AFFERRO Mining, which has an iron ore exploration project in Cameroon, is looking for a strategic partner, a hunt that could include South African companies, chairman David Netherway, said on Friday.

Anglo American and its 65%-held subsidiary, Kumba Iron Ore, the largest producer of the steel-making feedstock in SA, have both said they are looking for opportunities to grow their African iron ore exposure.

Exxaro Resources is growing an iron ore portfolio and has just bought African Iron, an Australian company with a project in the Republic of Congo (Brazzaville). Afferro, which trades on London's Alternative Investment Market and Toronto's venture exchange, has a resource of 2,5-billion tons in southern Cameroon and it has seven drills turning on four prospects. The key problem is moving ore more than 300km to the Atlantic coast. There is no nearby railway.

Afferro recently said its total resources had increased by 26% to 2,5-billion tons with an iron content of 32%, while within that figure its indicated resources had grown by 25% to 1,19-billion tons with a 33% iron content.

"We are looking for a strategic partner and we are looking to the Far East, countries such as Japan, Korea, China and India, but it could also be South African companies," Mr Netherway said.

The most advanced project is called Nkout and it hosts about 25-million tons of direct shipping ore with an iron grade of just above 60%. This ore is basically an oxidised layer over the magnetite ore body that makes up the resource.

"We believe the increase in high grade resource and conversion of direct shipping ore resource into indicated category are positive results as it strengthens the possibility to start a small scale low cost operation to generate early cash flows," GMP Securities said in a note last week. Mr Netherway said there was no "for sale" sign up on the company or its projects.

"The first prize for us would be to sell Nkout and keep the rest of the tenements. Second prize would be selling all the prospects and keeping the cash in the company to do something else. Third prize is an outright sale of the company," he said.

The key issue for the project is resolving the matter of a new dedicated iron ore line to the coast. Afferro and a number of companies across the border in Gabon and Congo are awaiting the outcome of Hanlong's $1,3bn bid for Australia's Sundance Resources and its Mbalam deposit. One of the key hurdles to be cleared is approval from the China Development Bank for Hanlong to make the purchase. The deal has an end-August deadline.

Sundance and the Cameroon government have set up an infrastructure company to build the railway in an 80:20 venture. If the rail is built, Afferro may have to pay for its share via tariffs. Afferro was investigating options of building the railway itself but it would need a strategic partner, Mr Netherway said.

As part of its prefeasibility study, Afferro was studying trucking between 1-million and 2-million tons a year of direct shipping ore to a railway siding to the northwest at Mbalmayo and on to Douala harbour. A decision on this option, which would cost more than $100m, would be made by next year.

Afferro has considered building a pipeline between Nkout and the harbour to send ore to the coast at a significantly reduced price, but the Cameroon government wanted the rail infrastructure.

Afferro hopes to release resource data on its Ntem prospect by the end of the September quarter.

Ntem is about 60km from the coast and if the deposit proves to be good the company may opt to accelerate its development because of its proximity to the coast, giving it a cost advantage.

seccombea@bdfm.co.za