african minerals appears to be upping its stake - possible takeover / offer?

Another good push forward to 16.75p this morning as volume is high after 1 hour trading

sounds like they're doing it right - the MD talks about their latest RNS interview

Some parts of Brokers Shore update

Tete DFS is essentially fully funded

Baobab had good news last week (11th October 2013): it is to place 13.5m
shares with its largest shareholder African Minerals Exploration &
Development (AMED) to raise £2.0m (gross), i.e. 15p/share – a 15.4%
premium to the previous day’s closing price. AMED will be granted 13.5m
options with a 20p strike, the exercise of which would raise a further £2.7m.
AMED will also receive a further 27m options whose strike will be 105% of
the five-day volume-weighted average price (VWAP) prior to exercise (at
20p, for illustration, their exercise could generate a further £5.4m). In our
view, AMED’s willingness to invest at the above prices underlines the
attractiveness of Baobab’s 85%-owned flagship Tete Project in Mozambique.

Investing in junior explorer-developers is by nature relatively high risk but
we continue to believe Baobab offers a more robust, lower-risk investment
with the prospect of better potential returns than typical of its peers.
Three tranches: Initially, AMED will receive 5m shares (plus 5m options), giving
it a 27.93% interest (previously 26.73%) in Baobab‟s resulting 306.8m of issued
shares. A second tranche of 8.5m shares and 8.5m options, and a third tranche
comprising the 27m VWAP options, are conditional on shareholder and regulatory
approval. These latter tranches could take AMED‟s interest above the 30% mark,
and a Takeover Panel waiver would be required to avoid AMED having to make a
general offer for all the outstanding shares it does not own.

DFS funded: Assuming all the requisite approvals are received, we believe that
the monies raised from the shares issued should be sufficient to complete what
we regard as a „bare-bones‟ Definitive Feasibility Study (DFS) on the Tete
Project. Option exercise should provide funds for additional work. Work currently
planned includes pilot plant metallurgical testwork on a bulk sample, a 3,000m
drilling programme designed to upgrade sufficient resources to Measured status
to support the first 25 years‟ mining, completion of environmental studies and
Memorandums of Understanding (MoU) for power, rail and port allocation, and a
detailed study on power generation options.

Significant potential for upside as Baobab derisks: For modelling purposes,
we have assumed that all the above shares are issued and options exercised in
H1 FY2014. For the third-tranche options, we have conservatively modelled a 15p
strike, i.e. the same price as the placing shares. The total monies raised and
overall fully diluted shares are similar to those in our last published assumptions
(19th June 2013). Consequently, our Tete Project attributable NPV10% range falls
only slightly, to 54-219p/share fully diluted (previously 55-221p/share). It should
be borne in mind that this makes no provisions for the potential for further volume
or mine life expansion, the possibility of upgrading titania slag to produce highervalue
by-products (which requires investigation), Baobab‟s various other assets in
Mozambique, or that the Tete Project is being progressively derisked.

Models updated
We have updated our Baobab models to reflect developments since our last published note
(19th June 2013). Principally, the changes comprise the replacement of our previous funding
assumptions (the raising at 17p/share of £3.5m in FY2014 and £5.5m in FY2015) with:

● The three tranches of AMED funding. As mentioned, we have assumed the issue of all
shares and exercise of all options in these tranches in H1 FY2014. For the thirdtranche
options, we have conservatively modelled a 15p/share strike, the same price
as the placing shares but lower than the 20p/share strike for the tranche 1 and 2
options. As a result, £8.7m is raised and issued shares rises by 54m.

● A drawdown of £0.1m from the £17m Equity Line Facility, in which there remains
£13.7m of headroom.
It should also be noted that the IFC made a pro rata contribution of US$1.0m to DFS
expenses in August 2013. We expect the IFC to continue to make further pro rated
contributions as the DFS progresses.
We have updated our models to reflect developments since our last published note
The IFC contributes pro rata (15%) to Tete Project funding

Conclusions: undervalued; significant upside potential
Baobab‟s current share price is far below our conservative Tete Project 1-2Mtpa attributable
NPV10% valuation range of 54-219p/share fully diluted. This is despite the fact that our
valuation makes no provision for further volume and/or mine life expansion potential, the
possibility of upgrading titania slag to produce higher-value by-products (which requires
investigation), or Baobab‟s various other assets in Mozambique. There is thus clearly
significant upside potential to our valuation.
We believe that Baobab‟s current share price represents an enticing low-cost entry
opportunity. We expect significant share price appreciation as Baobab advances towards
production and thereby becomes progressively derisked, and its compelling pig iron story
becomes more widely recognised.

There is significant upside potential to our Tete Project valuation of 54-219p/share
We conclude that Baobab‟s current share price represents an enticinglow-cost
entry opportunity into a highly compelling story

hxxp://baobabresources.com/files/ShoreCap_Baobab_20131016.pdf

WATCH: Baobab Resources - The 96th Minesite forum

Click here

LISTEN: Ben James, Managing Director of Baobab Resources, discusses the initial Tenge drill results at the company's Tete pig iron project in Mozambique

Click here to listen

I advised getting out of this in August 2013 as Mocambique iron costly to get to market, and now global glut of the stuff - arn't I clever ?