Avocet may cut back on Guinea projects spend: CEO
(Reuters) - West Africa focused-gold miner Avocet Mining Plc (AVM.L) expects to cut spending on exploration projects in Guinea and might even sell its assets in the country to preserve cash, its chief executive said.
Shares of Avocet have more than halved in value in the past two weeks after the company cut production outlook on lower recoveries and processing rates at its sole producing mine.
Analysts have said the steep fall in its shares could land the company on the radar of buyers looking to boost their presence in mineral-rich West Africa.
"There will be some mildly strategic changes to what we want to do with Guinea because the obliteration of our share price on June 29 would prevent us from doing anything with our paper," Chief Executive Brett Richards told Reuters.
In Guinea, Avocet owns twelve exploration licenses, of which the Tri-K project is the most advanced. Its only operational mine is in Inata, Burkina Faso, which produced 167,000 ounces of gold in 2011.
"We've got something of substance (in Guinea), but I think we simply have to take a hard look at if we will be able to finance it ... so maybe we'll let someone else do it," said Richards.
"The possible options are really going to be about joint-venturing with somebody, farming it out or selling it outright."
Richards has focused on building Avocet's presence in West Africa since taking over as CEO in July 2010 and oversaw the company's exit from Indonesia and Malaysia in December 2010.
The CEO said Avocet would take up a debt facility of between $50 million and $75 million, but said there were no issues with its cash flow position and it would continue to be cash flow positive. The company had $100.5 million in cash as of March 31.
"We're going to be cash flow positive as long as gold holds up at fifteen to sixteen hundred dollars," Richards said.
Spot gold, which was trading at $1,561 an ounce on Thursday, has seen volatile trading over the past few months amid the euro zone crisis, a slowdown in China's growth and a sluggish U.S. economy.
"Would we be crippled if gold price drops to twelve or thirteen hundred dollars? Not at all," Richards said.
Richards dismissed talks of a sale and said Avocet, currently valued at 133.5 million pounds ($207.74 million), was still looking to grow its business.
"The assets in the ground are still there, nothing's changed there. It's going to be how we get it out of the ground and the right (way) to do that. That may take a little different form than originally planned, but my plan is still to do it."
($1 = 0.6426 British pounds)
(Reporting by Brenton Cordeiro in Bangalore; Editing by Saumyadeb Chakrabarty)
- Confusion as search for Malaysian jet spreads across SE Asia |
- Malaysia military source says missing jet veered to west |
- Toddler found with heroin at New Jersey daycare center
- Special Report: How China's official bank card is used to smuggle money |
- UPDATE 1-Missing Malaysian plane last seen at Strait of Malacca-source