TIDMAVM
RNS Number : 0479W
Avocet Mining PLC
20 December 2013
Avocet announces lower production for 2013 and requirement for
additional funding in 2014
- initiates business review
As a consequence of lower than expected production in Q4 2013,
Avocet Mining PLC ('Avocet' or the 'Company') now expects 2013
production at the Inata gold mine ('Inata') to be 115,000-120,000
ounces compared with previous guidance of 125,000-130,000 ounces.
The Company has also commenced a business review of options to
maximise the value of its assets.
The deterioration in Q4 production has led to higher unit costs
and lower cash generation and has been caused largely by breakdowns
in mobile and plant equipment. There is a requirement for capital
expenditure to refurbish the processing plant and mobile fleet and
also to complete construction of the blinding circuit. In addition,
there is a need for maintenance processes to improve, having
suffered from a cash squeeze during 2013. Q4 production was also
affected by two minor pit slope failures which generated additional
volumes of waste material and slowed production at a time of low
excavator availabilities. The plant shutdown for refurbishment of
the SAG mill, which was noted in the 2012 Annual Report, is now
expected to halt gold production for up to four weeks in H1
2014.
In August, when the gold price was approximately US$1,300 per
ounce, the Company announced an eight year Inata life of mine plan
and positive cash flows in every year, based on pit shells run at
US$1,200 per ounce and mining costs of US$1.75 per tonne. With the
potential for a lower gold price environment over the coming years,
the Company has estimated the cash flows of a four year life of
mine plan based on pit shells run at US$950 per ounce, with mining
costs of approximately US$2.15 per tonne. This estimate ("the
estimated LOMP") includes higher capex to refurbish the mine fleet
and the four week plant shutdown. The effect of pit shells based on
a lower gold price is to improve cash generation at lower prices by
reducing the proportion of waste mined and increasing the grade of
ore mined, albeit over a shorter mine life.
The estimated LOMP indicates that in 2015-2018 Inata should
generate cash flow before financing of approximately US$180m, based
on an assumed gold spot price of US$1,200 per ounce. However, this
plan shows negative cash flow in 2014 and a requirement for further
short term funding in 2014, amounting to between US$20 million and
US$30 million, depending on the extent of refurbishment costs,
whether a decision is taken to adopt contract mining, and the level
of production in 2014. The further funding requirement would be in
addition to the remaining funds from the Ecobank loan facility,
which was drawn down in November by the Company's 90% subsidiary,
Société des Mines de Bélahouro SA ('SMB'). The loan is for 30
billion Francs de la Communauté Financière d'Afrique ('FCFA'), the
legal currency of Burkina Faso, which is currently equivalent to
US$61 million.
Of the Ecobank loan funds, US$29 million was used to buy back
SMB's gold hedge with Macquarie Bank Limited and US$3.4 million was
paid in tax to the Burkina Faso authorities. Approximately US$18
million is expected to be used as working capital during November
and December, due to weak gold production and a build-up of
creditors in preceding months when the mine was required to deliver
a high proportion of its production into the hedge at $938 per
ounce.
Group cash balances at year end are forecast to total
approximately US$15 million, which is less than the US$16 million
loan repayment (including accrued interest to the 31 December 2013
loan maturity date) owed to an affiliate of the Company's largest
shareholder, Elliott Associates. The Company has informed both
Ecobank and the Elliott lender about the anticipated additional
funding requirement and estimated LOMP, and intends to conduct
discussions with both lenders in parallel with the business
review.
Further work is needed to confirm the conclusions of the
estimated LOMP. In parallel with this, and its discussions with
lenders, the Company has initiated a business review to consider
options for maximising the value of its assets for the benefit of
shareholders, namely:
-- At Inata, evaluating options to ensure the mine is optimised
and adequately funded for 2014, thus enabling it to generate
significant cash flow for subsequent years, including contractor
mining, which should alleviate the need for extensive mobile fleet
capex and deliver improved availability and productivity;
-- The Souma deposit, located 20 kilometres from Inata, which
currently has a Mineral Resource estimate of 0.8 million ounces:
treatment of economic Souma material at the Inata plant is assumed
in the estimated LOMP; and
-- The Tri-K project in Guinea, which currently has a Mineral
Resource estimate of 3.0 million ounces and is awaiting the
issuance of an exploitation permit for a heap leach operation
treating oxide ore. This resource also has the potential to
facilitate the development of a larger, longer life carbon in leach
operation, which would encompass the much larger fresh ore
resources. Evaluation of both processes is in progress.
In a separate release today, the Company has announced that two
of its non-executive directors have advised the Board of their
intention to leave in the near future. These departures will allow
the Company to reduce its Board and committee memberships to a
level commensurate with its current market capitalisation.
Furthermore, the non-executive directors have agreed to accept a
reduction in fees, back dated to 1 March 2013. Corporate costs will
also benefit from a decrease of eight head office employees during
2013, representing approximately half of the corporate
function.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining Bell Pottinger J.P. Morgan Cazenove Arctic Securities SEB Enskilda
PLC Financial PR Corporate Broker Financial Financial
Consultants Adviser Adviser
David Cather, Daniel Thöle Michael Wentworth-Stanley Arne Wenger Fredrik Cappelen
CEO Petter Bakken
Mike Norris,
FD
Rob Simmons,
IR
+44 20 7766 7676 +44 20 7861 3232 +44 20 7742 4000 +47 2101 3100 +47 2100 8500
NOTES TO EDITORS
Avocet Mining PLC ('Avocet' or the 'Company') is an unhedged
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. 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 Resource
estimate of 0.8 million ounces.
In Guinea, Avocet owns 100% of the Tri-K Project in the north
east of the country. Drilling to date has outlined a Mineral
Resource of 3.0 million ounces, and in October 2013 the Company
announced a maiden Ore Reserve on the oxide portion of the orebody,
which is suitable for heap leaching, of 0.5 million ounces.
Development of a CIL processing plant to exploit the remaining 2.4
million ounces will also be considered.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCLFFLLFFLALIV
Avocet Mining (LSE:AVM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Avocet Mining (LSE:AVM)
Historical Stock Chart
From Jul 2023 to Jul 2024