Period ended September 30, 2013.
ST. PETER PORT, Guernsey, Nov. 14, 2013 /CNW/ -
Overview of the Company
Avnel's principal assets are an 80% indirect interest in Société d'Exploitation des Mines d'Or De Kalana, S.A. ("SOMIKA") and a 100% indirect interest in the Fougadian Exploration Permit, through its subsidiary, Avnel Mali SARL. The State of Mali holds the remaining 20% interest in SOMIKA which owns a long tenure (30 years plus two 10 year extensions) Exploitation Permit over 387.4 square kilometres located in South West Mali ("the Kalana Permit").
Avnel operates the small underground Kalana gold mine (the "Kalana Gold Mine") located in the far northwest of the Kalana Permit extracting narrow quartz veins and with a gravity only recovery process.
The Kalana Permit was acquired by Avnel in late 2002 following which the existing plant and infrastructure were upgraded. Mining operations were resumed by SOMIKA in January 2004 with commercial production commencing in March 2004.
Avnel's strategic objective, through SOMIKA, is to commercially exploit underground reserves at the Kalana Gold Mine, whilst exploring for commercially viable opportunities for the exploitation of a bulk mineable deposit.
Avnel entered into an agreement (the "Option Agreement") with IAMGOLD Corporation ("IAMGOLD") on August 10, 2009 pursuant to which IAMGOLD had the right to earn a 51% interest in Avnel's interest in the Kalana Permit by spending $11 million over a three year period and making two payments to Avnel of $1 million each on August 10, 2009 and August 10, 2010. The IAMGOLD work programme focussed primarily on the evaluation of the Kalana Mine and its environs to examine the potential for a large scale, bulk mineable resource. The Option Agreement automatically lapsed on March 1, 2013 as IAMGOLD did not produce a Resource Study as defined in the Option Agreement within the timescale allowed.
IAMGOLD spent approximately $32.0 million on the Kalana Main Project between the periods, mid-August 2009 to February 28, 2013. The costs incurred by IAMGOLD are represented by loans to the Company's subsidiary Avnel Gold, Limited which were on lent to SOMIKA. IAMGOLD's loans to Avnel Gold, Limited are forfeited to Avnel.
Avnel has engaged Dundee Securities Limited as its exclusive financial advisor in assisting Avnel in exploring all options available to maximise the value of the Kalana Project and shareholder value.
Kalana Permit Exploration
Avnel has received an extensive geological database after the completion of 130,000 metres of drill holes at the Kalana Mine that has added value to the future development of a bulk mineable deposit. At the Kalanako prospect, IAMGOLD completed 29,500 metres of drilling. At the Djirila prospect, IAMGOLD completed 2,535 metres of RC drilling. IAMGOLD reported that 11 gold anomaly targets were identified on the Kalana Permit (including Kalana itself) that are worthy of additional exploration.
Avnel has been working with its consultants Roscoe Postle Associates ("RPA") and Snowden in analysing the database arising from the exploration program conducted by IAMGOLD. The final drill assay results (15,340 assays or 12% of the total assays) and the geological logging were received from IAMGOLD during the first quarter. RPA updated the data base with the new data and reviewed their geological model. RPA have recommended that higher grade assays from the 2010-2012 drill program might benefit from re-assaying by a more exhaustive assay method. RPA recommend that a screens metallic assay on a 1kg sample be implemented.
Avnel has received two geological models, one from RPA and one from IAMGOLD. The methodology of the two geology model differs and Avnel will review the models with Snowden Mining Industry Consultants.
IAMGOLD and RPA identified the technical challenge to evaluate grade associated with the high content of free milling gold (nuggets) in the Kalana Mine. Historically gold grades from drill holes have under estimated mined grades at Kalana.
IAMGOLD conducted a limited number of metallurgical tests to address the under estimation of gold in drill hole samples. The main variable was a larger sample weight than the standard 50 gram fire assay used for all assays reported to date.
