Improved Inata mine plan and 2013 Interim Results

Improved Inata mine plan and Unaudited Interim Results for the quarter ended 30 June 2013

Improved Inata life of mine plan & Tri-K feasibility study

·; Stronger cash generation from Inata - US$65m in hedge period, US$190m thereafter;

·; New life of mine plan with 36% increase in recovered ounces over the life of mine;

·; Life of mine total cash costs and all-in cash costs (incl. capex) reduced to US$906/oz and US$958/oz respectively;

·; Inata cash flows to fund US$6 million carbon blinding circuit with completion by mid-2014;

·; Capex reduced to an average of US$7 million per annum over the next five years, including construction of the new carbon blinding circuit; and

·; Tri-K feasibility study on track - ESIA and project summary presented to Guinea government in July.

Q2 results

·; Q2 production of 31,245 ounces at cash cost (including royalties) of US$1,238 per ounce;

·; Milestone of four million hours without a lost time injury reached during June;

·; Access to higher grade, high recovery Minfo East oxide ore in Q2 - recovery of 91% achieved in June and 12,072 ounces recovered;

·; Monthly production for H2 to be in line with June with processing of oxide ore until mid-2014;

·; Mining costs to fall in Q3 after end of waste catch-up campaign and standing down of mining contractor during Q2; and

·; Impairment of US$73.3 million driven by revised gold price assumptions - partially compensated by US$60.8 million decrease in hedge liability.

David Cather, Chief Executive Officer, commented:

"The Q2 results announced today are in line with expectations and the mine's performance in June in particular has shown encouraging progress. The new life of mine plan at Inata is an important step forward for Avocet, as it positions us to produce over a third more ounces than the previous plan, at lower costs. Key to this progress is the planned carbon blinding circuit, which will allow processing of carbonaceous ore at significantly higher recoveries. This is the main driver behind the improved life of mine plan and will dictate Inata's performance for all types of ore. In adjusting to lower gold prices, Inata pits have been optimised with lower mining volumes, cost savings and a reduction in capex as we focus on positive cash generation. Longer term, I fully expect ore from the Souma deposit, when permitted, to improve Inata's life of mine plan even further. In Guinea, the feasibility work at Tri-K remains on track for completion in H2 2013, which we are targeting to be Avocet's next new mine."

Management Conference Call

The Company will host a presentation at the offices of its PR Consultant (Pelham Bell Pottinger) for investors and analysts at 9am (UK) on Thursday 8 August 2013 to discuss both this release and the new Inata life of mine plan, which was also released today in a separate release. This presentation will be made available on Avocet's website (www.avocetmining.com) ahead of this meeting taking place.

A conference call facility is also available for this call; dial in details are as follows:

UK: 0800 6940257

Norway: 21563013

Alternative number: +44 (0)1452 555 566

Conference ID # 14084368

A recording of the conference call will also be made available on the Avocet website later on the same day.

FOR FURTHER INFORMATION PLEASE CONTACT

NOTES TO EDITORS

Avocet Mining PLC is a gold mining and exploration company listed on the London Stock Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The Company's principal activities are gold mining and exploration in West Africa.

In Burkina Faso the Company owns 90% of the Inata Gold Mine. The deposit at Inata currently comprises a Mineral Resource of 4.7 million ounces and an Ore Reserve of 0.9 million ounces. The Inata Gold Mine poured its first gold in December 2009 and produced 135,189 ounces of gold in 2012.

Other assets in Burkina Faso include eight exploration permits surrounding the Inata Gold Mine in the broader Bélahouro region. The most advanced of these projects is Souma, some 20 kilometres from the Inata Gold Mine, where there is a Mineral Resources estimate of 0.8 million ounces.

In Guinea, Avocet owns exploration licences in the north east of the country. Mineral Resource development has been ongoing since 2005 and the Tri-K project is the most advanced project, which is currently in the feasibility study stage.

CHIEF EXECUTIVE OFFICER'S REVIEW

Improved Inata life of mine

Today we announce a new life of mine plan for Inata, which shows an expected increase of 36% in the life of mine gold ounces produced, compared to that shown in the mine plan announced in March. The new plan reflects significant improvements to gold recoveries and includes near-surface Inferred oxide material identified since the previous life of mine plan. The mining schedule has been optimised so that waste mining is spread more evenly over the life of mine and at a lower annual rate, despite which annual gold production has increased 21% from an average of 96,000 ounces to 116,000 ounces over the presently defined 8 year mine life. Inata's life of mine cash costs and all-in costs including capex have fallen to US$906 per ounce and US$958 per ounce respectively, from US$964 per ounce and US$1,028 per ounce. As a result, the net cash generated is significantly higher than the previous mine plan, especially in the next four years, even at gold prices lower than current spot levels.

