28th Oct 2009 07:00
AVOCET MINING PLC
QUARTERLY OPERATIONAL AND CORPORATE UPDATE
REVENUE, PRODUCTION AND COST IMPROVEMENT FROM PREVIOUS QUARTER AND COMPARABLE PRIOR YEAR PERIOD
INATA PROJECT COMMISSIONING COMMENCED
INATA DEBT FACILITY RESTRUCTURED
Avocet Mining PLC ("Avocet" or "the Company") announces its gold production for the quarter ended 30 September 2009 and provides a corporate update, as summarised below:
Gold sales of US$27.9 million, 7 per cent up from the previous quarter and 12 per cent up from the same period last year;
Realised gold price of US$966/oz compared with the previous quarter of US$925/oz and US$870/oz in the same quarter last year
Gold production of 28,734 ounces, 4 per cent up on previous quarter (27,563 ounces), with increases at both Penjom and North Lanut, and 3 per cent up from the same quarter last year of 27,756 ounces;
Total cash costs before adjustment for deferred stripping of US$595/oz, in line with the previous quarter (US$597/oz) and 2 per cent lower than the same quarter last year of US$607/oz;
Commissioning activities have commenced at the Inata gold project in Burkina Faso; and
Inata project debt facility now in compliance following restructuring - additional 50,000 ounces of gold hedged at US$1,056/oz, required by Macquarie Bank.
The Company also announces that it will change its year end from March to December with effect from 31 December 2009, in line with the regulatory December year end applicable to the Inata project in Burkina Faso and other subsidiaries in West Africa.
Quarterly gold production to 30 September 2009
Avocet announces gold production of 28,734 ounces for the quarter from the Company's operations at Penjom in Malaysia and North Lanut in Indonesia. All gold sales were into the spot market during the quarter with an average realised price of US$966/oz.
Before adjustment for deferred stripping at Penjom, the Company's total cash cost was US$595/oz, in line with the previous two quarters. A higher ratio of waste to ore mined at Penjom in the quarter resulted in a lower reversal of deferred stripping costs than in the previous quarter, which meant that the Company's average unit cost from both operations after deferred stripping was US$638/oz compared with US$771/oz in the previous quarter.
Appendix 1 sets out key operating statistics including production and cash costs by quarter for both Penjom and North Lanut. Appendix 2 sets out Penjom's waste and ore volumes and mining cost per tonne, as well as the calculation of stripping costs deferred in the quarter ended 30 September 2009.
Penjom, Malaysia
Compared with the previous quarter, Penjom's gold production in the quarter ended 30 September 2009 of 16,401 ounces represented a 5 per cent improvement, as ore tonnes treated increased by 4 per cent and grades and recovery were broadly similar.
Total cash costs in the quarter were US$10.8 million, 3 per cent above the previous quarter of US$10.5 million, principally due to the timing of mobile fleet maintenance. Higher gold production resulted in cash costs of US$660/oz before adjustment for deferred stripping, slightly better than the previous quarter. As the stripping ratio in the quarter was 19.7, below the life of mine average, the adjustment for deferred stripping added US$75/oz to cash costs, for a total of US$735/oz. This was lower than the previous quarter when a low stripping ratio of 13.1 resulted in the adjustment for deferred stripping adding US$307/oz, for a total cost of US$976/oz. Adjustments for deferred stripping do not affect the Company's cash flow.
During the quarter, work progressed on a revised resource model at Penjom, including new structural interpretations based on several years of structural mapping data. Initial testing of the resulting interim model against historic data indicates that the interim model predicts grades more accurately than the previous model. Drilling below and adjacent to the current pit has identified orebody extensions to the Kalampong main orebody, indicating a potential expanded resource with future underground mining potential. The complex structurally controlled nature of the mineralisation at Penjom means that the model does not yet provide sufficient certainty to support a revised resource report. This is expected to be completed and announced before the end of December 2009.
Based on the interim resource model, gold production in the next two quarters is expected to continue at approximately 5,000 ounces per month, with the exception of October when production will be lower as the result of a planned shutdown for a mill liner change.
