When commenting on the production results for the third quarter of Avocet’s fiscal year, group CEO Jonathan Henry used the word ‘mixed’... and we agree. However looking ahead, in our view production is set to become more predictable as positive developments at and around North Lanut in Indonesia more than offset any possible issues at the group’s Malaysia mine, Penjom.
As gold goes from strength to strength Avocet’s production was relatively stable. Production in its third quarter (to 31 December 2008) had reached 26,766, down on the 27,756 ounces of the preceding quarter. Furthermore, the group reported that these ounces came at a cash cost of US$554 per ounce up from US$506 from the previous quarter whilst the average sales price received during the quarter was US$798 per ounce.
Underpinning the group’s performance was output emanating from the North Lanut mine in Indonesia where recovery increased from 31 percent to 56 percent. Furthermore, gold production at the mine was 5 percent up on the previous quarter to almost 10,500 ounces whilst cash cost per ounce dropped 7 percent to US$617 per ounce.
Although the group’s cash cow, Malaysia based Penjom mine reported an 8 percent production drop on the previous quarter discussions are ongoing to solve the power problems which blighted operations.
So whilst production took a breather the major plus point from the quarter was the great strides taken on an operational front in bolstering efficiency. Before deferred stripping adjustment, total costs of the group during the quarter were US$16.3 million compared with US$16.8 million in the previous quarter. In our view, this represents significant progress and could not be better timed.
Looking ahead, earnings at Avocet are set to benefit from a robust gold price as well as a near one million ounce resource that has been confirmed at the Indonesian Doup project Avocet holds a 60 percent interest in the project and its mineral resource increases Avocet's total by 48 percent.
Furthermore, the projects proximity to North Lanut provides further reason to cheer. Located just 25 kilometres northeast of Avocet’s second mine, the development promises to be operationally extremely efficient.
As far as timelines are concerned infill drilling is scheduled to commence in July 2009 once the metallurgical investigation is complete with the aim of supporting feasibility studies in 2010. In addition Avocet has stated that will also evaluate several satellite prospects that are likely to…
