Mano River toughs it out in Liberia

Mano River Resources (MNO-V, MNRVF-O) president Tom Elder describes the journey of bringing Liberia’s first significant gold mine into production as one of faith and persistence.

After nearly a decade of off-and-on exploration work in a country that has been plagued with civil strife, the company recently released a positive feasibility study for the New Liberty gold project in western Liberia, 100 km northwest of the capital, Monrovia.

Production is expected to start at New Liberty during the first half of 2008 at a rate of 99,000 oz. gold in the first year, averaging 84,000 oz. gold per year over the first five years. The area is known for artisinal mining, but the open-pit mine will be one of the first gold mines in the country.

Liberia was settled by freed American slaves in 1822, who as a minority, ruled the country fairly peacefully until a military coup led by Samuel Doe in 1980. In 1989, Charles Taylor launched a rebellion against Doe, leading to a civil war that plagued the country until 2003, when a peace agreement was signed. Taylor resigned and was exiled to Nigeria. More than 250,000 people were killed during this time and hundreds of thousands fled to neighbouring countries.

“We were, for a long time, the only public company brave enough to operate there,” Elder says. “We had faith in the geology — that’s the objective of being an explorer.”

The ongoing fighting that led to Taylor’s resignation caused Mano River to cease exploration until a transitional government was brought in.

“There were roving groups of militia with guns looking to steal anything they liked the look of. It was very dangerous,” Elder says.

Much of the exploration team was sent to work on other projects in Sierra Leone. The company continued to pay its licence fees and picked up where it left off in 2005, when a transnational government was brought in.

Later that year, Havard-educated Americo-Liberian Ellen Johnson Sirleaf was elected as Africa’s first female leader. She’s been busy looking for support from around the world to improve Liberia’s economy. The country has an 85% unemployment rate and a 70% illiteracy rate.

In fact, the Liberian government and the World Bank are holding a forum in Washington, D.C., this month with private companies.

“The government will get the chance to tell its story and promote Liberia,” says Christian Mulamula, senior investment officer of the oil, gas, mining and chemicals department at the International Finance Corp. (IFC), the private sector arm of the World Bank Group.

Jamie Cumming, head of research at Mano River’s exploration office in London, England, says it’s only in the last six to eight years that any major exploration has taken place in the country.

“There was exploration before that, but nobody can do that much exploring when people are fighting all over the countryside,” Cumming says.

In fact, in the 1970s and ’80s, Liberia was one of the world’s top iron ore producers. But interest is picking back up. Major steel producer Arcelor Mittal recently signed a 25-year, US$1-billion deal with the Liberian government for a large, high-quality iron ore resource, boosting Mittal’s production by 15 million tonnes a year.

Feasibility

The feasibility study for New Liberty, which focused solely on gold mineralization suitable for open-pit mining, calculated proven and probable reserves of 4.6 million tonnes grading 3.9 grams gold per tonne. Average annual production from three pits, Larjor, Kinjor and Marvoe, is estimated at 68,000 oz. over eight years.

Based on 2005-2006 drilling, New Liberty is estimated to host a gold resource of 1.4 million oz. or 13.5 million measured and indicated tonnes grading 3.18 grams gold per tonne.

The company expects to start underground mining in year five, which will allow it to exploit the measured and indicated resources that can’t be recovered through the open pits. This will extend the life of the operation, but further definition drilling must be done in the meantime.

New Liberty’s stripping ratio is projected at 11.5 and the plant will be able to process up to 600,000 tonnes of ore per year. The metallurgy of the deposit, which has a recovery rate of 93%, is very simple and does not require special treatment. A conventional crushing and ball mill circuit with a split stream from the cyclone underflow will deliver the coarse gold fraction to a centrifugal concentrator, with the concentrate upgraded on a shaking table and then sent to a smelter.

This process will recover almost half the gold, followed by conventional carbon-in-leach treatment. Tailings will be deposited in a valley about 1 km from the plant. The area gets a lot of rain — up to 3 metres per year, so the tailings dam and the Marvoe Creek diversion are designed for a 50-year flood event.