In 2011 metallurgical test work was carried out with seven composite samples from two RC holes and underground samples (weighing 50-70 kg per sample) sent to Lakefield Laboratories in Canada. IAMGOLD have reported that the seven Kalana 50 kg metallurgical test samples mostly showed a significantly higher grade than the 50 gram fire assay results.
In 2012 a total of fifty bulk metallurgical samples (weighing 10-12 kg per sample) were submitted for heavy concentrate analysis by using the Knelson concentrator at the SGS laboratory in Johannesburg. IAMGOLD reported that 50g fire assay results underestimate grade when the Fire Assay ("FA") grade is 4g/t or higher. In the range 1g/t to 4g/t the FA and the bulk sample assays report similar results. In the range below 1g/t there appears to be some limited upgrade in bulk sample assays compared to 50g FA results.
IAMGOLD reported initial indications are that the bulk samples analysed in Johannesburg and metallurgical samples previously analysed in Canada display the same behaviour as illustrated by the "Poisson effect" during sub-sampling with the global under-estimation of grade using a classical FA 50g approach.
Avnel has appointed Snowden to review the sampling procedures utilised at Kalana deposit which demonstrates a high coarse gold nugget effect. Snowden completed the study in July 2013 after reviewing all historical reports and data on the Kalana deposit, and has reported that alternative assay protocols may be more suitable to optimise the coarse gold mineralisation present in the Kalana deposit. Dr Simon Dominy, from Snowden, an expert in this field, has reviewed the nature of the coarse gold mineralisation at Kalana and concluded the veins bear dominant coarse gold mineralization, potentially >35% plus 100 micron based on a liberated gold study and up to 75% based on Screen Fire Assay ("SFA") results. The IAMGOLD protocols are likely to underestimate gold grade. Three options were considered for improved protocols for sample preparation and assay. These included the use of metallic screen fire assays, Leachwell cyanide extraction method and laboratory-scale gravity processing of bulk samples. The use of these protocols will reduce the sampling error inherent in the IAMGOLD sample protocol.
The selection of samples for re-assaying commenced in June 2013 and approximately 20,000 samples (1m sample length) were identified. All selected samples from the RC drill campaigns have been collected and selected diamond drill samples will be available in November.
1,500 samples for re-assay were prepared and submitted to SGS laboratory in Bamako for SFA. The protocol required 1 kilograms of the 2-4 kilogram sample to be screened (106 µm) after pulverisation. The QAQC assessment showed that there were significant errors in the work and it was decided to stop SFA at SGS Bamako. SGS and Snowden agreed that, data on these 1,500 samples are not usable.
In October 1,000 samples were submitted to the Bigs Global laboratory in Burkina Faso for assaying using the Leachwell cyanide extraction method. The weight of each sample is approximately 2-4 kilograms. The protocol requires 2 kilograms of the 2-4 kilogram sample to be split after crushing; it includes sample preparation for 24 hour leaching with fire assay of the leach tail. Partial results (fire assaying of tails is not yet available) indicate that the grade compares favourably to the assay results reported by IAMGOLD who used the standard 50g Fire Assay protocol.
In October 298 samples for re-assay and metallurgical test work were submitted to the SGS Metals and Mineralogy laboratory in Johannesburg, South Africa to carry out gravity and cyanidation test work. This is the same laboratory that conducted test work for IAMGOLD in 2012. The weight of each sample is 2-4 kilograms. The protocol requires sample preparation (crushing and milling), batch gravity concentration, and cyanide leaching of the gravity tails and fire assay on the final tails.
It is expected that the re-assaying of 20,000 selected samples will continue using the Leachwell method, assuming results from the test work is satisfactory. If the work proceeds, it is expected that a new assay database will be complete by March 2014.
