Cheapest entry to West African iron oreEdison analyst Charles Gibson said that Afferro represents the cheapest entry to West African iron ore
According to Edison Investment Research, Afferro Mining (LON:AFF,TSE:AFF) represents that cheapest entry to West African iron ore forinvestors, based on its resources.
The research house has initiated coverage of the AIM quoted iron oredeveloper today, valuing it at up to 346 pence compared to the stock’scurrent share price of 71.5 pence.
Edison analyst Charles Gibson said that based just Afferro’s 38.5percent in the Putu iron ore project in Liberia, the company is worth167 pence per share. Afferro’s other “world class” iron ore project,Nkout in Cameroon, adds another 182 pence to the valuation.
“On this comparison basis, Afferro represents the cheapest entry to WestAfrican iron ore and a good buy, even when taking into account thecurrent worldwide market turmoil,” said Gibson.
The report also noted Afferro’s recent fundraising effort, which raised it £14.9 million.
Edison said this should carry the company through the next nine monthsof its “aggressive exploration campaign”, which is currently costingUS$11 million per quarter.
As of 5 August this year, the company had US$30 million in the bank.
At Putu, Afferro and partner Severstal of Russia are currently advancing Putu towards a pre-feasibility study (PFS).
The project currently has a resource of 2.4 billion tonnes, a 200percent increase since the first resource estimate – prepared inaccordance with the globally recognised NI43-101 standard – wasannounced in July 2009.
According to estimates backed by consultancy SRK, there is potential for a resource of up to 4.2 billion tonnes.
Afferro believes that the resource at its wholly owned Nkout also hasthe potential to reach 4 billion tonnes. The project currently accountsfor 1.42 billion tonnes of the total 14 billion tonne potential of theMekambo iron ore orbit of West Africa.
Gibson noted that infrastructure remains a key issue at both Nkout and Putu.
According to the analyst, Putu represents the least infrastructure riskas it requires less capital expenditure on part of Afferro. In additionto that, the project is located just 120 kilometres from existinginfrastructure and there may be the option to use existing portfacilities.
An infrastructure scoping study for Putu is expected in September/October this year.
As for Nkout, Fairfax analyst John Meyer has previously said that theproject could potentially use infrastructure planned by SundanceResources, which has the latest stage assets in the region.