TORONTO, June 10 2019 /CNW/ - Avesoro Resources Inc., ("Avesoro" or the "Company"), the TSX and AIM listed West African gold producer, announces the following operational update including revised full year production and cost guidance.
Serhan Umurhan, Chief Executive Officer of Avesoro, commented: "During Q1 and thus far in Q2, the Company has experienced significant ore dilution at the Youga Gold Mine which we have focussed on remediating to maintain sufficient ore grades to the ROM pad.
Following a comprehensive cost review, we have implemented an initiative to transition both Youga and New Liberty to contractor mining to further reduce the mining cost at both mines whilst increasing mining volumes. As part of this initiative we have seen a temporary reduction in operating performance and associated inefficiencies at both assets. At Youga, this has resulted in the open pit mining fleet operators refusing to work. If the situation at Youga is not resolved on or before June 12, 2019 gold production at Youga will be temporarily suspended. Negotiations are on-going between both parties and I am optimistic that we can find a mutually acceptable resolution to this issue in the near future. The planned transition to contractor mining at New Liberty has also resulted in disruption to mining activities and gold production, with production materially deviating from budget in April and May as a result.
I expect the downside of this initiative to be short lived and that the anticipated reduction in mining costs will be beneficial to the Company over the longer term. However, as a result of the aforementioned issues, production guidance for 2019 has been reduced to 180,000 – 200,000 ounces (previous guidance 210,000 – 230,000 ounces). Assuming the stoppage in mining operations at Youga is resolved quickly, we expect a funding shortfall of between US$25milliion to US$30million later this year.
I am confident that these short-term challenges will be quickly overcome, and the Company's focus remains firmly on delivering production from both mines in line with the forecasts within the Technical Reports whilst delivering a successful transition to underground mining operations at New Liberty within the next two years."
Youga Gold Mine, Burkina Faso ("Youga")
As highlighted in the Company's Q1 2019 Production Results (announced on April 11, 2019) unexpected ore dilution had been a feature in Q1 2019. This has continued into Q2 with the average mined grade at the Gassore satellite pit during the five months ended May 31, 2019 ("YTD") substantially lower than the reserve grade of 3.74 g/t published in the updated Mineral Reserve estimate announced on May 8, 2019.
In order to address the unplanned dilution, the mining rate at Gassore has been reduced and as a consequence, mining volumes YTD are c. 14% behind budget. The shortfall in ore tonnes mined has been supplemented by low grade stockpiles to maintain mill feed levels. This has resulted in a mill feed grade for the year to date of 1.87 g/t compared with a budgeted feed grade of 2.94 g/t. Provisional, unreconciled production from Youga for the YTD was 30,700 ounces.
An initiative, driven directly by the Company's Chairman Mr Mehmet Nazif Günal (the "Chairman"), to transition Youga to contractor mining is also being implemented with the objective of further reducing mining costs. As part of this initiative and a drive to reduce costs in general the Burkinabe employee headcount has been reduced by c.300 employees, most of whom were employed within the mining department.
The Company's proposed mining contractor, Orkun Group Sarl ("Orkun"), is currently in negotiation to re-hire the open pit operators. However, they have refused to work since June 7, 2019 resulting in the suspension of open pit mining activity at Youga. Gold production has continued using mill feed from existing stockpiles and emergency lower grade stockpiles have been used since June 8, 2019. However, the emergency stockpiles will be depleted, and gold processing operations will be suspended on June 12, 2019 unless open pit mining operations resume before that date.
In order to mitigate against the impact of this temporary stoppage in mining activities and to increase future material movement at Youga, Orkun has committed to supplement the existing Heavy Mining Equipment ("HME") fleet, at their own cost, with five additional excavators, 15 haul trucks and other associated auxiliary equipment.
New Liberty Gold Mine ("New Liberty")
At New Liberty in Liberia, the Company, also under the direct supervision of the Chairman, commenced an initiative to the transition from owner mining operations to contractor mining operations. During April 2019 a number of staff in the existing HME maintenance team chose to resign rather than accept the alternative employment terms being offered by the incoming mining contractor, Demir Kose Insaat Turizm Tasimacilik Ithalat Ihracat Sanayi Ticeret AS. As a consequence, production at New Liberty in April was reduced to 3.4koz before increasing to 8.1koz in May 2019.
Provisional unreconciled production from New Liberty for the YTD stands at 37,400 ounces. Total material movement in April and May at New Liberty was 5,079kt. In order to increase material movement to budgeted levels, the contractor is expected to supplement the HME fleet with additional HME with an approximate value of EUR 7 million, at their own cost. The first shipments of this equipment have already started to arrive at New Liberty, with the balance due throughout the remainder of June and July 2019.
