Afferro Mining is cheapest entry to West African iron ore - Edison

Saturday, 13 Aug 2011

According to Edison Investment Research, Afferro Mining represents the cheapest entry to West African iron ore for investors, based on its resources.

The research house has initiated coverage of the AIM quoted iron ore developer, valuing it at up to 346 pence compared to the stock’s current share price of 71.5 pence.

Mr Charles Gibson analyst at Edison said that based on just Afferro's 38.5% in the Putu iron ore project in Liberia, the company is worth 167 pence per share. Afferro's other world class iron ore project, Nkout in Cameroon, adds another 182 pence to the valuation.

Mr Gibson said that "On this comparison basis, Afferro represents the cheapest entry to West African iron ore and a good buy, even when taking into account the current worldwide market turmoil."

The report also noted that Afferro's recent fundraising effort, which raised it GBP 14.9 million.

Edison Investment said that this should carry the company through the next nine months of its aggressive exploration campaign, which is currently costing USD 11 million per quarter. As of August 5th 2011, the company had USD 30 million in the bank.

At Putu, Afferro and partner Severstal of Russia are currently advancing Putu towards a pre feasibility study. The project currently has a resource of 2.4 billion tonnes, a 200% increase since the first resource estimate, prepared in accordance with the globally recognized NI43-101 standard, was announced in July 2009.

According to estimates backed by consultancy SRK, there is potential for a resource of up to 4.2 billion tonnes.

Afferro believes that the resource at its wholly owned Nkout also has the potential to reach 4 billion tonnes. The project currently accounts for 1.42 billion tonnes of the total 14 billion tonne potential of the Mekambo iron ore orbit of West Africa.

Mr Gibson noted that infrastructure remains a key issue at both Nkout and Putu. He added that Putu represents the least infrastructure risk as it requires less capital expenditure on part of Afferro. In addition to that, the project is located just 120 kilometers from existing infrastructure and there may be the option to use existing port facilities.

As for Nkout, Fairfax analyst Mr John Meyer has previously said that the project could potentially use infrastructure planned by Sundance Resources, which has the latest stage assets in the region.

An infrastructure scoping study for Nkout is expected in September or October 2011.

(sourced Proactiveinvestors)