Lonmin ready to take over AfriOre

Platinum producer Lonmin (LNMIF-O, LMI-L) has reached a binding agreement to acquire AfriOre (AFO-T) in an all-cash take-over bid.

The transaction will combine Lonmin’s extensive operational experience in platinum mining, smelting and refining with AfriOre’s 74% interest in the Akanani platinum project in South Africa. The remaining 26% of Akanani is owned by a number of Black Economic Empowerment investors.

AfriOre shareholders will receive $8.75 per share a 14.3% premium based on the 30-day volume-weighted average trading price of AfriOre on the TSX.

AfriOre’s directors recommend that shareholders accept the deal, which values the company at $500 million.

“We believe that this represents the optimum route to maximize value for AfriOre shareholders and other stakeholders,” said AfriOre president and CEO Warren Newfield.

Conditions for the agreement include that AfriOre agrees to tender at least 1.5 million fully-diluted shares to the bid, satisfactory technical and legal due diligence by Lonmin and the receipt of all regulatory approvals.

If the deal doesn’t go through AfriOre will pay Lonmin a $15-million break fee. It is projected the deal will be finalized at the end of January 2007.

Lonmin’s preliminary evaluation suggests the current resource could support an initial mine development producing around 500,000 oz. of platinum group metals a year, including about 250,000 oz. of platinum.

Akanani has reported total inferred P2 resources of about 249 million tonnes containing 33.7 million ounces of PGMs grading 4.2 grams per tonne.

Lonmin estimates it will spend nearly $800 million for mine, concentrator and infrastructure development.

“We are excited by the potential of the Akanani deposit which our preliminary evaluation suggests can be developed into a low-cost, fully-mechanized mine,” said Brad Mills, Lonmin CEO.

Lonmin will fund the acquisition at an estimated yearly cost of about $28.5 million before interest for the first two years of ownership.