2nd May 2007 07:00
Avocet Mining PLC02 May 2007 Avocet Mining PLC 2 May 2007 AVOCET PROFITS AHEAD OF EXPECTATIONS Avocet Mining PLC ("Avocet" or "the Company") today announces a trading updatein advance of its preliminary audited results for the year ended 31 March 2007,which will be released on 11 July 2007. Highlights for the 12 month period include: • Lower than expected average cash costs anticipated to be US$428/oz, and higher average realised gold price of $607/oz • Pre-tax profits ahead of market consensus at approximately US$22m (unaudited) • Total gold production of 178,318 ounces, with fourth quarter production of 43,501 ounces • Commenced discussions in December with several parties with regard to a joint venture or divestment of the Company's 75% interest in ZGC - now at advanced stage • Exploration: - Increased Penjom's resource to over 1 million ounces, increasing life-of-mine by over 100,000 ounces - Continued excellent drilling results and confirmation of a resource exceeding 500,000 ounces at the Bakan project in Indonesia - Significant trenching results from South Sulawesi in Indonesia Trading overview Malaysia Gold production from Penjom in Malaysia amounted to 22,246 ounces for the fourthquarter (Q4 2006: 28,257 ounces) bringing Penjom's total production for thefinancial year to 95,966 ounces (2006: 117,679 ounces) at a lower than expectedcash cost of US$351/oz (2006: US$242/oz). As reported on 20 December 2006, Penjom has seen a significant increase in itsreserves during the year. This has resulted in the design of a larger pitrequiring substantial waste stripping. During 2006 the mine commenced cut-backdevelopment in anticipation of the larger pit and had to rely on lower gradestockpiles for gold production. This has, in turn, resulted in a lower amount ofgold being produced during the period when compared to 2005. Costs were affectedby significantly higher diesel and consumable prices. Unit production costs werehigher than the previous year although efficiency measures implemented inresponse to these cost pressures kept costs below the US$380/oz estimate givento the market in September 2006. In particular, costs and productivity haveimproved over recent months as a result of the transition to an in-house orehaulage fleet, including investment in 45 new trucks, of which 28 have now beencommissioned, to replace the previous, less efficient, contractor fleet. The pit expansion, together with a planned investment of US$15m in mining andprocessing equipment to increase the throughput of ore at the mine, willgenerate production of at least an additional 100,000 ounces over thelife-of-mine. Annual gold production is expected to be 100,000 ounces per yearwith estimated unit production costs expected to average slightly more thanUS$300/oz over the extended mine life. Exploration work continues at Penjom to the north, south and at depth of themain pit, where the orebody remains open, with a view to establishing extensionsto the orebody and bringing further resources into the open pit mine plan or,alternatively, into a possible future underground mine development. The Company announced on 4 April 2007 the planned divestment of its Buffalo Reefproject in Malaysia to Monument Mining (formerly Moncoa Corporation), a Canadianlisted junior, which is in the process of acquiring the adjacent tenements tothe south of Buffalo Reef. Avocet expects this deal to complete during the firsthalf of the year. Indonesia Gold production from North Lanut in Indonesia amounted to 13,475 ounces for thefourth quarter (Q4 2006: 13,703 ounces) bringing total production for thefinancial year to 48,170 ounces (2006: 54,520 ounces) at a cash cost of US$354/oz (2006: US$201/oz). In the first half of the year unseasonal rainfall at the operation necessitatedsome re-engineering of the waste dumps and storm-water ponds for the dump leach.This, together with increased diesel and reagent prices, accounts for the higherunit production costs for the year. For the current year gold production isexpected to be above that of the year just ended with a comparable decrease inunit production costs. At Bakan, located close to North Lanut, the Inferred Resource at the Durian andOsela deposits announced on 7 July 2006 has been upgraded to a Measured,Indicated and Inferred Mineral Resource through the completion of over 16,500metres of infill diamond drilling. Details of this Measured, Indicated andInferred Mineral Resource are set out in Table 1, with a total of 16.87 milliontonnes averaging 0.96 g/t Au containing 518,000 ounces of gold in the Durian andOsela deposits using a cut-off grade of 0.3 g/t Au. The revised grade model isnow being used as the basis for a feasibility study on the project. Meanwhileexploration efforts have been redirected to the investigation of