Avnel and Snowden have reviewed the two geological models prepared by IAMGOLD and RPA consultants. The geological model is being updated using drill hole data that was not available to IAMGOLD in November 2012. Avnel's Group Geology Manager, Dr. Olivier Femenias, is leading the re-interpretation of the mineralized intercepts having agreed an appropriate methodology with Snowden. The geological model is scheduled to be completed in November. Preliminary indications are that the volume of mineralization will increase compared to the IAMGOLD model, due to the additional data from 25,000m of drill hole and detailed interpretation of all aspects of the geological database.
Fougadian Exploration Permit
On October 17, 2006, Avnel was awarded the Fougadian Exploration Permit which lies south of the Kalana Permit. The Fougadian Exploration Permit covers an area of 150 square kilometres including a portion of the Niessoumala exploration area. The permit was awarded in accordance with the 1999 Mining Code and a foundation agreement (the "Foundation Agreement") was signed between Avnel Mali, a 100% wholly-owned subsidiary of Avnel, and the Government of the Republic of Mali. The Foundation Agreement provides for the exploration and exploitation of Group 2 minerals as defined in the 1999 Mineral Code. Group 2 minerals include gold and silver, and base metals, but exclude precious stones, semi-precious stones and fossils.
Avnel applied for a renewal of the Fougadian Exploration Permit and this was granted in March 2010, with the commencement date December 2009. Avnel has specified a new area of 75 sq. km as required by the Malian Code. This area lies in the northern half of the original permit and includes the largest anomaly Avnel 1 (Maramele). The renewal was for 3 years and Avnel has committed to expenditures of $1.9 million over this period. As at December 31, 2012 expenditure totalled US$1.8 million.
The Permit expired in December 2012. Avnel applied for a two year extension of the Permit and which was granted in August 2013. The Permit is for two years and is non-renewable.
Joint Venture Arrangements Agreement Fougadian Permits
In 2010, Avnel Gold and IAMGOLD entered into the Joint Venture Arrangements Agreement whereby IAMGOLD has the option to acquire up to an initial 51% interest in Avnel's 90% interest in the Fougadian Exploration Permit as described below.
The Fougadian Exploration Permit held by Avnel previously comprised 150 sq. km. to the south of and abutting the Kalana Exploitation Permit. Avnel relinquished the southern half of its ground in accordance with the Malian Mining Code and was granted a new exploration licence on the northern half on March 23, 2010. IAMGOLD applied for an exploration permit in respect of the southern 75 sq. km and this was granted on June 20, 2012. This Permit is called the Fougadian South and was granted for 3 years, renewable twice. The combined permits are referred to as the "Fougadian Exploration Permit".
Following the military coup in Mali in March 2012, IAMGOLD halted the planned drilling program. A ground geophysics program was completed over the Avnel 1 (Maramele) target by SAGAX. 192 line kilometers were completed and results received. The results confirm the previous interpretations.
IAMGOLD completed 8,836 meters of air core drilling during the quarter and the samples have been submitted to SGS Mineral Laboratories in Bamako. Drilling was focused on the Maramale and Zambala targets on the Fougadian North permit. These two prospects were chosen by IAMGOLD being the only ones accessible at the beginning of the annual rainy season. Results have recently been received and are being reviewed. Field work has been suspended during the annual rainy season. During the fourth quarter and first quarter 2014 it is planned to complete 15,000m to 20,000m of air core drilling on the Fougadian North and South permits. The 2013/14 budget is $1 million.
