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Aureus Mining starts gold production in Liberia in shadow of Ebola crisis

Parts of Liberia are rich in gold but the country’s mineral development went nowhere for more than two decades because of the country’s twin civil wars, the first from 1989 to 1997, the second from 2000 to 2005.

MICHAEL DALDER/REUTERS

Aureus Mining Inc. has survived the Ebola crisis to produce its first gold in Liberia, the West African country that had no gold mine until the Canadian company arrived.

Aureus, which trades on the Toronto Stock Exchange and on London's AIM market, poured the first gold from its New Liberty open pit mine in Liberia's northwest Friday evening. The $172-million (U.S.) mining project will be in full production in the autumn, when it will become one of the desperately poor country's largest private employers.

David Reading, 59, the company's Canadian-trained, British chief executive officer, said he was worried at one point that the Ebola crisis would doom the company's Liberia plans. Liberia was one of the countries hit hardest by Ebola last year, with 10,666 reported cases and 4,806 deaths by the end of February, according to the World Health Organization (WHO).

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"You go through sleepless nights as management," Mr. Reading said. "If we stop everything, the company would go bankrupt. But if we keep going and we lose someone, we'd never forgive ourselves."

Aureus kept going, but put in place a formidable set of Ebola screening procedures. The mine site was cordoned off. Anyone entering the site was stopped at a checkpoint, where their temperature was taken. "We had a roll call every few hours and everyone's temperature was taken again," Mr. Reading said. "We had health professionals on site, including two doctors. We also had a special ambulance and an isolation chamber."

In the end, none of the mine's 1,000 workers – direct employees and contractors – contracted Ebola. The outbreak, however, delayed the project by at least two months and cost the company $18-million in direct costs, such as the screening procedures, and indirect costs, mostly forgone revenue.

On May 9, the WHO declared Liberia's Ebola outbreak over, meaning two incubation periods – 42 days – had passed since the last Ebola victim was buried.

Parts of Liberia are rich in gold but the country's mineral development went virtually nowhere for more than two decades because of the country's twin civil wars, the first from 1989 to 1997, the second from 2000 to 2005. A British company called Mano River obtained licences to the New Liberty area in the late-1990s. They were later picked up by an iron ore and gold company called African Aura Resources Ltd., then the employer of Mr. Reading. The company took the view that it made no sense to combine the two metals, so the gold side was split off in 2011 and became Aureus. Mr. Reading was installed as its first boss.

The New Liberty mine, located in Bea Mountain, about 100 kilometres northeast of the capital Monrovia, is a high-grade deposit, though a large amount of waste material has to be stripped away to get to the gold. The site has 900,000 ounces of proven and probable gold reserves and will yield 122,000 ounces in the first 12 months of production. The cash costs per ounce are $789, giving it a fairly good margin compared with the current gold price of about $1,200 an ounce.

In a recent note, Stifel Financial Corp., a British brokerage that has a "buy" rating on Aureus, said: "This low-cost structure should facilitate decent margins at current gold pricing levels, but should also provide comfort that operational profitability could be maintained in the event of another sharp downturn in gold."

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Mr. Reading said a property about 35 kilometres northeast of New Liberty will be drilled once the company starts to produce cash flow. "The opportunity to expand is quite big," he said.

Aureus has a market value of about $209-million (Canadian). Its shares fell sharply during the height of the Ebola crisis in late 2014 but have since recovered. They are up almost 50 per cent over six months.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More

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