26th Sep 2006 07:02
Avocet Mining PLC26 September 2006 Avocet Mining PLC TRADING UPDATE Avocet Mining PLC ("Avocet" or "the Company"), the Central and South East Asiangold production and exploration company, today announces a trading update inadvance of today's Annual General Meeting and of its interim results to 30September 2006 which will be released on 15 November. Production and financial highlights for the first half year include thefollowing: • Total gold production is anticipated to decrease temporarily by approximately 11% to 92,000 ounces, but is expected to recover to previous levels next year. • Average cash costs are estimated to be US$439/oz, an increase of over 50% on same period last year. • Average realised price is expected to be US$580/oz, an increase of 44% over the same period last year. • Gross margin is expected to be 18% compared to 20% for the previous year. Exploration highlights include the following: • A resource of over 500,000 ounces discovered at Bakan in Indonesia. • Significant trenching results from South Sulawesi prospect in Indonesia. • Drilling recommenced at Idenburg, Indonesia. • Continued drilling at Penjom to extend resources. Malaysia Gold production at the Penjom mine is expected to be approximately 50,000 ouncesfor the first half year. This will be a 17 per cent decrease on the same periodlast year. As reported on 16 November 2005, Penjom has seen a significantincrease in its reserves by 199,100 ounces. This has resulted in the design of amuch larger pit which has necessitated substantial waste stripping in the shortterm. This has resulted in a temporary increase in the waste-to-ore strippingratio. During this period the mine has had to rely on lower grade stockpiles forgold production which has, in turn, resulted in a lower amount of gold beingproduced during the period. These factors, together with significantly higherconsumable prices, have temporarily pushed unit production costs up toapproximately US$380/oz. Production next year should be maintained at an annual rate of at least 100,000ounces per annum and cash costs will reduce owing to the reduction of thewaste-to-ore stripping ratio as the mine deepens to access higher grade ore andreplaces the smaller contractor-operated trucks with a new fleet of largerowner-operator trucks. Additionally, the remaining gold in stockpiles has beenre-valued in line with the Company's gold put option position of US$450/oz. Thishas added approximately US$4 million to pre-tax profit. Exploration continues in and around Penjom with drilling results beingencountered that should continue to add to the resources and further extend thelife of the mine. These results will be announced shortly. Indonesia Unseasonal rainfall at the North Lanut operation has required the mine toconduct some re-engineering of the waste dumps and storm water ponds for thedump leach. The Company has also brought forward the decision to hirearticulated dump trucks for ore and waste haulage. This has coincided with thecancellation of government-funded fuel subsidies, which has resulted insignificantly increased diesel prices. These factors have translated into ahigher production cost of over US$320/oz compared to US$191/oz for the previousyear. In spite of these challenges, the mining team has maintained goldproduction at the forecast rate of approximately 50,000 ounces per annum. At Bakan, located close to North Lanut, we continue to drill the Durian andOsela deposits. This drilling should allow us to bring the recently announcedinferred resource of 533,000 ounces up to the measured and indicated category sothat feasibility work can commence at the start of next year. Our exploration program at South Sulawesi has produced some significanttrenching results which were announced on 30 August and we expect furtherongoing trenching results to be announced later this year. Drilling hasrecommenced at the Idenburg property in West Papua where we are exploring for ahigh-grade gold resource through scout drilling of areas of known goldmineralisation, including the Sua area, which was drilled last year. We are alsoin negotiations over a number of additional prospects in Indonesia. Tajikistan A number of management changes have recently been made at ZGC in Tajikistan toimprove day to day operations at the mine. These changes, together with changesto operational practices, have been necessitated in order to efficientlycontinue planned stripping of waste from the high wall of the Jilau Pit whichhas been delayed. This in turn has had an adverse effect on the increase in goldproduction that we had forecast at the beginning of the year. The mine hascontinued to operate on the processing of stockpiled material and lower gradematerial mined on the periphery of the main orebody at the Jilau Pit. Productionfor the first half year was on a similar level to last year at approximately18,000 ounces, but production costs have escalated to over US$700/oz. The newmanagement team is now implementing a series of changes to improve operationalefficiencies and is undertaking a strategic review of the operation. This willbe completed by mid November. China The Company has spent just over US$1 million on its earn-in to the Hatu projectand is awaiting the drilling results from a recent programme, which we intend toannounce in December. This should allow a revised resource to be announced byApril 2007. Metallurgical testwork will commence at the Company's laboratory inPenjom by November 2006. The Board is aware of market consensus for full year profits and does notexpect, at current gold prices, that these expectations will be met. Goingforward the Company believes that gold production from its three mines shouldincrease. Costs should reduce as factors we are encountering this year, such asthe high waste strip at Penjom and the upgrades due to high rainfall at NorthLanut, are completed. Provided the ongoing strategic review at ZGC is positivethe Company still forecasts a significant increase in gold production in themedium term. With the potential to bring a fourth mine into production, at Bakanin Indonesia, by the end of 2008, the directors of the Company continue to havea positive outlook for the future.________________________________________________________________________________ For further information please contact:Avocet Mining PLC Buchanan CommunicationsJonathan Henry (Chief Executive) Bobby Morse, Director020 7907 9000 Ben Willey, Associate Directorwww.avocet.co.uk Tel: 020 7466 5000 www.buchanan.uk.com Evolution Securities LimitedRob Collins - 020 7071 4311 Grant Thornton (UK) LLPPhilip Secrett - 0870 991 2578 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 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 26% of Dynasty Gold Corporation, a Canadian listedexploration company active in Western China. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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