The biggest iron ore deposit in the world outside of Australia and Brazil, Simindou in the African country of Guinea, has been stranded since it’s discovery by RIO in the 1990s despite hundreds and hundreds of millions having been spent on delineation and mining/environmental studies and despite the Chinese giant Chinalco owning 39.95% and RIO owning 40.05% of the project. The delay in developing this world class Tier1 resource IMO was a master stroke on the part of RIO to protect the price it receives for its Australian iron ore. An example of putting one’s foot on a strategic asset to stop development and protect one’s market share as I’ve explained in previous posts. This is a recognised LONG - STALLED project.
Reports in May 2017 suggested that Chinalco was interested in taking the entire project of RIO’s hands to secure LONG TERM supplies of iron ore. You can read about this proposal below and the then state of this stall major project.
https://www.reuters.com/article/us-...e-guinea-simandou-iron-ore-mine-idUSKCN18B1QL
“That suggests Chinese interest in Simandou is part of a long-term strategy, driven more by concerns about control of resources than short-term shareholder value, the sources say.”
Unfortunately ASX investors will always view their own investments through the prism of their own biases. IMO Manono has a much higher probability of becoming a stalled project, like Simandou, than of being developed anytime in the near future. This doesn’t mean the project won’t be bought by the Chinese but I think that the premise that the Chinese are desperate to buy and develop and have money burning holes in their pockets to secure Manono at any cost is false. I think the premise that the Chinese might use the continued need for development funding of the project to increase their stake is more likely. A slow war of attrition through dilution of existing equity holder’s interests would be the smart way to play this. At the moment AVZ still have significant cash to develop the project but I’d be seriously questioning who they will be developing the project for. Once the money has been expended the tin will again be rattled in the direction of the Chinese who will be holding all the cards. I suppose it comes down to whether or not you believe the Chinese are desperate for Manono to be developed, if they are than AVZ still have a card to play, if they are not, like I believe, it will be death for the AVZ shareholders by a thousand cuts as was the case for shareholders in SDL in the Cameroon and Congo with their Mbalam-Nabeba Iron Ore Project. At the moment a lot of you believe the former. Time will tell who is right and who is wrong. The market is not currently pricing this as an imminent hot prospect for a take-over. Even in the unlikely event that a TO comes it’s unlikely to be at any more than a 60-100% premium to the current price which would leave many of the faithful that bought higher disappointed along with those calling for higher valuations. I’ll save this post for future reference and give my sincere apologies to this forum if AVZ gets taken over for more than about 20cents/share. Esh
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