Risking it all for gold

Challenges of mining in Liberia’s ebola zone

THERE is nothing more calculated to make you feel unpopular than turning up at an international conference in New York only to find everyone cancelling their appointments with you.

Was it something you said? Something you did?

For David Reading ( pictured) it was the fear he might be spreading ebola that made him persona non grata at the Goldman Sachs Global Metals and Mining Conference in November. He says: ‘I had back-to-back meetings planned. By the time I got there everybody had cancelled. No one wanted to see me.’

This was more than a social inconvenience. Reading runs AIM-listed Aureus Mining, which at the time was more than halfway through building a gold mine in the ebola zone. He had 1,000 workers on site at New Liberty – Liberia’s first gold mine.

‘When ebola emerged there was utter panic,’ he says. ‘There was speculation it was airborne, that the whole of West Africa would be affected.’

At its peak the outbreak infected as many as 400 new victims a week. Reading says the company took expert advice, putting strict ‘health protocols’ in place and two doctors on site. He adds: ‘We monitored people, did constant temperature checks, lots of handwashing. We put up road blocks around the site and the local village where many of the workers came from. We were in quarantine.’

On May 9 the World Health Organisation declared Liberia free of ebola and the country started to slowly move on. MIRACuLOuSLY the mine had not had any cases of ebola but the outbreak did cause delays. Reading adds: ‘We had to reset the clock. We lost a couple of months which delayed the opening from March.’

However most people in the industry believe the fact the mine started operations this month is remarkable, considering what the workers have been through.

The gold mine has also been built at a cost of around £110m during the worst slump in gold mining in more than a decade.

Fellow gold mining boss John McGloin, chairman and chief executive of AIM-listed Amara Mining, says: ‘Bringing the New Liberty gold mine into production is a phenomenal achievement. Constructing a gold mine in West Africa is never an easy process, but it’s on an entirely different level to do it when your main supply channels are disrupted, your camp is locked down and the health of you and your team is at serious risk.’

Reading, who has spent 35 years in the gold mining industry, worked at FTSE 100 gold miner Randgold Resources for many years. Aureus Mining’s predecessor, African Aura Mining, had acquired a licence for New Liberty, but as Reading explains: ‘The mine was the right asset at the wrong time.’

Roll on to 2010 and he was asked to take a look. He realised New Liberty had potential. The following year he joined as chief executive and Aureus Mining was split from African Aura.

Aureus managed to raise debt and equity in 2012 just before the gold price slumped further and rivals started to put developments on hold.

The mine finally started production this month and will support 320 jobs – much needed in the African nation whose economy is ranked 181st out of 184 countries by the International Monetary Fund. Aureus has also helped set up local co-operatives to supply the mine, including farming, bricklaying, carpentry, roof making, uniform making and cleaning.

The company has a mineral licence from the Liberian government for which it pays 3pc of production in royalties and incurs 25pc corporation tax.

Some may criticise a British company making money from the minerals of such a poor state, but Reading defends its activities: ‘If you look at the pie, by the time you pay tax, the cost of production, the cost of community development projects, about 60pc of the money is gone. We are not taking advantage of the country.

‘We are a small company and the development models we are introducing are participatory – we are working with the community.’

Growth for Aureus will come from increasing the size and production at New Liberty once it is up and running, but it also has leases for other areas where it could explore and eventually develop new mines.

Reading says: ‘There are bigger opportunities in Liberia. This is a starter kit. We will use revenue from New Liberty to fund the next development project.’

If the gold price starts to pick up, then the company will start to look attractive and it could even become a takeover target.

Currently the shares are around 75pc lower than when it listed four years ago.

Now the mine is up and running investors will want to see the share price shine too.