First gold at Aureus Mining in days

It has been touch and go getting Aureus Mining's New Liberty Gold project to production, but the company has struck gold and maiden sales are just days away. That money should then begin to offset big losses at the West African explorer in the first quarter.

The Liberian mine should be producing by now, but Aureus - spun out of African Aura in 2011 - struggled to secure debt financing a few years ago. Now, most of the plant is in operation, mining has begun in both starter pits, and first gold is expected by the end of May.

The New Liberty Gold Project, located in the Bea Mountain mining licence will, initially at least, be Aureus' bread and butter. It has a proven and probable mineral reserve of 8.5 million tonnes, which is set to generate 924,000 ounces of gold graded 3.4 grams per tonne. With an eight-year life, production is set to reach 119,000 ounces per annum for the first six years.

Without selling anything, losses doubled to $2.7 million in the first quarter of the year. Cash of $33 million was better than expected due to cuts in capital expenditure and a larger debt drawn of $12 million.

If everything goes to plan, finnCap analyst Martin Potts expects maiden sales in 2015 of $74.3 million, generating adjusted cash profit of $29.5 million and adjusted pre-tax profit of $13.4 million. At 26p, the shares trade on 11.2 times forward earnings, falling to 5.1 times in 2016.

Potts reckons the shares have 54% upside, retaining his price target of 40p and 'buy' recommendation. The shares haven't been that high since 2012.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.