PRELIMINARY ECONOMIC ASSESSMENT ON NEW LIBERTY (8915X)

TIDMAAAM

RNS Number : 8915X

African Aura Mining Inc.

14 December 2010

NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION TO US NEWS WIRE SERVICES.

14 December 2010

TSX-V: AUR

AIM: AAAM

PRELIMINARY ECONOMIC ASSESSMENT ON NEW LIBERTY GOLD PROJECT

African Aura Mining Inc. ("African Aura" or the "Company"), the TSX--V (AUR) and AIM (AAAM) listed exploration and development company is pleased to announce the completion of the preliminary economic assessment study (the 'Study') with respect to the Company's 100% owned New Liberty Gold Project located in western Liberia.

-- Study highlights potential for robust open pit gold mine with strong economics

-- First five year's production with minimum 100,000oz pa in initial 8.5 year mine life

-- Pre-tax NPV of $234m (GBP148m) based on $1,100/oz Au and 10% discount rate

-- Initial capex of $92m, average cash cost of $484/oz and head grade of 3.6 g/t Au

-- IRR of 73% and capital payback in under two years

-- Definitive Feasibility Study underway and on track for 4Q 2011 completion

Luis da Silva, Chief Executive of African Aura, commented:

"These very positive results demonstrate the robust nature of the New Liberty Gold Project and confirm our long held belief on the excellent grade potential of the ore zone for the open pit mine. It is worth highlighting that the pre-tax NPV of the project calculated using a gold price of $1,100/oz and 10% discount of $234m / GBP148m equates to approximately GBP1.62 / $2.56 per African Aura common share on a fully diluted basis. New Liberty will be an excellent flagship gold asset for Aureus Mining Inc which, subject to the necessary shareholder and regulatory approvals, is anticipated to be created by March 2011 by way of the corporate restructuring as detailed in the Company's news release of 8th November 2010.

In the meantime we shall complete further infill and exploration drilling in the process of finalising the definitive feasibility study. New Liberty is on the cusp of becoming a very significant gold operation in West Africa and we will update shareholders in due course. Over the last five years, the current administration under President Ellen Johnson Sirleaf has brought about a monumental change in investor sentiment culminating in stated foreign direct investment of approximately $16 billion, mainly in mining, oil and agriculture. Indeed New Liberty will be the first operating gold mine in Liberia and I would like to acknowledge the cooperation and support of the Government of Liberia."

The study supports an open pit and gold processing plant with an average annual production rate of 850,000 tonnes of ore over an 8.5 year production life. In the first 5 years of the project, forecast gold production will average 100,000 ounces per year with total gold production for the project expected to be some 786,700 ounces. Metallurgical testwork has confirmed the ore is non-refractory and a recovery of 93% is achievable through a combined gravity and carbon in leach process.

The average life of mine cash cost per ounce is estimated at $484 with an expected pre-tax net present value ('NPV') of $234 million at a gold price of $1,100/oz using a 10% discount rate and a pre-tax internal rate of return ('IRR') of 73%. The expected payback period is less than 2 years. For all estimates 4Q 2010 market prices for capital and operating costs were applied. All dollar amounts presented in this news release are expressed in US dollars. Based on the results of the study, the New Liberty deposit contains 7.3 million tonnes of mineable gold ore in the Indicated and Inferred category at a diluted head grade of 3.6 g/t. The majority of the mineable resource is in the Indicated category.

The Study was compiled by AMC Consultants (UK) Limited ('AMC') in collaboration with MDM Engineering Ltd, Golder Associates Africa Ltd and the African Aura Project Development team. The study is based on the Indicated and Inferred resources as stated in the National Instrument 43-101 of the Canadian Securities Administrators ("NI-43-101") compliant technical report dated November 2010 and entitled 'New Liberty Gold Project, Liberia, West Africa, Technical Report on Additional Drilling and Estimated Resources for African Aura Mining Incorporated' prepared by Mr C G Arnold of AMC Consultants (UK) Limited (the 'November 2010 Technical Report').

