Avocet Mining increased capacity and output from its Inata mine in Burkina Faso to 166,744 ounces of gold (from 137,732 ounces in 2010). The scoping study into expanding output further is taking longer to complete than planned but the company still aims to increase the production rate to 245,000 ounces per year by the end of 2013.
The company has cannily restructured its gold hedging strategy to reverse out of 20 per cent of its gold hedge, albeit at a cost of some $40m (£25.5m). This means that the proportion of Inata's production that is now subject to higher spot prices has doubled from 40 per cent to around 80 per cent. Avocet will still deliver 8,250 ounces per quarter at $950 per ounce through to June 2018 to honour the remaining 233,733 ounces of its hedging contracts.
Costs rose from $533 per ounce in the first quarter to $773 per ounce in the fourth, primarily driven by rising fuel costs. Gold resources more than doubled to 6.26m ounces, including 2.2m ounces in the Tri-K region of Guinea, where the company's second substantial mine could be in production by the end of 2014.
The $200m sale of Avocet's Asian assets is now substantially complete, with $197m of the consideration received in the year. Meanwhile, the challenge to the legality of the sale by Avocet's former joint-venture partner in Indonesia looks to be receding.
Numis Securities is forecasting EPS this year of 14.1¢.
| AVOCET MINING (AVM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 235p | MARKET VALUE: | £469m | |
| TOUCH: | 234-235p | 12-MONTH HIGH: | 289p | LOW: 175p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | na | |
| NET ASSET VALUE: | 195¢ | NET CASH: | $72.5m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2008* | 124 | 29.3 | 16.2 | nil |
| 2009* | 97 | 33.9 | 20.3 | nil |
| 2009† ** | nil | -7.6 | -4.8 | nil |
| 2010** | 133 | 17.5 | 2.0 | nil |
| 2011** | 213 | 6.5 | -0.2 | 6.3 |
| % change | +61 | - | - | - |
Ex-div: 9 May Payment: 1 Jun *Year to 31 Mar †Nine-month period **Post-sale of Asian assets £1=$1.57 | ||||