Importantly, this new mine plan demonstrates that the steps we have taken to adapt to a lower gold price environment will ensure Inata remains cash generative, despite the fall in the gold price from US$1,600 per ounce at the start of the period to current levels of US$1,300 per ounce.

As set out in more detail in the separate life of mine release issued today, the main driver of improvement has been the metallurgical work completed by our team at Inata. This has confirmed that a new carbon blinding circuit will achieve significantly higher recoveries when processing the carbonaceous ore found at depth in some of Inata's pits. The higher recovery rates alone equate to over 60,000 additional ounces of gold production. A further benefit of the blinding circuit is that high grade ore previously excluded from the mine plan due to high PRI (carbon) values is now economic. Together with the inclusion of areas containing Inferred Mineral Resources previously excluded, these factors mean that the life of mine gold produced has increased by 36%.

Unlike previous work which indicated that such improvements would require a complex solution with significantly higher capital expenditure, the planned new carbon blinding circuit is a simple project with an estimated capital cost of US$6 million. This investment will be met from Inata's own cash generation. Orders have already been placed for the longest lead time items and the project is scheduled to be complete by mid-2014.

The new life of mine plan is based on the same pit shell price assumption of US$1,200 per ounce as the previous mine plan announced in March. Importantly, however, the Company has identified changes it could make to Inata's life of mine plan, if necessary, to increase grades and reduce cash costs in order to remain cash generative at prices as low as US$800 per ounce, albeit with a shorter life of mine and a reduction in life of mine ounces produced.

Although Souma continues to show promise as a satellite feed of ore for later years at Inata, the new plan announced today does not include any ore feed from Souma. During 2013, work at Souma has focussed on additional targets for a 2014 exploration campaign, but in response to lower gold prices, further exploration at Souma has been deferred until 2014 (subject to sufficient free cash flow from Inata). However, to preserve its upside options, the Company has commenced the low cost work stream of preparing an Environmental and Social Impact Assessment ('ESIA') to facilitate a mining licence application for Souma in 2014/2015.

Tri-K project in Guinea

The Tri-K feasibility study is on track for completion and application for a mining permit. The required drilling for the project's maiden Ore Reserve was completed during the quarter and subsequent resource and reserve estimation work is nearing completion. The ESIA report was completed and submitted to the Guinean government in July. A presentation on the project was also given to the government in July at the start of the assessment process expected to culminate in the grant of a mining permit following completion of the feasibility study in H2 2013. The Company intends to provide a full technical update to the market in H2 when the mining permit application is submitted to the Guinean government.

Financing

During March 2013, Avocet announced that it had reached agreement with Elliott Management, its largest shareholder, and Macquarie Bank Limited ('MBL'), as a result of which an affiliate of Elliott agreed to provide a loan of US$15.0 million, to be drawn down in three equal tranches, repayable by 31 December 2013. This agreement was subsequently approved by Avocet's shareholders at an EGM on 28 May 2013. Discussions on financing, including the repayment of the Elliott loan, are ongoing with a number of parties. These are being progressed with a view to a refinancing by the end of the year, predicated on the new improved life of mine plan at Inata announced today and a successful feasibility study at Tri-K.

Results for the quarter ended 30 June 2013

Avocet's underlying operational performance in the quarter was broadly in line with expectations with gold production for the quarter of 31,245 ounces. Total cash costs (including royalties) in the period were US$1,238 per ounce, an increase compared to the prior quarter reflecting the timing of maintenance in the mine and plant and higher drill and blast costs, as well as the impact of changes in gold in circuit which benefited the Q1 but reduced Q2 production.

A highlight in the quarter was the accessing of high grade oxide ore in the Minfo East pit, which yields higher recoveries and plant throughput than other ore types. During June recoveries averaged in excess of 90% and over 12,000 ounces were recovered. With further oxide ore scheduled to be available for the rest of 2013, monthly gold production in H2 2013 is expected to average approximately 12,000 ounces per month. During the quarter, the waste catch-up campaign initiated in mid-2012 came to an end and the mining contractor used in the campaign was demobilised. As a result of lower mining rates and the absence of mining contractor costs, together with higher gold production and cost savings in the rest of the year, cash costs are expected to be significantly lower in H2 2013.

