RNS Number : 9737G
Avocet Mining PLC
30 October 2008
Q2 GOLD PRODUCTION
PRODUCTION AND CASH COSTS IN LINE WITH EXPECTATIONS
- ON TRACK FOR PRODUCTION INCREASE IN H2
Avocet Mining PLC ("Avocet" or "the Company") announces gold production in its second quarter to 30 September 2008 of 27,756 ounces, in
line with the expectations set out in the Company's Q1 production release of 31 July 2008 and in line with production in the prior quarter
of 28,022 ounces. All gold sales were into the spot market during the quarter with an average realised price of US$870/oz compared with
US$684/oz in Q2 last year.
Furthermore, the Company is on track to deliver its planned second half production increase, following progress on the initiatives
outlined in July, and updated below, to enhance grades at Penjom and recovery at North Lanut. Cash costs continued to reflect high
consumable prices, especially diesel and kerosene as a result of record world oil prices. Average cash costs in Q2 were US$506/oz, 3% below
the Q1 cost of US$521/oz due to a higher deferred stripping adjustment at Penjom.
Appendix 1 sets out key operating statistics including production and cash costs by quarter for this year and the prior year for both
Penjom and North Lanut. Appendix 2 sets out Penjom's waste and ore volumes and mining cost per tonne for each year, as well as the
calculation of stripping costs deferred in Q2 FY2009.
Penjom, Malaysia
Gold production in Q2 of 17,793 ounces was 5% below Q1. Pending the imminent transition to higher grade mining areas, Q2 ore continued
to be sourced predominantly from the bottom of the main Kalampong pit where grades have been lower than anticipated. In response, changes
to the mine plan have been implemented and good progress was made in the quarter in accessing the new mining areas on the east wall and in
the Janik and Manik areas to the south of the main pit. Stripping was accelerated to bring forward mining in these higher grade areas during
the second half. A stream diversion was completed on 19 September to facilitate mining of Janik.
Before adjustment for deferred stripping, Penjom's cash cost per ounce of US$576/oz was the same as the Q1 cost, with the overall
impact of fuel related costs equal in each quarter. The high strip ratio of 42.9 in Q2 meant that after deferred stripping adjustment,
Penjom's Q2 reported cash cost was US$420/oz compared with US$481/oz in Q1 when the stripping ratio was 29.4. In the second half, Penjom's
cash cost per ounce before deferred stripping is expected to fall due to higher production and lower fuel and kerosene prices, although mine
maintenance costs will rise as more of the truck fleet enters a component overhaul programme. Reported cash costs, after deferred stripping
adjustment, will depend on the level of stripping in Q3 and Q4. The strip ratio is expected to fall significantly in the second half as
mining focuses again on ore mining after a period of heavy waste stripping in Q2.
North Lanut, Indonesia
North Lanut's gold production in Q2 of 9,963 ounces was 7% above Q1 as higher tonnes processed more than compensated for lower recovery.
Ore treated was highly sulphidic throughout the quarter, and recovery at 31% was therefore lower than the 38% achieved in Q1, which
benefited from a higher proportion of oxide material. During Q2 several projects were progressed with a view to enhancing recovery, as
outlined in the Company's Q1 release. A new mobile crusher and a leach plant upgrade were commissioned at the end of the quarter and work
continued on the new HLP3 leach pad which will provide separate cells for the different ore types. In addition, a decision was made to
bring forward mining of the Effendi deposit to the north of the Riska pit, as Effendi ore is mainly oxide and therefore yields a higher
recovery from dump leaching. Pre-treatment of Riska's sulphide ore is being evaluated to improve subsequent leaching.
North Lanut's cash cost of US$661/oz was 10% above Q1, with diesel prices and lime consumption both higher, the latter reflecting the
more sulphidic material treated and the timing of lime dosing. In the second half, costs are expected to benefit from lower fuel prices and
higher production.
Further details of production and cash costs will be provided in the interim results to be announced on 12 November 2008.
Jonathan Henry, Chief Executive Officer, commented:
"Good progress has been made on a wide range of measures intended to improve gold production at both mines during the second half of
FY2009 and to address the ongoing challenges of grade and recovery we have been facing over the last year. Together with promising
exploration results I view these efforts as encouraging for the future."
Avocet Mining PLC Buchanan Ambrian Partners Limited JPMorgan Cazenove
Communications NOMAD and Joint Broker Lead Broker
Financial PR
Consultants
Jonathan Henry, Chief Bobby Morse Richard Brown Michael Wentworth-Stanley
Executive Officer
Mike Norris, Finance Director Sam Botterill Richard Greenfield Sam Critchlow
020 7907 9000 020 7466 5000 020 7634 4709 020 7588 2828
www.avocet.co.uk www.buchanan.uk.com www.ambrian.com www.jpmorgancazenove.com
Notes to Editors
Avocet is a mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM). The Company's principal activities are
gold mining and exploration in Malaysia (as 100 per cent owner of the Penjom mine, the country's largest gold producer), and Indonesia (as
80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi). The Company has a number of other advanced mining and
exploration projects in South East Asia.
