Alecto Minerals Acquired Bauxite Licence in Guinea

2012-03-07

Mar. 6, 2012 - Alecto Minerals'  acquisition of bauxite licence 223 in Guinea could quickly transform the company into a producer, broker Fox-Davies said today.
Analyst Peter Rose said the area could potentially host a bauxite resource of over 500 million tonnes and is contiguous to the 3.1 million tonne per annum Kindia mine.
Alecto acquired the licence through its acquisition of Forward Africa Resources (FAR) in February.
Rose, who has a speculative buy stance on the shares, said the FAR licence also gives access to a railway line, roads and power.
In a bauxite project this is as important as the resource, he added.
There is also expansion underway at the port of Conakry to provide additional stockpiling and shipping capacity, he said.
The upgrade is expected to be completed in 2017.
The infrastructure is government owned and the authorities have already assured Alecto that it will be available to new bauxite producers.
Under the terms of the deal, Alecto has the right to buy 51 percent of FAR in exchange for a 15.2 percent stake subject to a 90-day due diligence period.
It can obtain full ownership within 18 months by issuing a further 14.785 percent of its share capital.
This means that Alecto could acquire the 500 Mt resource for £898,500, which Rose said was very cheap.
"The deal is not without potential problems, with corruption in Guinea being endemic at almost every level of society and keeping operating costs down will be difficult,” said Rose.
"However we believe the deal could transform Alecto as a company in a short amount of time.”