Q3 2016 RESULTS AND OPERATIONAL UPDATE
November 14, 2016Back
Q3 2016 RESULTS AND OPERATIONAL UPDATE
Aureus Mining Inc. (“Aureus” or the “Company”), the TSX and AIM listed West African gold producer, announces the release of its unaudited results for the quarter-ended September 30, 2016 (“Q3”), and is pleased to provide an update on operations at the New Liberty Gold Mine (“New Liberty”) in Liberia.
The financial statements should be read in conjunction with the accompanying management’s discussion and analysis. These documents have been filed on Sedar and are available on the Company’s website www.aureus-mining.com or at www.sedar.com.
Q3 Financial Summary
- Revenues of US$18.8 million from gold sales of 14,139 ounces;
- Operating cash costs of US$1,971 per ounce sold and all-in sustaining cash costs of US$2,153 per ounce sold. Unit costs were negatively impacted by the plant restart procedures, intermittent stoppages during the quarter and the write off of the low grade oxide ore stockpile;
- Quarter-end cash of US$5.9 million and inventory of US$16.5 million;
- Closed final tranche of the US$30m equity financing with MNG Gold Jersey Ltd. (“MNG Gold”) in July 2016 to strengthen the Company’s balance sheet and fund working capital;
- Post quarter end, the Company received an extension until December 14, 2016 to its default waiver and standstill agreement with its lending banks (the “Lenders”) during which time the Company continues to work with its Lenders to reschedule its debt repayment profile; and
- Post quarter end, the Company announced that it has raised, conditional on minority shareholder and TSX approval, approximately US$76 million via an equity fundraising to finance the Company’s transition to an owner-operator mining model, repay amounts due to its Lenders and to further strengthen its balance sheet.
Q3 Operational Summary
- Mining operations focused mainly in the Kinjor stage 1 and 2 starter pits with tonnes mined during the quarter totalling 1,900,326 tonnes, including 302,822 tonnes of ore at an average grade of 2.61 g/t;
- 221,360 tonnes of ore were processed at an average feed grade of 2.92 g/t resulting in the production of 14,392 ounces of gold during the quarter; and
- During September the Company announced that the mining services contract between Bea Mountain Mining Corporation (“BMMC”), and MonuRent (Liberia) Limited (“MonuRent”) together with all underlying MonuRent supplier contracts had been novated to Atmaca Services (Liberia) Inc. (“Atmaca”), a subsidiary of MNG Gold.
Q3 Operational Update
During Q3 2016, mining operations continued with 1,900,326 tonnes mined including 302,822 tonnes of ore at an average grade of 2.61 g/t. Mining operations were focused on the Kinjor stage 1 and stage 2 pits, opening access to fresh high grade ore, with limited tonnage coming from the Larjor pit. Grade control drilling continued throughout the period, with a focus on the Kinjor pit, with a new drill rig delivered to site during early November to ensure that ore requirements in early Q4 2016 can be met. During the quarter the Company also entered into a contract with an established explosives supplier in Liberia, reducing the cost of explosives. It is anticipated that these initiatives will increase the stock of broken ore in the pit, increase fleet availability and assist with the reduction in overall mining cost.
Since the restart of processing operations on 30 June 2016, the Company experienced periods of unscheduled plant downtime whilst plant modification activities were undertaken, which disrupted gold production in Q3 2016. Despite this, 221,360 tonnes of ore were processed during the quarter at an average feed grade of 2.92 g/t, resulting in the production of 14,392 ounces of gold.
Plant optimisation and preventative maintenance activities continued throughout the quarter, with the Company’s existing operations team being supplemented by MNG Gold’s in-house expertise. The process plant detoxification circuit was modified to recycle process plant effluent from the tailings storage facility (“TSF”) to reduce discharges from the TSF and changes were made to both the design and operation of the TSF, converting it from an open to a closed loop system with controlled discharges. Throughout Q3 2016 and to date, the process plant detoxification system has continued to operate to specification and all discharges into and out of the TSF have remained fully compliant with the Company’s environment and operating permits.
