West African Minerals

SPECULATIVE BUY

10/01/2012 Robert Tyerman

West African Minerals (WAFM) hopes to establish a maiden iron ore resource of 250-to-500m tonnes this summer for projects in Sierra Leone. The Isle of Man-based company, founded and co-chaired by successful sector entrepreneur Stephen Dattels, says it expects drilling to start after receiving assays from grub samples later this month, followed in March by aeromagnetic survey findings.

AIM-quoted West African, where investment figure James Mellon is also co-chairman, points out its 75%-owned Sierra Leone licences are near other significant deposits and two are near the coast. These include Aussie-quoted Cape Lambert's 680m-tonne Marampa project and Kukuna, where Cape Lambert has targeted one to two billion tonnes, while the country also hosts African Minerals' 12.8bn-tonne Tonkolili deposit, boasting a significant proportion of high-grade haematite iron ore.

Haematite ore is also prominent in deposits near West African's prospects in Cameroon, where another Australian concern Sundance Resources (which has attracted a £1 billion takeover bid from China's Sichuan Hanlong Group) claims a haematite potential of nearly 522m tonnes at one prospect, Mbalam. Three of West African's 60%-owned Cameroon projects are near the coast and others are near a planned railway line, crucial for a bulk mineral operation, whose economics depend on affordable delivery.

West Africa secured its positions in Cameroon and Senegal through the recent £8.3m paper acquisition of private iron ore play Ferrum Resources, originally backed by Dattels and Mellon, a deal leaving the two with an indirect 23% West African stake and accompanied by a £3.25m share raising at 10p. The company's Cameroon partners include the projects' operator Plinian Capital, headed by former Lonmin boss Bradford Mills.

Arguing West African is funded for three years' exploration, directors envisage eventual production and delivery costs of some $40 a tonne, around $100 below present market prices, and insist demand from China, Brazil and elsewhere will persist, whatever the short-term swings.

The shares could well repay a punt at 12.63p.