As well, Mano River is looking into other gold prospects in the area to feed the plant, such as its Weaju gold property, which is within trucking distance of New Liberty. Recent drill holes at Weaju yielded grades between 3.5 grams gold per tonne over 22 metres to 33 grams gold over 24 metres.

Altogether, Mano River has 18,500 sq. km of licenced property in western Africa, with a focus on politically challenging locations.

In addition to properties in Liberia, Mano River has also been exploring for gold, diamonds and iron ore deposits in Guinea, where increasing poverty and a 30% inflation rate have spurred mass demonstrations lately, and Sierra Leone, where a civil war from 1991 to 2002 saw tens of thousands killed and millions displaced as refugees.

Cumming says Mano River’s management knew what they were getting into when they were looking for properties to explore.

“If you are a small company — where can you go and get large licenced areas?” asks Cumming. “Early on, Mano made the decision to look at areas where it was more difficult, and Liberia is clearly more difficult.”

Liberia has little infrastructure as a result of the war — Monrovia has been without electricity for 15 years — though generator- powered streetlights were turned on last July.

This lack of infrastructure added to costs in the New Liberty feasibility study. Mano River had to include a US$12-million heavy-fuel power generation plant — more expensive than diesel, but likely to save the company money in the end.

“If you use diesel, you’ll start with 10,000 gallons at the port facility and you’ll end up with 8,000 gallons when you get to the other end,” says Cumming, referring to the widespread problem of theft of fuel. “But if you use heavy fuel, it’s got no value to anybody else. It’s a slightly higher capital cost, but a better bet for a bankable feasibility study.”

Even with the hassles, Cumming says the project is worth the effort.

The top end cutoff gold grade for the feasibility study was 25 grams gold per tonne, but Cumming says there were grades as high as 77 grams gold.

“I think it’s a pretty conservative view they’ve taken.”

The project is wholly owned by Mano River, with a 10% free carried interest and a 3% production royalty, both held by the government.

The feasibility study put the internal rate of return at 72% for US$600-per-oz. gold, assuming 70% debt financing at 6% interest over five years. Capital costs are estimated at US$59 million, to be paid back in 2.5 years with an operating cost of US$35 per tonne and a break-even gold price of US$452 per oz.

Financing

The company has yet to secure financing, but the IFC is helping to encourage business growth in Liberia.

Cumming says the IFC has indicated that it’s interested in financing part of the New Liberty project, but he says it’s still early in the negotiation process.

William Bulmer, senior manager of the mining investment division for the IFC’s oil, gas, mining and chemicals division says the organization looks for well-designed projects with good environmental and social planning. The IFC is limited to funding 25% of project cost, but the amount
can vary depending on the size of the project.

“We can mobilize more of that through syndication with other commercial banks,” Balmer says.

Mulamula says the IFC is interested in projects that will spur growth locally, in the community surrounding the mine.

“We try to avoid a very sterile environment where people can only look for employment from the mining operation,” Mulamula says.

As well, the Liberian government has committed to implementing the Extractive Industries Transparency Initiative (EITI), which ensures that the government is upfront about how much revenue it’s getting from the mine, discouraging corruption and encouraging development in the country. EITI is supported by an international secretariat based in the United Kingdom’s Department for International Development and works closely with the World Bank and the International Monetary Fund.

Mano River is based in Vancouver, with its exploration office in London. It was formed in 1998 by a reverse takeover involving the sale of Mano River Resources Ltd. before it became Mano River Resources Inc. The geologists that work in Liberia are all from West Africa.

Mano has a number of diamond and iron ore interests in Africa, including a joint venture with Petra Diamonds (pdmdf-o, pdl-l) in Sierra Leone on the Kono kimberlite project. The company has already begun producing diamonds from Kono, using the money to further develop the project.

In eastern Liberia, Mano River is currently doing reconnaissance work on the Putu iron ore project.

In western Liberia, Mano’s joint-venture partner Trans Hex Group (trnshex-j) will soon begin a bulk-sampling program on a cluster of diamondiferous kimberlite pipes.

As well, mano has joint ventures with BHP Billiton (BHP-N, BLT-L), Golden Star Resources (GSC-T, GSS-X), Navasota Resources (NAV-V, NAORF-O), SearchGold Resources (RSG-V) and African Aura.