The safety of our employees and contractors is key to a successful operation, and our safety record at Inata remains strong, with the milestone of four million hours without a lost time injury reached during June.

The Company's financial results were impacted by lower gold prices in the quarter, with prices falling below US$1,200 per ounce in June. The overall fall in prices from approximately US$1,600 per ounce at the start of Q2 to US$1,192 per ounce at the end also resulted in two large non-cash accounting adjustments, with an impairment of Inata's fixed assets of US$73.3 million being partially compensated by a US$60.8 million reduction in the hedge liability.  

INATA OPERATIONAL REVIEW

Gold production and cash costs

Year to date gold production of 61,726 ounces is in line with expectations. H2 production is expected to be higher than H1 as a result of mining higher grade oxide ores at the Minfo East pit. Waste stripping at Minfo East commenced on 25 April and June was the first full month of ore mining from this pit.

Ore mined during the quarter came from the Inata North, Inata Central, Minfo East and Sayouba pits, with mining focused on the latter two pits towards the end of the quarter as sources of oxide ore. Total tonnes mined in Q2 remained in line with Q1 at 9.7 million tonnes; this figure is expected to decrease during Q3 and Q4 as the period of high waste stripping has come to an end. Strip ratios during Q2 dropped 20% compared to Q1 to 8.96 as a result of ore mining commencing in new areas (Minfo East and Sayouba). Rental equipment belonging to mining contractor African Mining Services was stood down at the end of the quarter following the completion of a period of increased wasted stripping in late 2012 and early 2013.

Processing for the quarter totalled 620,000 tonnes and is in line with expectations for the year, despite maintenance being undertaken on the crusher and mills. As guided at the end of Q1, the mining of ore from Minfo East during Q2 has resulted in an increase in head grade to 1.84 g/t Au. The oxide nature of the ore from Minfo East has also resulted in the quarter's average recovery increasing to 87% (including June at 91%), compared to 82% in Q1 when ore was predominantly sourced from more carbonaceous ore sources.

Q2 cash costs of US$1,238 per ounce were higher than the previous quarter. Mining costs were US$582 per ounce, or US$1.88 per tonne mined, an increase compared to US$1.66 per tonne in Q1, including the effect of timing of mobile maintenance and higher drill and blast costs.

Plant costs were US$371 per ounce, or US$18.70 per tonne milled, which was slightly higher than US$17.81 per tonne in the first quarter, largely due to mill liner changes and higher lime prices.

Souma exploration project, Burkina Faso

Work undertaken at Souma during H1 focussed on additional targets for an exploration campaign in 2014. RC drilling was conducted during Q1, and to a lesser extent Q2, to scout drill potential extensions to the orebody. A geophysical survey over the full extent of the Souma trend has given an improved understanding of the region's geology and shows a distinct IP chargeability anomaly along which mineralisation is associated.

In the current gold price environment, the decision has been taken to scale back exploration for the remainder of the year. Souma continues to show promise as a prospective satellite feed of ore for later years at Inata, and low level work conducted during the remainder of 2013 is aimed at identifying targets for drilling in 2014, subject to sufficient cash flow from Inata. To preserve its upside options, the Company has commenced the low cost work stream of an ESIA as part of a mining licence application in 2014/2015.

Tri-K development project, Guinea

Work in Guinea in Q2 included infill drilling of the Inferred mineral resource estimate at Kodiéran, heap leach column testwork and development of a maiden reserve and mining schedule for both Koulékoun and Kodiéran deposits.

Significant intercepts from infill drilling during Q2 at Kodiéran were published on 3 July. Highlights from this work included:

·; KD000575: 36 metres @ 6.84 g/t Au from surface;

·; KD000508: 21 metres @ 9.29 g/t Au from 27 metres depth, and 11 metres @ 12.10 g/t Au from 49 metres depth; and

·; KD000639: 34 metres @ 8.45 g/t Au from 24 metres depth.

The Tri-K feasibility work envisages an initial heap leach project on the oxide portion of the resource, and the study will form part of the Company's application for a mining licence in H2 2013. All drilling was completed during the quarter and this work will be incorporated into the feasibility study, as well as contributing to a maiden reserve. In addition, an ESIA was completed over the project footprint during the quarter, which will form a key part of the licence application. Technical studies are ongoing with Tenova Bateman in South Africa. The Company will provide a full technical update to the market when the mining licence application is submitted.

Cost saving measures

In light of the prevailing gold price environment, the Company has sought to reduce costs throughout its activities.

