Afferro Mining Signs Preliminary Pact With South Korea's Posco

Cameroonian iron ore explorer Afferro Mining Inc. (AFRIF, AFF.V) said Monday it has signed a preliminary agreement with South Korean steelmaker Posco (PKX, 005490.SE) to facilitate infrastructure and project development funding for three out of Afferro's four iron ore projects.

Afferro said Monday it had signed a memorandum of understanding with Posco Africa, a unit of Posco, in order to negotiate a definitive agreement in relation to Afferro's Nkout, Ntem and Akonolinga iron ore projects in Cameroon. The Nkout project alone has the potential to produce 35 million tons of the steelmaking raw ingredient annually.

Both parties are working towards signing a definitive agreement during the second quarter of this year, Afferro said.

Miners have flocked to West Africa to develop a new basin for the steel making raw ingredient in order to meet iron ore demand from fast-growing developing countries such as India and China. A scarcity in funding, however, over the past year has made it hard for many of the small- to medium-sized miners to fund their projects, particularly for those which require heavy amounts of investment in port and railway infrastructure to ship their bulk commodities abroad.

"The MOU with POSCO Africa is a potentially transformational step in the continuing development of our high quality and strategically located portfolio of iron ore assets in Cameroon," said Luis da Silva, Chief Executive of Afferro, in a statement.

"POSCO has extensive expertise in developing iron ore projects and related infrastructure, and an existing presence in Africa, making them an ideal partner to work with us to unlock long term value from our project portfolio," he added.

Posco Africa is headquartered in Johannesburg and has operations in Mozambique, Zimbabwe, South Africa and Ethiopia.

Afferro announced last year that it was in negotiations with potential suitors interested in buying out the company. Earlier this month, however, it said talks with one of the potential suitors, Jindal Steel & Power Ltd. (532286.BY), had ended after Jindal made an indicative offer that Afferro said undervalues its portfolio of iron ore assets.

Afferro's shares closed up 2.7% at 78 pence a share.

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