Afferro outlines plans for the rest of 2011

West Africa-focused iron ore miner Afferro (LON:AFF, CVE:AFF) outlined its key objectives for the remainder of 2011 as it published its half-year results today.

The firm intends to complete its 81,000-metre drill programme at the Putu project by the fourth quarter of this year, as well as progress other work in order to complete a pre-feasibility study by Q1 2012.

Putu – which Afferro jointly owns with Severstal (Afferro has a 38.5 per cent stake) – holds a 1.89 billion-tonne magnetite banded iron formation ‘indicated’ resource.

At its Nkout project in Cameroon, Afferro plans to further increase the resource (estimated at 1.42 billion tonnes at 33.6 per cent iron), as well as identify additional potential direct shipping ore material by Q4 2011. It also plans to complete the logistics and infrastructure scoping study by the fourth quarter, before beginning a preliminary economic assessement on Nkout.

Afferro’s half-year results revealed that it is debt free and had cash and cash equivalents of US$7 million at the end of June, along with total assets of US$40.1 million. Its current cash balance is US$27.9 million.

US$29.2 million was spent during the period, which included US$10.8 million transferred to Aureus (LON:AUE, CVE:AUE) in the plan of arrangement when the two companies were formed out of African Aura earlier this year.

The firm made a loss during the six months to the end of June of US$6.7 million.

“We have had an extremely busy and successful first half to 2011. Following the split, Afferro is now focussed on developing its iron ore assets,” said Luis da Silva, Afferro’s chief executive. “There has been much progress in increasing our iron ore resource this half. The resources at both Nkout and Putu are now of sufficient scale to justify development as stand-alone projects.”

da Silva added that the company now has more than 900 million tonnes of attributable contained iron.

Analysts at broker Fairfax commented: “The company has demonstrated that they have tonnage at both their projects and now need to demonstrate the feasibility of both projects. The study on logistics and infrastructure will be useful in this process. Success in securing an offtake agreement will also help to underpin the projects.”

House broker Evolution Securities point out that “as is typical for exploration companies, there is little of interest in the group’s income statement”, noting that the loss from discontinued operations and various entries in the firm’s cash flow statement represented the closure of the butterfly split that separated African Aura’s gold assets out of what became Afferro and into Aureus.

Focusing on Putu and Nkout, Evolution noted the group’s aim to increase its indicated resources by the end of 2011 at Putu and its plans to complete its scoping study during the third quarter and deliver a pre-feasibility study in the first half of next year.

The broker reiterated also reiterated its ‘buy’ target for Afferro’s shares.

Evolution has a target price of 408 pence each for the shares, which were down one-fifth of a penny at 63.3 pence each by 11:33am today.