TIDMAVM
RNS Number : 2167L
Avocet Mining PLC
08 August 2013
New Inata life of mine plan shows 36% increase in gold
produced
-- Stronger cash generation - US$65 million in hedge period, US$190 million thereafter;
-- Total production increase of 36% in life of mine ('LOM') plan
recovered ounces to 960,000 ounces compared with March 2013 LOM
plan of 707,000 ounces;
-- New LOM plan based on US$1,200 pit shells;
-- Average annual production of 116,000 ounces, up 21% from 96,000 ounces in previous plan;
-- Inata cash flows to fund US$6 million carbon blinding circuit, with completion by mid-2014;
-- Life of mine total cash cost (including royalties) of US$906
per ounce, all in cost (including capex) of US$958 per ounce;
-- Capex reduced to an average of US$7 million per annum over
the next five years, including construction of new carbon blinding
circuit; and
-- New plan showing robust cash flow to be utilised in year end financing discussions.
Avocet Mining PLC ('Avocet' or the 'Company') today announces
the new life of mine plan for its Inata gold mine ('Inata') in
Burkina Faso. The announcement follows a phase of further drilling
and evaluation of additional areas within the Inata mining licence
and metallurgical testwork on the ore at Inata. A combination of
the above two factors have resulted in a net increase in the total
ounces recovered of 36%, or 253,000 ounces, compared with the
previously published life of mine plan.
Annual production over the life of mine is now on average 21%
higher at 116,000 ounces, with the mine life now extending to 2021.
During 2013-2016, when mining was previously scheduled to occur,
total tonnes mined are now reduced by 7%, but ounces recovered have
increased by 16%. As a result, cash costs during this period
(2013-2016) are on average 17% lower at US$976 per ounce.
The new plan is therefore significantly more cash generative,
with net cash flows (after capex) at current spot prices and
hedging profile are estimated to average approximately US$17
million in 2014 and 2015, and US$30 million in 2016 to 2019. In
2020 and 2021, when mining has ceased and the plant is processing
stockpiled material, over US$100 million of net cash flow is
forecast.
Commenting on the new life of mine plan, CEO David Cather
said:
"This new life of mine plan, modelled on $1,200 pit shells,
shows that Inata can produce robust cash flow in a lower gold price
environment. The new plan increases operational efficiency and will
deliver significantly higher value than we had previously
indicated. Importantly, the solution to deliver higher recoveries
from processing carbon rich ore is simple, with low capex and will
be financed from Inata's operating cash flow. Souma is not included
in the life of mine plan and therefore remains as upside for the
future."
Management Conference Call
The Company will host a presentation at the offices of its PR
Consultant (Pelham Bell Pottinger) for investors and analysts at
9am (UK) on Thursday 8 August 2013 to discuss both this release and
the Company's Q2 results, which was also released today in a
separate release. This presentation will be made available on
Avocet's website (www.avocetmining.com) ahead of this meeting
taking place.
A conference call facility is also available for this call; dial
in details are as follows:
UK: 0800 6940257
Norway: 21563013
Alternative number: +44 (0)1452 555 566
Conference ID # 14084368
A recording of the conference call will also be made available
on the Avocet website later on the same day.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining Pelham Bell Pottinger J.P. Morgan Cazenove Arctic Securities SEB Enskilda
PLC Financial PR Corporate Broker Financial Financial Adviser
Consultants Adviser & &
Market Maker Market Maker
============= ===================== ========================= ================= ==================
David Cather, Daniel Thöle Michael Wentworth-Stanley Arne Wenger Fredrik Cappelen
CEO Petter Bakken
Mike Norris,
FD
Rob Simmons,
IR
------------- --------------------- ------------------------- ----------------- ------------------
+44 20 7766 +47 2101
7676 +44 20 7861 3232 +44 20 7742 4000 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
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 and an Ore Reserve of 0.9 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 Resources
estimate of 0.8 million ounces.