North Lanut, Indonesia
North Lanut's gold production at 12,333 ounces was 4 per cent up on the previous quarter, reflecting the benefit of higher tonnes irrigated since March and also continuing efficiencies in the leaching process, including improved piping and pumping to allow an increase in active irrigation area, and improvements to increase stripping capacity. During the quarter ore was sourced from the Riska pit and from the new Rasik pit. As expected, a higher proportion of material from Rasik meant that grades were lower than previously, but the more oxide nature of ore from this deposit, which leaches more easily, meant that the impact of lower grades was more than compensated by higher recoveries. Cash costs of US$507/oz were in line with the previous quarter of US$501/oz.
Production in the next two quarters is expected to continue at a rate of approximately 4,000 ounces per month.
Inata project update
The expediting of remaining materials and mobilising of necessary labour to site has proceeded according to plan. Construction work has also progressed ahead of plan over recent weeks, including rectification work to the gravity tower and CIL tank banding, both of which are close to completion. The following key milestones have been achieved:
7 October - Generators commissioned, supplying electrical power to entire site
15 October - Raw water available from Gomde Barrage to plant water tank
15 October - Crusher circuit commissioned
Remaining elements of construction are progressing according to schedule and commissioning of several elements of the plant has commenced in parallel with construction in order to expedite successful commissioning of the plant in its entirety and a sustainable ramp-up to full production. As previously announced, the most likely date for first gold pour is January 2010, however, an earlier date may be achievable if all remaining construction and commissioning tasks proceed without significant problems.
Restructuring of Inata project facility ("PFA") with Macquarie Bank ("MBL")
As reported at the time of Avocet's announcement of the Wega Mining acquisition in April 2009, the US$65 million PFA with MBL was out of compliance with the lending terms and conditions due to certain debt covenant breaches, which were the result of construction delays prior to Avocet's involvement. Following the recent delivery of a new life of mine plan by Avocet to MBL, agreement on a number of outstanding issues, including amendments to the PFA and a restructuring of the hedging arrangements under the PFA, MBL has confirmed that the borrower is now in compliance with the PFA.
As part of the agreement to bring the PFA back into compliance, and to make the remaining undrawn US$9.2 million of the PFA available for draw down, the Company has been required to hedge an additional 50,000 ounces at a fixed price of US$1,056/oz, for delivery over a 45 month period commencing September 2010. Avocet has successfully negotiated that the existing 350,000 ounce hedge position under the PFA and loan repayment timeframe also be rescheduled to commence in September 2010. The revised hedging arrangements mean that Inata has 400,000 ounces hedged at an average price of US$970/oz for delivery over a 45 month period commencing September 2010. This represents approximately 45 per cent of Inata's life of mine gold production, based on the current statement of reserves. All sales from Inata until September 2010 will be at the prevailing spot price.
Cash update
On the basis of the recent encouraging commissioning progress at Inata and the successful completion of all conditions to bring the PFA into compliance, the Company has elected to draw down the remaining US$9.2 million available under the US$65 million PFA, as well as the US$25 million funds available under its Standard Chartered Bank facility. The Company therefore has a total of US$62 million cash and a net debt position of US$28 million. The Company's cash balances are in excess of the remaining requirement to bring the Inata project to positive cashflow, currently estimated at approximately $40 million, prior to cash flow generated by Penjom and North Lanut.
Change of year end
Following the acquisition of Wega Mining, Avocet has a number of subsidiaries, including Inata's Burkina Faso registered holding company, with accounting and tax year ends of December, as prescribed by local regulations in West Africa. Adopting a December year end will simplify the integration of the Wega Mining entities and provide future reporting periods aligned with calendar years as favoured by many financial analysts. The Company will therefore report its preliminary, audited results in mid-March 2010 for the nine month period ended 31 December 2009.
Jonathan Henry, Chief Executive Officer, commented:
"Penjom and North Lanut have continued to operate in line with expectations. At Inata, good progress has been made towards a first gold pour in January 2010; our efforts remain focused on shortening the remaining schedule while still allowing for a smooth production ramp up. As we approach first gold at Inata, we are pleased to report that the Inata project facility is now in compliance for the first time since Avocet's involvement."
