Gold miner Avocet's figures were flattered by an accounting nicety - a mark-to-market gain on a hedge liability that moved in the company's favour before being retired. Pre-exceptional pre-tax profit was actually $15m (£9.2m), compared with a pre-exceptional $52.4m in the previous year - largely due to problems at the core Penjom and North Lanut mines in Indonesia.
Falling mineralisation grades and lower recoveries, reflecting a higher carbon content in ore, saw processed ounces drop from 165,000 to 110,000 and, as a result, cash costs per ounce ballooned. It could take some months to correct this - chief executive Jonathan Henry says that these two operations are producing around 9,000 ounces a month between them at a cash cost of around $600 an ounce, but they should be producing 10,000 ounces at $500 per ounce.
The all-paper acquisition of Wega was completed alongside the announcement of these results - it comes with the Inata gold mine in Burkino Faso. Avocet's post year-end net cash balance of $58m must now be balanced against the need to assume Wega's debt of $56m. A further $23m will be spent on completing this project, which will add 160,000 ounces of production in its first full year and is core to Avocet's plans for annual production to approach 300,000 ounces in 2011-12.
Evolution Securities expects EPS of 10.7¢ for 2010.
| AVOCET MINING (AVM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 78p | MARKET VALUE: | £94.5m | |
| TOUCH: | 77-78p | 12-MONTH HIGH: | 166p | LOW: 48p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 154¢* | NET FUNDS: | $72.4m | |
| Year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | 71.1 | 15.8 | 11.3 | nil |
| 2006 | 90.5 | 15.9 | 10.6 | nil |
| 2007 | 108.0 | 23.6 | 14.7 | nil |
| 2008 | 124.0 | 29.3 | 16.3 | nil |
| 2009 | 97.0 | 33.9 | 20.3 | nil |
| % change | -22 | -+16 | +25 | - |
*Includes intangible assets of $42.3m, or 35¢ a share £1=$1.66 | ||||