In Guinea, Avocet owns exploration licences in the north east of
the country. Mineral Resource development has been ongoing since
2005 and the Tri-K project is the most advanced project, which is
currently in the feasibility study stage.
New life of mine plan
As shown in the table below, the new LOMP has 1.15 million
ounces of contained gold, a life of mine gold recovery of 83% and
gold produced of over 960,000 ounces. The gold price assumption is
unchanged at US$1,200 per ounce. This plan only includes material
mined from Inata and does not include Souma, which remains as
upside for the project as a satellite deposit.
[Please visit www.avocetmining.com for associated graphic]
The new life of mine plan is the culmination of a phase of
evaluation and planning to add new areas to the plan, metallurgical
testwork and improvements to the predictability of processing
carbonaceous ores and a plan for a low cost upgrade to the Inata
processing plant that will increase both gold recoveries from
carbonaceous ores and Inata's ability to process carbonaceous ore
types earlier in the mine life rather than stockpiling this
material for later in the mine life. In total 253,000 ounces of
recovered gold have been added to the plan, from the sources as
shown in the table below. A comparison table of the two LOM plans
is shown later in this release.
[Please visit www.avocetmining.com for associated graphic]
Increased recoveries
The March 2013 life of mine plan assumed no improvements to the
Inata processing plant. Since March, metallurgical testwork has
provided a more accurate method of modelling recoveries from the
various Inata ore types. Unlike the previous processing model,
which only considered each sample's Preg Robbing Index ('PRI'), the
new method of modelling uses an algorithm that accounts for PRI,
head grade, sulphur content and arsenic concentration of each ore
sample.
The new recovery algorithm has now provided a means for
estimating the potential impact of various engineering
modifications to the Inata process plant. Testwork has shown that
construction of a carbon blinding circuit at Inata would result in
significantly improved gold recoveries when processing ore with
high PRI values. As shown in the comparison table below, this
blinding circuit increases life of mine recoveries from 78% to 83%.
Ordering of long lead items has been completed and the blinding
circuit is expected to become operational in mid-2014. The
estimated capital cost of this project is US$6 million, with US$3.4
million budgeted for 2013. This investment will be funded from
Inata's own operating cash flow and is significantly lower cost
than the flotation regrind solutions previously considered for
processing of carbonaceous ore types.
Additional high-PRI material
The carbon blinding circuit will also make carbonaceous (high
PRI) ore economic that was previously excluded from the mine plan
allowing additional areas of carbonaceous material to be mined and
processed profitability.
Inata's enhanced ability to handle carbonaceous ore improves
flexibility in the mining schedule. The blinding circuit will
facilitate processing of carbonaceous ore as it is mined, rather
than stockpiling ore for processing at the end of the mine life.
Mining is therefore spread over seven years, rather than four in
the previous plan, and this greatly reduces mining costs in the
initial four years of the new plan. As a result, the peak stockpile
balance is now 2.6 million tonnes, 51% lower than the previous peak
stockpile balance.
Importantly, with the reduction in mining volumes in 2013-2016,
total cash costs for this period are scheduled to be on average 17%
lower. Total cash costs over the life of mine are also scheduled to
be 6% lower at US$906/oz; this reflects the increase in gold
production and slightly offset by a higher strip ratio.
Additional Inferred oxide material
Additional areas of Inferred material included in the new life
of mine plan are located parallel to the existing pits at Minfo
East and Inata South, and are near surface sources of oxide
material that are located within the Inata mining licence. Infill
drilling of this material to generate Measured and Indicated
Mineral Resources has been completed and this work will be
published before the end of the year. In total, these areas along
with other Inferred material contained in the planned life of mine
pit shells contribute 172,000 ounces of the additional gold
production over the course of the mine life.
The tonnage and grade of Inferred material included in the
current pit shells is approximately 2.6Mt @ 2.56 g/t. Mining of
much of this oxide material is scheduled to take place during 2014
and 2015, providing time to construct and implement the plant
upgrade to allow processing of the deeper carbonaceous ores.