Revised Annual Guidance
As a consequence of the matters noted above, and following a review of the Company's 2019 mine plans, the Company now expects production for the full year to be in the range of 180,000 – 200,000 ounces, a reduction from the previous guidance of 210,000 – 230,000 ounces.
It is expected that, although a number of cost saving initiatives are currently being implemented and mining unit costs are decreasing on a per tonne basis, operating cash costs will increase to between US$889 to US$960 per ounce sold (previously US$850 to US$910) with all-in sustaining costs ("AISC") increasing to between US$1,152 to US$1,248 per ounce sold (previously US$1,110 to US$1,190).
Appointment of Special Committee
A Special Committee has been formed to oversee the operational performance at the Company's mines and to consider various financing options available to the Company. The Special Committee is comprised of three independent, non-executive directors, David Netherway, Jean-Guy Martin and Loudon Owen, with Mr. Owen serving as its Chair.
About Avesoro Resources Inc.
Avesoro Resources is a West Africa focused gold producer and development company that operates two gold mines across West Africa and is listed on the Toronto Stock Exchange ("TSX") and the AIM market operated by the London Stock Exchange ("AIM"). The Company's assets include the New Liberty Gold Mine in Liberia ("New Liberty") and the Youga Gold Mine in Burkina Faso ("Youga").
New Liberty has an estimated Proven and Probable Mineral Reserve of 17Mt with 1,365,000 ounces of gold grading 2.49g/t and an estimated Measured and Indicated Mineral Resource of 20.47Mt with 1,748,200 ounces of gold grading 2.66g/t and an estimated Inferred Mineral Resource of 3.0Mt with 271,000 ounces of gold grading 2.8g/t. A supporting Technical Report summarising the PFS, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated January 31, 2019 and entitled "NI 43-101 Pre-Feasibility Report, Mineral Resource and Mineral Reserve Update for the New Liberty Gold Mine, Liberia" and is available on SEDAR at www.sedar.com.
Youga has an estimated Proven and Probable Mineral Reserve of 14.7Mt with 814,900 ounces of gold grading 1.72g/t and a combined estimated Measured and Indicated Mineral Resource of 22.16Mt with 1,189,100 ounces of gold grading 1.67g/t and an Inferred Mineral Resource of 7.6Mt with 377,000 ounces of gold grading 1.5g/t. A supporting Technical Report summarising the PFS, prepared in accordance with the requirements of National Instrument 43-101 will be filed on SEDAR at www.sedar.com and on the Company's corporate website www.avesoro.com within 45 days of the date of May 8, 2019.
For more information, please visit www.avesoro.com
The Company's Qualified Person is Mark J. Pryor, who holds a BSc (Hons) in Geology & Mineralogy from Aberdeen University, United Kingdom and is a Fellow of the Geological Society of London, a Fellow of the Society of Economic Geologists and a registered Professional Natural Scientist (Pr. Sci.Nat) of the South African Council for Natural Scientific Professions. Mark Pryor is an independent technical consultant with over 25 years of global experience in exploration, mining and mine development and is a "Qualified Person" as defined in National Instrument 43 -101 "Standards of Disclosure for Mineral Projects" of the Canadian Securities Administrators and has reviewed and approved this press release. Mr. Pryor has verified the underlying technical data disclosed in this press release.
Forward Looking Statements
Certain information contained in this press release constitutes forward looking information or forward-looking statements within the meaning of applicable securities laws. This information or statements may relate to future events, facts, or circumstances or the Company's future financial or operating performance or other future events or circumstances. All information other than historical fact is forward looking information and involves known and unknown risks, uncertainties and other factors which may cause the actual results or performance to be materially different from any future results, performance, events or circumstances expressed or implied by such forward-looking statements or information. Such statements can be identified by the use of words such as "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "would", "project", "should", "believe", "target", "predict" and "potential". No assurance can be given that this information will prove to be correct and such forward looking information included in this press release should not be unduly relied upon. Forward looking information and statements speak only as of the date of this press release.
Forward looking statements or information in this press release include production guidance for the full year 2019 to be in the range of 180,000 – 200,000 ounces; operating cash costs of between US$889 to US$960 per ounce sold and an all-in sustaining cost ("AISC") of between US$1,152 to US$1,248 per ounce sold.
