Procurement News Notice |
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| PNN | 7320 |
| Work Detail | Aureus Mining the listed West African gold producer, announces that the mining services contract between Bea Mountain Mining Corporation (“BMMC”), a wholly-owned subsidiary of the Company and MonuRent Limited (“MonuRent”) together with all underlying MonuRent supplier contracts have been novated to Atmaca Services (“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.” Operations Update 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. |
| Country | Liberia , Western Africa |
| Industry | Mining |
| Entry Date | 15 Oct 2016 |
| Source | http://www.mineweb.com/news-fast-news/aureus-to-transition-new-liberia-gold-mine-to-owner-operator-model/ |
