* IMIC pledges to overcome mine's infrastructure problems
* Afferro's strategy was flawed, says CEO
By Stephen Eisenhammer
LONDON, May 22 West Africa-focused miner Afferro
has agreed to a $190 million cash-and-paper
offer from investment group IMIC that could pave the
way for development of its flagship iron ore project.
The deal is unique because IMIC has already sealed a
partnership with China - a major potential buyer of the ore -
to build transport links so the raw material can be exported.
IMIC, allied with African Iron Ore Group run by Afren
founder Bert Cooper, teamed up with a unit of China
Railway Group to develop the infrastructure around Afferro's
most important asset, the Nkout iron ore project in Cameroon.
"The issue with West and Central Africa is infrastructure.
The deposit is there but the infrastructure is not so you're not
able to bring the product to market," Haresh Kanabar, chairman
of IMIC, told Reuters. "We identified that ... and started
building strategic partnerships with large multi-billion dollar
BHP cast doubt on the prospects of dozens of West
African iron ore projects when it decided earlier this year to
pull out of its Mount Nimba project in Guinea.
But the IMIC-Afferro deal has the potential to open up a
vital transport corridor for southern Cameroon and the Republic
IMIC will offer 80 pence in cash and a two-year convertible
loan note with a principle value of 40 pence for each Afferro
Afferro shares closed on Tuesday at 70.5 pence and were up
11 percent at 78.35 pence on Wednesday.
"The market is a bit sceptical about the 40 pence
convertible loan, which is why it's not trading higher," said
analyst Carole Ferguson at SP Angel. "The market is just very
sceptical of all bids unless they're full cash at the moment."
IMIC shares were up 2 percent.
The bid is IMIC's first major move as the investment company
targets resource projects and businesses in Africa. Kanabar said
the group aimed to invest in between two and five junior mining
companies in the region.
Afferro had previously hoped to use infrastructure that
China's Hanlong Group planned to build as part of its takeover
of neighbouring explorer Sundance. That deal collapsed,
leaving Afferro with little chance of developing Nkout alone.
"Afferro's strategy was flawed... Our relationships are all
directly with the Chinese state-owned companies," Kanabar said.
The IMIC offer also allows China to provide the
infrastructure and secure the offtake as a contractor instead of
taking over the company itself and the risks associated with it.
Such a structure may sit better with China's more cautious
recent approach to investing in projects in Africa.
Afferro Chief Executive Luis da Silva told Reuters he
expected to have a definite agreement in place within about two