Aureus Mining battles mechanical issues and needs further funding

Aureus produced 8,274 ounces of gold in the second quarter from processing of 99,438 tonnes of ore at an average grade of 2.54 grammes per tonne (g/t).

The gold was produced at a cash cost of $1,253 per ounce prior to the plant shutdown, though with costs added on from the safety-related shut-down overseen by Lineria's Ministry of Lands, Mines and Energy, the mechanical issue and testing have taken operating costs during the period of process plant suspension operating to $1,660 and all-in sustaining cash costs to $1,894 per ounce.

Dwindling cash levels, which are backed up by inventory of $19.9m, the company drummed up a $30m investment by MNG Gold last month to boost funds, though analysts see further fundraisings as likely to be necessary.

Mining operations continued during the period when processing was suspended, with Aureus unearthing a total of 201,774 tonnes of ore at an average grade of 3.58 g/t gold produced at an average waste:ore ratio of 12.6:1.

Current ore stockpiles of over 200,000 tonnes of fresh ore at an average grade of 3.24 g/t gold with an additional stockpile of oxide and transitional ore amounting to over 90,000 tonnes at a grade of 1.46 g/t.

The company said it remained committed to maintaining its listing on both London's AIM and Canada's TSX, however, management, which includes a new chief executive and chief financial officer from MNG Gold, were said to be primarily focused on looking to "stabilise and then improve both operational and financial performance at the New Liberty Mine."

The incoming management team from MNG Gold were said to be “currently undertaking a comprehensive review of the company's cost base with a view to improving cash costs and operating margins. Following the completion of the operational and financial performance reviews and the achievement of steady state operations at New Liberty, management intends to produce a new life of mine plan for the project.”

Broker Shore Capital noted that liabilities amounted to US$58.7m – albeit US$12m of this comprised promissory notes to MNG, which were converted to shares post-period end.

"Adjusting for these post-period events implies a working capital deficiency of circa US$7m. However, we expect this position to worsen given ongoing operational issues. We believe that another significant slug of equity will be required (both for working capital and investment activities, not to mention debt servicing), implying significant dilution for any shareholders who are unable to participate."

Shares in Aureus were down 13.5% to 3.57p, though still above the all-time lows below 2.5p struck early in the year.