Avesoro Resources

Using existing experience to rejuvenate the New Liberty mine

About This Project

A Turkish gold miner with existing projects in West Africa recently signed a deal to become the majority shareholder in Avesoro Resources (LSE,TSX: ASO) (formerly Aureus Mining) in a bid to repurpose and stabilise production at the New Liberty gold mine in Liberia.


MNG Gold founder Mehmet Nazif Günal, whose initials inspired the company name, initially started out in 1976 in construction in Turkey. His company has since evolved to become a diverse group of companies operating in many sectors including tourism, air freight, finance, energy as well as its mining branch, MNG Gold.


The takeover deal between MNG Gold and Avesoro (formerly Aureus Mining) saw a number of director level changes as MNG acquired a 55% stake in the company through a US$30 million share subscription. As a part of that deal Serhan Umurhan became Avesoro CEO and was charged with overcoming the commissioning challenges that Avesoro had experienced in bringing its flagship project, the New Liberty Mine into production.


Umurhan has a lot of technical experience in gold mining. Prior to heading up MNG’s gold mining branch, at Koza Gold, Turkey’s largest gold miner, Umurhan developed two mines from $40 million to $2 billion in value in his role as technical manager.


Having established MNG Gold in 2013 the company now has 2,000 employees and three operating gold mines in two countries. In addition to this Umurhan is already targeting a host of exploration opportunities across West Africa.


The New Liberty mine


The New Liberty mine had been struggling in a depressed price environment and was forced to suspend operations in May amid commissioning delays, a tailings leak and a deteriorating financial position. Umurhan and MNG Gold identified New Liberty as a mine with potential if it was managed well believing it could be a profitable asset if some key challenges were overcome.


“You cannot find a reserve like that in the market very easily. It’s more than 3g/t, it’s a very nice reserve with big potential,” says Umurhan.


Umurhan and MNG Gold are in a really strong position to take New Liberty forward and strengthen the mining operations based on both previous local experience and the available capital from MNG.


MNG already has a strong portfolio in the region: the operating Kokoya gold mine in Liberia, the Youga gold mine in Burkina Faso and a number of West African exploration assets. Umurhan says that this existing knowledge and experience of building and operating gold mines in West Africa means they can implement financial efficiencies at the project.


“We’ve worked in Liberia, we know the country, we know how much things cost and we know how to do business in there,” says Umurhan.


The other factor which will enable MNG Gold to make New Liberty into a profitable mine is the level of capital that the investor will be able to apply to the Liberian project. MNG has already supplied $90 million, $30m as part of the entrance deal which provided much needed cash to revive the project, and a further $60 million investment as part of a larger $72 million equity fund raise to transition the project to an owner-operator model, strengthen its balance sheet and make principal and interest repayments due to the Company’s lending banks.


Since taking charge of Avesoro in July, Umurhan has identified the problems that were holding New Liberty back and is putting together a plan to solve them. The process will target two key areas. Firstly, Umurhan needs to get the project up to continuous production, both at the mine site and the processing plant. Secondly, Umurhan is embarking on a cost-cutting programme and believes that once both have been achieved the project will be in good shape.


One of the initial measures to implement cost saving at New Liberty is the recently completed transition to an owner-operator mining model. Under the Aureus moniker it was announced in early September that the mining services contract previously held by MonuRent had been transferred to MNG Gold-owned Atmaca Services (ASLI) in order to reduce ongoing costs.


ASLI paid MonuRent $15.4 million for the mining equipment and $7.1 million in cash for the inventory onsite. Following the completion of the recent $72 million equity fundraising by Avesoro, the mining assets were sold back to the company by ASLI for no profit.


This comes as part of the full management review of cost savings and Avesoro said in a statement this is likely to be the most substantial measure in that review.


Strategic review


Umurhan also notes that the operational costs are high and the management team will use its local experience to bring these down. “We have a gold mine in Liberia so we know all the costs and what they should be and we are comparing it. If it’s higher than it should be we will change it,” Umurhan asserts.


The second major review that the Avesoro management team are undertaking for New Liberty is to implement efficiency measures to deliver continuous production at the project. Umurhan feels that currently the mine is performing at 50% of what it should be. The CEO has engaged a programme of plant modifications and optimisation activities to improve operations, which he expects to have completed by the end of Q1 2017.


“There are two major issues, one of them is the tailings storage and discharge limits, we have temporarily fixed it and we are looking for the permanent solution,” explains Umurhan. “We want to have continuous production with the plant and parallel to that we want to lower our costs.”


Umurhan has his sights set on big targets for MNG Gold and Avesoro. He wants to develop the existing assets and utilise exploration to reach a production rate of 1 million ounces per year (oz p/a).


“When I established the company it was at 150,00 oz p/a, I think next year we will make 250,000 oz p/a. Our next target is reach more than 1 million oz p/a.”


Avesoro Resources


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Africa, gold, mining, services