Cape Lambert ramps up Marampa interest
Mining developer Tony Sage’s plan to sell the majority of a Sierra Leone iron ore venture via a 430 million Australian dollar (US$435 million) initial public offering in London looks to be on shaky ground because of weak equity markets.
The good news for Sage’s Cape Lambert Resources is the strong interest shown by Chinese and other companies in the Marampa project, which could result in an outright or partial sale of the asset.
“We’ve had six (groups) through the data room for Marampa, including Chinese interests,” said Mr. Sage, Executive Chairman of Perth-based Cape Lambert, which specializes in buying early stage mineral assets and then on-selling them after adding value.
“There are also non-Chinese companies in the data room and they are already in West Africa.”
Mr. Sage declined to identify the parties due to confidentiality agreements.
But Perth stockbroker Patersons Securities says global miners Vale of Brazil and U.K.-based Xstrata are two of the parties undertaking due diligence on the undeveloped iron ore asset.
“We are confident that Vale and Xstrata have been in the Marampa data room but, given they are both active in West Africa, they are probably looking at any assets that come up,” said Alex Passmore, head of research at Patersons.
Spokespeople for Xstrata and Vale weren’t immediately able to comment.
Mr. Passmore, of Patersons, says interest in Sierra Leone – one of several West African countries trying to establish a major iron ore export industry – has increased after the country last month shipped its first iron ore shipments in 30 years, courtesy of African Minerals’s Tonkolili mine.
“Confidence in mining projects in Sierra Leone will have improved markedly given the commencement of exports, providing Cape Lambert a boost in its efforts to IPO or sell Marampa,” Mr. Passmore said.
However, due to weak market conditions, a straight sale of Marampa might only fetch roughly A$250 million, a 20% discount to Patersons’ valuation of the asset, he said.
Mr. Sage, meanwhile, insists that his preferred option remains an IPO, despite the company delaying plans that would have seen a prospectus unveiled in October.
“We haven’t pulled anything,” Mr. Sage said. “When the market starts to turn we will issue a prospectus and go from there.”
But he said: “If someone comes along and makes us a silly offer in the meantime, we will do something.”
One favorable outcome is that a “cornerstone investor”, possibly Chinese, may secure iron ore offtake rights and buy roughly 40% of the IPO, he said.
Mr. Sage believes Marampa could support a 10 million tons a year export operation, following an investment of US$1.05 billion.
By Stephen Bell
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