6 September 2016
Aureus Mining Inc.
TSX : AUE
AIM : AUE
TRANSITION TO OWNER-OPERATOR MINING MODEL
Aureus Mining Inc. ("Aureus" or the "Company"), the TSX and AIM listed West African gold producer, announces that the mining services contract (the "Contract") between Bea Mountain Mining Corporation ("BMMC"), a wholly-owned subsidiary of the Company and MonuRent (Liberia) Limited ("MonuRent") together with all underlying MonuRent supplier contracts have been novated to Atmaca Services (Liberia) Inc. ("ASLI"), a Liberian company that is wholly owned by MNG Gold Jersey Limited ("MNG Gold"), the Company's 55% shareholder. Save for the novation of the Contract from MonuRent to ASLI, all terms of the Contract will remain the same.
As part of the agreement with MonuRent, ASLI will pay to MonuRent cash of US$15.4 million to take ownership of the mining equipment, US$7.1 million cash for the inventory currently on site at New Liberty, US$7.9 million cash for invoiced receivables, approximately US$2.5 million cash for future uninvoiced receivables incurred by BMMC during July and August 2016, (together the "Sale Assets") and US$4.5 million cash as a contract novation fee. MonuRent employees will be transferred to ASLI on the same terms and conditions enabling ASLI to operate the Contract without an interruption to mining operations at the New Liberty Mine.
It is intended that upon completion of an equity fundraising by the Company, which MNG Gold has agreed in principle to fully underwrite, the Sale Assets will be sold by ASLI to BMMC at no gain or loss. BMMC will also pay to ASLI a fee of US$4.5 million to terminate the Contract, being the same amount as the novation fee paid by ASLI to MonuRent, thereby achieving the transition of BMMC to owner-operator of the mining operations at the New Liberty Mine.
The strategic decision to move to an owner-operator mining model is a result of the previously announced on-going review of the Company's cost base. Management believe that the adoption of owner-operator mining at New Liberty will significantly reduce the ongoing costs of mining operations and improve the operational and financial flexibility of the Company. In order to make an efficient transition to owner-operator mining, the Company will draw on the experience of MNG Gold who successfully owner-operate mining activities at the Kokoya Gold Mine in Liberia.
As previously announced, the Company's management team are undertaking a comprehensive review of the Company's cost base with a view to improving cash costs and operating margins to ensure the Company is well-positioned to deliver its full potential. Whilst this review is still ongoing, it is expected that the cost of adopting an owner-operator model will be the most substantial cost arising from management's review.
Loudon Owen the Company's Lead Director commented:
"We are pleased to have successfully taken the first steps of transitioning Aureus to an owner operator. We believe this is an attractive financial proposition as the capital requirements associated with completing this transaction are expected to be far outweighed by the significant reductions in future operating costs. In addition, it is an important strategic initiative that gives the Company control over the mining fleet. We are grateful to our major shareholder for facilitating this transaction until the Company has raised sufficient capital to acquire these assets directly. With ASLI taking ownership of the mining fleet, there is a strong mutual interest between fleet owner and operator in seeing New Liberty deliver on its full potential.
The Company's management continue to review the Company's cost base and associated life of mine plan, and look forward to updating the market once it is finalised."
Following the restart of processing operations at New Liberty in June 2016, the Company continues to experience periods of unscheduled plant downtime. Average plant availability has been 66% over the past 65 days, however better availability has been achieved in recent weeks. Plant modifications and optimisation activities continue with particular focus on optimising the ball mill grind size and also reagent consumption in the Carbon in Leach ("CIL") and detoxification circuits of the process plant. Since the restart of processing operations to date, the Company has poured and shipped approximately 8,100 ounces of gold.
The detoxification circuit has been continuously operating at a stable level and performing to its design specifications following recent modifications. All discharges from the Tailings Storage Facility ("TSF") have been within permitted levels in accordance with the International Cyanide Management Code ("ICMC"). However, the Company is working in conjunction with its consultants to modify the layout and operation of the TSF, including using the TSF as a source of plant make up water, to allow for an increased retention time for process effluent and also to enable more control over future discharges.
Related Party Transaction
The Contract has a minimum contractual spend of c.US$2 million per month, and as such, under the AIM Rules for Companies, the novation of the Contract to ASLI, a wholly owned subsidiary of MNG Gold, gives rise to a Related Party Transaction between Aureus and MNG Gold. The independent directors of the Company, consisting of Mr David Netherway, Mr Jean-Guy Martin and Mr Loudon Owen consider, having consulted with the Company's Nominated Adviser, that the terms of the Transaction are fair and reasonable insofar as its shareholders are concerned.
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 25 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. 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 as a result of the 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.
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.
This information is provided by RNS