 36 to 41.

Substantial shareholdingsShareholdings in the Company on 27 March 2012 of 3% or more are as follows:

Shares

FIL Limited/FMR LLC 10.35UBS AG 10.06

F & C Asset Management Plc 9.81Government Singapore Investment Corporation 8.11Blackrock Inc 6.55Directors 5.33Schroder Investment Management Limited 5.17Investec Asset Management 4.27Credit Suisse Securities (Europe) Limited 3.47Lazard Asset Management Limited 3.10

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 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 34 of the financial statements on page 104.

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 AGM.

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

Rohit BhoothalingamCompany Secretary

28 March 2012

Directors’ Reportcontinued

73

Governance


Statement of Directors’ responsibilities For the year ended 31 December 2011The 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; and

• make 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; and

• the 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 Officer Graeme Hossie Rachel Rhodes 28 March 2012 28 March 2012


Financial statements



Greenland

Isua


Drilling the Isua orebodyLondon Mining drilled 7,656 metres in the summer of 2011.

London Mining PlcAnnual Report 2011London Mining PlcAnnual Report 201176

We have audited the financial statements of London Mining Plc for the year ended 31 December 2011 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 35, 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 5. 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. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

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 2011 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; and• the 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; or• the 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




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 UK Corporate Governance 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 UK

Corporate Governance Code specified for our review; and• certain 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 Auditor London, United Kingdom

28 March 2012


Year Ended 31 December

Note2011

USD’0002010

USD’000

Revenue – –Cost of sales – –

Gross profit – –Administrative expenses 6 (41,933) (32,394)

Loss from operations (41,933) (32,394)Loss on disposal of a subsidiary – (236)Impairments 8 (13,390) (61,657)Fair value gain/(loss) on deferred consideration 9 14,745 (5,565)Share of results of joint ventures and associates (net of tax) 10 – (1,006)Finance income 11 2,923 3,289Finance costs 12 (3,978) (3,267)

Loss before taxation (41,633) (100,836)Taxation 13 (18,399) 1,258

Loss for the year after taxation attributable to equity holders of parent (60,032) (99,578)

Basic and diluted loss per share (USD per share) 14 (0.53) (0.92)

Consolidated statement of comprehensive income

Year Ended 31 December

Note2011

USD’0002010

USD’000

Loss for the year (60,032) (99,578)Net gain on cash flow hedges 20 8,718 –Exchange difference on consolidation of non-USD operations – 47

Net income recognised directly in equity 8,718 47

Transferred to income statement: sale of asset held-for-sale 91 –

Total transferred from equity 91 –

Total comprehensive loss for the year (51,223) (99,531)

Consolidated income statement




Consolidated balance sheet(as at 31 December)

Note2011

USD’0002010

USD’000

Intangible assets 15 126,161 97,241Property, plant and equipment 16 301,387 81,118Deferred tax asset 17 2,164 1,226

Total non-current assets 429,712 179,585

Current inventories 18 6,841 600Current loans and receivables 19 6,962 6,423Derivative financial instruments 20 8,718 –Cash and cash equivalents 21 67,832 76,038

Total current assets 90,353 83,061

Assets classified as held-for-sale 22 – 28,072

Total assets 520,065 290,718

Trade and other payables 23 (61,136) (21,482)Current tax liabilities (425) (545)Borrowings 24 (92,070) –Deferred consideration payable 9 (7,574) –

Total current liabilities (161,205) (22,027)

Borrowings 24 (90,485) –Other non-current liabilities 23 (28,836) –Deferred consideration payable 9 (3,023) (24,337)Deferred tax liabilities 17 (19,337) –Restoration and decommissioning provision 25 (1,405) –

Total non-current liabilities (143,086) (24,337)

Total liabilities (304,291) (46,364)

Total net assets 215,774 244,354

EquityShare capital 26 412 411Share premium account 25,021 21,803Merger reserve 9 12,000 12,000Shares held in employee benefit trust (4,180) (5,411)Other reserves 44,463 18,589Retained earnings 138,058 196,962

Equity attributable to equity holders of the parent 215,774 244,354

The financial statements of London Mining plc (Company Number 05424040) were approved by the Board of Directors on 28 March 2012 and are signed on their behalf by:

Graeme Hossie Rachel RhodesChief Executive Officer Chief Financial Officer


Share capital

USD’000

Sharepremiumaccount

USD’000

Mergerreserve

USD’000

Shares held in

employeebenefit

trustUSD’000

Retainedearnings

USD’000

Warrant and

optionreserve1

USD’000

Hedging and

foreign exchange

reserveUSD’000

Convert-ible debt

reserveUSD’000

Equity attributable

to equity holders of the parentUSD’000

Non-controlling

interestUSD’000

Total equity

USD’000

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

Total comprehensive loss for the year – – – – (99,578) – 47 – (99,531) – (99,531)

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

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

subsidiary – – – – – – – – – (399) (399)

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

Total comprehensive loss for the year – – – – (60,032) – 8,809 – (51,223) – (51,223)

Issue of share capital 1 772 – – – – – – 773 – 773Recognition of share-

based payments – 377 – 1,231 1,128 (491) – – 2,245 – 2,245Equity component of

convertible bond2 – – – – – – – 17,556 17,556 – 17,556Return of stamp duty3 – 2,069 – – – – – – 2,069 – 2,069

Balance at 31 December 2011 412 25,021 12,000 (4,180) 138,058 12,653 14,254 17,556 215,774 – 215,774

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 See note 24 for details of the convertible bond.3 In August 2011 GBP 1.3 million (USD 2.1 million) was received from Her Majesty’s Revenue and Customs as a refund on stamp duty incorrectly paid when the Company listed on

the Oslo Axess.

Consolidated statement of changes in equity





Note2011

USD’0002010

USD’000

Cash flows from operating activitiesCash used by operations 27 (34,545) (29,716)Interest received 179 252

Net cash outflow from operating activities (34,366) (29,464)

Cash flows from investing activitiesLoans and investments in joint ventures – (6,514)Loans to and investments in associates – (1,500)Other loans and investments net of repayments – 2,000Acquisition of subsidiaries net of cash acquired – (5,061)Payments to acquire intangible assets (36,660) (31,462)Purchase of property, plant and equipment (180,989) (50,798)Proceeds received from sale of assets held-for-sale 22 24,762 –Transaction costs, net of proceeds from sale of subsidiaries1 – (4,746)

Net cash outflow from investing activities (192,887) (98,081)

Cash flows from financing activitiesProceeds on issue of borrowings 24 192,438 –Interest paid and other financing costs (4,893) (116)Consideration received for future royalty payments 23 28,379 –Acquisition of shares by the Employee Benefit Trust – (9,749)Net proceeds from sale of shares by the Employee Benefit Trust – 9,932Net cash inflow on share capital issued on exercise of options and warrants 377 1,711Return of stamp duty 2,069 –Arrangement fees for debt financing – (2,140)

Net cash inflow/(outflow) from financing activities 218,370 (362)

Net decrease in cash and cash equivalents (8,883) (127,907)Cash and cash equivalents at beginning of year 76,038 204,261Exchange differences 677 (316)

Cash and cash equivalents at end of year 67,832 76,038

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

Consolidated cash flow statement


1. General informationLondon Mining Plc is a company incorporated in the United Kingdom under the Companies Act and listed on the AIM stock exchange. The address of the registered office is 103 Wigmore Street, London W1U 1QS. The nature of the Group’s operations and its principal activities are set out in note 5 and in the Operational and Financial Reviews on pages 22 to 35.

