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Licence extension boon for Aureus - share price rally to accelerate?

By Robert Tyerman | Tuesday 12 May 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.

David Reading, chief executive officer of West Africa-focused gold play Aureus Mining (AUE), describes as ‘very significant’ the award by the Liberian authorities of a 21-km. extension to the company’s Bea Mountain mining licence to include the promising Leopard Rock target. With its flagship New Liberty gold project set to start producing by the end of May or the beginning of June, the mining licence extension, which brings in Leopard Rock along a 13-km. gold-bearing corridor, comes hard on the heels of a pronouncement from the World Health Organisation that Liberia is now free from the deadly ebola virus.

This comes in a sequence of developments which has seen the company’s AIM and Toronto-quoted shares rally from 15.5p last autumn to 25.87p now. That remains a long way off levels of above £1 seen four years ago, but Aureus, now valued on the stockmarket at £88.5 million, sounds confident of launching imminently into cash-generating production and of having a worthwhile expansion in its estimated resources as from next January, subject to receiving an environmental permit. 

At present, New Liberty boasts a proven and probable reserve of 924,000 oz. with 3.4 grammes of gold per tonne of ore, a measured and indicated resource of 1.14 million oz. with 3.6 grammes a tonne and an inferred resource of 593,000 oz. with 3.2 grammes a tonne. Meanwhile the Ndablama prospect, which is next to Leopard Rock, sports an estimated resource of 901,000 oz. at a lower grade of 1.6 to 1.7 grammes a tonne.

The company says drilling at Leopard Rock has so far shown some encouraging ‘very early shows’. These include four metres with gold at 17.6 grammes a tonne, four metres with 13.9 grammes a tonne, three metres with 9.5 grammes a tonne and six metres with 9.4 grammes a tonne.

Reading, former exploration chief at £4.4 billon fully-listed Randgold Resources, says Aureus, which halved its losses last year to £2.2 million and received a £6.6 million cash injection last July from World Bank affiliate the International Finance Corporation (IFC), ‘has no intention to raise money’ to develop these projects, but will use New Liberty as ‘a starter kit’, deploying its revenues to fund the others. He indicates the company, which has estimated New Liberty could generate ‘free cash’ of $200 million (£128 million) over eight years with gold averaging $1,250 an ounce, against a current $1182.87c, will soon decide whether to the projects as a combined operation or as two separate undertakings.

Monaco-based investor Richard Griffiths holds 15.5% of Aureus, which began as the gold part of AIM-quoted African Aura, which later split into Aureus and its iron ore wing, Afferro Mining. The IFC, which paid 27p for each share plus half a warrant exercisable at 37.8p, has a 14.7% stake. 

An improvement in the sentiment for gold would help Aureus rally further.         


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