Avnel Gold Mining Limited (AVK: TSX) announces third quarter 2009 results
Period ended September 30, 2009. ST. PETER PORT, Guernsey, Nov. 13 /CNW Telbec/ - Results
Avnel recorded net loss of
Revenue, which included a
Operations
Avnel's principal assets are an 80% indirect interest in Société d'Exploitation des Mines d'Or De Kalana, S.A. ("SOMIKA") and a 90% indirect interest in the Fougadian exploration and exploitation permit (the "Fougadian Exploration Permit"), through its subsidiary, Avnel
Avnel's strategic objective, through SOMIKA, is to commercially exploit the remaining underground reserves at the Kalana Gold Mine, convert existing open pit mineral resources into open pit reserves and increase the resource base of bulk mineable resources. In
The mineral reserves that can be mined from the existing underground infrastructure are being constantly reviewed and are currently estimated at 32,000 tonnes containing 12,700 gold ounces available to mine. Development may provide additional reserves during the next quarter.
Avnel anticipates the decline in production from the narrow vein underground mine will take place in an orderly transition whilst the bulk mining potential of the Kalana deposit and proximal areas is investigated by the IAMGOLD Joint Venture.
IAMGOLD Joint Venture
Avnel and IAMGOLD Corporation ("IAMGOLD") each announced in a press release on
The Kalana mine area is underlain by the prolific Proterozoic Birimian volcano-sedimentary sequence that is host to most of the world-class gold occurrences of West
Avnel and IAMGOLD have commenced the re-evaluation of the extensive database on the Kalana Mine and the remainder of Avnel's 387.4 square kilometre Exploitation Permit, with the priority area of interest being the 60 square kilometres in the northern most part of the permit incorporating the Kalana Mine and areas proximal to it.
The Joint Venture initiated field investigations in Q3 2009 with geologic mapping and sampling of approximately four kilometres of underground workings. A detailed airborne radiometric and airborne magnetic survey started in
The key terms of the agreement with IAMGOLD are summarized as follows:
1. IAMGOLD paid Avnel a signing fee of US$1 million and will pay a continuation fee of a further US$1 million on the first anniversary of the Option Agreement (subject to IAMGOLD not terminating the option before then). 2. IAMGOLD is required to spend US$11 million within three years (subject to a one year extension) to explore the potential for further gold mineralisation principally in and around the area of the existing Kalana Gold Mine. 3. If IAMGOLD, on the completion of exploration, delivers a resource study establishing the existence of not less than 2 million ounces of gold and a work plan to move forward with a feasibility study, it will have the option to acquire a 51% indirect interest in Avnel's 80% interest in SOMIKA. If IAMGOLD funds the exploration costs within the required time period but does not deliver the required resource study and feasibility study work plan it will have the option to acquire a 25% indirect interest in Avnel's interest in SOMIKA. 4. After IAMGOLD has acquired an indirect interest in SOMIKA under the Option Agreement, it will enter into a shareholders' agreement (the "Shareholders' Agreement") with Avnel (the terms of which are agreed) to govern IAMGOLD's and Avnel's indirect joint ownership interest in SOMIKA. 5. Under the Shareholders' Agreement, if IAMGOLD exercises its right to acquire a 51% interest under the Option Agreement, IAMGOLD will have the right to acquire up to an additional 19% (total 70%) interest if, among other requirements, it solely funds the preparation of and delivers a feasibility study that supports the development or re- development of a gold mine in the Kalana Permit area. If Avnel participates in the funding of the feasibility study by reimbursing IAMGOLD for 25% of its feasibility study costs, IAMGOLD's additional interest will be 14% (total 65%). 6. If IAMGOLD does not deliver the feasibility study, its interest will drop to 35% 7. During the period of the preparation of the feasibility study, Avnel and IAMGOLD will share all operating costs related to the Kalana Mine and Permit Area on a pro-rata basis based on their indirect partnership in SOMIKA. 8. Upon delivery of the feasibility study, IAMGOLD will pay a cash fee to Avnel based on the number of ounces of gold categorized as reserves in the feasibility study and the number of ounces of gold in excess of 650,000 ounces categorized as resources (excluding reserves) in the feasibility study, multiplied by the gold price per ounce based on the previous 180 day trading average gold price. 9. Upon delivery of the feasibility study, as a precondition to IAMGOLD increasing its indirect interest in SOMIKA, IAMGOLD is required to provide a completion guarantee to secure project financing for the development and construction of the mine outlined in the feasibility study or, IAMGOLD shall itself provide the project financing in an amount equal to 60% of the development costs. Avnel and IAMGOLD shall fund the remaining 40% of development costs on a pro-rata basis based on their indirect ownership interests in SOMIKA.
On
Production data for the Kalana Mine for the three month period ended
Mining Operations The following table shows the production from the Kalana Gold Mine: Three months ended September 30 ----------------------- 2009 2008 ----------- ----------- Tonnes milled: Underground ore 12,041 13,993 ----------------------- ----------------------- ----------------------- Gold grade - grams per tonne (g/t): Underground ore 12.85 16.21 ----------------------- ----------------------- ----------------------- Recovery rate - % 86.7 86.7 Gold production - ounces 4,314 6,328 Gold production from mill reline-ounces - - Cost per tonne milled $287 $228 Operating cost per ounce of gold sold $829 $700 Operating cost per ounce of gold produced $802 $505
Gold production of 4,314 ounces in the three months ending
Tonnes milled in the third quarter of 2009 were 14% lower than the production achieved in the corresponding period of 2008. Tonnes milled in the nine months to
The gold grade of ore milled in the third quarter of 2009 was 20% lower than that obtained in the third quarter of 2008. The grade was 17% lower than the planned grade (15.1g/t). Gold production from the higher grade zone on vein 17 was lower than plan due to a decrease in overall grade (actual 12g/t compared to plan 30g/t). The mining grade in the remainder of vein 17 was lower than plan as mining moved to the fringes of the vein. Grade was improved due to better mining control leading to lower mining widths (actual 1.27m versus plan 1.6m). Vein channel grades were lower than expected in the quarter. Ore development grade was 4g/t with disappointing results from vein 18, vein 18C and Vein 1 ore development. The grade for the third quarter was boosted by mining of temporary pillars from the high grade Vein 1. This contributed 1,200 tonnes containing 770 ounces.
