Both of Afferro Mining's (LON:AFF, CVE:AFF) iron ore projects are going to plan, according to mining analyst John Meyer, of broker Fairfax.
The analyst released a note on the firm's progress following a meeting with the company's management yesterday (August 3).
Both Nkout (Cameroon) and Putu (Liberia) have shown tonnage potential with resource upgrades and an increase in projected tonnage, but to create value, infrastructure has to be developed in tandem as the company brings the projects through to feasibility, said the analyst.
"Crucially, as in a number of projects being developed in Africa, they are dependent on a high pricing environment continuing. Strategic partnerships with credible partners will help," he added.
Meyer said both projects depended on investment in infrastructure, with Nkout in Cameroon potentially using infrastructure planned by another firm - Sundance Resources. Afferro is 30km away from connecting to Sundance's planned railway.
"As Sundance is now subject to a bid by Sichuan Hanlong, Afferro will have to wait to see the outcome of bid and consequences for the planned railway line which connects to a deepwater port," he says.
Afferro estimates that the cost of the railway will be around $3.44 million a km/line in Cameroon and $2-2.5m /km line in Liberia, said the analyst.
Meyer says if Nkout can use the Sundance scheme, 30 km will cost a modest $103.2 million and connecting to the port directly would be 580 km at a cost of $2 billion.
He added that power supplies, in both Cameroon and Liberia, while improving, are unlikely to be able to service the two projects and they will need to self generate, while management was seeking strategic partners both for infrastructure and financing capability.
"At the jointly owned Putu project, Severstal have no right to an offtake at this stage but first right of refusal to buy out the stake in the Putu project," he said.
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