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 financial statements (see page 71 of the Directors’ Report).

2. New and revised International Financial Reporting Standards (IFRSs)(a) Adoption of new and revised IFRSsIn the year ended 2011 the Group has adopted IAS 24 (Revised) Related party disclosures retrospectively with no impact on the Group’s results in the current or prior year.

There are no other standards or interpretations which apply for the first time in the year ended 31 December 2011 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 2015)IFRS 10 Consolidated Financial Statements (effective for periods beginning on or after 1 January 2013)IFRS 11 Joint Arrangements (effective for periods beginning on or after 1 January 2013)IFRS 12 Disclosure of Interest in Other Entities (effective for periods beginning on or after 1 January 2013)IFRS 13 Fair Value Measurement (effective for periods beginning on or after 1 January 2013)IAS 27 (reissued) Separate Financial Statements (effective for periods beginning on or after 1 January 2013)IAS 28 (reissued) Investments in Associates and Joint Ventures (effective for periods beginning on or after 1 January 2013)IFRIC 20 Stripping costs in the Production Phase of a Surface Mine (effective for periods beginning on or after 1 January 2013).

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 21.7 million (2010 loss: USD 94.3 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.

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.

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.

Notes to the consolidated financial statements




3. Significant accounting policies continuedAny 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 thereon The 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.

Goodwill 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.

Gains and losses on matured hedges are included within revenue as these pertain to gains or losses as iron ore hedges are settled and the actual price is received.

(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.


Notes to the consolidated financial statementscontinued

3. Significant accounting policies continued(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.

(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 based on proved and probable reserves.

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.




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) Loans and receivablesIn the consolidated balance sheet, the Group’s financial assets investments 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. 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.

Derivatives embedded in financial instruments (including rights to convert 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 such derivative instruments are recognised immediately in the income statement.

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.

(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) BorrowingsInterest-bearing bank borrowings are recorded at the proceeds received, net of direct transaction costs. Interest is accounted for on an accruals basis using the effective interest method.

Interest on borrowings directly relating to the financing of qualifying capital projects under construction is added to the capitalised cost of those projects during the construction phase, until such time as the assets are substantially ready for their intended use or sale which, in the case of mining properties, is when they are capable of commercial production. Where funds have been borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred. Where the funds used to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the Group during the period.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

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.

(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.



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.

(x) Derivative financial instruments and hedge accountingThe Group uses iron ore forward contracts and non-deliverable foreign exchange forward contracts as derivatives to manage the risks associated with commodity and foreign exchange risks.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date, using quoted market prices for derivative financial instruments that are traded on an active market, or appropriate valuation techniques for those that are not traded on an active market. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument. The Group designates certain derivatives as hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Hedge accountingAt the inception of a designated hedge accounting relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument has been and is expected to be highly effective in offsetting changes in cash flows of the hedged item.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the “other gains and losses” line item.

Amounts previously recognised in other comprehensive income and accumulated in equity are recycled to profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the recognised hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationship; the hedging instrument expires or is sold, terminated or exercised; or no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income at that time is accumulated in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.




3. Significant accounting policies continued(y) LeasingLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised in accordance with the Group’s policy on borrowing costs.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits for the lease are consumed.

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 and useful economic lives 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 timelines of 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.

(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. During the year ended 31 December 2011 and 31 December 2010, the Group has used Black Scholes methodology for valuing share-based payments. 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 advisers 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. Segment reportingThe Group operates in four principal geographical areas, Sierra Leone, Greenland, Saudi Arabia and Colombia.

Segment revenues and resultsThe following is an analysis of the Group’s results from continuing operations by reportable segment. 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.

Since 1 January 2011 China is no longer considered a reportable segment.



5. Segment reporting continuedThe analysis of the Group’s results from continuing operations by reportable segment for the year ended 31 December 2011 is as follows:

Note


2011 USD’000


2010 USD’000

ResultIron ore projects – Sierra Leone (12,825) (10,258)

– Greenland (1,460) (816)– Saudi Arabia (684) (1,009)

Coal project – Colombia (4,136) (2,127)Unallocated costs including corporate (21,390) (17,202)

Group EBITDA (40,495) (31,412)Depreciation and amortisation (1,438) (982)

Loss from operations (41,933) (32,394)Loss on disposal of subsidiary – (236)Impairments 8 (13,390) (61,657)Fair value gain/(loss) on deferred consideration 9 14,745 (5,565)Share of results of joint ventures and associates 10 – (1,006)Finance income 11 2,923 3,289Finance costs 12 (3,978) (3,267)

Loss before taxation (41,633) (100,836)

EBITDA includes unallocated costs for non-cash charges in relation to share-based payments (note 28). There are no other material non-cash charges included in EBITDA.

Segment assets and liabilitiesSegment assets Segment liabilities

31 December 2011

USD’000

31 December 2010

USD’000

31 December 2011

USD’000

31 December 2010

USD’000

Iron ore projectsSierra Leone 290,307 78,685 (57,935) (9,627)Greenland 62,999 30,644 (32,715) (512)Saudi Arabia 25,308 23,352 (31) (789)Coal projectColombia 69,571 55,136 (13,573) (25,623)

448,185 187,817 (104,254) (36,551)Unallocated including corporate 71,880 74,829 (200,037) (9,813)Assets classified as held-for-sale – 28,072 – –

Total 520,065 290,718 (304,291) (46,364)

For the purposes of monitoring segment performance and allocating resources between segments, all assets and liabilities are allocated to reportable segments other than assets and liabilities held within corporate head office or Jersey investment companies.




5. Segment reporting continuedSegment depreciation and additions to non-current assets

Depreciation and amortisation Additions to non-current assets1


2011 USD’000


2010 USD’000


2011 USD’000


2010 USD’000

Iron ore projectsSierra Leone 615 499 205,139 61,981Greenland 313 291 30,299 10,070Saudi Arabia 10 20 2,301 7,266Coal projectColombia 202 12 22,372 42,958Unallocated including corporate 298 160 625 31

Total 1,438 982 260,736 122,306

1 The non-current asset additions above comprise additions to intangible assets and property plant and equipment on an accruals basis and include capitalised borrowing costs.

Segment non-current assets31 December

2011 USD’000

31 December 2010

USD’000

Sierra Leone 280,978 76,454Greenland 60,235 30,249Saudi Arabia 25,254 22,969Colombia 60,497 48,430United Kingdom 584 257

Total 427,548 178,359

Non-current assets stated above exclude deferred tax assets and are net of impairments.

