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| | Wed Feb 10, 2010
The Imminent Listing Of Stellar Diamonds Is Further Good News For Cornerstone Investor African Aura
Publisher: minesite.com
Author: Alastair Ford
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| | In just a few days time, on 22nd February, West African Diamonds will hold an EGM. Provided there are no unforeseen hitches, shareholders will then vote through the company's reverse takeover of Stellar Diamonds. And at that point, West African will officially cease to exist, and the enlarged Stellar will commence trading on Aim.
It'll be a red letter day for Luis da Silva, chief executive of African Aura, the company that originally incubated Stellar, and which will own just under 32 per cent of the newly-listed vehicle. African Aura, formerly known as Mano River, has been trying to get its West African diamond assets listed for years now, but one way or another has always run up against roadblocks. The two key stumbling blocks in recent years have been a lack of critical mass in the company's operations, and the impact of the global financial crisis, which decimated diamond markets, and any prospects of a listing for Stellar.
Those problems are now past. Critical mass has been reached by combining Stellar's west African diamond mining operations with those of Aim-traded West African Diamonds, a John Teeling company. What's more, to set the new company nicely on its way, RBC has also managed to raise £5 million, as sure a sign as any that appetite is returning for the diamond juniors.
And the newly-listed, cashed up Stellar will have plenty going for it. The diamond market has bounced back, as reported by virtually everybody in the retail business over Christmas. And Stellar isn't just a development story, though there is exploration and development inside the portfolio. On the contrary, it hits the ground running with two producing mines in Guinea, and will start out on its new path already cash flow positive. That sets it apart from most of Aim's other diamond juniors, few of whom have any cash flow to speak of. The next one up, reckons Luis da Silva, is Petra, and that's quite a leap, since Petra is definitely now angling for a place at the mid-tier table. So if it's a cash generative fully-fledged diamond junior you're after, Stellar certainly stands out from the crowd.
And it's interesting to note that after an absence of Aim listings that's lasted the better part of two years, the first new company to join the ranks of the miners is actually in the diamond space. Not many people would have predicted that outcome this time last year.
But for African Aura, there's more to it simply than the successful launch of a long delayed venture. Luis reckons that having Stellar listed will at last allow investors to attribute the correct value to African Aura's own investment in the company. "It's a big step in creating the see-through value for African Aura", he says. Stellar's initial market valuation will be £20 million, and whichever way the price goes from here, African Aura's 32 per cent stake will now hold a clearly priced value.
Indeed there's every chance that African Aura shares may now re-rate in response, given that until now the precise value of the Stellar assets has been hard to pin down. The company's shares have been creeping up anyway recently, rising from around 50p three months ago to the current 70p, partly in anticipation of the Stellar listing and partly as a result of ongoing work on other projects. African Aura's primary offering these days is in gold and iron ore in Liberia, and the diamonds have only added to the complexities of trying to put a value on the company. But now that that issue has been removed, decisively, investors can concentrate on working out what they think of the gold and iron ore.
In that they'll be helped along nicely by plenty of newsflow. At Indaba a Liberian minister endorsed the company's Putu iron ore project, and all that's awaited now is the signing off of the mining licence by the executive branch of the government, and then joint venture partner Severstal can start wielding the cheque book. Meanwhile, on the New Liberty gold project, the drills continue to turn. Luis reckons a new resource should be out by the middle of the year, and adds that it won't be too long after that before the company starts looking for finance for a new mine.
"It's going to be a big year for us", he concludes, before rushing off to meet with lawyers. It'll be a big year for African Aura shareholders too, perhaps the year in which the company finally delivers on years of promise. Charles Kernot at Evolution certainly thinks so. He's not a man to be trifled with in the world of mining, and his latest updated target price for African Aura is 210p, a value primarily driven by the iron ore. But the diamonds are nice to have in the back pocket too. |
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