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TABLE OF CONTENTS Feb 4 - 10, 2013 Volume 98 Number 51 - 0 comments

Aureus on track to production in Liberia

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When Aureus Mining (AUE-T, AUE-L) turns its Liberty Gold deposit in Liberia into an open-pit mine as early as the first quarter of 2014, it will be the country’s first modern, commercial gold mine.

The high-grade deposit — about 100 km from the deep-water commercial port city of Monrovia, the country’s capital — is expected to produce about 115,000 oz. gold a year at US$685 per oz. over a mine life of 8.5 years.

All key construction permits are in place and in November Aureus completed an equity financing that raised US$80 million, despite challenging market conditions. It expects the balance of the funding for New Liberty will come from debt financing.

In the meantime, the company has started development work for the mine in parallel with exploration programs and has released the findings of metallurgical optimization test work completed since the feasibility study was released in October 2012.

The optimization studies show that improvements to leach kinetics can cut the leach residence time in half to 24 hours; cyanide consumption can be reduced by one-third; and potential gold recoveries increased to 93%. 

The findings will have a positive impact on capital and operating costs outlined in the feasibility study. And results of further optimization studies will be published before the end of the first quarter of this year. The company is looking at optimal positioning of the processing plant; further improvements in infrastructure; and the diversion of the Marvoe creek to the north and west of the open pit area.

The main conclusions of the feasibility study at a gold price of US$1,400 per oz. include: a post-tax net present value of US$187 million, a post-tax internal rate of return of 33%; and a capital payback of 2.2 years. Initial capital costs, excluding contingencies, are estimated at US$140 million. Annual gold production over the first four years of production will average 120,000 oz. at a grade of 3.7 grams gold per tonne.

The company believes there is scope to increase the deposit’s reserves through drilling inferred resources on hanging wall lenses within the pit and resource blocks just below the bottom of the current optimized pit. The ore body is open at depth and management believes the deposit may have underground potential.  

Proven and probable reserves at a cut-off grade of 0.8 gram gold stand at 8.7 million tonnes grading 3.3 grams gold for 910,000 oz. contained gold.

Measured and indicated resources total 9.8 million tonnes at 3.63 grams gold for 1.14 million oz. of contained gold. Inferred resources add 5.73 million tonnes of 3.2 grams gold for 593,000 oz. contained gold.

Under the current mine plan, the company envisions an operation consisting of two adjacent and interconnecting pits from which 1.1 million tonnes of ore will be extracted a year.

The mining schedule sees the operation producing 8.7 million tonnes of ore at 3.3 grams gold with an associated 132 million tonnes of waste or an average life-of-mine stripping ratio of 15:1.  (The annual waste mining rate is 22.2 million tonnes for the first five years, followed by 10.6 million tonnes, 5.7 million tonnes, and 2 million tonnes in the last year.) The company says it intends to pre-strip an estimated 2.2 million tonnes of waste at a cost of US$5.5 million, which is included in the mine’s capital cost budget.

The plant will have a typical two-stage crushing process, ball mill and carbon-in-leach flow sheet.

Altogether the mine plan and associated infrastructure will cover an area of about 16 sq. km.

A relocation program will have to be undertaken. It involves building a new village about 2 km from the mine site and moving about 300 existing dwellings.

According to the company, however, the local community has agreed in writing to the relocation under a resettlement action plan. In a new corporate presentation published on its website, Aureus said it expects the government will approve its relocation plan this quarter.

The company has started upgrading a 20-km laterite road that links the Monrovia-to-Freetown tarmac highway to the mine site. The project involves replacing wooden bridges with five 100-tonne steel bridges as well as building additional drainage gullies and culverts.

The Liberty project is part of the company’s Bea Mountain mining licence, which spans about 457 sq. km. It comes with a 25-year renewable mineral development agreement, and hosts other gold targets such as Ndablama, Gondoja and Weaju.
The Weaju target, about 30 km northeast of the New Liberty deposit, is the priority exploration target given historical intercepts of high grade that have ranged from 3 to 33 grams gold. The material is near-surface and could be trucked to the proposed New Liberty plant. The company expects to define a resource estimate for Weaju by June 2013.

Hunter Hillcoat, an analyst at Investec Securities in the United Kingdom, has a “buy” rating on the stock and argues the investment case for Aureus is that the New Liberty mine “benefits considerably from high grade, which allows for a meaningful production base at relatively low capital cost” and that the asset “opens up the potential to advance other discoveries in the region.”

“Despite its problematic recent history,” he writes in a research note, “Liberia appears to be making considerable progress and evolving into a reasonable jurisdiction.”

Between 1997 and 2003, the country was ruled by Charles Taylor in a regime that was characterized by widespread human rights abuses. Taylor’s forces also were involved in armed conflicts and raids in Sierra Leone, Guinea and Côte d’Ivoire.  Last year Taylor was found guilty of war crimes by the UN-backed Special Court for Sierra Leone in the Hague and sentenced to 50 years in prison.

Today Liberia enjoys one of the highest levels of foreign direct investment relative to GDP in all of West Africa, has an attractive fiscal code, a democratically elected government since 2006, and has cut its foreign debt from $4.9 billion in 2007 to $250 million in 2010, according to Aureus’ website.

Companies investing in assets there now, Aureus says, include BHP Billiton (BHP-N), ArcelorMittal (MTN-N), Vedanta Resources (VED-L) and Severstal, which have iron ore interests in the country. Liberia has also attracted oil and gas investment from Exxon Mobil (XOM-N) and Chevron (CVX-N).

At presstime in Toronto, Aureus was trading at 77¢ per share within a 52-week range of 67¢-$1.50. It has about 221 million shares outstanding.

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A driller at Aureus Mining's New Liberty gold project in Liberia. Source: Aureus Mining
A driller at Aureus Mining's New Liberty gold project i...
Core samples at Aureus Mining's New Liberty gold project in Liberia. Source: Aureus Mining
Core samples at Aureus Mining's New Liberty gold projec...

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