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

2011 USD’000

2010 USD’000

Return Bonus Plan1 421 1,905Staff costs (see note 7)Share-based payments2 1,614 2,821Directors and key management remuneration excluding share-based payments 4,637 3,889Other staff costs 10,747 5,417

Consultancy and legal fees 10,546 7,028Depreciation and amortisation 1,438 982Fees payable to the Group’s auditors for the audit of the Group’s statutory accounts 243 378Fees payable to the Group’s auditors for the audit of the Company’s subsidiaries 28 –Fees payable to the Group’s auditors for other services to the Group3 217 286Operating lease costs – property 1,125 787

1 Details of the Return Bonus Plan (“RBP”) 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 0.4 million charge to the income statement in the year ended 31 December 2011 (2010: USD 1.9 million) represents the non-cash charge. Cash payments in the year were USD 1.8 million (2010: USD 2.9 million) and a further USD 2.3 million is due (subject to the return bonus plan rules), payable over the next two 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 Other services undertaken by the Group’s auditors included interim audit fees of USD 117,000 (2010 USD 121,000), taxation services of USD nil (2010: USD 116,000), IT

consulting of USD 54,000 (2010: USD nil) and other services of USD 46,000 (2010: USD 49,000).



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

2011 Number

2010 Number

Marampa (Sierra Leone) 983 247Wadi Sawawin (Saudi Arabia) 4 8Isua (Greenland) 3 3Colombia 40 15Corporate 22 19Technical Services team 5 5

1,057 297

2011 USD’000

2010 USD’000

Directors’ and key management personnel:Wages and salaries 4,656 3,995Social security costs 842 570Contribution to private health schemes 16 7Share-based payment expense 1,000 2,678

6,514 7,250

Amounts capitalised (877) (683)

Directors and key management personnel costs charged to income statement 5,637 6,567

Staff other than Directors and key management personnel:Wages and salaries 25,256 9,824Social security costs 830 423Superannuation 50 74Contribution to private health schemes 380 216Employer’s liability insurance 19 24Share-based payment expense 863 143

27,398 10,704

Amounts capitalised1 (16,037) (4,461)

Other staff costs charged to income statement 11,361 5,560

Total staff costs charged to income statement 16,998 12,127

1 Included within amounts capitalised is USD 0.2 million of share-based payments.

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 and the Head of Legal.

8. Impairments

Note2011

USD’0002010

USD’000

Impairment of goodwill 9 10,079 –Impairment of asset held-for-sale 22 3,311 –Impairment of investment in CGMR and joint venture partner1 10 – 50,046Impairment of investment in Atacama2 10 – 11,611

13,390 61,657

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.




9. London Mining Colombia deferred consideration and impairment(a) Deferred consideration

Note

Deferred share consideration

Number

Deferred share consideration

USD’000

Deferred cash consideration

USD’000Total

USD’000

At 1 January 2010 – – – –On acquisition 4,250,000 13,223 5,021 18,244Unwinding of discount – 427 100 527Fair value adjustment – 5,565 – 5,565

At 31 December 2010 4,250,000 19,216 5,121 24,337Unwinding of discount 12 – 821 184 1,005Fair value adjustment (2,500,000) (12,333) (2,412) (14,745)

At 31 December 2011 1,750,000 7,704 2,893 10,597Included in current liabilities 5,600 1,974 7,574Included in non-current liabilities 2,104 919 3,023

Total deferred consideration 7,704 2,893 10,597

On 5 May 2010 London Mining completed the 100% acquisition of London Mining Colombia, (formerly International Coal Company) for initial consideration of USD 5.5 million and 3.5 million newly issued London Mining shares. Potential further consideration of up to USD 8.5 million cash and up to 6.3 million in 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.

USD 18.2 million of expected deferred consideration was accrued and included in the goodwill recognised at acquisition, which related to expected cash payments of USD 5.0 million and issuance of 4.25 million shares.

At 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.

As at 31 December 2011 it has been concluded that certain performance conditions will no longer be met following a delay in expected production and increased capital expenditure relative to that assumed at acquisition, due to heavy rains and landslides resulting in road blockages and necessary design changes to the project. As a result cash and share consideration of USD 2.5 million and 2,500,000 respectively has been derecognised as at 31 December 2011. This has resulted in a fair value gain of USD 14.2 million recorded in the income statement. A further USD 0.5 million gain is recorded as a decrease in the fair value of outstanding share consideration (1,750,000) resulting from the fall in share price from GBP 3.15 as at 31 December 2010 to GBP 2.97 as at 31 December 2011.

The fair value of contingent cash and share consideration has been discounted using a discount rate appropriate for the anticipated settlement dates.

(b) ImpairmentThe goodwill arising on the acquisition of London Mining Colombia was attributed to the acquisition of land, environmental and construction permits and detailed plans to build coke ovens with a nameplate capacity of up to 400ktpa.

Heavy rains at the project resulted in landslides and road blockages and in addition certain design changes have been required to the configuration of the project which has resulted in delays to expected production and in particular, to a delay in the expansion of the project to full planned capacity. In addition local market conditions for the purchase of coke have softened. Given these operational issues and delays the Group has recorded an impairment of USD 10.1 million against the carrying value of goodwill and recorded the charge within impairments in the income statement.

These same issues have also contributed to an offsetting gain in the income statement of USD 14.7 million as the result of deferred consideration no longer being payable. Of this USD 14.7 million fair value gain USD 10.1 million was valued and recorded in goodwill at the date of acquisition.

Management’s focus is to optimise the operating performance and design of the Phase 1 ovens (200ktpa) prior to an assessment of an expansion to increase production to 400ktpa.

The impairment brings the carrying value of London Mining Colombia in line with fair value (less costs to sell), determined by a value in use calculation on the basis of latest prices and growth forecasts for commodity prices and exchange rates consistent with external sources of information and an asset life of 20 years, discounted appropriately at the Group’s weighted average cost of capital applicable to Colombia, and assumes the expansion to 400ktpa is delayed. The fair value is sensitive to changes in the assumed coke price and in the event market conditions worsened further this would result in an indication of further impairments.

(c) Merger reserveFollowing the issue of the initial 3.5 million shares on acquisition, 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.



10. Joint ventures and associatesThe Group has two joint venture investments (China Global Mining Resources (“CGMR”) and Atacama Mining Resources Corporation (“Atacama”).

In the year ended 31 December 2010 both joint venture investments were written down to a nil carrying value (see note 16 of the financial statements for the year ending 31 December 2010). No further amounts have been recognised in the year ending 31 December 2011.

Contingent liabilities exist at 31 December 2011 in relation to the CGMR joint venture (see note 30).

