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UPDATE 1-Avocet Mining cuts full-year gold target, shares slump
August 5, 2014 / 12:25 PM / 3 years ago

UPDATE 1-Avocet Mining cuts full-year gold target, shares slump

* Cuts production outlook to 105,000 ounces from 105,000-115,000 ounces

* Says funding requirement for Inata mine now $15 mln-$20 mln

* Shares fall as much as 12 pct (Adds CEO, finance director comments, updates share price)

By Karen Rebelo

Aug 5 (Reuters) - Avocet Mining Plc cut its full-year production forecast due to the delayed delivery of key equipment to its gold mine in Burkina Faso, sending its shares down as much as 12 percent.

Avocet, hit by a hefty reserve downgrade and funding worries at the Inata mine, said it expected to produce 105,000 ounces of gold this year. It had earlier forecast production in a range of 105,000 to 115,000 ounces.

The company plans to commission a carbon-blinding circuit in September, equipment that will allow it to step up monthly gold production by processing higher-grade carbonaceous ore at Inata.

But a delay in commissioning has forced Avocet to process “clean” oxide ore for longer than it had expected. This ore has become increasingly scarce and gold content has fallen steadily this year.

Gold production for the second quarter ended June 30 fell to 21,650 ounces from 31,245 ounces a year earlier.

“What has caused the drop in reported ounces is the fact the carbon-blinding circuit is a couple of months late in being commissioned, primarily as a result of delays in mobilising the equipment to site,” Chief Executive David Cather told Reuters.

“It’s difficult logistics to that part of West Africa.”

London-listed Avocet, which has a market capitalisation of $28 million, lost more than 85 percent of its value last year as a tumbling gold price accentuated the reserve downgrade and funding concerns at Inata.

The company said on Tuesday it had cut the funding requirements for Inata to a range of $15 million to $20 million, from $20 million to $30 million, through a revised mine plan and additional cost reductions.

The company is in talks with pan-African lender Ecobank and other parties to secure funds.

“We have already agreed on some measures that allow us to effectively defer some expenditure into the period when the production is much higher,” Avocet Finance Director Mike Norris told Reuters.

Avocet reported a pretax loss of $46 million for the first half of the year, compared with a pretax loss of $65.7 million a year earlier.

Avocet owns 90 percent of the Inata mine and the government of Burkina Faso the rest. Avocet also holds several exploration licences in the country, as well as the Tri-K development project in Guinea.

Cather said that Avocet had not seen any impact in Guinea from the deadly Ebola virus.

The outbreak of the virus, for which there is no known cure, began in the forests of eastern Guinea in February and has killed nearly 900 people in West Africa. The epicentre has since shifted to Sierra Leone and Liberia.

Avocet’s shares were down 10.6 percent at 7.35 pence at 1207 GMT. (Editing by Robin Paxton)

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