12 Jun 2014 07:00
12 June 2014
Avocet Mining PLC
Update on business review and life of mine plan
Avocet Mining PLC ("Avocet" or "the Company") today provides an update on its business review and on the life of mine plan for its Inata operation in Burkina Faso.
The business review initiated in January to address the Company's financial requirements is continuing, with discussions ongoing with multiple parties about a range of potential investment or asset sale transactions, with a view to repaying the outstanding loan due to Avocet's largest shareholder Elliott Management, as well as ensuring adequate working capital for the Company and Inata in 2014.
In the meantime the Company has taken further steps aimed at reducing costs and minimising capital expenditure at Inata, in order to manage the mine's limited cash resources in the period leading up to commissioning of the new carbon blinding circuit. During the period leading up to commissioning of the new circuit, Inata is reliant on low grade oxide ore, as it preserves higher grade transitional and fresh ore, which is more carbonaceous and would deliver much lower recoveries if processed through the current plant configuration. Following commissioning of the carbon blinding circuit, which is now expected in September 2014 following late delivery to site of key components, Inata is forecast to process the higher grade carbonaceous ore at higher recoveries.
On 20 December 2013, the Company reported that an estimated life of mine plan for Inata showed negative cash flow in 2014 and a requirement for further short term funding in 2014 of between US$20 million and US$30 million. It also stated that according to the estimated life of mine plan Inata should generate pre-financing cash flows in 2015-2018 of approximately US$180 million at a gold price of US$1,200 per ounce (roughly US$200 million at US$1,250 per ounce). Since then, further work has been undertaken on the plan which indicates that the short term funding requirement in 2014 is now between US$15 million and US$20 million. The pre-financing cash flows in 2015-2018 have decreased to approximately US$115 million at a gold price of US$1,250 per ounce.
These changes, which are provisional pending completion of technical work in a number of areas, reflect a number of amendments, including the following:
· the exclusion from the life of mine plan of high grade inferred material at Souma South pit representing approximately 56,000 contained ounces, pending further drilling work. The life of mine plan still includes high grade inferred material at Souma Central pit;
· increased waste stripping volumes at Inata North and Central pits; and
· higher operating costs, working capital and mine closure costs towards the end of mine life than assumed in the previous estimate.
Importantly, the life of mine plan does not include any of the following possible sources of additional value at Inata, which the Company will continue to investigate:
· further cash savings from reducing Inata's cost base and achieving working capital efficiencies;
· Souma South pit, or any of the remaining areas at Souma other than Souma Central;
· new sources of oxide elsewhere in the Belahouro district; and
· heap leaching of lower grade material.
Further updates will be given as appropriate and when the work on the new life of mine plan is complete.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC | Bell Pottinger Financial PR Consultants | J.P. Morgan Cazenove Corporate Broker | NM Rothschild Financial Adviser | Investec Bank Plc Financial Adviser |
David Cather, CEOMike Norris, FD | Daniel Thöle | Michael Wentworth-Stanley | Roger Ewart-Smith Sam Critchlow | Jeremy Wrathall |
+44 20 7766 7676 | +44 20 7861 3800 | +44 20 7742 4000
| +44 20 7280 5424 | +44 20 7597 4180 |
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. Across the Bélahouro district, which includes both Inata and Souma, there is a Mineral Resource of 6.1 million ounces and an Ore Reserve of 0.5 million ounces. The Inata Gold Mine poured its first gold in December 2009 and produced 118,443 ounces of gold in 2013. 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. As an alternative, the potential exists to exploit the entire 3.0 million ounce Tri-K orebody via CIL processing method.