11. Finance income

2011 USD’000

2010 USD’000

Interest income from cash and cash equivalents 176 259Interest income from loans receivable – 422Exchange gains 2,747 2,608

2,923 3,289

12. Finance costs

Note2011

USD’0002010

USD’000

Interest and other finance expense 525 –Interest payable on convertible bond 7,700 –Unwinding of discount on convertible bond 2,915 –Interest payable on other borrowings 2,275 –Unwinding of discount on other borrowings 1,323 –Unwinding of discount on other non-current liabilities 1,272 –Unwinding of discount on deferred consideration 1,005 527Financing charges – 289Exchange losses 2,448 2,451

19,463 3,267

Less: interest expense capitalised as intangible assets 15 (457) –Less: interest expense capitalised as property, plant and equipment 16 (15,028) –

Total interest expense 3,978 3,267

13. Taxation

2011 USD’000

2010 USD’000

Income tax recognised in the income statementAnalysis of charge in year:Current tax – –Deferred tax charge/(credit) relating to origination and reversal of temporary differences 18,399 (1,258)

18,399 (1,258)

Analysis of charge in year:Loss before taxation (41,633) (100,836)

Expected tax credit based on rate of corporation tax in UK of 26.5% (2010: 28.0%) (11,033) (28,234)Expenses not deductible for taxation, net of investment allowances (1,163) 14,339Tax effect of associates – 1,663Tax deductible gains on LTIP and option exercises (56) (6,215)Capital allowances in excess of depreciation (8,089) (4,415)Different tax rates applied in foreign jurisdictions 20,560 2,227Tax losses not recognised 13,530 19,377Adjustment in respect of prior years 4,650 –

18,399 (1,258)




14. 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.

2011 USD’000

2010 USD’000

Loss from continuing operations attributable to equity holders of the Company (60,032) (99,578)

Weighted average number of ordinary shares in issue 112,230,625 108,473,752

Total earnings per share attributable to equity holders of the Company (0.53) (0.92)

(b) DilutedThe outstanding options, warrants, LTIP awards and the impact of the convertible bond at 31 December 2011 and 2010 represent anti-dilutive potential ordinary shares with respect to earnings per share for continuing operations. Therefore, basic and diluted earnings per share are the same for the current and prior year.

15. Intangible assets

NoteSoftwareUSD’000

GoodwillUSD’000

Mineral rights and exploration and evaluation

costsUSD’000

TotalUSD’000

Cost1 January 2010 106 – 49,186 49,292Additions – – 28,647 28,647Acquisition of subsidiary – 39,695 1,723 41,418Disposals (7) – – (7)Disposal of subsidiary – – (1,374) (1,374)Transfer to property, plant and equipment 16 – – (20,702) (20,702)

31 December 2010 99 39,695 57,480 97,274Additions 973 – 37,626 38,599Borrowing costs 12 – – 457 457

31 December 2011 1,072 39,695 95,563 136,330

Amortisation1 January 2010 – – – –

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

31 December 2010 33 – – 33

Charge for the year 57 – – 57Impairment loss 8 – 10,079 – 10,079

31 December 2011 90 10,079 – 10,169

Net carrying value1 January 2010 106 – 49,186 49,292

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

31 December 2011 982 29,616 95,563 126,161

Mineral rights and evaluation and exploration costs consist of costs incurred on the exploration of the Group’s projects located in Greenland, Saudi Arabia and Colombia.

The Group has certain licences which will be subject to renewal during 2012 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 proven and probable reserves. Software costs capitalised as intangible assets are amortised over three years.



16. Property, plant and equipment

Note

Mineral propertiesUSD’000

Land and buildingsUSD’000

Capital work in progress

USD’000

Office equipment and furniture

USD’000

Plant and equipmentUSD’000

TotalUSD’000

Cost1 January 2010 – 1,486 91 702 2,576 4,855Additions 6,599 – 47,615 342 2,423 56,979Acquisition of subsidiary – 445 272 43 – 760Transfers from intangible

assets 15 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 83,259Additions 28,645 569 157,762 2,115 17,561 206,652Borrowing costs 12 – – 15,028 – – 15,028Disposals – – – (422) (91) (513)

31 December 2011 55,322 1,014 222,878 2,761 22,451 304,426

Depreciation1 January 2010 – – – 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 2,141Charge for the year – 8 – 523 850 1,381Disposals – – – (392) (91) (483)

31 December 2011 – 8 12 680 2,339 3,039

Net carrying value1 January 2010 – 1,486 91 387 1,668 3,632

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

31 December 2011 55,322 1,006 222,866 2,081 20,112 301,387

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 90.0 million facility with Standard Chartered Bank of USD 190.4 million (2010 USD 49.6 million).

17. Deferred tax assets and liabilities

Group

Accelerated capital

allowances USD’000

Tax losses carried

forward USD’000

Total USD’000

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

(Charged)/credited to the income statement (26,950) 8,551 (18,399)

31 December 2011 (28,762) 11,589 (17,173)

The following is the analysis of the deferred tax balances for financial reporting purposes:

2011 USD’000

2010 USD’000

Deferred tax liabilities (19,337) –Deferred tax assets 2,164 1,226

(17,173) 1,226

At the balance sheet date, the Group has recognised tax losses in Sierra Leone and Colombia as the Group is anticipating utilising all tax losses incurred in Sierra Leone and Colombia against taxable profits within the foreseeable future. In addition the Group has further unused losses of USD 228.8 million (2010: USD 170.7 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.




18. Inventories

2011 USD’000

2010 USD’000

Raw materials 5,475 600Finished goods 1,365 –

Total current asset inventories and stockpiles 6,841 600

Ore stockpiles are all considered to be consumed within one year based on current Life of Mine plan estimates.

Included within raw materials is 590kt of iron ore stockpiled at the Marampa mine and 28.5kt of coking coal at the Colombia oven project.

Included within finished goods is 17kt of iron ore concentrate.

19. Loans and receivables

2011 USD’000

2010 USD’000

Prepayments1 6,167 5,794Other receivables 795 629

6,962 6,423

1 In 2010 this included USD 2.1 million of the arrangement fees on the USD 60.0 million Standard Chartered Bank undrawn facility. Following drawdown in 2011 of the facility the arrangement fees have been netted against the facility and are being accreted using the effective interest method (see note 24).

20. Derivative financial instruments

2011 USD’000

2010 USD’000

Forward commodity contracts 8,718 –

The forward commodity contracts are for 513kt of Marampa production from April 2012 to December 2012 and represent one third of total 2012 production. The hedged items are the iron ore sales. The hedged risk is the volatility of the iron ore price.

The forward contracts are designated and effective as cash flow hedges and are due for settlement within one year. Profit or loss will be affected with each settlement. All amounts have been recognised in other comprehensive income in the period.

The forward contracts have been highly effective in the period and no amounts have been recognised in profit or loss in respect of ineffectiveness.

21. Cash and cash equivalentsIncluded in cash and cash equivalents is an amount of USD 15.0 million (2010: USD nil) of restricted cash relating to funds held in reserve in accordance with the Group’s covenants as part of the Standard Chartered Bank loan facility (see note 24). No amounts were held as collateral for letters of credit at 31 December 2011 (2010: USD 7.8 million).