Economic Highlights

Economic highlights of the Study are detailed in the table below, and are on a 100% project basis, excluding debt finance:

Key Data

 
 Ore Milled                Mt        7.3 
----------------------  --------  -------- 
 Mined Head Grade          g/t       3.6 
----------------------  --------  -------- 
 Total Gold Produced     Ounces    786,700 
----------------------  --------  -------- 
 Process Recovery           %        93 
----------------------  --------  -------- 
 Mine Life                Years      8.5 
----------------------  --------  -------- 
 Waste                     Mt       137.9 
----------------------  --------  -------- 
 Stripping Ratio                    18.9 
--------------------------------  -------- 
 
 
 Gold price              US$/oz     1100 
----------------------  --------  -------- 
 Gross Revenue            US$M       865 
----------------------  --------  -------- 
 Net Smelter Return       US$M       837 
----------------------  --------  -------- 
 Operating costs          US$M       352 
----------------------  --------  -------- 
 Operating Cash flow      US$M       485 
----------------------  --------  -------- 
 NPV pre-tax @10%         US$M       234 
----------------------  --------  -------- 
 IRR pre tax                %        73 
----------------------  --------  -------- 
 Pay-back period          Years    1.5-2.0 
----------------------  --------  -------- 
 Operating cash cost     US$/oz      484 
----------------------  --------  -------- 
 Initial Capital Cost     US$M       92 
----------------------  --------  -------- 
 Sustaining & Closure 
  Capital Cost            US$M        6 
----------------------  --------  -------- 
 

Sensitivity analysis

 
 Gold price          US$/oz    900   1000   1200 
------------------  --------  ----  -----  ----- 
 NPV pre-tax @10%    US$M      132   183    285 
------------------  --------  ----  -----  ----- 
 IRR pre tax            %      49     61     85 
------------------  --------  ----  -----  ----- 
 

The total capital cost of $98m for the project includes processing plant power supply, other mine infrastructure, tailings dam construction, creek diversion, sustaining capital and mine closure. The pit optimization work assumes that the mining operation will be outsourced to a suitable mining contractor. An analysis of project sensitivities highlights that the operation is least sensitive to capital cost increases. The company considers the project to be robust as the breakeven gold price is approximately $640 per ounce, inclusive of capital cost repayments and depreciation.

Based on the positive results of the Study, the Company plans to advance the New Liberty Project through to the definitive feasibility study stage by the end of 2011. In that regard, a project environmental and social impact assessment scoping study was started by Golders Associates Africa Ltd in August 2010 and the final study is due within the DFS period in 2011. The Company is planning a resource infill drilling programme to convert indicated resources to the measured category and inferred resources to the indicated category during the first 6 months of 2011. Inter alia, further metallurgical samples will be obtained for testing to update the mill comminution and recovery test work previously completed by SGS Lakefield of Canada, and Mintek of South Africa. The work will be aimed at providing final design parameters for the grinding circuit together with investigations to improve recovery performance and optimise reagent additions.

The New Liberty project is a greenfield development with the advantage of having excellent access from the capital and main port of Liberia, Monrovia. From the capital there is predominantly paved road covering the 85 kilometres to the project site, providing all year round access.

Updated Resource

The resource estimate was undertaken by AMC Consultants (UK) Limited ('AMC') in accordance with the requirements of National Instrument 43-101 "Standards of Disclosure for Mineral Project", of the Canadian Securities Administrators ("NI-43-101"). It incorporates all the results from drilling as at 14 September 2010, being 175 holes for 27,736 meters and was calculated on the basis of a 1.0 g/t cut-off grade.

Resource categories

The total resource estimate of 1.51 million ounces of gold grading 3.78 g/t is comprised of 5,599,000 tonnes grading 4.17 g/t (for 751,000 ounces) in the indicated category and 7,040,000 tonnes grading 3.40 g/t (for 762,000 ounces) in the inferred category, as detailed in Table 1 below. The indicated resource has been projected to an approximate depth of 200 metres below surface. The inferred resource remains open down dip and open along strike.

Table 1. New Liberty NI 43-101 Mineral Resources

 
 Zone            Indicated                 Inferred 
--------  -----------------------  ----------------------- 
           Tonnes                   Tonnes 
            (Kt)          Au         (Kt)         Au 
--------  -------  --------------  -------  -------------- 
                    (g/t)   (KOz)            (g/t)   (KOz) 
--------  -------  ------  ------  -------  ------  ------ 
 Larjor     1,637    4.37     230    2,109    3.50     234 
--------  -------  ------  ------  -------  ------  ------ 
 Latiff     1,080    5.03     175      380    4.20      51 
--------  -------  ------  ------  -------  ------  ------ 
 Kinjor     1,449    4.26     198    2,310    3.80     280 
--------  -------  ------  ------  -------  ------  ------ 
 Marvoe     1,433    3.21     148    2,230    2.80     198 
--------  -------  ------  ------  -------  ------  ------ 
 Total      5,599    4.17     751    7,040    3.40     762 
--------  -------  ------  ------  -------  ------  ------ 
 

Notes:

1. The four zones are each within 100m of the next zone and comprise sections of the same deposit. The total strike length of the four zones is 1.75km.

