Sunergy, Inc. (fka SNEY)

[falon]

Liberia - West Africa's next gold frontier?

Author: Lawrence Williams

http://www.mineweb.com/mineweb/content/en/mineweb-gold-analysis?oid=159496&sn=Detail

Posted: Tuesday , 02 Oct 2012

Almost alone among West African states, the gold exploration and mining sector has mostly passed Liberia by, despite appropriate geology, and a fair amount of artisanal mining - usually great guides to highly prospective gold terrain. In part this is because that at the time the gold price was entering its bull market Liberia was engaged in brutal internecine strife, and its aftermath, and the explorers stayed away, and were slow to return. This is now changing with companies like Aureus Mining.and Hummingbird Resources acquiring major exploration tenements which are just beginning to show their potential.

The most advanced is AIM and TSX quoted Aureus (formerly African Aura) with its New Liberty gold project, for which it has just announced what it reckons to be a highly positive NI 43-101 compliant feasibility study - and Hummingbird may not be far behind with its Dugbe gold project. Others now beginning to explore for gold in Liberia include Endeavour Mining and Newmont.

To recap, Liberia, after a long period of relative stability from its foundation in 1847 saw a military coup which overthrew the Americo-Liberian leadership in 1980, marking the beginning of political and economic instability and two successive civil wars that left approximately 250,000 people dead and devastated the country's economy. A 2003 peace deal led to democratic elections in 2005. Today, Liberia is recovering from the lingering effects of the civil war and related economic dislocation, with about 85% of the population living below the international poverty line.

It is bordered by Sierra Leone on the west, Guinea to the north and Cote d'Ivoire to the east. Geologically it is dominated by the Man Craton of Archaean age and with great structural similarities to the Birimian Craton in which fall most of West Africa's major gold mines. The mineralisation is concentrated within sheared ultramafic komatiitic talc schists, typical of Archaean greenstone belts elsewhere in the world. The shear zones are almost vertical and the sheared ultramafic rocks appear to be continuous throughout the known strike length of the mineralisation. Granite gneiss and amphibolite make up the hanging wall and foot wall respectively. Metallurgical tests of the mineralised sections carried out by Lakefield Research indicate that the gold in these formations is free in form.

The outstanding feature of the New Liberty gold prospect is the scale of the artisanal workings - rarely seen in Archaean gold deposits. These workings are on a larger scale than those previously witnessed at what is now known as the three-million ounce resource of the Resolute ex-Samax Gold "Golden Pride" mine in Tanzania. The dimensions and nature of the host lithology, strength of shearing, intensity of the hydrothermal alteration system and associated gold mineralisation, suggests, according to Aureus that this prospect has all the hallmarks of a major gold deposit.

Now the company has come up with a feasibility study which it reckons shows that New Liberty is an economically viable and robust gold project based on an average gold price of a fairly high US$ 1,400/oz. New Liberty would be Liberia's first commercial gold mine and Aureus' first mine in its highly prospective 546km2 total licence area.

The main conclusions from the study demonstrate a pre-tax IRR of 37% at an average gold price of US$ 1,400/oz, average annual production of 120,000 oz/year over the first four years at 3.7g/t head grade, with initial capital costs of only $140million (However the capital estimate excludes contingency of $14million, and deferred capex covering sustaining capital of $12.8million, additional plant and equipment of $60.6million and pre-stripping costs of $18million (total $105million)). . At a gold price of around $1,750/oz the IRR improves to 47%.

The study comes up with a life of mine operating cash cost averaging $685/oz, using contract mining. Total revenue is estimated at $1.2 billion and pre-tax cash flow $338 million based on the $1,400/oz average gold price.

The company believes that there are multiple, further opportunities to optimize the project and this work is in progress and will be completed in Q1 2013. A mine build and production schedule is expected to be outlined in Q1 2013.

The Proven and Probable Ore Reserve has been estimated at 8.7million tonnes at 3.3 g/t for 910,000 oz of contained gold, which is an increase of 4% from the initial reserve statement in February 2012. There is also scope to increase current reserves further through drilling of inferred resources on hanging wall lenses within the pit as well as drilling of inferred resource blocks just below the bottom of the current optimised pit

Open pit mine and gold plant is designed to mine and treat 1.1 million tonne/year of primarily unweathered ore. The preliminary plant design incorporates two stage crushing, ball milling, gravity concentration and a Carbonin-Leach circuit for a full steady state recovery rate of 93% derived from metallurgical testing.

Aureus has secured a 25 year, renewable, Mineral Development Agreement and mining licence and the EIS permit is expected in early Q4 2012 following the completion and submission of the EIA to the Environmental Protection Agency of Liberia in July 2012. With receipt of the environmental permit, Aureus can move quickly to obtain any other procedural and functional permits required for construction

Aureus say there is strong interest in financing the project from various banks and financial institutions.

Aureus CEO, David Reading said "We believe we are still capable of improving the robust economics of the project further through a number of initiatives. These opportunities include conversion of Inferred Resources through drilling and optimizing infrastructure, plant layout and conditions for gold recovery. Once this work is complete we intend to move quickly to mine building and production phases."

Given Liberia's poverty levels and its need to develop export industries to help rebuild its economy, there seems to be little likelihood that the New Liberty project will suffer any serious administrative or environmental delays so it seems well set assuming no collapse in the gold price and that what the company says about the interest in financing it is correct.