African Aura Inc Mining Explorations Operations in Cameroon, Africa

Yaounde, Cameroon Africa(Cameroon News) – Afferro Resources Evolution showcases the “excellent potential” Nkout project.

Afferro Resources (LON:AFF, TSX:AFF), the metal and mineral resources exploration company, has “excellent potential to outline a significant deposit” at its Nkout iron ore project in Cameroon as per its house broker Evolution Securities.

Evolution, who had toured the Nkout site, also indicated that Nkout may also have the chance to evolve early-stage cash flow from higher-grade material that can be made ready for direct shipping.

The broker said by September Afferro would set up seven rigs in operation on the Nkout project – which is a major geophysical anomaly that is more than 20 kilometres in length – and that the setting up of these rigs should get it ready it to meet its target 60,000 metres of drilling by 2012.

“This exploration programme offers significant upside potential,” said Evolution’s analysts in a research note Afferro that was announced today.

“The resource to date is based upon drilling of less than six kilometres of the 20 kilometre strike of the magnetic anomaly. In the near term we expect an extension of the resource into the Nkout West deposit.”

The broker is holding onto its ‘buy’ recommendation and its 350 pence target price for the shares, which had gone up by half a penny at 78.5 pence each at 11:27 am today.

“We believe that there is a solid buying opportunity offered by Afferro’s currently weak share price,” said Evolution.

The broker detailed that it assumes that the lower share price is a by product of portfolio rebalancing between gold and iron ore after the ‘butterfly split’ that had resulted in Afferro’s parent company African Aura’s iron ore assets being handed over to the subsidiary while Aura’s gold business was given to Aureus Mining.

“In our view, the fundamentals of the iron ore industry remain robust,” added Evolution. While the broker accepted that the possibility of a slowdown in China has recently been aided by economic information such as a steep slash in copper imports, it said that a subsequent balancing of the economy could well work out in the positive direction.

“We believe that China continues to be well positioned to absorb much mined supply, particularly in terms of bulk commodities.”

The broker indicated that there are still a huge number of barriers that Afferro needs to tackle at Nkout.

In more specific terms, a clearer answer in required to understand the project’s infrastructure needs and Evolution opines that such an answer would result in a significant increase in the company’s share price “as has been the case with Afferro’s peers”.

Another major block was that the broker has keyed in on is the closure of the drilling programme to facilitate the upgrade of more resources from an ‘inferred’ to an ‘indicated’ resource category, which would permit Afferro to upgrade to a feasibility study.

“We expect significant share price appreciation as these various boxes are ticket,” said Evolution.

The broker looks at iron that is hidden below the ground as the basis for evaluating Afferro. With close to 2.4 billion tons of iron ore determined at the company’s Putu project, in Liberia, and an additional 1.4 billion tons at Nkout deploying attributable weighted contain iron of approximately 451 million tons, Evolution forecasts that the company is likely to accumulate a value of about US$490 million (around 350 pence per share) in comparison to other companies across the market operating in the same space.

Meanwhile, Evolution said that it is still to determine the upside in the time frame to follow, which it anticipates will work out once drilling programmes are carried out later during the year.

“We believe that there is considerable potential here as the group pushes forwards with a concentrated focus on these two projects and believe that the associated newsflow will enable us to revisit our target price as the year proceeds,” said the broker.

“We can expect reporting of further significant developments at Nkout with one resource update already released and another planned for September.”