IMIC to acquire Cameroon-focused ore miner Afferro Mining for $190 mn
23 May 2013
In a deal sttruck today West Africa-focused iron ore miner Afferro Miningwill be acquired by British investment group International Mining and Infrastructure Corporation (IMIC) in a $190 million cash-and-paper deal.
The acquisition comes three months after Jindal Steel and Power (JSPL) backed out from talks on investing in a Cameroon iron ore mine owned by Afferro, after finding that the project was not financially viable. (See: Jindal Steel backs out from investing in Afferro Mining's Cameroon iron ore mines)
In April, IMIC, which holds a 5-per cent stake in Afferro, had tabled three takeover options, which include an 80 pence per share offer with a convertible loan note of 20 pence per share, or 50 pence per share in cash plus a 70 pence per share convertible loan, or shares in IMIC equivalent to 140 pence per Afferro share.
Under the terms of the deal agreed yesterday, IMIC will offer 80 pence in cash, plus a 2-year convertible loan note of with principal value of 40 pence for each share of Afferro:
IMIC said that this combination of cash and convertible loan notes, which values Afferro at approximately $190 million, replaces the three options it had proposed in April.
David Netherway, chairman of Afferro, said, ''The board believes that the 120p per share proposal offers good value and the ability for further upside with the exposure to the strong relationships built by IMIC with the key consumer that is China.''
''We believe that the combination of IMIC and Afferro is highly attractive in that it brings together Afferro's high quality African iron ore assets with a deliverable infrastructure and offtake solution,'' said Haresh Kanabar, chairman of IMIC.
Earlier JSPL had backed from cutting a deal since it felt that a buyer would have to invest billions of dollars to create the required infrastructure and had said that the future potential of the mining licenses are unclear.
AIM and Toronto Stock Exchange-listed Afferro holds 100-per cent ownership in three exploration permits in Cameroon, Nkout, Ntem and Akonolinga iron ore projects and 70 per cent the Ngoa project, which lies close to its flagship Nkout permit.
The Cameroon government issues exploratory permits for a period of 7 years, and under new mining rules, may renew them subject to permit holder handing over 50 per cent of the concession area.
Two of Afferro Mining's biggest and explored permits are due for renewal in 2013, amidst uncertainty whether the Cameroon government will renew them unconditionally or under the 50-per cent take back policy.
The mines currently do not have the required transport and power infrastructure, and are located 30km from a proposed rail corridor and an upcoming deepwater port located 330 km away.
The government, which is aiming to triple grid capacity to 3,000 MW by 2020, has also promised to supply power to the mines.
But, with uncertainty both with the exploration leases and infrastructure that may be built, some of the earlier suitors had backed away from concluding a deal.
IMIC, headed by Kanabar, has roped in two Chinese state-owned companies to help close the deal.
Prior to tabling the bid, IMIC has signed an iron ore offtake agreement from Nkout with China Railway Materials, and China Railways Eryuan Engineering to build the infrastructure from Nkout to port.
Luis da Silva, Afferro's chief executive, said that the indicative offer was an endorsement of the progress it has made at its iron ore projects, especially at Nkout.