Gold recovery of 86.7% in the third quarter of 2009 was in line with plan despite the lower head grade.
Development advanced 58 metres in the third quarter of 2009 compared to the planned 269 metres and 354 metres in the third quarter of 2008. Development activities were reduced in the north side of the mine as initial development ore grades and diamond drill assay results indicated lower grades than forecast. Development focused on extending the mining areas on vein 17 and vein 18C where good grades have been mined. Development of vein 18 between 180m level and 100m level has shown ore grades to be lower than expected. The quartz vein is thin with erratic grades. Over a mining width of 1.2m the mining grade is forecast at 8.0g/t. Development of vein 1 below 180m level has shown that the vein grade has reduced to less than 5.0g/t. Development of this potential mining block has been stopped. Development of vein 18C below 180m level showed disappointing grades and a portion of the planned mining block has been abandoned as uneconomic.
Based on the diamond drill results in the 1st quarter, it was decided to stop underground diamond drill operations. The target areas lie below the existing infrastructure at No 2 Shaft and it is not considered appropriate to continue with this program. The drill holes were targeting Vein 19 and 19A between the 180m level and 220m level. The results show that the veins contain good grades over several narrow channel widths. When the mineralised zone is combined as a number of narrow quartz veins within the metasediments, the mineralised package extends over several metres but at lower grades. This mineralisation is not suitable for narrow vein mining with only gravity recovery as currently practised at Kalana but will be suitable for a mass mining method with a larger gold plant which is designed to recover all gold, not just free milling gravity gold.
Cash operating costs of
Liquidity and going concern
The consolidated financial statements have been presented on the basis that the Company is a going concern. Accordingly, the financial statements do not include adjustments relating to the carrying value of assets, the amounts and classification of liabilities, or other adjustments that might result should the Company be unable to continue as a going concern. The Company has total current liability debts of
The Company's cash flow and profitability is dependent primarily on the volume of production, gold prices, operating costs, interest rates on borrowings and investments and discretionary expenditure levels including exploration, resource development and general and administrative costs. With the world economy in recession sources of finance are more difficult to obtain and more expensive. Since the Company has subsidiaries operating in the UK,
Outlook
For the remainder of 2009, Avnel is planning gold production of approximately 3,450 ounces at an average operating cost of approximately
Based on the diamond drill results in the 1st quarter, it has been decided to stop underground diamond drill operations. The target areas lie below the existing infrastructure at No 2 Shaft and it is not considered appropriate to continue with this program.
Underground development will focus on ore raises and winzes to open up and extend the remaining reserve blocks that can be mined from the 150m and 180m levels via the existing No2 Shaft infrastructure. The low development grades encountered in the second and third quarters are a concern as the mineable mineral reserves are lower than forecast.
However, in November development on Level 120 intersected Vein 17 east of a major fault. Previous Russian geological interpretation, based on surface diamond drilling, considered the flat, quartz vein was cut off by the fault. It is considered possible that vein 17 may extend 30 to 60m east of the fault over an 80m length. Initial sample grades are in excess of 15g/t over a 1.8m channel width (approximately 22g/t over a mining width of 1.4m).
On the 180m level exploration development of three quartz veins has commenced with encouraging results with grades in the 6g/t to 10g/t range and these veins are currently being developed for mining.
The company has commenced a cost reduction program. The program will focus on reducing capital expenditure and operating costs. A retrenchment plan is in place to reduce the employee numbers in line with the anticipated decreasing gold production and reflect increasing productivity from the labour force.
Management have reviewed the planned mineable mineral reserves. As at 30 September the plan showed 19,000 tonnes at 11.7g/t containing 7,000 ounces. With the intersection of vein 17 to the east of the major fault referred to above and the development of the three veins at the 180m level, management has increased its estimate to 32,000 tonnes with contained gold of 12,700 ounces.
It is anticipated that Avnel's Joint Venture with IAMGOLD will have completed the interpretation of the geophysical data captured, which together with the geochemistry, field work and structural geology currently being done, will generate a significant drilling program in and around the Kalana Mine, to commence after the rainy season, in the first quarter of 2010.
The company will require re-financing during the fourth quarter to meet its outstanding liabilities. Management is continuing to negotiate with the holders of the loans due payable in
Additional information is available in the MD&A for the quarter ended
Caution Regarding Forward Looking Statements:
Statements regarding the corporation's plans with respect to the Kalana Mine and exploration of the Kalana Permit are forward-looking statements. There can be no assurance that the planned ongoing development of the Kalana Gold Mine will be completed as forecast or that the exploration program on the Kalana Permit will identify minerals resources.
The TSX has neither approved nor disapproved the form or content of this information release.
%SEDAR: 00021819E
For further information: For further information: Howard Miller, Chief Executive Officer, +44 207 589 9082; Fax +44 207 589 8507, [email protected]; www.avnelgold.com; Barry Mire or Henri Perron, Renmark Financial Communications, (514) 939 3989; Fax (514) 939 8507; www.renmarkfinancial.com
Share this article