22. Assets held for sale

2011 USD’000

2010 USD’000

Assets held for sale – 28,072

In October 2011 the Group received USD 24.8 million in cash for its investment in DMC Group from Sable Mining Africa Limited. Full provision has been made at year end against the residual investment carrying value of USD 3.3 million, although management continues to pursue settlement of an agreement dated 19 January 2010 with the private investment vehicles of Heine van Niekerk and Pieter Wiese, (Chief Executive Officer and Chief Financial Officer 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 is therefore due under the private agreement a further USD 15.2 million, which it expects to be paid in DMC shares. Approval has been received from The South African Regulatory Bank in respect of enforcement of the downside protection agreement. Management believes the Group has a very strong case to receive the downside protection but is uncertain on the timing of when this will occur.



23. Trade and other payables

2011 USD’000

2010 USD’000

Current liabilitiesTrade and other payables 19,871 4,132Other taxation and social security 3,329 2,331Accruals 29,836 15,019Deferred revenue 8,100 –

61,136 21,482

Deferred revenue relates to prepayments received in respect of iron ore sales for the Marampa project.

2011 USD’000

2010 USD’000

Non-current liabilitiesConsideration for royalty payments 28,836 –

The liability for future royalty payments relates to the Anglo Pacific (‘AP’) funding for the Greenland BFS. In return for the consideration of USD 30 million, AP is entitled to 1 – 1.4% of all future revenues of the Isua project in Greenland. The USD 30 million has no interest accruing and is otherwise repayable if milestone targets are not met by pre-agreed dates:

a. The BFS being completed by 31 December 2012;

b. An exploitation licence obtained by 31 December 2013;

c. Commercial production not occurring before the long stop date of 30 June 2017;

d. A change in control; or

e. The revocation of any right of London Mining to the area defined in the mining licence.

The consideration was received in August 2011 net of issue costs of USD 1.6 million at USD 28.4 million. Until commercial production when the liability will be extinguished and treated as a disposal of the Group’s economic interest in the Greenland project, a repayment obligation exists for USD 30 million. This has been treated as a financial liability at amortised cost, being the principal less transaction costs plus accretion of the issue costs (see note 12), as the impact of discounting to a market rate of interest is immaterial. The carrying value at 31 December 2011 was USD 28.8 million.

The Directors consider the fair value of trade and other payables at 31 December 2011 not to be materially different to their carrying value.

24. Borrowings

Bank loans (secured) USD’000

Convertible bonds

(unsecured) USD’000

Total USD’000

At 31 December 2010 – – –Fair value of borrowings issued in year 90,000 110,000 200,000Issue costs (2,688) (4,874) (7,562)

Net proceeds 87,312 105,126 192,438

Recorded in equity – (17,556) (17,556)Transferred from prepayments (2,140) – (2,140)Effective interest 3,598 10,615 14,213Interest paid – (4,400) (4,400)

At 31 December 2011 88,770 93,785 182,555Due within one year 88,770 3,300 92,070Due greater than one year – 90,485 90,485

88,770 93,785 182,555

All borrowings are USD denominated.

Interest charges in respect of bank loans and convertible bonds have been capitalised to property, plant and equipment and intangible assets as they relate to the cost of qualifying assets, primarily the Sierra Leone project.




24. Borrowings continued

The other principal features of the Group’s borrowings are as follows:

(i) The Bank loans are held with Standard Chartered Bank (“SCB”) as an amended revolving credit facility dated July 2011. The facility tenure is for two years, ending in October 2012, with an extension option of 12 months. The ability to exercise the extension is subject to certain conditions which are under management’s control, in addition to credit committee approval from SCB. Although management expects to receive the necessary credit approval and roll the loan for 12 months, the loan is presented as a current liability in accordance with International Accounting Standards.

The total facility bears a blended interest rate at 5.5% above LIBOR, falling to 4.8% based on the ratio of EBITDA to net debt. The effective interest rate is 10.6%.

The loans are secured on the Group’s assets and the Group is subject to financial and non-financial covenants. Interest is payable bi-annually.

(ii) The 1,100 senior, unsecured convertible loan notes were issued by the Company’s wholly owned subsidiary London Mining (Jersey) Plc on 15 February 2011 at an issue price of USD 100,000 per note. The notes have a coupon of 8% per annum and are convertible into ordinary shares of the Company at any time between April 2011 and January 2016 at a conversion price of USD 7.71, representing a 38% premium to the share price of the ordinary shares at the date the convertible loan notes were issued (GBP 3.51) fixed at an exchange rate of 1.5922. The maturity date of the bonds is 15 February 2016.

The Company has a call option to redeem the shares at par plus accrued interest from 15 February 2014 if the share price exceeds GBP 6.29 for more than 20 out of 30 consecutive trading days or at any time if 15% or fewer of the bonds remain outstanding. Interest of 8% per annum will be paid semi-annually up until that settlement date.

The net value received from the issue of the convertible loan notes have been split between the financial liability element and an equity component, the latter representing the fair value of the embedded option to convert the financial liability into equity of the Company. The fair value of the liability component included in non-current borrowings at inception was calculated by discounting the future cash flows using a market interest rate for an equivalent instrument without a conversion option. The discount rate applied was 13.0%.

The equity component of USD 17.6 million has been credited to a convertible debt reserve.

The interest charged for the period is calculated by applying an effective interest rate of 13.4%.

25. Restoration and decommissioning provision

2011 USD’000

2010 USD’000

Restoration and decommissioning provision 1,405 –

The restoration and decommissioning provision is based on management’s best estimate of the cost of remediation of the current disturbance of the Marampa lease in Sierra Leone and is expected to be incurred at the end of the mine’s life. An equal amount is included within mineral properties of property, plant and equipment (see note 16). The provision has been recognised at 31 December 2011, accordingly no amounts have been incurred or charged against the provision and no unwinding of discount has occurred.

26. Share capital

No. of shares 2011

USD’000 No. of shares 2010

USD’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 sharesIssued and fully paid:At 1 January 113,760,461 411 109,583,795 398Issued during the year 341,499 1 4,176,666 13

114,101,960 412 113,760,461 411

During the year ended 31 December 2011:

• 163,333 (2010: 176,666) shares were issued following the exercise of options by employees; and• 178,166 (2010: nil) shares were issued to Fraser Turner Limited in connection with the Company’s obligation under a facilitation

agreement dated 28 February 2007.



26. Share capital continuedIn 2010 further shares were issued on the acquisition of International Coal Company (3,500,000) and on exercise of warrants by a consultant (500,000).

Employee 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 2011 400,000 shares (2010: 4,718,884 shares) were distributed on the exercise of LTIP awards, no shares (2010: 100,000 shares) were transferred into a second discretionary trust, no shares (2010: 587,722 shares) were acquired in the year and no shares (2010: 2,812,781 shares) were sold during the year. The Group’s EBT had 1,267,000 shares at 31 December 2011 (2010: 1,667,000). On 10 June 2010 100,000 shares were transferred to a second trust to hold jointly owned shares with a key management employee. At the year end this trust “Spartacus Trustees” held 100,000 jointly owned shares (2010: 100,000). 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 reorganisation 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.




