With gold production from its two operating mines showing few signs of imminent growth, Avocet Mining hopes for a boost from its new Inata project in Burkina Faso. Mining there began in April, with the commissioning of the processing plant still ongoing and only some $35m-$40m (£21m-£24m) of the $200m capital plan still to be spent. First gold is expected by January 2010 and could more than double existing output - potentially to over 200,000 ounces a year - which would transform Avocet into the largest gold producer on Aim.
Although Avocet's Penjom project in Malaysia has proven to be a difficult ore body to mine and has disappointed with its gold grade. This resulted in a $8m write-off, related to stripping-out costs that had been deferred and capitalised in anticipation of higher grades. Chief executive Jonathan Henry is resigned to Penjom remaining a 60,000 ounces a year producer, although Avocet is drilling to increase the gold resource. Recoveries at North Lanut in Indonesia have improved 25 per cent year-on-year and, whilst there's little scope to increase output beyond 50,000 ounces a year, there is scope to increase the mine's life through further drilling. And both mines are generating positive cash flow, with Avocet also benefiting from the high gold price.
Prior to these results, broker Evolution Securities was forecasting a full-year pre-tax profit of $15m and EPS of 8.8¢.
| AVOCET MINING (AVM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 92p | MARKET VALUE: | £179m | |
| TOUCH: | 92-93p | 12-MONTH HIGH: | 92p | LOW: 48p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 142¢ | NET DEBT: | 9% | |
| Half-year to 30 Sep | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Net div per share (p) |
|---|---|---|---|---|
| 2008 | 50.6 | 30.9 | 18.6 | nil |
| 2009 | 54.2 | -4.53 | -2.55 | nil |
| % change | +7 | - | - | - |
£1=$1.676 | ||||
