News & Analysis » UK

Avocet Mining, Orosur Mining, Papua Mining news briefs

Contributed by Fox-Davies Capital

Avocet Mining PLC announced that test work completed to date has indicated that the orebody is more complex than had previously been believed. While further analysis continues, current indications are that the impact of fresh and transitional ore on recoveries and throughput, as well as higher cost levels, is such that the new Mineral Reserve is likely to be between 0.9 and 1.2Moz as at 31 December 2012, compared to the previous Mineral Reserve of 1.85Moz as at 31 December 2011. The 31 December 2012 reserve figure is net of depletion during 2012 of approximately 160,000oz. The lower end of the re-estimate range is based on pit shells run at a gold price of US$1,200/oz, while the higher end of the range is based on pit shells run at a gold price of US$1,400/oz. The Inata Mineral Reserve is based on the Mineral Resource within the Inata mining licence area. This does not include the Souma deposit, 20km east of Inata, where a Mineral Resource of over 500,000oz already exists. The Company has completed an infill drilling programme and will report an updated Mineral Resource shortly. Exploration in parallel with the drilling programme has defined several geochemical anomalies and geological structures that indicate potential for a significant resource increase in due course. Avocet will undertake a step out drilling programme at Souma aimed at evaluating the expanded resource potential and generating a new Mineral Reserve by the end of 2014. Of note, gold at Souma commonly occurs as free gold grains in quartz veins hosted by a sequence of volcaniclastic and intrusive rocks. Preliminary metallurgical test work at Souma indicates that high recoveries will be achievable through standard gravity recovery and carbon-in-leach circuits.

The Inata Mineral Reserve reduction is likely to result in a significant non-cash impairment, to be determined once the Mineral Reserve is finalised. Production in 2013 is now expected to be similar to that achieved in 2012 of approximately 135,000oz. Production in subsequent years, through to the end of the life of mine in about 2020, is likely to be in the order of 100,000oz per year, although this may change the following development of Souma. Cash costs in 2013, including royalty payments, are now expected to be in the range of US$1,050 -1,100/oz. The revised life of mine plan does not assume any enhancements in recoveries and does not require any expansionary or plant improvement capex in order to be delivered. However further test work is continuing which may identify value adding opportunities.

As a consequence of these developments, the Company is engaged in discussions with Macquarie Bank Limited with regard to the hedge arrangements at Inata, including the restricted cash at Société des Mines de Bélahouro SA, the Company's trading subsidiary which holds Inata, which was disclosed in the Company's third quarter accounts as U$38.3M at 30 September 2012. Avocet believes that in order to increase cash flow generation at Inata and maximise funds returned from SMB to finance corporate activities and support the Company's investment plans at other projects, it is necessary to reduce the hedge book substantially as soon as possible. MBL and the Company are in discussions regarding arrangements to ease near term liquidity constraints at the Company.

Avocet is exploring all options to fund the proposed hedge book reduction including raising equity.

Orosur Mining Inc. announced that the development of the Arenal Deeps ramp and lateral waste development to enable production from transverse stopes has been completed. Ore development is underway and stoping is planned to commence by the end of February. Completion of the ramp and lateral development will enable the Company to access higher grade transverse stope ore at Arenal Deeps for the first time in the last quarter of the financial year ending 31 May 2013.

Papua Mining has raised £2.496M before expenses at 80p per share.

In this news:
- The net proceeds of the Placing will be utilised to assist in the funding of the Company's exploration programmes on its licences in PNG
- Will enable the Company to increase the amount of drilling to be carried out on its existing and emerging targets in the Nakru area of West New Britain.