27. Notes to the cash flow statement

Note2011

USD’0002010

USD’000

(a) Reconciliation of the loss for the year to cash outflows from operating activitiesLoss for the year (60,032) (99,578)Adjusted for:Share of results from joint ventures and associates – 1,006Fair value (gain)/loss on deferred consideration 9 (14,745) 5,565Impairments 8 13,390 61,657Loss on disposal of a subsidiary – 236Depreciation and amortisation 1,438 982Loss on sale of property, plant and equipment 30 9Finance income 11 (2,923) (3,289)Finance costs 12 3,978 3,267Share-based payments expense 6 1,614 2,821Tax expense/(credit) 13 18,399 (1,258)

(38,851) (28,582)

Increase in non-current receivables – (1,074)(Increase)/decrease in current receivables (2,873) 327Increase in inventories (6,241) –Increase/(decrease) in payables 13,420 (387)

Cash outflow from operating activities (34,545) (29,716)

28. Share-based paymentsShare options and warrants to subscribe for ordinary shares in the Company are granted to certain employees, Directors and consultants providing services to the Group. Options 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. Options are forfeited if the employee leaves the Group before the options vest.

Each employee share option or LTIP 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 exercise of each option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.

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

2011 2010

Number

Average exercise

price in pence per share Number

Average exercise

price in pence per share

Share optionsAt 1 January 8,938,411 170.95 8,250,000 188.28Granted 1,955,000 299.50 1,653,411 200.45Forfeited (33,694) 249.14 (788,334) 131.00Exercised (163,333) 141.53 (176,666) 131.00

At 31 December 10,696,384 206.79 8,938,411 170.95

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

At 31 December 850,000 309.00 850,000 309.00

Jointly held shares 100,000 237.00 100,000 237.00

Long Term Incentive Plan awardsAt 1 January 964,592 – 5,683,476 –Exercised (400,000) – (4,718,884) –

At 31 December 564,592 – 964,592 –



28. Share-based payments continuedOf the outstanding options, warrants and awards the following were outstanding:

• 7,535,999 options (2010: 5,994,999) • no warrants (2010: none) or JSOP options (2010: none)• 314,592 LTIP awards (2010: none).

The related weighted average share price at the date of exercise for the options and warrants exercised during 2011 was USD 4.87 (2010: USD 4.72). The options outstanding at the end of 31 December 2011 had a weighted average exercise price of USD 2.72 (2010: 2.30) and a weighted average remaining contractual life of 5.79 years (2010: 5.96 years). The inputs into the pricing model for all share options granted during the year and the preceding year were as follows:

2011 2010

Weighted average fair value of option (USD) 0.98 0.6145Weighted average exercise price (USD) 4.8762 3.1005Expected volatility 36% 38%Expected life 2 years 1.80 yearsRisk-free rates 0.52% – 1.05% 0.99%Expected dividend yields 0% 0%

The estimated aggregate fair value of the options granted during the year to 31 December 2011 was USD 1.8 million (2010: USD 1.0 million).

Expected volatility of the options issued during the year to 31 December 2011 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 6 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 dateExercise price in

pence Number

Options granted prior to 201112 September 2012 174 640,00002 May 2013 344 500,00002 May 2013 309 100,00014 May 2013 344 125,00011 July 2013 174 2,450,00016 October 2018 237 775,00030 June 2019 131 2,376,66730 June 2019 161 150,00024 May 2020 201.25 944,71707 June 2020 204 200,00009 June 2020 197.5 500,000

8,761,384

Options granted during 201125 August 2021 299.50 1,935,000

Options outstanding at 31 December 2011 10,696,384

29. Operating leasesAt 31 December 2011, the Group had the following minimum cumulative commitments under non-cancellable operating leases.

2011 USD’000

2010 USD’000

Expiry dateWithin one year 8,441 579One to five years 1,839 764After five years 1,810 2,768

11,455 4,111




30. Contingent liabilitiesThe Group is subject to various claims which arise in the ordinary course of business.

As part of the disposal of the Brazilian operations, 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.

In December 2011, London Mining was served with a claim by Fraser Turner Limited seeking declarations relating to its alleged entitlement to receive an additional royalty payment under the terms of a Facilitation Agreement dated 28 February 2007. As disclosed in London Mining’s Admission Document dated 3 November 2009, the agreement provides for the payment of an additional royalty payment per tonne of iron ore sold where the royalty payable by London Mining to the Government of Sierra Leone is reduced to a lower level than the Standard Government Royalty within 24 months following execution of the agreement. The amount of any additional royalty payment is limited to the difference between the Standard Government Royalty and the actual government royalty required to be paid by London Mining, capped at 2%. The Group believes that there was no reduction to a lower level and therefore the additional royalty payment is not payable and accordingly intends to vigorously defend the claim.

As part of the acquisition of its Chinese joint venture, 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 eight years and available cash in CGMR after the priority repayment of the Group’s USD 44.5 million initial investment and subsequent ingoing distribution rights. The Group has not recognised any provision for the year ended 31 December 2011 based on the Directors’ current expectation that the likelihood of the vendor being entitled to a material balance is remote.

In December 2011 London Mining filed an action against Wits Basin Precious Minerals Inc (“Wits Basin”), the Group’s partner in the CGMR joint venture, seeking the repayment of USD 1.0 million plus interest and costs of indebtedness on promissory notes. Wits Basin filed an answer and counterclaim in January 2012 asserting that the loan is not yet due and claiming damages of at least USD 650.0 million for actions and breaches of fiduciary duty relating to the CGMR joint venture. London Mining believes the answer and counterclaim to be completely without merit with the chance of loss being remote, and there is no valid defence against repayment of the USD 1.0 million loan.

31. 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.

Liquidity 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.



31. Financial instruments, risk management and exposure continuedThe maturities of the Group’s non-derivative financial liabilities are shown in the table below.

Less than 1 month

USD’000

1-3 months

USD’000

3 months to 1 year

USD’000

1-5 years

USD’000Total

USD’000

At 31 December 2011 47,793 7,595 91,412 120,520 267,320

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

The Group has entered into commodity price derivatives this year as part of the agreed terms of the SCB facility (see note 20). It remains Group policy to not hedge commodity prices other than for strategic reasons.

On 26 January 2010 the Group entered into an offtake agreement that will cover 9.5 million of wet metric ton production from the Marampa project at a sales price directly correlated to the benchmark cfr China price.

ii) Exchange rate risk The 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 Sierra Leone Leones, British Pounds (“GBP”), Colombian Pesos, Danish Kroner, Australian Dollar, Canadian Dollar and Euro.

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.

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.

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 2011 the Group had drawn borrowings and therefore exposure to interest rates. The SCB facility of USD 90.0 million has a floating interest rate. The facility bears interest at 5.5% above LIBOR, falling to 4.8% based on the ratio of EBITDA to net debt. The effective interest rate is 10.6%.

