TIDMAFF
RNS Number : 7458T
Afferro Mining Inc.
12 December 2011
NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION
TO US NEWS WIRE SERVICES.
12 December 2011
TSX-V: AFF
AIM: AFF
AFFERRO MINING INC.
Afferro divests interest in the Putu Iron Ore Project
for minimum US$115 million cash
Afferro Mining Inc. ("Afferro" or the "Company"), a TSX-V / AIM
listed exploration and development company is pleased to announce
that Afferro and its wholly owned subsidiary, Mano River Iron Ore
Holdings Limited ("Mano"), have entered into a legally binding
heads of terms agreement (the "Heads of Terms") with Lybica
Holdings B.V. ("Lybica"), an affiliate of ZAO "Severstal Resources"
("Severstal"), for the sale of its 38.5% interest in the Putu iron
ore project in Liberia ("Putu"). Lybica currently holds the
remaining 61.5% interest in Putu.
Transaction Highlights:
-- Afferro to receive a cash payment of US$65 million on completion;
-- Afferro's right to request a deferred payment of US$50 million cash;
-- Additional consideration should Putu be sold to a third party;
-- Afferro released from any further capital contribution to fund Putu from 1 January 2012;
-- Transaction subject to shareholder and regulatory approvals;
-- Funds will be used to accelerate the Company's development
strategy for its 100% owned Nkout iron ore project in Cameroon;
and
-- Proceeds will enhance Afferro's negotiating position in
attracting a strategic partner for Nkout.
Luis da Silva, Chief Executive Officer, commented:
"This transaction demonstrates Afferro's ability to successfully
generate significant returns for our shareholders. Divesting the
minority stake in Putu to generate total cash proceeds of at least
US$115 million allows the Company to focus on its 100% owned
flagship Nkout project and minimises shareholder dilution. With the
focus and cash, Afferro will be extremely well placed to enter a
new and exciting phase of growth. We would like to thank Severstal
for the successful partnership between our companies during the
last three years."
A conference call for analysts and investors will take place at
11.00 GMT on Monday 12th December 2011 on the following
numbers:
UK dial in: +44 20 8515 2302
Toll Free UK: 0800 358 5271
Toll Free Canada: 1 866 228 9189
A replay of the conference call will be available on the
Company's website: www.afferro-mining.com
Strategy: Taking into consideration the potential upside from
its other core projects and the increasing capital commitments for
Putu the Board of Directors of Afferro believes this is an
appropriate time to divest the Company's remaining non-controlling
interest in the project. The Nkout project, like Putu, has the
potential to continue to create significant value for Afferro. The
Company has made exceptional progress in expanding Nkout's mineral
resource in 2011, with an estimated 944Mt at 32.7% Fe in the
indicated category and 1.05Bt at 31.6% Fe in the inferred category.
The mineral resource at Nkout has been delivered in only 18 months
and under budget, reflecting the Company's cost effective approach
to exploration.
The proceeds from divesting Putu ensure that the Company will be
able to accelerate its development strategy in Cameroon, including
completion of a preliminary economic assessment ("PEA") and a
prefeasibility study at Nkout. Work on the PEA which commenced last
month with a site visit by the project team and a delegation of
government ministers from Cameroon together with ambassadors from
Canada and the UK. The delegation was impressed with the progress
Afferro and its local wholly-owned subsidiary Caminex SARL have
made. At a recent meeting in Cameroon the Minister of Industry,
Mines and Technological Development invited representatives of the
Company to a meeting along with other mining companies to establish
a consultative framework for the development of the mining industry
in Cameroon.
The Company is continuing to have discussions with potential
strategic partners who would be prepared to fund Nkout's
infrastructure requirements. Although these discussions are at an
early stage, it is expected that the preferred partner will also
provide a long term off take agreement. The cash resources from the
sale of Putu make Afferro a stronger party in any negotiations.
Consideration Terms:
Under the Heads of Terms, an initial cash payment of US$65
million will be payable on completion of a definitive sale and
purchase agreement (the "SPA") by no later than 28 February 2012.
The Company may be able to benefit from the future sale of a
material stake in Putu to a third party or other realisation of
commercial value without having to contribute further to its
development post 2011. A deferred cash payment will be made in an
amount to be determined in accordance with the following
provisions:
(a) At any time after the earlier of (i) June 30, 2013 and (ii)
two months after the delivery of a definitive feasibility study (a
"DFS") relating to Putu, Mano may require Lybica to pay a cash
payment of US$50 million. Such right shall terminate on the second
anniversary of such right first arising.
