Aureus Mining (LON:AUE) chief executive David Reading said it is “full steam ahead” into production for the New Liberty gold mine in Liberia after the company secured US$100mln in project finance.
The plan is to have the operation up and running by the end of next year with first gold in March 2015.
Agreeing the debt package, provided in two tranches by Nedbank, Rand Merchant Bank and RMB Resources, is a significant milestone in the development of the company and the high-grade open pit deposit.
At the same time the low cost of finance, which averages around 6%, provides great third party validation of the project.
“Quite honestly for a mining project in this environment in the current economic environment, this is excellent,” Reading said of the coupon.
This point is borne out by City analysts, who said the last major obstacle had been removed from taking New Liberty into production.
“Having modelled the debt repayment schedule, we remain confident that New Liberty will be able to finance repayments over the six-year term of the loan,” said Duncan Hughes, of mining house RFC Ambrian.
“The recent equity raise also provides a (probably unnecessary) buffer against any possible cost blowouts during construction.”
Having spent US$45mln so far, work on Liberia’s first gold mine is well underway.
The foundations are complete, as are the earth works and Aureus is currently having the equipment manufactured. “It is full steam ahead,” said Reading.
City reaction to the news was positive with Ambrian and small-cap specialist finnCap repeating their ‘buy’ advice.
The former reckons Aureus is worth 47p, while the latter has a very punchy 81.4p a share price target. The stock is currently changing hands for 33.5p, valuing Aureus at £85mln.
With a total resource of 2.4mln ounces, New Liberty is being built to produce 120,000 ounces of gold a year over an eight year mine life.
However, there is plenty of upside, with the potential to convert inferred pit resources and ounces from the satellite deposit as well as the option to go underground.
Life-of-mine cash costs of US$668mln mean the economics of New Liberty are very robust.
Not that this is reflected by the share price, which is down 27% in the year to date despite the progress made to get the project to the brink of production.
“I don’t think Aureus has any particular downside,” said Reading, referring to the current bargain-basement valuation.
“There has been an indiscriminate decimation of gold equities over the last year so everyone is trading at massive discounts to value.
“I think the difference with Aureus is we are financed, building a mine and more likely to unlock that discount than a lot of other companies.”