extensions tothe known deposits, the assessment of additional mineralisation in the Bakandistrict and sterilisation of proposed infrastructure sites. The exploration program on the Mangkaluku gold prospect in South Sulawesiproduced some significant trenching results reported on 30 August and 22November 2006. Drilling on this prospect is planned to commence before the endof July this year. A drilling program at the Idenburg gold property in WestPapua has recently been completed and the results of this are currently underreview. Tajikistan Production from JV Zeravshan LLC (ZGC) in Tajikistan for the fourth quarter was7,780 ounces (Q4 2006: 7,972 ounces), bringing total production for thefinancial year to 34,182 ounces (2006: 36,328 ounces) at a cash cost of US$750/oz (2006: US$634/oz). The board of Avocet has reviewed the conclusions and recommendations ofmanagement in a strategic review of the Company's investment in Tajikistan.Discussions commenced in December 2006 with a number of parties with regard to ajoint venture or divestment of the Company's interest in ZGC, with thesignificant third party interest in ZGC reflecting the continued buoyancy in thecommodity market. Avocet is at an advanced stage in finalising thesediscussions, including with its joint venture partner, the Tajikistangovernment. A further announcement will be made as soon as is appropriate. Group Results For the full year ended 31 March 2007, total unaudited cash costs for the groupare estimated to be US$428/oz (2006: US$300/oz), with an average gold priceachieved of US$607/oz (2006: US$437/oz) for sales of 177,634 ounces (2006:207,995 ounces). Unaudited results show that the group is expected to make a pre-tax profit ofapproximately US$22 million for the full year. This includes a foreign exchangegain of approximately US$2 million from funds held in sterling during a periodof a weakening US dollar. Almost all of these funds have now been converted toUS dollars. Full details of each operation, including updated resources and reserves, willbe announced at the time of the Company's preliminary year-end audited resultsdue to be released on 11 July 2007. Jonathan Henry, Chief Executive Officer, commented: "The continued strength in the gold price and operational improvements haveallowed Avocet to return a better than expected financial performance for thelast financial year. The measures implemented in the second half of the year toimprove our cash costs and production are now beginning to bear fruit, with apositive trend expected to continue into the first half of the current financialyear. With this in mind, we are very confident about the prospects for ouroperations and projects in South-East Asia and look forward to a successfuloutcome in the near future from our ongoing discussions on ZGC." ________________________________________________________________________________ For further information please contact: Avocet Mining PLC Buchanan Communications Grant Thornton Corporate FinanceJonathan Henry, Chief Executive Officer Bobby Morse, Director Fiona KindnessMike Norris, Chief Financial Officer Nick Melson, Manager 020 7728 3414020 7907 9000 020 7466 5000 www.grant-thornton.co.ukwww.avocet.co.uk www.buchanan.uk.com Notes to Editors All references to resources and exploration results have been approved forrelease by Mr Peter Flindell, BSc (Hons) MAusIMM, Chief Geologist for Avocet,who has more than 20 years experience in the field of activity concerned and isa Competent Person as defined by the JORC Code (2004). He has consented to theinclusion of the material in the form and context in which it appears. 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 andexploration in Malaysia (as 100% owner of the Penjom mine, the country's largestgold producer), Tajikistan (as 75% owner and operator of ZGC, Tajikistan'sprincipal gold mine), and Indonesia (as 80% owner of the North Lanut gold minein North Sulawesi). The Company has a number of advanced mining and explorationprojects in Asia and owns 27% of Dynasty Gold Corporation, a Canadian listedexploration company active in Western China. Table 1: Resources by category of the Durian and Osela Deposits, Bakan district, North Sulawesi, Indonesia Deposit Tonnes Grade Gold Attributable (millions) (g/t Au) Ounces Ounces (1)Durian Measured and Indicated 7.28 0.96 224,000 179,200 Inferred 4.76 0.73 112,000 89,600 Subtotal 12.04 0.87 336,000 268,800Osela Measured and Indicated 3.04 1.34 131,000 104,800 Inferred 1.80 0.88 51,000 40,800 Subtotal 4.84 1.17 182,000 145,600Total Measured and Indicated 10.32 1.07 355,000 284,000 Inferred 6.56 0.77 163,000 130,400 Total 16.87 0.96 518,000 414,400 (1) The Company owns 80% of PT Avocet Bolaang Mongondow, the operator of the CoW This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AVM.L