Mano River And African Aura Merge To Create A Gold And Iron Ore Specialist With Cash In The Bank And Big, Big Plans
By Alastair Ford
minesite.com
You get a bit of a feel for the way Luis da Silva’s mind is working when, mid-way through a discussion on the proposed merger between his company, Mano River Resources, and fellow West African-focused explorer African Aura, he starts talking about an iron ore “division”, instead of talking simply about good old-fashioned iron ore “projects”. On the face of it that sort of talk involves jumping several guns, not the least of which is that the deal between African Aura and Mano has yet to be consummated. At the very least some sweet talking to Canadian investors is required on the part of the Mano board. But looked at another way it makes perfect sense.
Mano’s recent strength and its robust stance in the face of the current global financial crisis has in large part been due to the security provided by having a big powerful friend in the shape of Russian steel giant Severstal. And Severstal really is a giant – according to the Metal Bulletin’s steel makers rankings for 2008, the company is 12th in the global pecking order. So, yes the post- credit crunch playground may be a nasty place to play, but with a big burly Russian at your very shoulder, you can at least move about freely. Severstal is stumping up US$30 million for the development of Mano’s Putu Range iron ore project in eastern Liberia, and is also responsible for providing much of Mano’s existing £3 million cash in the bank. And with Severstal involved, and two potentially huge iron ore projects now inside Mano instead of one, talk of an iron ore “division”, no longer appears ahead of itself, and actually starts to sound ordinary, if a little futuristic.
“We would dearly love to bring Severstal in for another deal”, says Luis da Silva, in what’s perhaps a statement of the obvious. But African Aura’s Nkout project in southern Cameroon does look the perfect candidate for another Mano-Severstal tie-in. Stretching out over a lengthy 12 kilometres, as defined by airborne geophysics and geological mapping, it certainly wouldn’t be that surprising if in the future Severstal at least ran the rule over Nkout. And, with Severstal still fairly new to West Africa, the chances are that even if the company did like what it saw at Nkout and started throwing its US dollars around, the enlarged Mano-African Aura would still be invited to participate on reasonably favourable terms, in order to encourage it to bring its local expertise to the party. With reconnaissance sampling along a five kilometer section of Nkout showing an average grade of 54%, this is not a small target, even if it is early stage. But with Severstal knocking around, the larger the better. If they reach their full potential, both Putu Range and Nkout will require billions of dollars to bring them on stream - that’s the work of a “division” to all but the most churlish. For our immediate purposes though, Kirill Zimin, Severstal’s man who watches all things Mano, will simply jump across to a non-executive role on the board of the enlarged company, and continue his watching brief.
Mano shareholders will own around 75 per cent of the enlarged business, although for a variety of complicated reasons, partly to do with a 1-for-6 share consolidation, and partly to do with Canadian listing requirements, the company will in future be known as African Aura. So the Aim market will soon bid farewell, in name at least, to one of its longest-standing constituent members. But, as African Aura, Mano River will live on. Indeed for those who were first introduced to the company through the marketing efforts of Steven Poulton there are actually elements of déjà vue in the deal as, by virtue of his role as a founder of African Aura, Steven comes back onto the Mano board, also as a non-executive director. To round off this gathering of illustrious board members, Guy Pas, that consummate deal-maker, is also staying on, as is African Aura’s chairman David Netherway. The future of African Aura’s current chief executive, John Gray, is less clear cut, and hasn’t actually been decided yet, although he’s likely to remain involved in some senior capacity or other. Luis da Silva remains in the chief executive role.
So what happens next is that Luis jets off to Canada with various advisers to seal the deal over there. As far as the Canadians are concerned, Luis reckons this series of transactions has several advantages. Investors in Canada will like the share consolidation, they will like the scale added to the iron ore offering, as well as the expansion of the gold portfolio. They will like the added liquidity. And they will like the fact that Mano isn’t just sitting still, hunkering down waiting for the storm to pass. “Now is the time to be building a company with momentum and critical mass”, says Luis. The combined company will have around £6 million, or C$11 million, in the bank, and it’s worth noting that each side contributes a very approximate half of that total – or to put it another way, this wasn’t a deal concluded with a clock was ticking loudly in the background, rather it was a strategic and well thought out combination. One indeed that might have been concluded previously, were it not for the earlier intervention of a troublesome African Aura shareholder with a low-ball offer.
But outside of the intricacies of closing off the African Aura-Mano combination in a legal sense, the next big thing to watch out for will probably be news from Mano’s New Liberty gold project in Liberia. This is something Luis comes back to time and again, and it’s obvious he’s anticipating good news. The plan is to drill the property down to at least 300 metres, have a look at the results and take it from there. There’s plenty to go on for back-of-the envelope merchants though, as a feasibility study dating back a couple of years put a US$56 million price tag on a potential open pit operation. The plan now is for an underground operation, and Luis reckons that that will come in at a cost of around US$100 million. It’s too early to be more precise, or to flesh anything out, but one thing Luis doesn’t reckon he’ll have trouble with is raising the money on the markets to get a mine built. Whether he’s right in that confidence remains to be seen. But as a quick footed West African consolidator, backed in part by heavy-duty Russian cash, the Mano River that we’re about to say goodbye to sure is a different proposition to the grass roots explorationist we said hello to all those years ago. |
