25 May 2012

Afferro soars on asset disposal

12/12/2011 Miles Nolan

As foreshadowed on this site last month, a 'rally could be on the cards' for Afferro Mining (AFF) - and so it has proved today, with the shares up 38 per cent.

The excitement surrounds the agreement to sell its remaining 38.5 per cent stake in the Putu joint-venture project in Liberia for a minimum $115 million, which is a significant premium to its current market value of £60 million. Afferro is set to receive $65 million by February 2012, with the the balance of $50 million deferred and further funds payable if Putu is sold to a third party.

Afferro was formed following the split between the gold and iron interests of the former African Aura Mining. The Putu project holds an estimated 3.2 billion tonnes of 34.3 per cent iron, in partnership with Russia's Severstal steel group. By offloading its shareholding it allows the AIM counter to focus its efforts on its 100 per cent owned Nkout project in Cameroon - which it plans to take to the pre-feasibility stage by second half of 2013.

The disposal also removes any further financing risk for Afferro. Depending on the eventual outcome, it brings cash of 77p to 89p into Afferro (compared to a current share price of 57p), which will be invested in Nkout. Having raised £15.5 million in July at 90p, the announcement is clearly a major result for Afferro, and its band of investors who had feared further dilution. Broker Investec places a target price of 85p on the shares.

Tags: AIM market, Cameroon, Disposal of Putu, Nkout project

Sector: Mining

Companies: Afferro Mining

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