The USD 110.0 million convertible loan has a fixed interest rate of 8.00% (more detail on this is provided in note 24).

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 2011 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 2011 equity attributable to equity holders of the parent is USD 215.8 million, (2010 USD 244.4 million) whilst cash and cash equivalents amount to USD 67.8 million, (2010 USD 76.0 million).

The Group is subject to and has complied with externally imposed capital requirements relating to debt ratios as part of the SCB facility.

(b) Potential impact of market risksi) Credit risk The Group’s maximum exposure to credit risk at 31 December 2011 was USD 77 million (2010: USD 104 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 8.

ii) Liquidity risk At 31 December 2011, the Group’s financial liabilities consisted primarily of borrowings, trade and other payables and deferred consideration payable on the acquisition of London Mining (Colombia), and an amount of USD 2.3 million (2010: USD 3.8 million) accrued in respect of the Return Bonus plan, as discussed in note 6.

iii) Sensitivity analysisFinancial instruments affected by market risk include cash and cash equivalents, loans and receivables, derivative instruments, borrowings and trade and other payables. A change in exchange rates would have an immaterial impact on these instruments. A change in the interest rate will have a limited effect on profit or loss due to borrowing costs being capitalised. A change in commodity prices would not affect profit or loss as no forward contracts have been settled in 2011 and the Group made no sales.




31. Financial instruments, risk management and exposure continued(c) Classification of financial instrumentsThe carrying amounts of the Group’s financial assets and liabilities are a reasonable approximation of fair value.

2011 USD’000

2010 USD’000

Current Financial assets Cash and cash equivalents 67,832 76,038Assets held for sale – 28,072Derivative instruments in designated hedge accounting relationships 8,718 –Loans and receivables 795 106

77,345 104,216

2011 USD’000

2010 USD’000

Financial liabilitiesAt fair value through profit and lossDeferred consideration payable 2,893 5,121At amortised cost:Borrowings 182,555 –Trade and other payables1 53,036 19,151Consideration for future royalty payments 28,836 –

267,320 24,272

1 Excludes deferred revenue.

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

32. Capital Commitments

2011 USD’000

2010 USD’000

Commitments for the acquisition of intangible assets 156 578Commitments for the acquisition of property, plant and equipment 16,966 29,148

Total 17,122 29,726

The Group’s share of the capital commitments of its joint ventures is USD nil (2010: USD nil).

33. Related party transactionsAt 31 December 2011 the Directors of the Group and their related parties, and entities in which they had a beneficial interest, controlled 7.3% (2010: 6.4%) 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 acquired the remaining 80% of ICC (now “London Mining Colombia”). Graeme 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% and will receive 15% of deferred contingent consideration. At 31 December 2011 the Group recognises this deferred contingent consideration at USD 10.6 million (note 9), of which Graeme Hossie would receive USD 1.6 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 also made available 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 prospects in Chile. At 31 December 2010 and 2011 a total of USD 6.5 million of loans had been drawn down by British Mining. Full provision has been made over the recoverability of these loans.

Key management personnel compensation is disclosed in note 7.



34. Events after the balance sheet dateOn 16 January 2012 London Mining completed a sale and leaseback arrangement with Egon Oldendorff (Liberia) Inc (“Oldendorff”) in relation to the floating offshore transhipment vessel the “Pride of Marampa”. Under the arrangement, London Mining received net proceeds of USD 18.4 million from the sale of the vessel, and at the same time entered into a 10 year leasing agreement over the same vessel. This agreement represents a finance lease under which London Mining will record the vessel within property, plant and equipment on the balance sheet and recognise a liability for obligations payable under the lease. At 31 December 2011 London Mining had trade creditors of USD 11.2 million in respect of amounts owing to the manufacturer of the vessel which was paid in January from the receipt of proceeds. The “Pride of Marampa” arrived and was discharged into Sierra Leone waters on 3 March 2012.

On 24 January 2012 the Company raised USD 87.3 million net of issue costs through placing 22,685,000 new ordinary shares at 255 pence per share. 11,199,214 shares were issued on 27 January 2012 with the remaining shares issued after shareholder approval was given at a general meeting held on 13 February 2012. The net proceeds are intended to be used primarily to fund acceleration of production at the Marampa iron ore project in Sierra Leone. Following the issue London Mining has a total of 136,816,960 ordinary shares in issue and in accordance with the Terms and Conditions of the Convertible Bonds, the conversion Price has been adjusted from GBP 4.8430 to GBP 4.7541.

On 28 March 2012, London Mining signed a USD 45 million prepayment agreement with the Vitol Group regarding the offtake of 2 million wet metric tonnes of iron ore per annum over five years, commencing in 2013 in parallel with London Mining’s ramp up in production to 5 million tonnes per annum. Pricing will be based off the Platts 63.5/63% Index and will include a premium to reflect the Fe content of the product. Subject to certain additional conditions being met, the facility may be increased to USD 55 million, and the offtake contract extended for a further year. The facility is repayable in two tranches over three and five years respectively, with no payments due in the first 12 months.

35. Composition of the Group The following companies have been consolidated in the Group accounts and materially contributed to the assets and/or results of the Group and are classified according to their main activity.

Ownership interest

Country of incorporation Principal activity

2011 %

2010 %

London Mining Company Limited Sierra Leone Mining Subsidiary 100 100London Mining Greenland A/S Greenland Mining Subsidiary 100 100Saudi London Iron Ltd Saudi Arabia Mining Joint venture 50 50London Mining (Colombia) Limited Cayman Islands Investment holding

companySubsidiary 100 100

London Mining Finance (Jersey) Ltd Jersey Treasury Subsidiary 100 –London Mining (Jersey) Plc Jersey Treasury Subsidiary 100 –

A full list of Group companies will be included in the annual return registered with Companies House.




Company balance sheet

As at 31 December

Note2011

USD’0002010

USD’000

Non-current assetsIntangible assets 1 30,967 28,250Property, plant and equipment 15,636 187Investment in subsidiaries 2 317,387 42,966Amounts owed by subsidiaries – 165,582

Total non-current assets 363,990 236,985

Current assetsDerivative financial asset 8,718 –Current loans and receivables 3 824 2,622Cash and cash equivalents 50,623 71,928

Total current assets 60,165 74,550

Total assets 424,155 311,535

Current liabilitiesTrade and other payables 4 (17,716) (10,603)Borrowings (88,770) –Deferred consideration payable (7,574) –

(114,060) (10,603)

Non-current liabilitiesDeferred consideration payable (3,023) (24,337)Amounts owed to subsidiaries (20,849) –

(23,872) (24,337)

Total liabilities (137,932) (34,940)

Total net assets 286,223 276,595

EquityShare capital 412 411Share premium account 25,021 21,803Merger reserve 12,000 12,000Other reserves 39,768 13,985Retained earnings 209,022 228,396

Total equity 286,223 276,595

The financial statements of London Mining Plc (Company Number 05424040) were approved by the Board of Directors on 28 March 2012 and are signed on their behalf by:

