Investment group IMIC makes conditional bid for Afferro Mining, as JSPL backs out
18 April 2013
Two months after Jindal Steel and Power (JSPL) backed out from buying the West Africa-focused iron ore miner British investment group International Mining and Infrastructure Corporation (IMIC) has launched a $223 million conditional bid for Afferro Mining, .
AIM-listed IMIC, which has been building a stake in Afferro, has 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.
IMIC, which already holds 6.8 per cent stake in Afferro, said the cash portion in each of the options would be subject to a limit of $100-million.
The indicative offer was subject to a number of preconditions, including the successful raising of funds for the deal, the completion of documentation required to enact a reverse takeover under the AIM rules for the London Stock Exchange and the negotiation of an arrangement agreement.
In early February, Naveen Jindal-promoted JSPL had backed out of 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)
"There is major spending in billions of dollars required to create the required infrastructure and consequently the project may not be financially viable," the New Delhi-based company had said in a statement.
It also 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 3,000MW 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 chairman Haresh 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.
''The update on the IMIC discussions is a development that should be viewed positively especially in respect of the Chinese consortium that IMIC has assembled to address the iron ore infrastructure requirements of the Nkout project,'' he said.