Afferro Mining: MoU With POSCO, In Talks With IMIC

Having signed MoU with POSCO, Afferro is now close to striking a breakthrough deal with one of the top-5 global steel producers, which is prepared to make a project level investment and should be instrumental in bringing the development and infrastructure funding. A definitive agreement is expected in Q213. Regardless of the outcome, Afferro maintains some flexibility as it remains in talks with IMIC (a 5.0% shareholder).

Afferro has signed an MoU with POSCO in relation to the Nkout, Ntem and Akonolinga iron ore projects in Cameroon. While the MoU is non-binding and non-exclusive, the companies will work towards signing the definitive agreement in Q213. The deal could result in a project level investment from POSCO to advance the Afferro assets to the development stage. Beyond that, POSCO, with its extensive upstream and downstream expertise, should be instrumental in facilitating the project and infrastructure financing. We believe that this tie-up, which comes shortly after the similar MoU between POSCO and Legend Mining lapsed, underlines the quality of the Afferro’s asset base. The latter ticks all major boxes in terms of the scale (Nkout) and favourable location (Ntem). In particular, we believe that Ntem, which lies close to the Legend’s Ngovayang iron ore project but has so far delivered much better exploration results, could be of a particular interest for POSCO as it is located only 80km from the greenfield deep water port near Kribi and 10km from the proposed rail line. Ntem’s maiden JORC compliant resource is expected in Q213.

The news is positive for Afferro stock, which should be well supported by the expectations of the formal agreement with POSCO. With $90m in cash, Afferro currently trades at an undemanding EV/Resource multiple of $0.05/t. POSCO’s involvement would significantly de-risk the projects causing the stock to re-rate further.

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