African Minerals CEO Studies Copper, Steel Raw-Materials M&A
African Minerals Ltd. (AMI), studying a $2 billion iron-ore mine expansion in Sierra Leone, is considering acquisitions in commodities such as copper and steelmaking raw materials.
“There are significant opportunities in West Africa, across commodities and across countries, that we will be extremely well-positioned to take advantage of,” Chief Executive Officer Keith Calder said in a phone interview from London today, adding that his primary focus is the existing Tonkolili mine and Pepel expansion project.
African Minerals, which has a market value of $1.2 billion, began iron-ore shipments from Tonkolili in November 2011, making it Sierra Leone’s largest producer. The price of the steelmaking raw material, the most-shipped commodity after oil, more than tripled in the past decade, encouraging mining companies to expand in new regions and away from more traditional hubs such as Brazil and Australia.
“We are looking at anything that’s related to steelmaking, anything that’s related to infrastructure like copper,” Calder said. “The infrastructural-based commodities that are driving the Chinese, the Indian, the South American economic growth, I think those are very attractive.
‘‘I don’t think we are targeting a specific size of investment,’’ he said. ‘‘I think we will just be looking around to find what makes sense and what’s available.’’
African Minerals said today it’s exporting at a rate of 20 million metric tons annually, meeting its second-quarter target. The stock jumped the most in more than two months in London trading, rising 8 percent to close at 235 pence after earlier rising as much as 15 percent.
The company expects to meet an April forecast of 13 million tons to 15 million tons of exports for the year ending June 30 after reaching its export capacity this quarter, it said in a statement today. Ten shipments left its port over 30 days from May 18 to June 16, it said.
‘‘This is a crucial step for the company in remaining relevant to the wider investor base and shows the group is beginning to deliver under new CEO Keith Calder,’’ Citigroup Inc. analyst Michael Flitton wrote in a report today.
Credit Suisse Group AG estimates earnings before interest, tax, depreciation and amortization of $320 million in the 2014 fiscal year as production increases.
Investors are focused on the company expanding its operations so ‘‘dividends for us are in the future, not in the immediate,’’ Calder said today.
The company got a $1.5 billion investment from China’s Shandong Iron & Steel Group Co. last year, giving it a 25 percent stake in the mine. It may seek debt funding from the Asian nation for the Pepel mine expansion that’s estimated to cost $2 billion to $2.5 billion and is scheduled for 2016. The expansion is expected to boost capacity to 35 million tons a year.
Tapping Chinese and western banks for financing is the best option, Calder said. ‘‘The $500 million that we have earmarked to kick off the project obviously puts us in a strong position,” he said, referring to available cash and existing credit facilities.
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