Alecto Minerals shares advance on Guinea bauxite acquisition news

Alecto Minerals (LON:ALO) shares shot up as much as 20 per cent today as it landed an option deal to acquire a new project in Guinea.

It can buy a 51 per cent stake in a company called Forward Africa Resources (FAR), which owns a 711 square kilometre bauxite licence in the highly prospective south west coastal region of Guinea.

The project has the potential to an in-situ bauxite resource of over 500 million tonnes, Alecto said. The area already has established infrastructure and producing bauxite operations, it added.

"This bauxite acquisition is potentially transformational for Alecto and provides us with the opportunity to develop a producing operation with significant tonnage and cash flow potential in the near to mid-term,” said executive director Damian Conboy.

“The deposit is near surface and high grade and contiguous to the 3.1 million tonne per year Kindia bauxite mine and importantly, its close proximity to established infrastructure, including roads and railways, provide access to the strategically significant port of Conakry.”

Conboy adds: "We will immediately commence the design of an exploration programme for 2012 focussed on identifying key high grade drill targets to define an initial resource and subsequently move into production.

“Significantly, our rapid development timeframe fits the government's desire to attract investment and create wealth and we look forward to working closely with them, as we meet key exploration and development milestones over the coming months."

To acquire the stake in FAR it must give the vendor a 15.2 per cent of the company’s issued shares, which is worth around £500,000 at the current share price.

Alecto has 90 days to carry out its due diligence. During this period it will have to spend around €45,000 on a work programme to assess the project.

The company also has the option to acquire the rest of FAR by issuing more shares, equating to 14.75 per cent of its share capital.

“This is a good addition to Alecto’s portfolio of licences and exploration assets – the licence is well located close to infrastructure, near an alumina refinery and with access to a port which is being expanded to develop the export market,” Fairfax Securities analyst John Meyer.

“There is resource potential at the licence and limited drilling and evaluation is expected to prove up resources giving Alecto the potential to create value.”

At 14:00 on AIM Alecto shares were up 0.25p, or 14 per cent, trading at 2p each.