Alufer Mining is raising US$40 million for a listing on the AIM market

Alufer Mining is laying the groundwork for a listing on the AIM market that will value the Guinea-focused bauxite specialist at between US$150 and US$200 million.

As part of the float, which is expected to take place in the next four to five weeks, the company is raising US$40 million.

The cash will fund preparations for production at the company’s Bel Air project in Guinea, which could happen as early as next year.

Alufer’s prospective valuation highlights the market’s appetite for new bauxite and aluminium plays.

And it also underlines the potential of AIM quoted minnow Alecto Minerals (LON:ALO) – which is currently completing due diligence on a Guinea bauxite project of its own.

The west-African country is believed to contain around a quarter of the world’s bauxite, which is a source of alumina – the primary aluminium feedstock.

At the same time the economics of these projects are attractive. Globally, bauxite demand is forecast to grow at an average of 6.9 per cent a year over the next 20 years, Alufer says. And China is one of the main drivers.

Chinese demand for alumina has grown massively in recent years, with imports increasing to 45 million tonnes last year compared with just 3 million tonnes six years ago.

Meanwhile due to a lack of investment it is believed that there will be a shortage of new mines coming on stream which may cause a drag on supplies.

Furthermore, from an investor’s point of view, bauxite plays are rather under-represented. Indeed, once listed, Alufer will be AIM’s only pure bauxite play.

“The supply and demand fundamentals for the bauxite industry look particularly attractive with continuing high demand from developing economies,” said Alufer chief executive Danny Keating.

“Our Bel Air project, with first production targeted at the end of 2013/early 2014, is poised to take advantage of this exciting opportunity.

“Alufer will be the first bauxite company admitted to AIM and we believe it will become a significant bauxite producer in Guinea within three years.”

The Bel Air project is thought to contain around three billion tonnes of bauxite.

So far Alufer has taken the project through the pre-feasibility stage and, supported by the new US$40 million injection, it aims to complete a bankable feasibility study which will pave the way for the project.

With Bel Air, Alufer is hoping to establish a 10 million tonne a year operation by 2015.

The company also plans to use some of the new cash to fund pre-feasibility work on its Labé project, also in Guinea, where it is targeting a 500 million tonne bauxite resource target. The money will also be used for asset acquisition and development activities.

Alufer is hoping to attract the attention of institutional investors. And it has also set the benchmark for other juniors with aspirations in Guinean bauxite.

Alecto is a case in point. The mirco-cap has an option to 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.

Currently valued at £4 million, it will be hoping for a significant re-rating if its acquisition goes ahead.

Alecto entered a 90 day due diligence period to assess the FAR asset in February.

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

The initial plan is to delineate a JORC resource of 10 to 12 million tonnes, via a 2-3,000 metre auger drilling programme. This will create an initial life of mine of at least five years at two million tonnes a year. And it is conceivable the project could be up and producing within 24 months.

Unlike Alufer, it also has gold and base metal exploration assets in Mauritania and Ethiopia respectively.