At Inata, full year capital expenditure guidance is now US$18m, including US$3m of costs relating to the carbon blinding project. Excluding this new project, total capex is some US$5 million below original guidance, as a result of savings on the new tailings management facility, construction of which has been completed earlier than planned, as well as reduced mobile plant component changes to the mobile fleet in H2 2013 as mining volumes decrease. The decision to stand down the mining contractor African Mining Services will reduce monthly costs by approximately US$1.1 million per month going forward. Total reductions of 25% have also been made in expatriate staff numbers both within the mine and exploration teams, with exploration activities curtailed for the remainder of 2013 except for resource definition drilling within the Inata mining licence.

In London, cost saving initiatives have resulted in the total of full time equivalent positions being reduced by five.

Costs for the Tri-K feasibility study were largely as budgeted for H1, and the main aspects of this study are either complete or nearing completion. It is not envisaged that Tri-K will require material investment during the second half of this year.

FINANCIAL REVIEW

Revenue in the quarter was US$39.6 million, reflecting sales of 30,368 ounces of gold at an average realised price of US$1,304 per ounce (including 8,250 ounces of gold delivered into forward contracts at US$937 per ounce), compared with revenue of US$40.9 million in Q1 2013, representing 28,751 ounces at an average realised price of US$1,422 per ounce (including 8,250 ounces of gold delivered into forward contracts at US$949 per ounce).

EBITDA for the quarter totalled US$0.8 million compared with US$6.7 million in Q1 2013.

The fall in gold price during the period led to a review of the value of the Inata assets for impairment, particularly since the impairment of US$135.3 million recognised in 2012 had been partially reversed at 31 March 2013 as a consequence of the recognition on the balance sheet of the forward gold contract liability. As a result of this review, which was based on updated production estimates and revised consensus gold prices, an impairment of US$73.3 million has been recognised in respect of Inata assets as an exceptional item. This is discussed in greater detail in note 9 to the accounts.

Since the market value of the forward contracts was recognised in the balance sheet on 31 March 2013, the fall in the gold price led to a US$60.8 million reduction in the value of this liability at 30 June 2013. This movement was recognised as a gain in the Q2 results, but is not included in operating profit.

The loss from operations in the quarter was US$80.6 million, which included the effect of the impairment, compared with a US$73.6 million profit in Q1 2013, which included the effect of the reversal of the 2012 impairment. Excluding the impairment and impairment reversal, the operating loss in Q2 2013 would have been US$7.3 million compared with an operating profit of US$1.4 million in Q1 2013.

The loss before tax for the quarter, including exceptional items, was US$20.9 million, compared with a loss of US$44.8 million in Q1 2013. Excluding exceptional items, the pre-tax loss was US$8.4 million compared with a pre-tax profit of US$0.2 million in Q1 2013.

Net cash consumed by operating activities in the quarter was US$10.6 million due to adverse working capital movements, namely increases of US$5.4 million in stockpile inventory and US$1.1 million in spare parts and gold inventory, and a reduction in trade creditors of US$5.6 million.

Other cash flow items in the quarter included capex of US$4.0 million (26% lower than Q1), US$5.1 million of capitalised exploration costs (US$2.1 million in Burkina Faso and US$3.0 million in Guinea), as well as the US$5.0 million drawn down of the second tranche of the Elliott Loan.

Total cash decreased in the quarter by US$15.3 million, with closing cash standing at US$17.7 million, and US$15.0 million of external debt (US$5.0 million due to Macquarie Bank Limited and US$10.0 million due to Elliott).

OUTLOOK

Over the remainder of 2013, Avocet will be focussed on optimising cash flow at Inata, while meeting its targeted production full year guidance of 135,000 ounces. Work will continue on both the Tri-K feasibility study and the planning of the carbon blinding project.

Refinancing will also remain a key priority, with discussions centred on the key projects described above, and the Company will provide updates as appropriate.

DAVID CATHER

Chief Executive Officer

DIRECTORS RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

·; The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

·; The interim management report includes a fair review of the information required by:

i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

DAVID CATHER

Chief Executive Officer

(1) EBITDA represents earnings before exceptional items, finance items, taxation, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

(1) During 2011, the Group disposed of all of its trading subsidiaries which were classified as discontinued operations. All operations for 2012 are continuing. Refer to note 3 for further information.

