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Sunday, February 12, 2012

West Africa offers good returns for right iron ore projects - Fairfax

Sunday, 12 Feb 2012

Broker Fairfax said that West Africa will become an important source of iron ore over the next ten tears, with attractive returns on projects once capital is secured.

The broker has assessed some of the companies planning iron ore mines in the region and picked the ones it sees as having most potential.

Investor interest in the region sparked into life recently after African Iron received a takeover bid from South African giant Exarro.

More corporate activity will underpin the value of iron projects in West Africa going forward, said Fairfax, though not all projects have the right pre-requisites to come to commercial production.

It said that be wary of large scale magnetite projects which are not close to transport infrastructure and do not have access to power.

It added that “The commercialisation of these projects will require significant capital and require the backing of partners with deep pockets.”

African Iron is typical of a company that will do well said Fairfax and it was no surprise to the broker that it attracted the attention of a buyer. It said that “The project had all the criteria to achieve commercialization good quality deposit with DSO (direct shipping ore) which could be readily mined and transported.”

The company has a 120 million tonnes high grade hematite resource 44 million tonnes of DSO with 77 million tonnes of upgradeable DSO.

African Iron’s target was a 5 million tonnes per annum operation for a 10 year mine life based on 50 million tonne DSO hematite resource and requiring a capex spend of USD 300 million.

West African Minerals is another early stage developer that Fairfax believes has potential through a very targeted strategy of finding tenements where there is DSO (haematite) potential.

It said that the management team have already identified six permits in the Cameroon DSO with potential from aeromagnetic geophysical surveys.

Two of the key licences are located near the Cameroon coast and discovery here could enable relatively easy transportation. The company also hold five exploration licences in Sierra Leone.


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