(b) Provided Mano has not exercised its rights under the above
clause (a), in the event of the agreement by Lybica or Severstal on
or prior to the date which is the earlier of (i) 12 months after
the delivery of a DFS and (ii) 31 March 2015 to directly or
indirectly sell all or a material part, being not less than 10%, of
Putu or otherwise realize commercial value for it (e.g. by the
introduction of another investor acquiring a material interest in
the project or offering of shares to the public in an entity
holding Putu), Lybica shall make a cash payment to Mano equal to
the greater of (i) US$70 million and (ii) a sum equal to 38.5% of
the total consideration in respect of the sale or realization event
less 38.5% of any further development costs, less the initial cash
payment of US$65 million, such sum to be multiplied by 50%.
(c) At any time after 30 June 2014, Lybica may at its sole
discretion make a cash payment of US$70 million to Mano being a
Deferred Payment. Upon receipt of such payment any rights of Mano
under clauses (a) and (b) above shall terminate.
Use of Proceeds:
The Company intends to use the proceeds to develop its Cameroon
iron ore assets with special emphasis on Nkout. Specifically the
sale proceeds are intended to fund:
The Company anticipates that work on the DFS for Nkout will
commence in the second half of 2013 and will take approximately 12
months to complete.
The potential for Direct Shipping Ore ("DSO") at Nkout is
currently under evaluation. To date, the Company has identified
18.5 million tonnes inferred DSO resource grading 60.3% Fe. The
current drilling programme is focused on Nkout Centre but the
Company intends to expand this to the west and east. Infill
drilling is expected to take place in 2012 to upgrade the DSO to
indicated resource status and potentially outline a DSO starter
project at Nkout to provide early cash flows.
Alongside the development of Nkout, the Company's exploration
team plans to increase exploration activities at Afferro's other
projects, and in particular the Ntem and Ngoa projects in Cameroon.
The Company believes the cost effective and timely delivery of the
above milestones will maximise the potential value of Nkout and the
other assets.
Exclusivity and Break Fee:
In consideration of Lybica agreeing to proceed with negotiating
the definitive transaction documents, Mano and Afferro have granted
a period of exclusivity to Lybica until midnight on 23 December
2011.
In addition each party to the transaction undertakes, that it
shall pay to the other party the sum of US$3 million in the event
that: (a) the proposed transaction does not complete prior to 28
February 2012, as a result of that party's failure to use its
reasonable endeavours to satisfy the conditions precedent to
completion; (b) upon satisfaction or waiver of all the conditions
precedent, they fail to fulfil their obligations with respect to
the completion of the transaction; and (c) in the case of Mano and
Afferro, either of them breach their obligations under the
exclusivity agreement.
Timing and next steps:
Subject to the terms and conditions set out under the Heads of
Terms, the parties plan to enter into the SPA by 23 December 2011.
Approval from shareholders, TSX-V and AIM will be required in order
to complete the sale transaction. An information circular setting
out the details of the transaction and the notice of the special
meeting of shareholders will be sent to the Company's shareholders
in due course.
For further information please see the Company's web site at
www.afferro-mining.com or contact one of the following:
Afferro Mining Inc.
Luis da Silva / Bevan Metcalf /Jeremy Cave
Tel: +44 (0) 20 7257 2930
Evolution Securities Limited
Nominated Adviser: Neil Elliot / Adam James
Corporate Broker: Chris Sim / Jonathan Wynn
Tel: +44 (0) 20 7071 4300
RBC Capital Markets Joint Broker: Martin Eales / Richard
Hughes
Tel: +44 (0) 20 7653 4000
Pelham Bell Pottinger
Charles Vivian / James MacFarlane
Tel: +44 (0) 20 7861 3232
About Afferro Mining Inc.
Afferro is an established exploration and development company
listed on the TSX-V (AFF) and AIM (AFF). Afferro's portfolio
includes the 100% owned Nkout iron ore project and surrounding iron
ore targets in Cameroon. At Nkout, Afferro has an NI 43-101
compliant indicated mineral resource estimate of 944Mt at 32.7% Fe
and an inferred mineral resource estimate of 1.05Bt at 31.6% Fe.
Afferro currently has a 38.5% interest in the Putu iron ore project
in Liberia, which it is currently intending to sell to Severstal,
the Company's joint venture partner, under the binding heads of
terms agreed between the Company and Severstal.
Qualified Person
Howard Baker has some ten years' experience in the exploration,
definition and mining of iron ore Mineral Resources. Howard Baker
is a full-time employee of SRK Consulting (UK) Ltd, an independent
Consultancy and has sufficient experience which is relevant to the
style of mineralisation and type of deposit under consideration,
and to the type of activity which he is undertaking to qualify as a
Qualified Person in accordance with NI 43-101 and a Competent
Person as defined in the June 2009 Edition of the AIM Note for
Mining and Oil & Gas Companies. Howard Baker consents to the
inclusion in the announcement of the matters based on their
information in the form and context in which it appears and
confirms that this information is accurate and not false or
misleading.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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