POSCO signed a MOU with Afferro in Feb 2013 to develop Afferro's Nkout, Ntem and Akonolinga iron ore projects in Cameroon after Jindal Steel's take over discussion was terminated in January 2013. Afferro accused Jindal's offer undervalued the company and Jindal said it's not worth to spend $2b to build the rail for the low grade iron ore (33% iron content). Then in April 2013 came the IMIC take over bid. IMIC surprised the market with US$190m to wrap up the deal before the deadline but refused to disclose where the money came from, it was speculated that Chinese was behind IMIC.
If I remember correctly, Nkout is 330km to Kribi, so it's almost 2/3 of SDL's rail (although different port). I always suspect it's China's plan to build our rail so that she can collect the iron ore from at least both Nkout & Mbalam-Nabeba. That's why I believe China was not happy when our rail job was given to Mota Engil.
Below is a relevant article re this deal:
Mining investor IMIC prepares move for Afferro
Wed Apr 17, 2013 11:31am GMT
By Stephen Eisenhammer
LONDON (Reuters) - Investment group IMIC is preparing a 147 million pounds offer for West Africa-focused miner Afferro, the biggest move yet in its strategy of building an Africa-orientated resources group.
IMIC's bid promises to resolve the infrastructure problems that have held back Afferro's flagship asset, the Nkout iron ore project in Cameroon, through a separately secured partnership with a subsidiary of China Railway Group.
But the possible offer depends on IMIC raising the finance in the next 15 days and some analysts said it was hard to see value in the bid, which could result in a rights issue of new stock by Afferro which would be hugely dilutive to the company's shareholders.
Afferro, whose stock jumped 15 percent, still owns all of its main asset, unlike many of its regional peers, and has been in talks with several potential partners since late last year. It disclosed an initial approach from IMIC in December.
The bid is an ambitious move for IMIC, an investment company that targets projects and businesses in the resources sector, with Afferro having a market capitalisation four times its size, according to Thomson Reuters data.
IMIC, which already owns almost 5 percent of Afferro, Thomson Reuters data shows, in January appointed as chief executive Ousmane Kane, who had previously served as a non-executive director at Afferro.
IMIC said on Wednesday it had approached Afferro with three potential options:
- 80 pence per share in cash plus a loan note worth 20p convertible into shares or cash after 24 months and carrying an 8 percent coupon;
- 50p per share in cash plus a 70p per share convertible loan note;
- an equity swap into IMIC stock equivalent to 140p per Afferro share.
GOOD SOLUTION
Afferro CEO Luis da Silva said the offer was a good solution for solving infrastructure issues, but it all depended on IMIC finding the funding for its offer in the next 15 days - the deadline outlined in the proposal.
"What analysts and shareholders will have to look at is, what will be different if IMIC is successful, and the difference is infrastructure," he told Reuters on the phone from Cameroon.
Da Silva stressed the importance of agreements IMIC has signed with subsidiaries of the China Railway to develop infrastructure for Afferro's projects in Cameroon.
"These are very detailed agreements, they're not just simple one-page MOUs (memorandums of understanding)," he said.
Jeremy Dibb, analyst at brokerage Canaccord, said IMIC's lack of cash made the deal risky for Afferro shareholders.
"Without a full cash bid, shareholders would still have an equity or loan exposure, in our view exposing the company to further fundraisings or potentially leveraging a development company, as IMIC lacks the funds to internally fund the bid," he said in a note.
Dibb said IMIC only has around $20 million cash compared with Afferro's reserves of $90 million.
"It just seems to be opening the door for a Chinese party to come in and put in a significant amount of cash and pay very little for it in terms of equity skin in the game," Dibb told Reuters.
IMIC said the cash portion Of the offer would be subject to a limit of $100 million.
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