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from: DOW JONES NEWSWIRES


INDABA: Miners See West Africa Iron Ore Ripe For M&A Activity

10/02/2012 1:06AM

By Devon Maylie

Of DOW JONES NEWSWIRES


CAPE TOWN, South Africa (Dow Jones)--Iron-ore developers in west Africa are poised for a flurry of merger and acquisition activity this year, with a number of companies in discussions to join up with partners or conclude takeover deals.

Miners and analysts said that the proposed merger between Anglo-Swiss miner Xstrata PLC (XTA.LN) and commodities titan Glencore International (GLEN.LN) could be the catalyst for more activity in the west African iron ore space, and that there are deals to be had in the region, given the difficult fundraising environment.

Boutique investment bank Fairfax said that if major mines being developed by Rio Tinto PLC (RIO) and Vale SA (VALE) in Guinea come to fruition, the country could become the world's third-biggest source of seaborne iron ore by 2016, after major producers Australia and Brazil.

Indeed, west Africa could be producing 1 billion metric tons of iron ore a year within a decade if a number of projects due to start production by 2016 come online on schedule, said Socrates Vasiliades, chief executive of central Africa developer Core Mining Ltd. Core is developing a mine in Gabon and is in the early stages of discussions to bring in a partner on the project, as it seeks to be producing by 2016.

"Something is likely to happen this year regarding a strategic partner," Vasiliades said.

Core, which counts Glencore and Severstal (CHMF.RS) among its shareholders, isn't alone. Bellzone Mining PLC (BZM.LN), which is developing iron ore in Guinea, said it is the right time to be picking up assets because stressed equity markets are pushing the value of companies down even when they have good mineral deposits.

Cape Lambert Resources Ltd. (CFE.AU), which is pursuing an initial public offering for it Sierra Leone iron ore operations by the end of June, said it could use the listed entity to pursue mergers and acquisitions.

"It is a buyers market…there is a lot of interest going around the region because they see bargains," said Bellzone's Chief Operating Officer Graham Fyfe, noting Bellzone, which is developing an iron ore project in Guinea with its 50-50 joint venture partner China International Fund Ltd., is itself is in talks with a number of parties about its assets.

This year has already seen activity in the region. In January, South African diversified mining company Exxaro Resources Ltd. (EXX.JO) said it would pay up to $348 million cash for African Iron Ltd. (AKI.AU), an Australian-listed company developing an iron-ore mine in Republic of Congo; Sundance Resources Ltd. (SDL.AU), which is developing iron ore mines in Cameroon and Republic of Congo, is still in talks with China's Hanlong Mining to conclude a deal; and reports this week also suggested that BHP Billiton Ltd. (BHP) is close to striking a A$3.5 billion deal with the government of Gabon over the Belinga project, which is said to contain about 4 billion metric tons of iron ore.

The three major producers--Vale, Rio Tinto and BHP--are all developing iron ore assets in west Africa, as is steel titan ArcelorMittal (MT). Glencore already has an offtake agreement with London Mining PLC (LOND.LN), which is digging iron ore in Sierra Leone, and Xstrata PLC (XTA.LN) in 2010 bought Sphere Minerals, which has iron ore assets in Mauritania, and last year took a controlling stake in Jumelles Ltd., a subsidiary of AIM-listed Zanaga Iron Ore Co. (ZIOC.LN), which owns the Zanaga iron ore project in Congo.