Avocet Mining (LON:AVM) has entered into an agreement to sell all its South East Asian assets in a move to focus on West Africa. Gold production in 2010 was above guidance and as such Avocet Mining reported a net profit for the year. With a change of focus to West Africa and strong cash from operations, the company is moving to expand capacity and accelerate exploration.

Operationally, 2010 was an excellent year for Avocet, with gold production for the year reaching 236,396 ounces which was well ahead of the guidance at 220,000 ounces. The ramp up of the Inata mine was completed ahead of schedule, delivering more ounces of gold than was expected.

In 2011 Inata’s gold production is expected to rise by an additional 45,000 ounces to 165,000 ounces. However, gold production for 2011 will be lower as a result of sale of the South East Asian assets.

In the meantime the Asian mines of Penjom and North Lanut will produce 8,000 ounces of gold per month until completion of the sale. The company is forecasting cash costs for 2011 to be in the range US$525 to US$575 per ounce. Cash costs in 2010 were US$531 per ounce.

A cash cost in the forecast range would place Avocet in the 2nd quartile of the gold cost curve while for an African gold miner it would fall into the 1st quartile of the cost curve. In any event with gold trading over US$1,400 the group’s operating margin is likely to improve this year.

In West Africa, the Inata/Belahouro resource stands at 41.5 million tonnes of ore showing 1.66 grams per tonne gold (g/t) with contained gold of 2.2 million ounces. Of this 9.5 million tonnes of ore is proven showing 2.1g/t gold with contained gold of 636,750 ounces. There is also 5.2 million tonnes of probable ore showing 2.0g/t gold with 336,600 ounces of contained gold.

Avocet’s total resource stands at 115.6 million tonnes of ore showing 1.47g/t gold with contained gold of 5.6 million ounces. The resource is not high grade however the quantity of ore is significant and contains potential for future reclassification upgrades.

On the exploration front the company is aggressively drilling at Inata and the surrounding region. A drill programme of some 200,000 metres has already commenced, with an aim to…

Unlock the rest of this article with a 14 day trial

Unlock with Email
Unlock with Google

Already have an account?
Login here