MIDAS SHARE TIPS UPDATE: Gold mine company Aureus could hit jackpot after surviving triple whammy
Kick start: Boss David Reading could see sales soar from nothing to $74 million this year
Investors in gold group Aureus Mining have had a miserable time since the company floated on AIM in April 2011 at 115p.
The company has suffered on three counts. First, the market has been negative on gold stocks more or less since Aureus floated.
Second, the business has spent the past four years building a gold mine, so it has been burning cash rather than making it. And third, Aureus is based in Liberia, so it was virtually written off when the ebola virus struck in the country last year.
Midas recommended the shares in October 2013 at 30p. Today they are 24¼p. However, Aureus chief executive David Reading is a tenacious character with a background of gold mining success.
He quarantined the company’s mine as soon as the ebola virus struck in Liberia – not a single member of his team was infected – and the mine is due to start production this month, just a few weeks behind schedule.
This year, the company is due to produce 60,000 oz of gold, rising to 120,000 oz in 2016. Gold is currently trading at $1,190 (£780) an ounce and Aureus’s production cost is $790, so each ounce sold will generate $400 of gross profit.
Analysts estimate that sales will go from nothing in 2014 to $74.3 million this year and $138 million in 2016. Last year, the group made a $3.4 million loss. This year a profit of $13.4 million is expected, more than doubling to $30 million in 2016. Unusually for a junior gold miner, Reading even hopes to pay a dividend within the next three years.
The Aureus mine is called New Liberty and it will be the first commercial gold mine in Liberia. Reading and his team have strong political backing, as they bring employment and capital to a country torn apart by years of civil strife.
Smart community relations have ensured local support too, and one of the company’s biggest shareholders is the World Bank’s private finance arm, the International Finance Corporation, with 14 per cent.
Armed with this backing, Reading is exploring ways to expand Aureus. New Liberty may be extended and a second site 20 miles up the road is under exploration. Early results are encouraging.
Midas verdict: Shareholders have had a disappointing run with Aureus, but now is not the time to sell. The stock should rise as production steps up and some in the City believe the long bear cycle on gold stocks may soon come to an end, providing a further boost to Aureus. Existing investors should hold. Brave punters could even buy a few at the current 24¼p price.
Traded on: AIM Ticker: AUE Contact: aureus-mining.com or 020 7010 7690
Most watched Money videos
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- Mini Cooper SE: The British icon gets an all-electric makeover
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- MailOnline asks Lexie Limitless 5 quick fire EV road trip questions
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- Mini celebrates the release of brand new all-electric car Mini Aceman
- Mail Online takes a tour of Gatwick's modern EV charging station
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Land Rover unveil newest all-electric Range Rover SUV
- Mercedes has finally unveiled its new electric G-Class
- Former Chancellor Nadhim Zahawi to chair Very Group
- Evri issues warning over huge rise in smishing scams -...
- Taxpayer stake in NatWest falls below 27% as Treasury...
- UK Government sells another chunk of NatWest shares
- Anglo strikes out alone - but can it survive a bid...
- London's 'Mr Super Prime' to take centre stage in...
- Police not interested in shoplifting, says M&S as thefts...
- Will Nationwide pay out a £100 loyalty bonus again this...
- Anglo American rejects rival BHP's £34bn second takeover bid
- Diploma shares top FTSE 100 risers after firm raises...
- MARKET REPORT: FTSE falters despite UBS call to buy...
- Heathrow takes fresh swipe at the tourist tax as it...
- Gamestop shares double as 'meme stock' social media...
- European-made electric car batteries could cut carbon...
- BUSINESS LIVE: UK wage growth higher than forecast; Anglo...
- A MILLION more people have taken on mortgages they will...
- Used car marketplace Cazoo looking for buyers as it nears...
- I repeatedly bail out my partner from his financial...