As these areas have been included, the life of mine strip ratio
has increased to 11.5, with higher phase of waste stripping
scheduled for 2016 and 2017. The primary reasons for the higher
strip ratio are an increase in the number of smaller satellite pits
and larger, deeper pits due to higher recoveries of carbonaceous
fresh ores, arising as a result of the carbon blinding circuit
Cash costs
Life of mine total cash costs (including royalties) have fallen
to US$906 per ounce; this includes the benefit of an increase in
overall production and improved recoveries when processing
carbonaceous ore types. The optimised scheduling of mining
operations to better match the processing capabilities has resulted
in more consistent and lower cash costs earlier in the life of
mine.
Comparison with previous life of mine plan
The table below shows a comparison between the life of mine plan
announced in March.
[Please visit www.avocetmining.com for associated graphic]
Ore Reserves
Inata's new Ore Reserve is shown in the table below, which is
dated as of 31 May 2013, and is based upon a gold price assumption
of US$1,200/oz. The new Ore Reserve of 0.95 million ounces is 4%
higher than the Ore Reserve announced in March 2013, due to higher
grades.
Open Pits Gross Net Attributable
----------- ------------------------------- -------------------------------
Tonnes Grade Contained Tonnes Grade Contained
Ounces Ounces
----------- ----------- ------ ---------- ----------- ------ ----------
(Au (Au
g/t) g/t)
----------- ----------- ------ ---------- ----------- ------ ----------
In situ
----------- ----------- ------ ---------- ----------- ------ ----------
Proved 3,083,000 1.84 182,000 2,774,600 1.84 163,930
Probable 9,445,000 2.41 731,000 8,500,460 2.41 657,550
----------- ----------- ------ ---------- ----------- ------ ----------
ROM Stockpiles
------------------------ ------ ---------- ----------- ------ ----------
Proved 883,000 0.98 27,700 794,800 0.98 24,940
Probable 219,000 1.49 10,500 196,800 1.49 9,420
----------- ----------- ------ ---------- ----------- ------ ----------
TOTAL 13,630,000 2.17 950,900 12,266,690 2.17 855,850
----------- ----------- ------ ---------- ----------- ------ ----------
The above Ore Reserves estimated using a gold price assumption
$1,200 per ounce. Figures shown above are gross (100%) and 90% are
attributable to Avocet. The government of Burkina Faso holds the
remaining 10%.Ore Reserves were estimated by Mr Clayton Reeves
(MSAIIM). Mr Reeves is a Competent Person as defined by the JORC
Code. Mr Reeves has consented to the inclusion of the technical
information in this report in the form and context in which it
occurs.
In addition to the above Ore Reserve, the life of mine plan
announced today includes 2.6Mt of Inferred resources in the process
of being upgraded to Measured or Indicated Mineral Resources, and
is expected to be converted to Ore Reserves. Inata has historically
had a high conversion rate of Inferred resources to Measured and
Indicated resources Drilling on the additional material highlighted
in this release has been completed and the Company intends to
publish the updated resource estimate prior to the year end.
Indicative life of mine plans at lower gold prices
In view of recent gold price volatility, the Company has
estimated the changes in life of mine parameters that would be
adopted in response to lower gold spot prices in order to ensure
that the mine could remain cash generative even in a very
conservative scenario. The table below summarises the life of mine
plans based on pit shell price of US$1,200 per ounce, as announced
today, as well as at a low price of US$800 per ounce. In addition,
LOMs have been estimated at intervening prices.
[Please visit www.avocetmining.com for associated graphic]
Note: aside from the $800/oz and $1,200/oz data, the above table
represents estimates based on Whittle-optimised pit shells and
should only be viewed as indicative.
As indicated in the table, as spot prices decrease, Inata's life
of mine plan would be optimised to provide a higher grade operation
with lower mining volumes. The result would be lower cash costs and
cash generative performance at each price level.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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