Aureus Mining is delivering on its promises at New Liberty gold project, says CEO David Reading

Aureus Mining (LON:AUE) is delivering on the promises it made to investors when it demerged from African Aura earlier this year, chief executive David Reading told Proactive Investors.

The independent gold mine developer was created in April this year and in May raised C$40.4 million from investors.

That money has allowed Aureus to make rapid progress in its development of the New Liberty gold project in Liberia. 

In the past seven months, the firm has doubled the amount of drilling and will complete a resource upgrade on the project before the year end.

The project is still running on schedule and the mine is expected to start producing gold in around 18 to 20 months time. New Liberty is expected to produce between 100,000 and 125,000 ounces of gold in its first year of operation.

But the group’s share price gives it little, or perhaps no, credit for this continued progress.

Currently trading at 60.5p the shares are down 30 per cent since the placing – which was priced at 83p.

Chief executive David Reading remains confident in the company’s potential and is focused on the job in hand, rather than obsessing about the current share price and tough equity markets.

“The (African Aura) split was a good process. It gave investors the opportunity to have a share in each company, with no crossholding,” Reading said.

“But you can’t always pick the timing of your birth. And unfortunately we were born into declining and illiquid stock markets.

“We managed to raise the money we needed. And as a company, and a management team, we are delivering on what we said we’d do.” 

He added: “I’m confident that when the time comes that investors are again looking at small cap gold stocks, they will see that Aureus is a company that has the opportunity to grow and develop.

“With New Liberty we can show that there is actually going to be a mine.”

Reading explains that New Liberty’s gold grades are a key differentiator. With an average grade of 3.8 grams per tonne he says the mine has a significantly higher grade than the mines being developed by the firm’s peers.  

As a result, the cost of capital will be much less for New Liberty, Reading said. 

“We are only going to need to build a 1 million tonne plant. Other projects, with grades of say 1 g/t, will have to build a 4 or 5 million plant.” 

The precise details of the mine design will be finalised in the coming months as Aureus completes its definitive feasibility study for the open pit mine.

A resource upgrade is due by the year’s end and will complete the DFS early next year.

A further mineral resource estimate for the mining area is scheduled in the second quarter of 2012. Most of this is being informed by the extensive drill work conducted in 2011. 

“There were two aspects to the drilling. One was to de-risk the project. We have enhanced the drill spacing to the point where most of the (geological) uncertainty has been removed,” Reading said.

“We’ve filled in a lot of the gaps and there is now a lot more continuity (within the results) over the main zone, which covers 1.75 kilometres.”

“So there’ll be an upgrade in the classification of resources (this quarter). Additionally in the eastern side of the deposit the mineralisation is still open, and we are still drilling there.”

“We’ve drilled another twenty holes and hope to extend the orebody eastwards. We are awaiting new numbers from those holes.”

Reading says that the team is currently busy with a very comprehensive metallurgical testwork programme. This is focused on the optimising process design rather than worrying about recoveries.

“We already know the recoveries are good – about 93 per cent. Around 50 per cent comes from gravity separation and the rest will be recovered through a simple CIL circuit.”

“All the geotechnical, hydrological and detailed survey studies have been substantially completed on site.

“We’ve also completed all the baseline work for the ESIA (environmental) and now that the Liberian elections are over will shortly start a public hearing process.”

The group’s drill results show potential for an underground development too, but according to Reading that is another plan, for another feasibility study at another time.

More drilling would be required to prove up the deeper mineralisation from the inferred category before Aureus looks more closely at the potential underground mine, he explained.

The DFS is fully funded. Reading expects that Aureus will have £30 million in cash at the end of this year.

Early project finance talks have already started and Aurues may choose to raise the start-up capital without having to ask the market.

“We’ve been engaging with a number of banks and they’ve been signing confidentiality agreements. 

“We have a shortlist of banks that have already given an indication of (debt financing) terms that could be available to us. We believe this a financeable project through them. 

“So we are pursuing that with a number of banking institutions. We’d like to do a (financing with) combination of debt and equity.” 

He added: “But in terms of the equity markets a lot will depend on what happens in the next year I suppose.”

Elsewhere, Aureus continues to explore its other areas of interest in Liberia so that it can add more ounces to its future mining operation.

“We are expanding the resource base by looking at new targets in the hope that we can find another mine or at the very least supply more material to the New Liberty mine,” Reading said.

It is important to note that Aureus already has a permit to mine most of its acreage. The current mining permit covers 457 square kilometres and it can mine any gold deposit inside that area, without having to apply again.

“Even around New Liberty we are going to find a lot more ounces, I think,” Reading said.

“We also have Weaju which is very exciting, we have the whole Ndablama/Leopard rock complex and we also have another corridor that stretches up from Ndablama and bends north east all the way up to Gondoja.

“So we’ve got lots of potentially big regional plays that could give us lots of ounces.”

This week David Reading and his Aureus team are hosting an analyst and investor site visit at New Liberty.