In making the forward looking information or statements contained in this press release, assumptions have been made regarding, among other things: general business, economic and mining industry conditions; interest rates and foreign exchange rates; the continuing accuracy of Mineral Resource and Reserve estimates; geological and metallurgical conditions (including with respect to the size, grade and recoverability of Mineral Resources and Reserves) and cost estimates on which the Mineral Resource and Reserve estimates are based; the supply and demand for commodities and precious and base metals and the level and volatility of the prices of gold; market competition; the ability of the Company to raise sufficient funds from capital markets and/or debt to meet its future obligations and planned activities and that unforeseen events do not impact the ability of the Company to use existing funds to fund future plans and projects as currently contemplated; the stability and predictability of the political environments and legal and regulatory frameworks including with respect to, among other things, the ability of the Company to obtain, maintain, renew and/or extend required permits, licences, authorizations and/or approvals from the appropriate regulatory authorities; that contractual counterparties perform as agreed; and the ability of the Company to continue to obtain and retain qualified staff (including employees and contractors) and equipment in a timely and cost-efficient manner to meet its demand.
Actual results could differ materially from those anticipated in the forward-looking information or statements contained in this press release as a result of risks and uncertainties (both foreseen and unforeseen) and should not be read as guarantees of future performance or results and will not necessarily be accurate indicators of whether or not such results will be achieved. These risks and uncertainties include the risks normally incidental to exploration and development of mineral projects and the conduct of mining operations (including exploration failure, cost overruns or increases, and operational difficulties resulting from plant or equipment failure, among others); the inability of the Company to obtain required financing when needed and/or on acceptable terms or at all; risks related to operating in West Africa, including potentially more limited infrastructure and/or less developed legal and regulatory regimes; health risks associated with the mining workforce in West Africa; risks related to the Company's title to its mineral properties; the risk of adverse changes in commodity prices; the risk that the Company's exploration for and development of mineral deposits may not be successful; the inability of the Company to obtain, maintain, renew and/or extend required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities and other risks relating to the legal and regulatory frameworks in jurisdictions where the Company operates, including adverse or arbitrary changes in applicable laws or regulations or in their enforcement; competitive conditions in the mineral exploration and mining industry; risks related to obtaining insurance or adequate levels of insurance for the Company's operations; that Mineral Resource and Reserve estimates are only estimates and actual metal produced may be less than estimated in a Mineral Resource or Reserve estimate; the risk that the Company will be unable to delineate additional Mineral Resources; risks related to environmental regulations and cost of compliance, as well as costs associated with possible breaches of such regulations; uncertainties in the interpretation of results from drilling; risks related to the tax residency of the Company; the possibility that future exploration, development or mining results will not be consistent with expectations; the risk of delays in construction resulting from, among others, the failure to obtain materials in a timely manner or on a delayed schedule; inflation pressures which may increase the cost of production or of consumables beyond what is estimated in studies and forecasts; changes in exchange and interest rates; risks related to the activities of artisanal miners, whose activities could delay or hinder exploration or mining operations; the risk that third parties to contracts may not perform as contracted or may breach their agreements; the risk that plant, equipment or labour may not be available at a reasonable cost or at all, or cease to be available or resign, or in the case of labour, may undertake strike or other labour actions; the inability to attract and retain key management and personnel; and the risk of political uncertainty, terrorism, civil strife, or war in the jurisdictions in which the Company operates, or in neighbouring jurisdictions which could impact on the Company's exploration, development and operating activities.
Although the forward-looking statements contained in this press release are based upon what management believes are reasonable assumptions, the Company cannot provide assurance that actual results or performance will be consistent with these forward-looking statements. The forward looking information and statements included in this press release are expressly qualified by this cautionary statement and are made only as of the date of this press release. The Company does not undertake any obligation to publicly update or revise any forward looking information except as required by applicable securities laws.
SOURCE Avesoro Resources Inc.
For further information: Avesoro Resources Inc.: Geoff Eyre / Nick Smith, Tel: +44(0) 20 3405 9160; Camarco: (IR / Financial PR), Gordon Poole / Nick Hennis, Tel: +44(0) 20 3757 4980; finnCap: (Nominated Adviser and Joint Broker), Christopher Raggett / Scott Mathieson / Camille Gochez, Tel: +44(0) 20 7220 0500; Berenberg: (Joint Broker), Matthew Armitt / Detlir Elezi, Tel: +44(0) 20 3207 7800; Hannam & Partners: (Joint Broker), Rupert Fane / Ingo Hofmaier / Ernest Bell, Tel: +44(0) 20 7907 8500