Amara plans one of Africa’s biggest gold mines Share

Amara plans one of Africa’s biggest gold mines

“Mining here goes back to 1880,” says Peter Brown, the chief operating office of Amara Mining (LON:AMA).

Feet firmly planted in the red African earth, he stands on the lip of a hill overlooking an old mining pit at Amara’s Yaoure gold project in Cote D’Ivoire, the distant outline of village huts shimmering in the distance across a valley beyond.

“I have a record back to 1880,” he adds. “Although probably mining by the locals goes back even further.”

The most recent significant effort was undertaken by Amara itself - then trading under its former name of Cluff Gold - and it entailed the excavation of the pit that Brown is now standing in front of.

At that time Yaoure was called Angovia, after the local village, and it yielded gold production in the tens of thousands of ounces.

Now, though, the plan is completely different, and is much, much more ambitious.

As the hot sun beats down, Brown pauses to light up an old pipe, and then proceeds to point out various drilling sites inside the old pit in front of him.

“The old Cluff pit is now called Yaoure Central,” he says. “All our drilling is in Yaoure Central.”

The difference this time round is that Amara isn’t targeting the easy-to-access oxide ore at surface. That’s all gone.

This time round Amara is targeting more than six and a half million ounces of gold underground, a more complex mining task but potentially a much more lucrative one too.

The plans are to mine at a rate of around 247,000 ounces per year over a ten year mine life, with all-in sustaining costs running at a very attractive US$648 per ounce.

Given that the current gold price is still comfortably above US$1,150 per ounce, that allows for an awful lot of margin.

How is Amara able to mine so cheaply, where peers regularly see costs punching through the US$1,000 per ounce mark? The answer is simple – infrastructure.

“I’d challenge you to find anywhere in West Africa with such good infrastructure,” says Amara executive chairman John McGloin back in the site office.

His audience is the same delegation that Brown addressed earlier, and consists of investors and journalists who have travelled up that morning from the commercial capital of Cote D’Ivoire, Abidjan.

The journey, almost all of it on paved roads, has taken only a couple of hours and in the final stretch the party has crossed over the dam that blocks the Bandama River to create Lake Kossou, the largest lake in Cote D’Ivoire.

This dam supports one of the most significant hydroelectric projects in West Africa, as McGloin is keen to emphasise.

“The dam is a major trunk for power”, he says. “The rate is US8 cents per kilowatt hour.”

There are many West African mining companies reliant on on-site diesel power that can only dream of power at such a price. Their costs show why.

But Amara faces different challenges, because this mine is one of the biggest gold mines around, it won’t be cheap to build. A recent pre-feasibility study put the pre-production capital costs at around US$447mln, money which won’t be easy to find in capital markets no longer enamoured of mining stories.

Nonetheless, inside the company there is a bullishness that tells its own story.

Staff are running a book on which of the following two outcomes is now the most likely: a takeout before mining commences, agreed at an attractive price, or a successful fund raising followed by production.

McGloin is no stranger to capital markets and has in the past shown himself able to put together innovative forms of funding.

Back in 2012 he signed up Samsung in an innovative funding deal that brought one of the world’s great electronic giants directly into the gold business.

More recently the IFC, the investment arm of the World Bank, has expressed interest in helping to fund the project to the end of the bankable feasibility stage.

Whether McGloin can repeat these successes on a much larger scale remains to be seen.

But he’s not a man that should be underestimated.

When he took the helm at Amara, the Yaoure project was viewed simply as a mined-out pit on care and maintenance, waiting for a spike in the gold price to get it going again.

Now, three years later, the company is sitting on one of the largest undeveloped gold mines in Africa, fully funded to the end of a bankable feasibility study, in the sure knowledge that once up and running it will be one of the cheapest operations around.

So, it seems clear that in the near-term future Peter Brown’s records of mining at Yaoure, going back to 1880, will be significantly added to.

As he sits listening to McGloin with the rest of the audience, now out of the sunshine, he puffs on his pipe in satisfaction.