Avocet sees H1 production, earnings rise despite challenging market

JOHANNESBURG (miningweekly.com) – Despite a tough operating environment, Aim-listed Avocet has achieved a positive performance in the six months to June 30, producing 41 614 oz of gold at a cash cost of $913/oz.

This was a slight improvement on the 39 859 oz produced at a cash cost of $1 021/oz in the six months to June 30, 2015.

Noting that the last few years had been extremely tough for the mining sector as a whole, with junior gold miners, such as Avocet, particularly affected by market conditions, CEO David Cather said the improved gold price had led to improved margins for producers, and renewed investor interest in the company’s projects.

“At Inata, we managed to sustain production levels and reduce costs, generating sufficient cash flow to meet the mine's financing obligations," he said.

The Burkina Faso-based mine generated some $11-million in cash flow and reduced the mine’s financial indebtedness. It currently has trade creditors of $31.4-million and financial liabilities of $31.5-million.

A number of measures had also already been implemented to reduce the mine’s cost base in response to lower gold prices, and an increase in spot rates provided a welcome benefit to gross margins, but Cather pointed out that the mine continued to face numerous challenges, ranging from operational risks such as equipment availability and variability of recovery levels, to supply chain concerns. 
 
Costs are also expected to be higher in the second half of the year, owing to increasing waste mining volumes. The overall cash cost forecast for the year now stands at $950/oz to $1 050/oz, while the production guidance is at 75 000 oz to 85 000 oz.
 
Meanwhile, Cather highlighted that discussions with potential finance partners for the Tri-K project, in Guinea, had moved towards resolution. 

The company further reported earnings before interest, taxes, depreciation and amortisation of $6.9-million.