Graeme Hossie Rachel RhodesChief Executive Officer Chief Financial Officer


Company statement of changes in equity

Share capital

USD’000

Share premium account

USD’000

Merger reserve

USD’000

Retained Earnings

USD’000

Warrant and option

reserve USD’000

Hedging and foreign

exchange reserve

USD’000

Convert-ible debt

reserve USD’000

Total equity

USD’000

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

Total comprehensive loss for the year – – – (94,306) – – – (94,306)Recognition of share-based payments 2 1,709 – (420) (2,981) – – (1,690)Issue of share capital (net of expenses)

on exercise of options 11 – 12,000 – – – – 13,722

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

Total comprehensive loss for the year – – – (21,732) – 8,718 – (13,014)Recognition of share-based payments – 377 – 2,358 (491) – – 2,244Issue of share capital (net of expenses)

on exercise of options 1 772 – – – – – 773Equity component of convertible bond – – – – – – 17,556 17,556Return of stamp duty – 2,069 – – – – – 2,069

Balance at 31 December 2011 412 25,021 12,000 209,022 12,997 9,215 17,556 286,223




Company cash flow statement


Note2011

USD’0002010

USD’000

Cash flows from operating activitiesCash used by operations 5 (13,126) (16,192)Interest received 147 235Interest expense (425) (121)

Net cash outflow from operating activities (13,404) (16,078)

Cash flows from investing activitiesLoans and investments in joint ventures – (6,514)Loans and investments in associates – (1,500)Other loans and investments – 2,000Convertible loans issued to third parties – –Loans to subsidiaries (93,750) (84,920)Acquisition of subsidiaries – (5,500)Investments in subsidiaries – –Payments to acquire intangible assets (3,916) (10,443)Purchase of property, plant and equipment (601) (8)Proceeds from sale of discontinued operations, net of transaction costs – (4,744)

Net cash outflow from investing activities (98,267) (111,629)

Cash flows from financing activitiesProceeds from issue of ordinary shares, share options and warrants 2,446 1,711Proceeds on issue of borrowing 87,312 –Arrangement fees for debt financing – (2,140)

Net cash outflow from financing activities 89,758 (429)

Net decrease in cash and cash equivalents (21,913) (128,136)Cash and cash equivalents at beginning of year 71,928 200,427Exchange differences 608 (363)

Cash and cash equivalents at end of year 50,623 71,928


Notes to the Company financial statements

1. Intangible assets

Software USD’000

Mineral rights and exploration and evaluation

costs USD’000

Total USD’000

Cost1 January 2010 106 20,194 20,300Additions – 7,990 7,990Disposals (7) – (7)

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

Additions – 3,949 3,949Disposals – – –Intra-group transfers – (1,199) (1,199)

Cost at 31 December 2011 99 30,934 31,033

Amortisation1 January 2010 – – –Charge for the year (36) – (36)Disposals 3 – 3

Amortisation at 31 December 2010 (33) – (33)

Charge for the year (33) – (33)Disposals – – –

Amortisation at 31 December 2011 (66) – (66)Net book value 31 December 2010 66 28,184 28,250

Net book value at 31 December 2011 33 30,934 30,967

2. Investments

Investments in Subsidiaries

USD’000

Investments in Joint Ventures

USD’000

Investments in Associates

USD’000

At 1 January 2010 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 – –

Equity injected into subsidiary 284,500 – 284,500Impairment of London Mining Colombia (10,079) – (10,079)

31 December 2011 317,387 – 317,387




3. Current loans and receivables

2011 USD’000

2010 USD’000

Prepayments 383 2,364Other receivables 441 258

Total current loans and receivables 824 2,622

Total loans and receivables 824 2,622

4. Trade and other payables

2011 USD’000

2010 USD’000

Current Trade and other payables 1,050 1,911Other taxation and social security 176 113Accruals 8,390 8,579Deferred revenue 8,100 –

Total current trade and other payables 17,716 10,603

5. Notes to the cash flow statement

2011 USD’000

2010 USD’000

Reconciliation of loss for the year to cash outflows from operating activitiesLoss for the year (21,734) (94,306)Adjusted for: Fair value (gain)/loss on deferred consideration (14,745) 5,565Impairments 13,390 73,492Loss on disposal of a subsidiary – 343Depreciation 308 180Loss on sale of fixed assets 6 9Finance income (2,895) (4,995)Finance costs 3,137 3,786Share-based payments expense 1,614 2,817

(20,919) (13,109)Increase in non-current receivables – (3,514)(Decrease)/increase in current receivables (389) 956Increase/(decrease) in payables 8,182 (525)

Cash outflow from operating activities (13,126) (16,192)


Glossary

“Al2O3” Alumina

“BFS” Bankable feasibility study

“BIF” Banded Iron Formation

“cfr” Cost and Freight

“DR” Direct Reduction

“DRI” Direct Reduced Iron

“EIA” Environmental Impact Assessment

“EPCM” Engineering, Procurement and Construction Management

“Fe” Iron

“FOB” Free On Board or Freight On Board

“FOTP” Floating Offshore Transhipper Platform

“Hematite” The mineral form of iron oxide (FeO)

“highly weathered material” The portion of the ore body that is often located on the surface that has been broken down in situ by environmental processes. This may result in the enrichment of iron and removal of gangue minerals. It typically requires less processing than unweathered material

“Indicated mineral resource” The part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations, such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed

“Inferred mineral resource” The part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes

“JORC” Australasian Institute of Mining and Metallurgy Joint Ore Reserves Committee (JORC) code on mineral resources and ore reserves

“Magnetite” Ferrous-ferric oxide (FeO)

“Measured mineral resource” The part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity

“mineral resource” A concentration or occurrence of natural, solid, inorganic or fossilised organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge

“Mtpa” A million metric tonnes per annum

“Mwmt” Million wet metric tonnes

“ore” A natural aggregate of one or more minerals which, at a specified time and place, may be mined and sold at a profit, or from which some part may be profitably separated

“PFS” Prefeasibility study

“SIA” Social Impact Assessment

“SiO2” Silica

“wmt” wet metric tonnes




Officers and professional advisers

Country of registration of parent companyEngland and Wales

Legal form Public limited company

Directors Graeme Hossie Rachel Rhodes Benjamin Lee Luciano Ramos Dr Colin Knight Sir Nicholas Bonsor Malcolm Groat Graham Mascall Dr Hans Kristian Schønwandt (retired 23 March 2012) Colin Harris (appointed 12 May 2011)

Company secretary Rohit Bhoothalingam

AuditorsDeloitte LLP Chartered Accountants London

Registered office Nations House 103 Wigmore Street London W1U 1QS

Registration number 05424040


Notes

Designed and produced by MerchantCantos.

www.merchantcantos.com

London Mining Plc Nations House 103 Wigmore Street London W1U 1QS United Kingdom T +44 (0) 20 7408 7500 londonmining.co.uk

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