Aureus Mining (Price: 38.0p | Target: 45.0p | Rec: Buy) Aureus Mining has secured a US$88m debt facility, with banks mandated for a further US$12m subordinated debt to take the total to US$100m.

We believe the terms are very attractive at 5%pa interest over a 6 year term, with first drawdown expected in 1H14.

Around 100koz is expected to be hedged as part of the facility.

Loan documentation completion is scheduled for Q4 this year.

The US$12m facility is expected to have a 6 month term at Libor +7.5% with warrants at a 25% premium to yesterday’s price. * We see this as a major step forward for the company, enabling it to continue with the development of the New Liberty gold mine in Liberia.

The terms look attractive and backing by the Export Credit Insurance Corporation of South Africa (ECIC) doubtless contributed to lowering the cost.

In March, Aureus had mandated banks to secure US$108m at 5%pa interest and no hedging; however, at that time, the gold price was over US$1,600/oz.

The hedging requirement seems prudent for all parties.

The delay in securing the financing has led to the company to holding back ordering certain plant and equipment leading to pushing back anticipated first gold pour to the end of Q1 2015. * Our updated valuation reflects the June US$54m cash position, the debt facility outlined and delaying progress by around 6 months in line with company guidance.

We also factor in 11m warrants due in 2015.

Our numbers indicate a cash shortfall for the development (c.US$20m by 2015), although there may be scope to reduce/adjust the timing of expenses through adjustments to the mine plan and cutting other expenditures.

Therefore there remains some moderate financing risk before the project is completed.

We value Aureus on a risked NPV of the New Liberty mine and some exploration value.

In setting our TP, we have adjusted our risking following this latest financing from 50% of NPV to 65% (lower risk) which offsets the decline in value following the delay and slightly higher debt costs.

Buy retained.
To access the full note please click here Analyst: Marc Elliott
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