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Aureus poised for production … and a rerating?

By Robert Tyerman | Thursday 16 April 2015

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

West Africa-focused Aureus Mining (AUE) says it is on track to start producing gold from its one million-plus-oz. New Liberty project in Liberia by the end of next month. The company, steered by well-regarded chief executive officer and former European Goldfields boss David Reading, declares it expects first gold from New Liberty, which will be previously strife-torn Liberia’s first gold mine, by the end of May and anticipates delivering 119,000 oz. of gold a year for six out of New Liberty’s eight years of expected production.

Aureus, whose backers include the World Bank-affiliated International Finance Corporation (IFC),    reports commissioning has begun for key production facilities at New Liberty, which holds proven and probable reserves of 924,000 oz. at a respectable grade of 3.4 grammes of gold per tonne of ore, within a measured and indicated resource estimated at 1.14 million oz. with 3.63 grammes a tonne and a more tentative inferred resource put at 593,000 oz. with 3.29 grammes a tonne. Based in Toronto and quoted there and on AIM, the company says it has started commissioning the primary and secondary crushing circuits for New Liberty.

With the ball mill and electro-winning circuit also installed, Reading hails ‘tangible milestones to production’ at New Liberty, which is in the southern block of Liberia’s Bea Mountain licence area. Aureus has hinted at likely cash costs (before capital costs) of $850 an ounce, against gold’s current $1,200.55c market price, and has suggested New Liberty, which will have cost around $150 million (£102.5 million) to bring to production, could generate ‘free cash’ of $200 million over eight years with gold averaging $1,250 an ounce, doubling to $400 million at $1,350 an ounce.

This would cheer the company, which halved its losses last year to £2.2 million, having arranged a $100 million debt facility with a banking consortium including South Africa’s Nedbank and Rand Merchant Bank and tapped equity investors, including IFC, which stumped up $11 million on one occasion and $8 million on another at 18p. That compares with a current price of 23.25p for Aureus, which was created by splitting the gold and iron ore parts of AIM-quoted African Aura and whose shares, which topped £1 in the boom, have traded between 29.5p and 15.5p over the past year.

Now valued at £84.3 million, the company, which claims ‘Liberia is now close to being declared ebola-free’, has other gold interests in the country, notably Ndablama, which boasts an indicated low-grade resource of 386,000 oz. with 1.6 grammes a tonne as well as an inferred resource of 515,000 oz. with 1.7 grammes a tonne in the northern block of the Bea Mountain licence. The northern block also holds Weaju, with an inferred resource of 178,000 oz. with 2.1 grammes a tonne, while Aureus will also be exploring Leopard Rock in its Archaen exploration licence and considering another West African permit in Cameroon.

If gold regains friends, so should Aureus.         

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