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For further information please contact: |
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Avocet Mining PLC |
Buchanan Communications |
Ambrian Partners Limited |
J.P. Morgan Cazenove |
Arctic Securities |
First Securities |
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Financial PR Consultants |
NOMAD and Joint Broker |
Lead Broker |
Financial Adviser |
Financial Adviser |
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Jonathan Henry, CEO Mike Norris, FD Hans-Arne L'orange, EVP Investor Relations & Business Development |
Bobby Morse Katharine Sutton |
Richard Brown Richard Greenfield |
Michael Wentworth-Stanley |
Arne Wenger Kim Galtung Døsvik |
Stein Hansen Eirik Lilledahl |
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+44 20 7907 9000 |
+44 20 7466 5000 |
+44 20 7634 4700 |
+44 20 7588 2828 |
+47 21013100 |
+47 2323 8000 |
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www.avocet.co.uk |
www.buchanan.uk.com |
www.ambrian.com |
www.jpmorgancazenove.com |
www.arcticsec.no |
www.first.no |
Notes to Editors
Avocet Mining PLC ("Avocet" or "the Company") is a mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM). On 15 September 2009, the Company announced its decision to apply for a listing on the Oslo Stock Exchange ("OSE") in addition to its existing admission to trading on AIM. The Company's principal activities are gold mining and exploration in Malaysia (as 100 per cent owner of the Penjom gold mine, the country's largest gold producer), Indonesia (as 80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi) and Burkina Faso (as 90 per cent owner of the Inata gold project currently in the latter stages of construction). The Company has a number of other advanced exploration projects in South East Asia and West Africa.
Background to operations
Penjom is Malaysia's largest gold producer and was developed by Avocet after applying modern technology to grass roots exploration in an area of historic alluvial mining. The mine is located in Pahang State, approximately 120 km north of the country's capital, Kuala Lumpur. The mine was commissioned in December 1996 with reserves of 223,000 ounces. Successful resource development means Penjom has produced over one million ounces of gold to date and still has nearly one million ounces of resource. Over the last two years Penjom has expanded its mining and plant capacity with plant throughput increasing from 570,000 to over 700,000 tonnes per annum to compensate for decreasing mined grades.
North Lanut in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced over 220,000 ounces since it was commissioned in 2004. Avocet purchased an 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 in 2002. North Lanut 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. The Company has a number of other advanced development and exploration projects in Indonesia.
The Inata gold project in Burkina Faso, West Africa, was purchased by Avocet as a result of the acquisition of Wega Mining ASA ("Wega Mining") which was completed in June 2009. Inata is currently under construction, with first gold production expected before the end of January 2010, and full steady state production in 2011. Inata is expected to produce greater than 120,000 ounces of gold per annum over an initial 7 year mine life. Other assets acquired from Wega Mining include exploration licences in Burkina Faso, Guinea and Mali (the most advanced being the Koulekoun gold exploration project in Guinea with a resource of 667,000 ounces), a 58.1 per cent interest in TSX Venture Exchange listed Merit Mining Corp and a 35.6 per cent interest in base metals company, Metallica Mining ASA.
Appendix 1 - Key operating statistics by quarter
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Quarters ended |
Quarters ended |
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Jun '08 |
Sep '08 |
Dec '08 |
Mar '09 |
Total |
Jun '09 |
Sep '09 |
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Penjom |
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Ore mined (tonnes) |
179,034 |
86,081 |
167,640 |
265,944 |
698,700 |
372,145 |
247,958 |
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Waste mined (tonnes) |
4,146,508 |
4,113,678 |
4,123,096 |
4,556,004 |
16,939,285 |
4,396,358 |
4,165,516 |
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Ore and waste mined (tonnes) |
4,325,542 |
4,199,759 |
4,290,736 |
4,821,948 |
17,637,985 |
4,768,503 |
4,413,474 |
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Ore processed (tonnes) |
190,516 |
179,059 |
168,884 |
180,480 |
718,939 |
179,146 |
185,767 |
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Average ore head grade (g/t) |
3.44 |
3.53 |
3.66 |
3.27 |
3.47 |
3.38 |
3.34 |
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Process recovery rate |
89% |
88% |
82% |
85% |
86% |
80% |
82% |
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Gold Produced (oz) |
18,729 |
17,793 |
16,303 |
16,077 |
68,902 |
15,664 |
16,401 |
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Cash costs (US$/oz) |
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Mining |
329 |
313 |
351 |
409 |
349 |
395 |
390 |
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Processing |
155 |
168 |
174 |
175 |
167 |
170 |
168 |
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Royalties and overheads |
92 |
95 |
82 |
107 |
94 |
104 |
102 |
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576 |
576 |
607 |
691 |
610 |
669 |
660 |
