great development upside & takeover potential

Near-ology, high-growth emerging region & Takeover potential

If you look at the map below you can see at some of the other major projects happening around us. We see the big players playing in the sand around us and LEG being excellently positioned amongst them.



Although further north-west, I am sure everyone has heard of the increasing M&A activity in West Africa by the big players in the region. The latest move was made by Xstrata who acquired Sphere Minerals for $3 per share or $514m up in Mauritania, and this was for a player who was already in production in the vicinity of 6Mtpa.

Closer to home, the majors Vale, RIO and BHP have robust projects already in operation and production is being ramped up to take advantage of record iron ore prices breaking the $170p/t mark.

And in the hot spot closes to us we have SDL, Equatorial Resources, Cape Lambert/ DMC and Severstal.

To be considered as a realistic takeover target you need to be close to existing infrastructure and preferably close to nearby existing projects. LEG ticks both boxes for its Eseka tenement and also ticks the box of having infrastructure already in place and as the map shows is only a stones throw from the to-be expanded Kribi port. Its northern Mayon Ninka tenement would most likely need to discover greater deposits along the periphery to justify further expansion and link up other stranded resource deposits in the region to an expanded CAPEX intensive rail line. I suspect LEG would need to team up with a strategic partner or JV partner to have the means to do this, but should it succeed, which we have seen is likely the positive Chinese and big player response to the region, we will see a SDL style re-rate immediately on that project alone.

Soverign Risk you say?

Some investors have cited sovereign risk as one of the greatest barriers to entering into investments in projects in this region. But what we see here is a great determination by these African governments to build this region into a world-class resource base. I am sure that many West African governments (or Africa for that sake) look at Brazil and the Pilbara with envy looking at how our resource boom has fuelled great living standards and development and economic growth. They want this too, and so does the big players. Through each fast tracked investment and growth development project (i.e. Rio Tinto's fast tracking of its project with Chinalco) we see the fears of sovereign risk being dispelled and the "critical mass" of this region expanding in a Carajas/Pilbara style development.

Anyone familiar with the SDL mining convention would know that the Cameroon and Congo governments are both giving SDL internationally completive royalty rates and a 5 year tax holiday to attract investment. In turn, this sends a signal to other investors around the world that Africa means business, and is prepared to undercut competitors (Australia and Brazil) to attract greater FDI and lift their people out of poverty.