Chromex Mining

HOLD

19/07/2010 Robert Tyerman

Chromex Mining says it has received a preliminary bid approach worth £31m at 35p.

The AIM-quoted company, which recently secured a £3.5m off-take deal with Chinese steel maker Suzhou Kaiyuan to finance a doubling of capacity at its Stellite chrome mine in South Africa, has not identified its potential suitor and stresses there is no certainty an offer will ultimately be made or on what terms.

However, given the tightness of the chrome market and the dearth of producers, it was only a matter of time before a potential bidder took note of what Chromex chief executive officer Russell Lamming hailed in May as a 'fantastic deal' with the Chinese. Under the agreement, Suzhou Kaiyuan will fund a 'dense media separation' (DMS) circuit for the Stellite mine as pre-payment for some of the 'lumpy' chromite it produces in its first two years.

This should enable Chromex, chaired by entrepreneurial sector veteran Brian Moritz, to double Stellite's productive capacity to 40,000 tonnes a month and improve recovery margins in the process. Highlighted by Growth Company Investor at 24.5p two months ago, the shares have already risen more than 22% to 30.5p. Hold on.

Tags: AIM, Commodities, Deals & contracts, Growth Stocks

Sector: Mining

Companies: Chromex Mining

Market cap: £27m

PE Forecast: n/a

Share price: 30.5p