(2) EBITDA represents earnings before exceptional items, finance items, taxation, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The condensed consolidated interim financial statements, which are unaudited, have been prepared in accordance with the requirements of International Accounting Standard 34 as adopted for use in the European Union. This condensed interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this condensed report is to be read in conjunction with the Annual Report for the year ended 31 December 2012, which has been prepared in accordance with IFRS as adopted by the European Union, and any public announcements made by the Group during the interim reporting period.

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The unaudited condensed financial statements for the six months ended 30 June 2013 have been drawn up using accounting policies and presentation expected to be adopted in the Group's full financial statements for the year ending 31 December 2013. The accounting policies are not different to those set out in note 1 to the Group's audited financial statements for the year ended 31 December 2012, with the exception of certain amendments to accounting standards or new interpretations issued by the International Accounting Standards Board, which were applicable from 1 January 2013. These have not had a material impact on the Group.

The Company's statutory financial statements for the year ended 31 December 2012 are available on the Company's website www.avocetmining.com. The auditor's report on those financial statements was unqualified and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.

Going Concern

On 25 March 2013, the Company announced that it had concluded financing agreement with an affiliate of its largest shareholder, Elliott Management ("Elliott"). On 28 May 2013 this agreement was approved by shareholders at an Extraordinary General Meeting.

The Elliott loan facility of US$15m will be due for repayment 31 December 2013. Further finance will be required in order to repay the Elliott Lender at that date and provide working capital for 2014. The directors have concluded that obtaining the required finance represents a material uncertainty that may cast significant doubt upon the Company's ability to continue as a going concern and that, therefore, the possibility exists that the Company could be unable to repay amounts owed to the Elliott Lender and to fund its corporate activities in 2014.

As a gold mining company, Avocet's cash generation is inevitably dependent on the prevailing gold price, along with prices of a number of other input costs (eg fuel/oil prices). However, the recent fall in gold prices has highlighted the risk that, if the gold price were to fall further below current production cost levels, and remain at a lower price level for a sustained period, then it is possible that a number of the covenants in respect of the loan and forward sales agreement with MBL would be breached. The consequences of this might be that further negotiations would be necessary with MBL and/or an alternative finance provider which, if unsuccessful, would represent a material uncertainty that may cast significant doubt upon the Company's ability to continue as a going concern.

Discussions continued during the quarter with potential sources of finance. These discussions have been constructive and will be assisted by the improved Inata life of mine plan which demonstrates significantly higher gold production and cash generation.

The directors therefore have a reasonable expectation that the Company will obtain sufficient funding prior to 31 December 2013 and that consequences of the gold prices will be remedied. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Estimates

Certain amounts included in the condensed consolidated interim financial statements involve the use of judgement and/or estimation. These are based on management's best knowledge of the relevant facts and circumstances, having regard to prior experience. However, judgements and estimations regarding the future are a key source of uncertainty and actual results may differ from the amounts included in the financial statements.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2012, with the exception of those highlighted in the exceptional items in notes of these statements.

2. Segmental reporting

IFRS 8 requires the disclosure of certain information in respect of reportable operating segments. One of the criteria for determining reportable operating segments is the level at which information is regularly reviewed by the Chief Operating Decision Maker (CODM) for the purposes of making economic decisions. In this report, operating segments for continuing operations are determined as the UK, West Africa mining operations (which includes exploration activity within the Inata mine licence area), and West Africa exploration (which includes exploration projects in Burkina Faso, Guinea and Mali). Discontinued operations for 2012 represent the disposal of one of the remaining assets in South East Asia that was subject to the agreement with J&Partners L.P. (note 3).

2. Segmental Reporting

(a) Other cost of sales represents costs not directly attributable to production, including exploration expenditure expensed;

(b) Includes amounts in respect of the amortisation of mine closure provision at Inata;

(c) EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

2. Segmental Reporting (continued)

(d) Includes depreciation and amortisation, share based payments, taxation in the income statement, and other non-operating items in the income statement;

(e) Other cash movements include cash flows from financing activities, intragroup transfers, and exchange gains or losses.

2. Segmental Reporting (continued)

(a) Other cost of sales represents costs not directly attributable to production, including exploration expenditure expensed;

(b) Includes amounts in respect of the amortisation of mine closure provision at Inata;

(c) EBITDA represents earnings before exceptional items, finance items, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

(d) Includes depreciation and amortisation, share based payments, taxation in the income statement, and other non-operating items in the income statement;

(e) Other cash movements include cash flows from financing activities, intergroup transfers; and exchange gains or losses.

2. Segmental Reporting (continued)