In September, the Company announced that the mining services contract between BMMC, a wholly-owned subsidiary of the Company and MonuRent together with all underlying MonuRent supplier contracts had been novated to Atmaca. After completion of the previously announced equity fundraising which is expected to close in early December 2016, the Company will acquire the mining equipment and inventory from Atmaca to effect its transition to an owner-operator mining model.
Post-Q3 Operational Update and Q4 Production Guidance
October 2016 was the first complete month since the mining services contract between Bea Mountain Mining Corporation, a wholly-owned subsidiary of the Company and MonuRent (Liberia) Limited was novated to Atmaca Services (Liberia) Inc., a Liberian company that is wholly owned by MNG Gold Jersey Limited, the Company’s 55% shareholder. In October 2016 a total of 1,054,009 tonnes of material was mined at New Liberty representing a record tonnage of material moved in a month at New Liberty since mining operations began in 2015.
During October 2016 the Company produced 7,431 ounces of gold. Mill utilisation was 88% being the second consecutive month at this level. However, the gold recovery rate in October totalled 80%, which whilst an improvement on the 72% achieved in September remains below the design specification of 93% gold recovery.
Management believe that the low gold recovery is primarily attributable to inadequate oxygen generating capacity of the existing process plant. Immediate action has been taken to address this with orders having been placed for two additional PSA oxygen plants, which are expected to be installed at site during the middle of Q1 2017.
However, while recoveries remain low, management has decided to feed lower grade ore through the plant to conserve the value of the higher grade ore. Management now expects production for the fourth quarter of 2016 will be in the range of 17,000 – 20,000 ounces.
The Company has received initial draft TSF designs from the specialist tailings consultancy which it engaged in August to undertake a review of the TSF design with a view to increasing the existing storage capacity and developing a long term tailings and water management strategy for the Project. The initial draft TSF design recommendations are consistent with management’s cost expectations and timetable for reconfiguring the TSF during the dry season.
Since processing operations restarted on 30 June 2016, the Company has been operating under a Provisional Approval from the Liberian Ministry of Lands, Mines and Energy (the “MLME”). On 10 November 2016 the Company received confirmation that it had satisfied all of the operating conditions stipulated by the MLME regarding the detoxification circuit including the TSF operating consistently within design limits and the Company can return to normal operations and is no longer operating under a Provisional Approval.
Aureus Mining Inc.
Tel: +44(0) 20 7010 7690
Bobby Morse / Anna Michniewicz
Tel: +44(0) 20 7466 5000
Numis Securities Limited
(Aureus Nominated Adviser and Broker)
John Prior / James Black / Paul Gillam
Tel: +44(0) 20 7260 1000
About Aureus Mining Inc.
The Company’s assets include the New Liberty Gold Mine in Liberia (the “New Liberty Gold Mine,” “New Liberty” or the “mine”) which has an estimated proven and probable mineral reserve of 8.5 Mt with 924,000 ounces of gold grading 3.4 g/t and an estimated measured and indicated mineral resource of 9,796 Kt with 1,143,000 ounces of gold grading 3.63 g/t and an estimated inferred mineral resource of 5,730 Kt with 593,000 ounces of gold grading 3.2 g/t. A Definitive Feasibility Study (“DFS”) has been completed, the first gold pour has taken place and commercial production has been declared. The foregoing mineral reserve and mineral resource estimates and additional information in connection therewith are set out in the Company’s technical report dated March 25, 2015 and entitled “New Liberty Gold Project, Bea Mountain Mining Licence Southern Block, Liberia, West Africa, Definitive Project Plan.”
The New Liberty Gold Mine is located within the Southern Block of the 100% owned Bea Mountain mining licence. This licence covers 478 km² and has a 25 year, renewable, mineral development agreement. The Bea Mountain mining license also hosts additional gold projects of Ndablama, Gondoja, Weaju and Leopard Rock which are the focus of exploration programs during 2016. Ndablama has an indicated mineral resource of 386,000 ounces of gold grading 1.6 g/t and inferred mineral resource of 515,000 ounces of gold grading 1.7 g/t and Weaju has an inferred mineral resource of 178,000 ounces of gold grading 2.1 g/t. The Yambesei (759 km2), Archaen West (112.6 km2), Mabong (36.6 km2) and Mafa West (15.6 km2) licences will also be subject to preliminary reconnaissance geological work. The foregoing mineral resource estimates and additional information in connection therewith are set out in the Company’s technical report dated December 1, 2014 and entitled “Ndablama and Weaju Gold Projects, Bea Mountain Mining Licence, Northern Block, Technical Report on Mineral Resources” (“Ndablama and Weaju Technical Report 2014”).
