The potential of Afferro Mining's (AFF) iron ore projects in Cameroon is underlined by the latest approach by fellow Aim constituent, International Mining and Infrastructure Corp (IMIC) , which follows on from the development memorandum Afferro signed with Korean steel group, POSCO, in February.
The early-stage bid by IMIC, a minority holder in Affero, is subject to a number of conditions, including successful financing and regulatory consents, and provides three options for shareholders: 80p in cash plus a convertible loan note of 20p; or 50p in cash plus a convertible loan note of 70p; or shares in IMIC equivalent to a valuation of 140p for each Afferro share. The convertible loan notes will carry a coupon of 8 per cent and are payable at the end of a 24-month period. The respective options effectively value Afferro at 35, 55 and 90 per cent premiums to its current share price. Though IMIC has promised to provide a written undertaking that a minimum of $100m (£65m) in cash is available within 15 business days, Afferro's management won't provide a recommendation until a formal offer is tabled.
Afferro already benefits from a collaborative relationship with IMIC; evidence of which was provided by news that the latter has signed a new deal with China Railway Materials (CRM) to organise the offtake of iron ore from Afferro's flagship Nkout mine, in addition to a deal with CRM subsidiary China Railways Eryuan Engineering, which will build the infrastructure from Nkout to port. The CRM deals auger well for the development of Nkout, but shareholders will need to weigh up whether the proposed IMIC deal represents the best way of unlocking value at the project, particularly given the likelihood of other suitors.