2. CIM definitions were used for Mineral Resources

3. A cut off of 1.0 g/t Au is applied for all zones

4. Due to rounding, some columns or rows may not add up exactly to the computed totals

About the New Liberty Mining Licence Area

The New Liberty gold deposit is a classic Archaean shear zone hosted greenstone gold deposit with a strike length of 1.75km, located in western Liberia. The project is open ended on strike and exploration work is being targeted to extend the near surface resources.

New Liberty is one of a series of gold deposits, including the Ndablama and Weaju prospects, located within the Company's 457km2 'Class A' 25 year renewable Mining Licence. Geologically, Archaean greenstone belts are known to host major gold mines in Canada, Australia, the Democratic Republic of the Congo and Tanzania. The Company considers that the Archaean geology of the Man Craton of west Africa is one of very few provinces globally that is highly prospective, but has yet to be systematically explored.

Technical Report

The entire Study will be available within seven days at www.sedar.com and on the Company's corporate website www.african-aura.com.

Note: The Study is preliminary in nature and the mineral resource estimates referred to within the Study include the use of Indicated Resources. The Company is completing its infill drilling programme and additional study to convert resources in to the Measured category.

Qualified Person

The Study was prepared by Mr M Staples of AMC Mining Consultants (UK) Ltd, a Qualified Person, for the purposes of the study, under the standards set forth by NI 43-101, and he has also reviewed and approved the contents of this news release, as applicable.

About African Aura Mining Inc.

African Aura is an established exploration and development company listed on the TSX-V (AUR) and London's AIM (AAAM). The Company operates two divisions, namely: iron ore and gold:

- The iron ore division includes its 38.5% interest in the Putu iron ore project in Liberia, which is moving through pre-feasibility managed by joint venture partner Severstal Resources (the mining division of Moscow listed OAO Severstal). In September 2010 Putu was granted a 25 year renewable Mineral Development Agreement by the Government of Liberia. The division also includes a 100% interest in the Nkout iron ore project and surrounding iron targets in Cameroon which is subject to a resource definition drilling programme.

- The gold division includes the multi million ounce potential New Liberty greenstone gold deposit, which is being advanced through a definitive feasibility study, and the proximal Ndablama, Weaju, Silver Hills and Gondoja gold projects all within the Company's Bea Mountain 25 year renewable Mineral Development Agreement.

In addition, the Company has a 22% interest in AIM-listed diamond producer Stellar Diamonds Plc (AIM: STEL, www.stellar-diamonds.com).

The Company has a highly motivated and experienced team with a track record of discovering mines and taking projects through development and into production. As a pioneer, African Aura has attracted some excellent strategic partners and shareholders, always with the objective of preserving or enhancing shareholder value. For further information on the Company you are invited to visit its website at www.african-aura.com or SEDAR's website at www.sedar.com, or contact one of the following:

African Aura Mining Inc.

Luis da Silva, President & CEO Tel: [phone]

Evolution Securities Limited

Simon Edwards / Tim Redfern Tel: [phone]

Pelham Bell Pottinger

Charles Vivian / James MacFarlane Tel: [phone]

Forward-looking Statements

This press release includes certain forward-looking statements. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding the future plans and objectives of African Aura, are forward-looking statements that involve various known and unknown risks and uncertainties as well as other factors. Such forward-looking statements are subject to a number of risks and uncertainties that may cause actual results or events to differ materially from current expectations, including delays in obtaining or failure to obtain required regulatory approvals. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Any forward-looking statements speak only as of the date hereof and, except as may be required by applicable law, African Aura disclaim any obligation to update or modify such forward-looking statements, either as a result of new information, future events or for any other reason.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accept responsibility for the adequacy or accuracy of this release.

Ends

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The company news service from the London Stock Exchange

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