The Company also has a gold exploration permit in Cameroon.
The Company’s Qualified Person is Mark J. Pryor, who holds a BSc (Hons) in Geology & Mineralogy from Aberdeen University, United Kingdom and is a Fellow of the Geological Society of London, a Fellow of the Society of Economic Geologists and a registered Professional Natural Scientist (Pr.Sci.Nat) of the South African Council for Natural Scientific Professions. Mark Pryor is an independent technical consultant with over 30 years of extensive global experience in exploration, mining and mine development and is a “Qualified Person” as defined in National Instrument 43 -101 “Standards of Disclosure for Mineral Projects” of the Canadian Securities Administrators and has reviewed and approves this press release.
Forward Looking Statements
Certain information contained in this Announcement constitutes forward looking information. This information may relate to future events or the Company’s future performance. All information other than information of historical fact is forward looking information. The use of any of the words “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe”, “predict” and “potential” and similar expressions are intended to identify forward looking information. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking information. Specific statements that constitute forward-looking information in this Announcement include statements regarding the timing and completion of the US$76 million equity fundraising, the acquisition by the Company of equipment and inventory from Atmaca, the timing of delivery and installation of two additional PSA oxygen plants before the end of Q1 2017, and gold production of 17,000 to 20,000 ounces in the fourth quarter of 2016. No assurance can be given that this information will prove to be correct and such forward looking information included in this Announcement should not be unduly relied upon. This information speaks only as of the date of this Announcement.
Actual results could differ materially from those anticipated in the forward looking information contained in this news release for a number of reasons including the failure to obtain minority shareholder approval, the failure of parties to contracts to honor contractual obligations, as well as a result of certain risk factors, including: the risk that the waiver and standstill agreement will terminate; risks normally incidental to exploration and development of mineral properties; the inability to obtain required waivers and amendments from the Company’s creditors in respect of its debt repayment obligations and consequential risks of default thereon; risks related to operating in West Africa; health risks associated with the mining workforce in West Africa; risks related to the Company’s title to its mineral properties; adverse changes in commodity prices; risks related to current global financial conditions; the inability of the Company to obtain, maintain, renew and/or extend required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities and other risks relating to the legal and regulatory frameworks in Liberia, including adverse changes in applicable laws; competitive conditions in the mineral exploration and mining industry; risks related to obtaining insurance or adequate levels of insurance for the Company’s operations; risks related to environmental regulations; uncertainties in the interpretation of results from drilling; risks related to the legal systems in Liberia; risks related to the tax residency of the Company; changes in exchange and interest rates; risks related to the activities of artisanal miners; actions of third parties that the Company is reliant upon; lack of availability at a reasonable cost or at all, of plants, equipment or labour, including required equipment, explosives and other necessary material not being delivered in the expected time frame, or at all; the inability to attract and retain key management and personnel; political risks; and future unforeseen liabilities and other factors.
This Announcement also contains references to estimates of mineral resources and mineral reserves. The estimation of mineral resources and reserves is inherently uncertain and involves subjective judgments about many relevant factors. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation, which may prove to be unreliable and depend, to a certain extent, upon the analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. Mineral resource or reserve estimates may have to be re-estimated based on, among other things: (i) fluctuations in commodity prices; (ii) results of drilling; (iii) results of studies; (iv) changes to proposed mining operations, including dilution; (v) the evaluation of mine plans subsequent to the date of any estimates; and (vi) the possible failure to receive required permits, approvals and licences.
The forward looking information included in this Announcement is expressly qualified by this cautionary statement and is made as of the date of this Announcement. The Company does not undertake any obligation to publicly update or revise any forward looking information except as required by applicable securities laws.