NEWSPublished 0:29 AM Feb 27, 2008Last update 7:04 AM Feb 27,...

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Published 0:29 AM Feb 27, 2008
Last update 7:04 AM Feb 27, 2008



Cape Lambert plans $170m Africa buy



LONDON -- Australian exploration firm Cape Lambert Iron Plc plans to invest about $170 million ($US158 million) in an African iron ore asset by June, chief executive Tony Sage told Reuters.

The London-listed firm also plans to return about $100 million to shareholders following the sale of its Western Australia-based Cape Lambert iron ore project to Chinese government construction firm China Metallurgical Group Corp, a sale that will raise $400 million.

"We've signed the confidentiality documents and done the due diligence on the Africa project," said Mr Sage, who was speaking by telephone from Australia.

"It's a fantastic resource, but we won't sign the MOU (memorandum of understanding) until the first tranche is paid by China Metallurgical, likely in the first week of June," he said.

Cape Lambert's foray into Africa comes as foreign groups like China Metallurgical increasingly take stakes in Australian miners, helping to meet its voracious need for minerals to fuel rapid industrial growth, but which could result in over-mining.

"The market will have to take a new view on Cape Lambert given its investment in this asset, but it could be a good move," said Collins Stewart analyst Danny Keating.

"The Australian market is well-represented and quite competitive and there's a lot more potential for new discoveries in Africa.

"We'd like to see where its location is and what sort of plans they have for it, but I suspect it's at a relatively early stage."

The firm's FTSE-listed shares had almost doubled since the start of the year ahead of yesterday's announcement on the sale to China Metallurgical.

Cape Lambert has excluded a 3km-long as-yet-undrilled site in Western Australia from the China Metallurgical sale, which the firm says will be worth as much as $300 million at current prices, Mr Sage said.

"That's the blue sky scenario," he said. "The market has not yet given us a value for that asset, and that's the upside to the share price."

By Hsu Chuang Khoo of Reuters