Africa-focused West African Minerals Corporation (LON:WAFM) is unlucky enough to be currently working in the iron ore space where prices have slumped but the group has prudently scaled back costs and is now waiting for an upturn in the market.
Iron ore prices have fallen to around US$60-70 per tonne, way below their 2013 highs of over US$140.
On the plus side, compared to peers, it has no debt, a healthy cash balance and a low maintenance cash burn rate of less than US$ 1 million per year, it pointed out in its latest full year report.
In fact, it shaved it’s expenses to £637,000 (2016: £764,000) in the 12 months ended 31 March, which meant its pre-tax loss slimmed to £539,700 (2016: £703,000).
At the end of the period its cash balance stood at £3.15mln (2016: £3.57mln).
Sanaga deposit the main focus
While it waits for iron ore prices to pick up, it is working on advancing its most mature and promising iron asset toward production.
That would be Sanaga in Cameroon, which lies 60km from the Douala Port and within 10km of the main rail line.
Earlier this year, WAMF said it would start to look for partners for the project after a scoping study indicated it could be brought into production within two years.
The deposit has a resource of 82.9Mt at 32.1%Fe and is 70km from the Atlantic Ocean, with access to existing road and power infrastructure.
Depending on which transport route is chosen the net present value (free cashflow over the project’s life) is between US$262-292mln, said consultant RHDHV.
Commodity prices are cyclical
West African said it was securing appropriate infrastructure for the project while also seeking out “compelling new business opportunities” outside of iron ore.
“Our long-term view is that all mineral commodities are fundamentally cyclical and that those companies that can take advantage of periods of low asset valuations to build their portfolio will be well place to benefit from the eventual market recovery,” the company said.
Shares were flat at 2.88p on Friday.