AIM explorers see big future in resource rich Liberia

In terms of natural resources, Liberia is one of Africa’s richest nations. Indeed even a catwalk model could tell you there’s more than just a bag of dirty stones there. No wonder then that a host of companies, big and small, are clamouring to develop its natural resources.

In the past, Liberia’s mineral wealth has been something of a curse as it provided an easily accessible source of funding for militias, tribal warlords and infamously, former president Charles Taylor - who has been on trial for war crimes at The Hague for the past four years.

But now, under the stewardship of Africa’s Iron Lady - Ellen Johnson Sirleaf -  Liberia’s vast and varied mineral resources are playing a key role in the nation’s economic recovery.

Sirleaf, a Harvard educated former World Bank director, was elected president of Libera in 2005. Since then she has worked hard to change perceptions throughout the international community. And, critically, she has instilled confidence among international investors with her zero-tolerance approach to dealing with corruption.

At the same time she has also played a vital role in nurturing the green shoots of Liberia’s economic recovery. The upshot is that five years after the nation’s first democratic election Liberia is now truly open for business.

On AIM there is a growing number of resource companies with operations in Liberia. And they are looking for and developing new sources of valuable commodities such as oil, gold and iron ore.

Hummingbird Resources (LON:HUM) is one of the first to take advantage of the transformation in Liberian politics and economics.  Hummingbird’s chief executive Dan Betts has now spent five years in the country and around US$15 million in amassing a very promising and substantial group of gold mining assets.

In total, Hummingbird has 14 exploration licences over an area of 7,170 square kilometres within a completely unexplored portion of the Birimian Craton - a massive geological feature that spralls across several west African countries.

The Birimian already hosts multi-million ounce gold mines like Randgold’s Morila mine in Mali or the Chirano and Ahafo mines in Ghana - run by Kinross and Newmont respectively.

At the moment Hummingbird is focused on its most advanced asset, the Dugbe project. Over 7,000 metres of drilling have been completed so far in 2011 and work is set to accelerate with a third rig joining the campaign.

City firm Liberium Capital reckons that when the drill programme is complete it could help Hummingbird increase its current 812,000 ounce gold resource to over 1.5 million ounces.

The broker’s analyst team recently visited Liberia to inspect the group’s project and they came home impressed. Analyst Dominic O'Kane reckons the current valuation, which equates to US$114 per ounce of gold in its resource, under appreciates the firm’s regional potential.

“Hummingbird’s US$129m market cap values the company at US$114 an ounce, an 8 percent discount to the average of its African explorer peers. Taking into account the enormous regional potential we do not see this discount to be justified," the analyst said in a note to clients.

Another AIM-listed firm looking to tap into Liberia's vast resource potential is Aureus Mining (LON:AUE, TSE:AUE). The company recently de-merged from African Aura and is developing a 1.4 million ounce gold mine further north west, up the Liberian coast.

Once up and running its aptly named New Liberty project will be part of the first wave of Liberia’s new mines.

At the moment Aureus is working on the New Liberty definitive feasibility study (DFS), which has been pencilled in for the fourth quarter of 2011.  Earlier this week Aureus hired plant design engineers, DRA Mineral Projects to carry out detailed metallurgical testing and process design studies.

Meanwhile, on the ground, infill drilling is still underway at New Liberty with two rigs currently working. So far Aureus has drilled 6,139 metres, in 29 holes. Another two rigs are expected to join the campaign by the end of June. The drilling is designed to add additional resource tonnages - on top of the current 1.5 million ounce resource - within the current defined pit shell and to gather samples for metallurgical testing.

The DFS is looking at an open pit and gold processing plant for 850,000 tonnes of ore each year, for a 8.5 year production life. The new gold mine is expected to produce an average 100,000 ounces a year in the first five years.

New Liberty is just one part of Aureus’ acreage that spans the Bea mountain region. It is also exploring other parts of Bea Mountain, with drilling underway at the Ndablama prospect. In total Aureus is working six drill rigs for around 36,000 metres of drilling across the 427 square kilometre licence.

Afferro Metals (LON:AFF) has also joined the race to develop Liberia’s natural resources. Its most advanced asset is the Putu iron ore mine, which is being developed through a joint venture with Severstal. The Russian steel giant is pouring US$30 million into the project to earn a 61.5 percent stake.

The project took a big step-forward in February 2011 as it more than doubled its resource base to 2.4 billion tonnes. A pre-feasibility study is now expected to be completed at some point next year.

This morning, Sable Mining (LON:SBLM) extended its foot-print in Liberia with a deal to buy a 60 percent stake in a 531 square kilometre exploration concession in the Kpo mountain range, in the Kenema-Man province.

Sable chief executive Andrew Groves said this part of Liberia is one of the most exciting iron ore provinces in the world. A number of majors are also exploring for iron ore in the area, including BHP Billiton, Arcelor Mittal and Severstal.

Aside from mining Liberia also has an emerging oil industry – although it is still in its infancy.

Canadian firm Simba Energy’s (CVE:SMB) 1,366 square kilometre reconnaissance licence, on the Liberian coast, is currently being processed into the country’s first ever onshore production sharing agreement (PSA). 

However, Simba is by no means alone here. Just offshore are several exploration ventures, including major names like Chevron and Anadarko. In the near term these major offshore projects could be the main driver for Simba’s shares, as a successful 2011 programme for the likes of Chevron could go a long way to de-risking the whole region, auguring well for Simba’s own PSA.