Name and Location
New Liberty gold project, Liberia.

Client
Aureus Mining.

Project Description
New Liberty will be Liberia’s first commercial gold mine and Aureus’s first mine in its highly prospective 1 470 km2 Liberian licence portfolio.

A definitive feasibility study (DFS) completed on the project in 2013 envisioned an openpit mining operation, extracting ore at a nominal rate of 1.1-million tonnes a year. The openpit would comprise two adjacent and interconnecting pits. Since the DFS was completed in 2013, Aureus has continued to conduct further evaluation, including grade-control drilling to produce a better geological understanding of the orebody. Using this information, an optimal new mine plan has been produced.

Despite Aureus maintaining construction activities throughout the peak of the Ebola crisis in Liberia, first gold pour has been delayed from March 2015 to the end of May 2015 as a result of logistical and other difficulties beyond the company’s control.

Owing to this delay, the previously published DFS mine plan fails to provide sufficient operational flexibility during the production phase and has an increased execution risk, in view of potential operational outages. This is primarily due to the DFS mine plan being based on a single starter pit, minimising operational face lengths and not allowing enough gold-bearing ore to accumulate on the stockpile to feed the plant in the event of an outage.

The new mine plan compensates for the delay and improves the project’s economics. It reduces costs over the life-of-mine (LoM) and generates stronger cash flows, particularly during the ramp-up period and first six months of production, resulting in significantly increased free cash flow after debt servicing.

The new mine plan will result in:
• stronger cash generation, particularly in the early stages of the project, which will provide more cash for exploration and working capital;
• greater operational flexibility through the creation of two starter pits, providing increased face length and stockpile management, as well as giving greater confidence that production targets will be met;
• increased run-of-mine (RoM) ore stockpiles, which will ensure against any unforeseen production disruption; and
• reduced mining cash costs, based on more efficient mining, using the layout of the mining infrastructure such as the waste dumps.

The new mine plan involves a revised mining sequence, now running from east to west, which uses two shallower starter pits at Kinjor and Larjor. This provides increased operational flexibility, owing to the increased workable face lengths, and allows for access to areas of high-grade ore earlier in the LoM.

A drainage berm surrounding the openpit, built from waste rock, has also been incorporated into the new mine plan.

The construction of this berm not only shortens the haulage distance for waste rock but also lowers the project execution risk during the wet season by safely reducing water ingress into the pit, minimising the pumping required to keep the pit fully operational throughout the wet season.

The plan also incorporates increased efficiencies in the mining fleet and schedule, including ‘hot seat changeover’ at the start and end of shifts, and using temporary haulage ramps to the north of the pit to minimise waste haulage distances. This allows for more waste rock to be removed, and ore to be mined and processed earlier in the mining schedule. The new mine plan also has the incremental benefit of the current low fuel prices, which help to reduce the overall mining cost.

The incorporation of two starter pits, combined with the increased mining and trucking efficiencies, has enabled the company to develop a more refined stockpile strategy than outlined in the DFS. The increased early tonnage in the new schedule enables Aureus to create a larger stockpile of ore on the RoM pad, enabling higher ore-grade material to be blended and fed to the process plant earlier than estimated in the original schedule. This also safeguards Aureau from any potential problems in the pit by having more ore material available for processing. The stockpile blending strategy facilitates a consistent grade of ore to be supplied to the process plant. Additional oxide material will be blended with sulphide ore during dry seasons, improving plant throughput by an estimated 15%.

The revised production profile is more appropriately aligned to the current gold price environment and the basis of the new plan is that 10% more ore material will be mined and 35% more gold will be produced in 2015, compared with the delayed DFS mine plan. These revisions more than adequately compensate for the delay in processing operations caused by the Ebola outbreak.

The New Liberty gold deposit has a total mineral reserve estimate of 923 716 oz of gold grading 3.4 g/t and comprises
704 600 t grading 4.4 g/t in the proven mineral reserve category, and 7.79-million tonnes grading 3.3 g/t in the probable mineral reserve category.

Net Present Value/Internal Rate of Return
Pretax project net present value from production, at a 5% discount rate, in the new mine plan is estimated at $365-million.

Value
The total cost associated with implementing the new mine plan, estimated at $15-million, pertains to the increased prestrip mining activities occurring over the delay period. Aureus has financed this new mine plan and its existing debt finance facilities. Remaining existing cash resources will finance the completion of the construction of New Liberty and fund general working capital.

Duration
First production is expected in 2015.

The change in the mining schedule will result in the completion of mining operations four months earlier than envisioned in the DFS, if all other material parameters are maintained.

Latest Developments
Aureus has entered into an agency and a subscription agreement to collectively raise $15.3-million by issuing 56-million new common shares.

The funds will be used to finance the $15-million implementation of an optimised mining plan for the New Liberty gold project.

“The funds to be raised will enable the company to push forward with the new optimised mining plan, which is more in line with the current gold price environment, and achieves significant additional and accretive benefits for all our shareholders and stakeholders through earlier cash-flow generation, a lower cost profile and improved operational efficiencies,” says Aureus president and CEO David Reading.

Any outstanding balance will be met by the company’s existing cash resources, which were at $33-million in December.

The revised plan will result in an additional 28 000 oz of gold produced in the first year of production through the mining of an additional starter pit to bring the total year-one production target to 122 000 oz of gold.

The new mine plan expects the operation’s LoM average operating cash costs of $692/oz to be 8% lower than previously expected, while all-in sustaining cash costs will be 7% lower than the previously expected $789/oz.

Mining operations have started, with the first blast of 25 000 t of waste rock successfully completed in January and first gold expected by the end of May. Further plant optimisation and final commissioning are expected in June, with steady-state production to be achieved in July.

The first gold pour was initially expected in March 2014; however, the outbreak of Ebola in the country made operating in the region more difficult, subsequently increasing operational costs.

“The new mine plan compensates for the delay and improves the project’s economics.

It reduces costs over the LoM and generates stronger cash flows, particularly during the ramp-up period and the first six months of production, producing significantly increased free cash flow after debt servicing,” Reading notes.

Key Contracts and Suppliers
DRA (EPCM contractors); Australian Mining Consultants (National Instrument 43-101 resource classification and openpit and mining optimisation studies); Digby Wells Associates (environmental and social advisers); and MonuRent (mining fleet rental and maintenance partner).

On Budget and on Time?
The new mining plan and change in the mining schedule will result in processing operations starting in May 2015 and completion of mining operations four months earlier than planned in the original DFS.

Contact Details for Project Information
Aureus Mining CEO and president David Reading or CFO Paul Thomson, tel +44 207 1017 690.