Background to operations
The Penjom gold mine is Malaysia's largest gold producer and was developed by Avocet after applying modern technology to grass roots
exploration in an area of historic mining. The mine was commissioned in December 1996 with reserves of 223,000 ounces. Successful resource
development, particularly over the last five years, means Penjom has produced over one million ounces of gold to date and still has nearly
one million ounces of resources. This resource is expected to grow further following a major drilling programme this year which includes
deep drilling to help assess the potential for underground mining in the near future, where areas of high grade ore are known to exist. In
November 2005, the Company announced a significant increase in Penjom's life of mine plan to over half a million ounces, which resulted in
the design of a much larger pit to allow the additional ounces to be mined. Over the last year Penjom has expanded its mining and plant
capacity accordingly. Avocet was able to overcome initial problems of highly carbonaceous ore at Penjom by developing unique processing systems including complex gravity circuits and
resin-in-leach (RIL) technology. These processes have potential applications at other carbonaceous orebodies.
The North Lanut gold mine in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced over 200,000
ounces since it was commissioned in 2004. Recent high grade exploration drilling results indicate the potential for increases in resources
and mine life. In 2002 Avocet purchased its 80 per cent interest in PT Avocet Bolaang Mongondow (PT ABM), an Indonesian company holding a
6th generation Contract of Work (CoW), from Newmont Mining Corporation. The North Lanut gold mine is located within the CoW, which includes
exploration and mining rights over approximately 50,000 hectares in an area highly prospective for gold. An Indonesian company, PT Lebong
Tandai, owns the remaining 20 per cent.
Appendix 1 - Key operating statistics by quarter
FY2008
FY2009
Q1 Q2 Q3 Q4 Total Q1 Q2
Penjom
Ore mined (tonnes) 155,794 160,625 59,842 185,006 561,267 179,034 86,082
Waste mined (tonnes) 3,970,228 3,574,009 4,490,503 4,662,010 16,696,750 4,746,786 4,139,994
Ore and waste mined (tonnes) 4,126,022 3,734,634 4,550,345 4,847,016 17,258,017 4,925,820 4,226,076
Ore processed (tonnes) 140,185 150,974 151,386 153,600 596,145 190,516 179,059
Average ore head grade (g/t) 5.62 4.67 4.26 4.87 4.84 3.44 3.53
Process recovery rate 91% 92% 88% 89% 91% 89% 88%
Gold Produced (oz) 23,069 20,895 18,253 21,507 83,724 18,729 17,793
Cash costs (US$/oz)
Mining 188 230 260 283 238 329 313
Processing 86 100 117 88 97 155 168
Royalties and overheads 76 71 86 81 78 91 95
351 401 463 452 414 576 576
Deferred stripping adjustment (58) (50) (187) (41) (80) (95) (156)
293 352 275 410 334 481 420
Mining cost per tonne (US$) 1.05 1.29 1.04 1.25 1.16 1.25 1.32
North Lanut
Ore mined (tonnes) 550,052 590,024 515,230 313,704 1,969,011 383,787 357,627
Waste mined (tonnes) 337,962 238,830 283,722 283,982 1,144,496 220,408 305,008
Ore and waste mined (tonnes) 888,014 828,854 798,952 597,686 3,113,507 604,195 662,635
Ore processed (tonnes) 469,191 573,719 451,665 188,013 1,682,588 383,787 437,917
Average ore head grade (g/t) 2.05 3.23 2.47 1.79 2.54 1.99 2.30
Process recovery rate 51% 39% 58% 136% 54% 38% 31%
Gold Produced (oz) 15,733 23,133 20,995 14,322 74,183 9,293 9,963
Cash costs (US$/oz)
Mining 161 116 126 174 140 251 295
Processing 70 54 67 86 67 198 229
Royalties and overheads 83 62 83 147 89 152 137
314 232 276 407 295 601 661
Total continuing operations
Gold Produced (oz) 38,802 44,028 39,248 35,829 157,907 28,022 27,756
Cash costs (US$/oz)
Mining 177 170 188 239 192 303 307
Processing 80 76 90 87 83 169 190
Royalties and overheads 79 66 84 108 83 112 110
336 312 363 434 358 584 607
Deferred stripping adjustment (34) (24) (87) (25) (42) (64) (101)
301 289 276 409 316 521 506
Appendix 2 - Penjom Q2 waste and ore volumes
Tonnes mined
Bench Cubic Metres mined(1)
Q2 FY2009 Q2 FY2008 Variance
Q2 FY2009 Q2 FY2008 Variance
Waste 4,139,994 3,574,009 16%
1,369,206 1,721,628 -20%
Ore 86,082 160,625 -46%
31,883 59,486 -46%
Total 4,226,076 3,734,634 13%
1,401,089 1,781,114 -21%
Mining cost per tonne/BCM US$ 1.32 1.29 3%
3.97 2.67 49%
Stripping ratio(1) (2) x
42.9 28.9
Life of mine stripping ratio x
20.2 22.5
Excess stripping ratio x
22.8 6.4
Excess waste stripping(3) Million BCM
0.7 0.4
Excess stripping cost US$m
2.8 1.0
deferred(4)
US$oz
156 49
(1) Bench cubic metre (BCM) is a measure of volumes mined and is equal to the weight of rock (measured in tonnes) divided by its specific
gravity. BCM is used in mine planning where volumes are
the key driver and it is necessary to avoid distortion due to differing specific gravities.
(2) Ratio of waste to ore.
(3) Represents the amount of waste BCM mined in the period in excess of the life of mine stripping ratio. Calculated as: excess stripping
ratio multiplied by ore BCM mined.
(4) Represents cost of waste mining carried out as part of the long term pit expansion, rather than associated with the ore mined in the
period.
This information is provided by RNS
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