UPDATE 1-Afferro strikes Cameroon deal with Korea's POSCO

Mon Feb 25, 2013 4:01am EST

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LONDON Feb 25 (Reuters) - Junior iron ore miner Afferro has struck an early-stage agreement with Korean steelmaker POSCO, and could secure a project and infrastructure funding boost with a definitive deal within months.

Afferro - active in Cameroon where its projects include Nkout, one of the largest deposits in the country - is one of a group of development and exploration companies hoping to turn West Africa into a major iron ore exporting region.

Tough markets have created financing restrictions for companies like Afferro, who need to overcome West Africa's dire lack of roads, rail lines and ports - troubles compounded by a weaker iron ore price.

Afferro had said last year it was seeking a partner.

It broke off negotiations with India's Jindal earlier this month, saying an indicative bid "fundamentally undervalued" both the company's deposits and its balance sheet.

On Monday, it said that it had signed a 'memorandum of understanding' with POSCO Africa, with the intention that POSCO will make a project level investment and co-operate on infrastructure and project development funding.

Both sides are working towards a definitive deal in the second quarter, the company said.

Afferro shares were up around 2 percent in early London trade, marginally outperforming a 1.6 percent rise in the sector.

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