TIDMAVM
RNS Number : 5021G
Avocet Mining PLC
29 June 2012
Avocet Operational and Expansion Update
Ahead of the announcement of its financial results for the half
year on 1 August 2012, Avocet Mining PLC ("Avocet" or "the
Company") provides an update on its production for 2012 and 2013,
and on its expansion project at the Inata mine.
Production Update
Following lower than expected gold production for the year to
date and a reassessment of mining for the remainder of the year,
the Company now expects its gold production for 2012 to be reduced
from 160,000 ounces to between 135,000 and 140,000 ounces. This
reduction reflects the following challenges at the Inata mine in
the first half of the year:
-- lower than planned availabilities among the Company's own
excavators, and among the rented excavators introduced in late
2011/early 2012 to increase waste stripping capacity;
-- lower than expected plant head grades in the second quarter,
with inadequate waste movement in the first half of 2012 limiting
access to areas of higher grade ore;
-- slightly lower recoveries, reflecting preg-robbing from
carbon-rich ore and lower grades processed in the second
quarter;
-- processing rates slightly lower than planned due to treatment
of a higher proportion of harder transitional and fresh ore
Since our last update on 3 May 2012, mining equipment
availabilities have continued to be lower than planned and ore
blending has not mitigated the effect of preg-robbing carbon and
maximized gold recoveries to the extent it had done previously. As
a result, full year 2012 guidance has been lowered to reflect the
second quarter performance.
Several measures have been introduced to ensure improved mining
capacity during the second half of 2012 and into 2013. The action
taken is expected to allow a higher rate of waste stripping,
ensuring access over the next three years to ore at depth where
grades are significantly higher:
-- additional rented excavators will be commissioned in the third quarter of 2012;
-- a new wheel loader has been ordered, and is expected to
arrive in the third quarter of 2012;
-- the purchase of further equipment, representing a fourth
mining fleet, is under consideration by the board, subject to which
orders are anticipated in the near term;
-- the recent installation of a gravity circuit at the existing
processing plant is expected to help reduce the impact of
preg-robbing as a greater proportion of gold is recovered outside
of the carbon-in-leach process;
-- as the distribution of gold at depth is increasingly coarse,
gravity separation for gold recovery on fresh rock will become
increasingly effective
The Company has engaged the services of leading mining
consultants, Alexander Proudfoot (part of Management Consulting
Group plc) to assist Avocet in realising material, measurable and
sustainable business improvements, with an initial focus on
increasing mining capacity. This will be achieved through analysing
operating procedures and streamlining processes to gain greater
equipment availability and efficiency.
Cost Guidance
Lower production in 2012 and additional mining costs mean that
2012 full year cash cost guidance has increased by US$200 per ounce
from previous guidance of US$800-US$850 to US$1,000 - US$1050.
Additional equipment rental and other mining costs of up to US$10m
will be incurred as waste stripping is increased in the second half
of 2012, and will add approximately US$75 per ounce, with the
remaining increase of US$125 per ounce attributed to the total
costs being spread over the revised production profile of 135,000 -
140,000 ounces compared with previous guidance of 160,000
ounces.
For 2013, production guidance is lowered from the previous
figure of 160,000 ounces to between 150,000 and 160,000 ounces.
Increased waste stripping capacity will allow access to higher
grade ore in the North Pit during 2013, but expectations for
recoveries have been lowered. Lower production and higher equipment
rental mean that cash costs per ounce for 2013 are now forecast at
US$900 - US$950.
It is anticipated that from 2014 the mining capacity
requirements will be met by the purchase and commissioning of a
fourth fleet, expected to total approximately US$25 million.
Approximately 25% of this capital expenditure will be incurred in
2012, with the remainder in 2013. Additionally, the cost guidance
above does not factor in any potential cost cutting exercises in
other areas of the operation that were commenced in Q1 2012, or any
potential cost savings identified by Alexander Proudfoot.
Inata expansion update
In the last six months, the expansion study at Inata has focused
on extensive metallurgical test work with a view to determining an
optimal plant configuration. Owing to delay in turnaround of this
test work, the Company has concluded that it cannot be certain of
confirming the appropriate process plant expansion designs within
the July 2012 timeframe as previously indicated.
Avocet will continue its evaluation of how best to exploit
Inata's reserve and growing resource base, but does not currently
expect commencing construction of the planned expansion by year end
2012, or achieving first gold from an expanded production platform
by the end of 2013, as previously anticipated. Final consultant
reports, including metallurgical test work results, are scheduled
for review in August 2012. Additionally, the Company is planning to
expedite the introduction of higher grade ore from the Souma trend,
with further step out and infill drilling planned in 2012 and 2013,
and a feasibility study planned for 2013 to support an application
for an exploitation license.
The Company will continue to give updates on the Inata Expansion
Study and the development of resources at Inata as appropriate. An
update on progress will be provided with the Q2 2012 results on 31
July 2012.
Despite short term production pressures, Avocet is committed to
realising Inata's full potential as a key step in delivering on its
strategy of becoming a leading West African mid-tier gold
producer.
Commenting on this update, CEO Brett Richards said:
"We have had a difficult second quarter in 2012, with issues
related to equipment availability continuing to affect mining rates
and capacity. We continue to aggressively address the issues
impacting production and envisage production of between 150,000 and
160,000 ounces for our revised 2013 production target. The Inata
resource remains very robust and will continue to increase as we
focus on exploration drilling in the Belahouro region. Ongoing work
to increase our understanding of the resource will leave us better
placed to optimise the production at the mine, and I am confident
that this will allow us to maximise the value from Inata."
For further information please contact
Avocet Mining Buchanan J.P. Morgan Arctic SEB Enskilda
PLC Financial Cazenove Securities Market Maker
PR Consultants Lead Broker Financial
Adviser
& Market
Maker
================ ================ ========================== ============ =================
Brett Richards, Bobby Morse Michael Wentworth-Stanley Arne Wenger Fredrik Cappelen
CEO James Strong Neil Passmore Petter
Mike Norris, Bakken
FD
Angela Parr,
IR
================ ================ ========================== ============ =================
+44 20 7766 +44 20 7466 +44 20 7588 +47 2101
7676 5000 2828 3100 +47 2100 8500
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
Bors (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 3.46
million ounces and a Mineral Reserve of 1.85 million ounces. The
Inata Gold Mine poured its first gold in December 2009 and produced
167,000 ounces of gold in 2011.
Other assets in Burkina Faso include eight exploration permits
in surrounding the Inata Gold Mine in the broader Belahouro region.
The most advanced of these projects is at Souma, some 20 kilometres
from the Inata Gold Mine, where a Mineral Resource of 0.56 million
ounces exists.
In Guinea, Avocet owns twelve exploration licenses in the north
east of the country. Mineral Resource development has been ongoing
since 2005 and the project at Tri-K is the most advanced. Within
the Tri-K project, Koulekoun has a Mineral Resource of 1.83 million
ounces and Kodieran of 0.4 million ounces.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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