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Deferred stripping adjustment |
(95) |
(156) |
(94) |
28 |
(82) |
307 |
75 |
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481 |
420 |
513 |
718 |
528 |
976 |
735 |
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Mining cost per tonne (US$) |
1.25 |
1.33 |
1.33 |
1.36 |
1.36 |
1.30 |
1.45 |
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North Lanut |
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Ore mined (tonnes) |
383,787 |
357,627 |
257,940 |
310,628 |
1,309,982 |
300,837 |
422,528 |
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Waste mined (tonnes) |
220,408 |
305,008 |
371,166 |
698,570 |
1,595,152 |
457,032 |
554,861 |
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Ore and waste mined (tonnes) |
604,195 |
662,635 |
629,106 |
1,009,198 |
2,905,134 |
757,869 |
977,389 |
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Ore processed (tonnes) |
380,181 |
437,917 |
257,308 |
262,810 |
1,338,216 |
319,399 |
333,346 |
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Average ore head grade (g/t) |
1.96 |
2.30 |
2.24 |
1.86 |
2.10 |
2.04 |
1.54 |
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Process recovery rate |
39% |
31% |
56% |
72% |
45% |
57% |
75% |
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Gold Produced (oz) |
9,293 |
9,963 |
10,463 |
11,297 |
41,017 |
11,899 |
12,333 |
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Cash costs (US$/oz) |
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Mining |
251 |
295 |
279 |
263 |
272 |
275 |
271 |
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Processing |
198 |
229 |
173 |
112 |
175 |
125 |
123 |
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Royalties and overheads |
152 |
137 |
165 |
113 |
141 |
101 |
113 |
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601 |
661 |
617 |
488 |
588 |
501 |
507 |
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Total |
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Gold Produced (oz) |
28,022 |
27,756 |
26,766 |
27,374 |
109,919 |
27,563 |
28,734 |
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Cash costs (US$/oz) |
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Mining |
303 |
307 |
323 |
349 |
320 |
343 |
339 |
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Processing |
169 |
190 |
174 |
149 |
170 |
151 |
149 |
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Royalties and overheads |
112 |
110 |
114 |
110 |
112 |
103 |
107 |
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584 |
607 |
611 |
608 |
602 |
597 |
595 |
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Deferred stripping adjustment |
(63) |
(101) |
(57) |
16 |
(51) |
174 |
43 |
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521 |
506 |
554 |
624 |
551 |
771 |
638 |
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Appendix 2 - Penjom waste and ore volumes
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Tonnes mined |
Bench Cubic Metres mined(1) |
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Qtr ended Sep '09 |
Qtr ended Sep '08 |
Variance |
Qtr ended Sep '09 |
Qtr ended Sep '08 |
Variance |
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Ore |
247,958 |
86,081 |
188% |
91,836 |
42,545 |
116% |
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Waste |
4,165,516 |
4,113,678 |
1% |
1,808,112 |
1,476,261 |
22% |
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Total |
4,413,474 |
4,199,759 |
5% |
1,899,948 |
1,518,806 |
25% |
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Mining cost per tonne/BCM |
US$ |
1.45 |
1.33 |
9% |
3.37 |
3.67 |
-8% |
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Stripping ratio(1) (2) |
x |
19.7 |
34.7 |
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Life of mine stripping ratio |
x |
24.0 |
20.2 |
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(Lower)/excess stripping ratio |
x |
(4.3) |
14.5 |
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(Lower)/excess waste stripping(3) |
Million BCM |
(0.4) |
0.7 |
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Stripping cost reversed/(deferred)(4) |
US$m |
1.2 |
(2.8) |
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US$/oz |
75 |
(156) |
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(1) Bench cubic metre (BCM) is a measure of volumes mined and is equal to the weight of rock (measured in tonnes) divided by its |
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specific gravity. BCM is used in mine planning where volumes are the key driver and it is necessary to avoid distortion due to |
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differing specific gravities. |
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(2) Ratio of waste to ore. |
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(3) Represents the amount of waste BCM mined in the period in excess of the life of mine stripping ratio. A negative figure indicates the extent to which stripping is below the life of mine average stripping ratio. Calculated as: excess/(lower) stripping ratio multiplied by ore BCM mined. |
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(4) Negative figure represents cost of waste mining carried out as part of the long term pit expansion, rather than associated with the ore mined in the period. A positive figure denotes reversal of deferred stripping costs as a result of a stripping ratio lower than the life of mine ratio. |
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