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Market: AIM
Sector: General Mining - Gold
EPIC: AVM
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Avocet Mining announces a duel resource and reserve upgrade at its Inata gold mine

13th Nov 2011, 4:12 pm

 

With the world’s attention focussed on the Euro zone, Avocet Mining (LON:AVM) has just announced a duel resource and reserve upgrade at its Inata gold mine in Burkina Faso, West Africa. In support of the upgrade to the reserves the company has commenced planning to increase production levels.

After an extensive drilling campaign - which included 601 drill holes totalling 101,967 metres - the new mineral resource estimate represents an increase of 1.24 million ounces of gold or a 59% (excludes mining depletion) to 3.36 million ounces.

Following hard on the heels of the resource estimate upgrade, the company announced an upgrade to the Inata reserve. The new mineral reserve number represents an increase of 417,200 ounces of gold or a 40% increase to 1.46 million ounces. 

With the increased gold resources for Inata and with future upgrades most likely, the company has commissioned a scoping study to investigate upgrading production capacity to 245,000 ounces of gold per annum over a ten year rolling mine life. The company is targeting early 2013 to bring the upgraded Inata capacity into production. A higher Inata production target of 330,000 ounces of gold per annum is already being considered. 

After the completion of recent drilling at Avocet’s Tri-K tenements in Guinea, an upgraded JORC compliant mineral resource estimate has been released.  The total resource increased by 376,000 ounces or 34% to 1.47 million ounces, and is based on 455 holes totalling 60,364 metres. The aim of new drilling will be to lift the gold resource to two million ounces by year’s end. The company plans to commence a definitive feasibility study on TRI-K in 2012. 

Avocet has a total attributable estimate mineral resource of 75.2 million tonnes of ore showing an average grade of 1.48g/t gold and contained gold of 3.6 million ounces. 

The current round of resources upgrades are the first steps in support of the company’s forward planning to increase gold production. We are of the opinion the company, given its current robust financial position and ongoing exploration success will achieve its targeted growth in gold production of 500,000 ounces per annum.

The gold hedge has been wound back further with 20% of the book bought back recently for a cost of approximately US$40 million. The remaining 80% or some 234,000 ounces of gold has been restructured to cover quarterly deliveries over the next seven years. Some 80% of annual production is currently exposed to the spot price of gold. 

The company has completed the sale of its South East Asian operations, with the proceeds of US$170 million received. Further asset sales totalling approximately US$30 million are being considered.  A budget of US$20m has been set aside for dividends. Given the company remains in a very robust financial position, we expect the remaining allocated budget for dividends in 2011 will be paid out. 

 

 

This report was produced by Senior Research Analyst, Aamer Nawid 

 

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