Avocet Mining jumps on boost to expected gold production - UPDATE

8th Aug 2013 10:33

Shares in Avocet Mining leapt on Thursday after the group revealed the new Inata life of mine plan showed a 36 per cent increase in total gold production. The Inata gold mine, in Burkina Faso, has undergone a phase of further drilling and evaluation of additional areas within the licence and metallurgical testwork on the ore.As a result of these steps, the figure for total ounces recovered has risen from 707,000 ounces to 960,000, with annual production now expected to average 116,000 ounces, up 21% from 96,000 ounces previously. Chief Executive Officer David Cather said: "This new life of mine plan, modelled on $1,200 pit shells, shows that Inata can produce robust cash flow in a lower gold price environment. "The new plan increases operational efficiency and will deliver significantly higher value than we had previously indicated." The group explained that during 2013-2016, when mining was previously scheduled to occur, total tonnes mined have been reduced by 7.0%, but ounces recovered have increased by 16%. As a result, cash costs during the period are on average 17% lower at $976 per ounce. "The new plan is therefore significantly more cash generative, with net cash flows (after capex) at current spot prices and hedging profile are estimated to average approximately $17m in 2014 and 2015, and $30m in 2016 to 2019," Avocet added.Analysts at Canaccord Genuity said the new mine plan should give the company the ability to renegotiate and extend the term of its $15m shareholder loan and organise a working capital facility, estimated at around $10m. "Avocet will thus need a total of $25m over the next 18 months, which is equal to circa 100% of the current market capitalisation.""The current cash position is very tight with unrestricted cash of only $4.3m, so keeping all-in sustaining cash costs below the realised gold price will be the key until the debt package is agreed."Shares in Avocet were up 25.3% to 10.75p at 16:00 on Wednesday.NR