Afferro sells Putu stake to focus on Cameroon project

12th December 2011 By: Natasha Odendaal - Creamer Media Senior Deputy Editor

The anticipated receipt of $115-million from the sale of its interest in the Putu iron project is ‘Christmas come early’ for iron-ore miner Afferro Mining, said London-based Evolution Securities’ Charles Kernot.

Russian steelmaker Severstal on Monday agreed to acquire the 38.5% stake in the Liberian iron-ore project from Aim- and TSX-listed Afferro Mining, resulting in the steelmaker now holding 100% stake in the project.

The payment will be made in two tranches - $65-million on completion of the agreement and a deferred cash payment of $50-million in June 2013.

Afferro CEO Luis da Silva said that, by divesting the minority stake in Putu, the company could focus on its 100%-owned flagship Nkout iron-ore project, in Cameroon, and reduce shareholder dilution.

“The near-term cash payment more than offsets the current weaker tone of the iron-ore market, which has been reflected in the sales prices,” commented Kernot.

The Nkout project has the potential to continue to create significant value for Afferro. The company has made good progress in expanding Nkout's mineral resource during 2011, with an estimated 944-million tons a year.

The divestment would ensure that Afferro would be able to accelerate Nkout’s development strategy, including completion of a preliminary economic assessment, which started in November, and a prefeasibility study at the mine.

Afferro was continuing to have discussions with potential strategic partners prepared to fund Nkout's infrastructure requirements.

“Although these discussions are at an early stage, it is expected that the preferred partner would also provide a long-term offtake agreement,” the company said.

Alongside the development of Nkout, the miner’s exploration team planned to increase exploration activities at its other projects, particularly the Ntem and Ngoa projects, in Cameroon.

Severstal senior VP of strategy and corporate development Thomas Veraszto believed the transaction would strengthen the company’s position in the global iron-ore market.

“The acquisition is in line with our key strategic goals of being a leading global steel and steel-related mining company with high quality iron-ore and coal assets globally,” he added.