16th Sep 2008 07:00
AVOCET ELIMINATES GOLD HEDGE POSITION
- 100% EXPOSURE TO SPOT GOLD PRICES
Avocet Mining PLC ("Avocet" or "the Company") announces that it has taken advantage of the recent fall in the gold price to eliminate its entire gold collar hedge position. On 15 September the Company completed the buy-back of its remaining hedge position for US$10.0m and is now fully exposed to the spot gold price. This is in line with the Company's stated strategy to sell gold at spot prices or better.
Under this transaction, the Company sold purchased put options over 350,000 ounces at a strike price of US$600/oz, exercisable from now until July 2011, and bought back sold call options over 125,000 ounces at a strike price of US$755/oz, exercisable between July 2010 and July 2011.
In its interim results for the period to 30 September 2008 the Company will report a pre-tax exceptional gain of US$24.8m, representing the reduction in gold collar liability attributable to the fall in gold prices since its March 2008 year end, when the liability was marked to market at US$45.6m. The remaining decrease in liability since March is accounted for by the partial hedge buy back of US$10.8m announced on 18 August and the US$10.0m buy back announced today.
Jonathan Henry, Chief Executive Officer, commented:
"Avocet has had historical hedging in place that we have sought to eliminate. With the price of gold falling by over 26% since its peak in May this year we believe that now is an opportune moment to become a fully unhedged gold producer, ensuring that shareholders receive 100% of the benefit from full exposure to the spot price of gold, which we expect to increase in the medium to long term. The Company continues to have a healthy balance sheet with no debt and sufficient cash resources to support our organic and acquisition growth aspirations."
For further information please contact:
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Avocet Mining PLC
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Buchanan Communications
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Ambrian Partners Limited
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JPMorgan Cazenove
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Jonathan Henry, Chief Executive Officer
Mike Norris, Finance Director
020 7907 9000
www.avocet.co.uk
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Financial PR Consultants
Bobby Morse
Robin Haddrill
020 7466 5000
www.buchanan.uk.com
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NOMAD and Joint Broker
Richard Brown
Richard Greenfield
020 7634 4700
www.ambrian.com
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Lead Broker
Michael Wentworth-Stanley
Sam Critchlow
020 7588 2828
www.jpmorgancazenove.com
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Notes to Editors
Avocet is a mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM). The Company's principal activities are gold mining and exploration in Malaysia (as 100 per cent owner of the Penjom mine, the country's largest gold producer), and Indonesia (as 80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi). The Company has a number of other advanced mining and exploration projects in South East Asia.
Background to operations
The Penjom gold mine is Malaysia's largest gold producer and was developed by Avocet after applying modern technology to grass roots exploration in an area of historic mining. The mine was commissioned in December 1996 with reserves of 223,000 ounces. Successful resource development, particularly over the last five years, means Penjom has produced over one million ounces of gold to date and still has nearly one million ounces of resources. This resource is expected to grow further following a drilling programme expected to total 70,000 metres over the next year which includes deep drilling to help assess the potential for underground mining in the near future, where areas of high grade ore are known to exist. In November 2005, the Company announced a significant increase in Penjom's life of mine plan to over half a million ounces, which resulted in the design of a much larger pit to allow the additional ounces to be mined. Over the last year Penjom has expanded its mining and plant capacity accordingly. Avocet was able to overcome initial problems of highly carbonaceous ore at Penjom by developing unique processing systems including complex gravity circuits and resin-in-leach (RIL) technology. These processes have potential applications at other carbonaceous orebodies.
The North Lanut gold mine in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced nearly 200,000 ounces since it was commissioned in 2004, including record production in the year ended 31 March 2008 of 74,183 ounces. Recent high grade exploration drilling results indicate the potential for a significant increase in resources and extension in the mine's life. In 2002 Avocet purchased its 80 per cent interest in PT Avocet Bolaang Mongondow (PT ABM), an Indonesian company holding a 6th generation Contract of Work (CoW), from Newmont Mining Corporation. The North Lanut gold mine is located within the CoW, which includes exploration and mining rights over approximately 50,000 hectares in an area highly prospective for gold. An Indonesian company, PT Lebong Tandai, owns the remaining 20 per cent.
Related Shares:
AVM.L