Selected Annual Information
(In thousands of U.S. dollars except per share amounts)
|Three months ended Sept 30||Nine months ended Sept 30|
|Total Revenue .................................................||2,930||3,427||11,811||12,854|
|Total Operating expenses ................................||4,321||3,467||12,556||11,611|
|Other income/(expenses) .................................||469||(550)||1,791||6,840|
|Net (loss)/profit .................................................||(1,766)||(1,280)||(1,445)||5,591|
| Net (loss)/profit from continuing operations
attributable to parent
|Net (loss)/profit per share attributable to parent||($0.004)||($0.000)||($0.000)||$0.040|
|Weighted average shares outstanding||191,743,724||191,743,724||191,739,724||191,739,724|
|Balance Sheet||Sept 30, 2013||Sept 30, 2012||Dec 31, 2012|
|Working capital surplus||10,854||12,235||12,226|
|Total assets .....................................................||28,491||31,196||31,051|
|Shareholders' equity ........................................||32,829||32,612||32,750|
Results of Operations
Metal revenues reduced to $11,811,000 in the nine months to Sept 30, 2013 from $12,854,000 in the nine months to Sept 30, 2012. This was as a result of a reduction in the realised average sales price of gold from $1,655 per ounce in the nine months to Sept 30, 2012 to $1,446 per ounce in nine months to Sept 30, 2013 being partly offset by increased gold ounces sold from 7,742 ounces in the nine months to Sept 30, 2012 to 8,147 ounces in the nine months to Sept 30, 2013.
Total expenses increased from $11,611,000 in the nine months to Sept 30, 2012 to $12,556,000 in the nine months to Sept 30, 2013. Operating costs per ounce of gold produced for the nine months to Sept 30, 2013 increased from $1,257/oz. to $1,286/oz.
Avnel recorded a net loss of $1,445,000 ($0.000 attributable loss per share) for the nine months to Sept 30, 2013, compared to a net profit of $5,591,000 ($0.040 attributable profit per share) in the comparative period in 2012. Included in the nine months to Sept 2013, is an accounting finance gain on the fair value of derivative financial instruments of $1,600,000, arising from a reduction in the Company's share price from December 31, 2012. This compared to a profit on financial derivatives of $6,733,000 in the nine months to Sept 30, 2012. These fair value accounting gains reported have no cash effect on the Company.
As compared to the balance sheet as at December 31, 2012, Avnel's cash and cash equivalents as at Sept 2013, decreased by $1,145,000 from $7,979,000 to $6,834,000. This decrease was mainly due to losses in the year to Sept 2013.
There was a working capital surplus of $10,854,000 as at Sept 30, 2013 compared to working capital surplus of $12,226,000 as at December 31, 2012. The working capital figure reported at December 31, 2012 excludes the other derivative financial liability reported on the Company's balance sheet which had no cash liability to the Company.
Total assets reduced from $31,051,000 as at December 31, 2012 to $28,491,000 at Sept 30, 2013.
Total stockholders' equity also increased to $32,829,000 as at Sept 30, 2013 from $32,750,000 at December 31, 2012. The retained deficit increased by $206,000 as a result of the net loss made in the nine months to Sept 30, 2013.
Third Quarter Results
Metal revenues reduced to $2,930,000 in the quarter to Sept 30, 2013 from $3,427,000 in the quarter to Sept 30, 2012. This was as a result of increased gold ounces sold from 2,021 ounces in the quarter to Sept 30, 2012 to 2,224 ounces in the quarter to Sept 30, 2013 more than offset by a reduction in the realised average sales price of gold from $1,690 per ounce in quarter to Sept 30, 2012 to $1,314 per ounce in quarter to Sept 30, 2013.
Total expenses increased from $3,467,000 in the quarter to Sept 30, 2012 to $4,321,000 in the quarter to Sept 30, 2013, arising from finished goods movement. Operating costs per ounce of gold produced for the quarter to Sept 30, 2013 increased from $1,392/oz. to $1,598/oz.
Avnel recorded a net loss of $1,766,000 ($0.004 attributable loss per share) for the quarter to Sept 30, 2013, compared to a net loss of $1,280,000 ($0.000 attributable loss per share) in the comparative period in 2012. Included in the Sept quarter of 2012, is an accounting finance loss on the fair value of derivative financial instruments of $711,000. There was zero comparative derivative financial instrument profit in the June 2013 quarter. These fair value accounting gains reported have no cash effect on the Company.
Avnel's cash and cash equivalents decreased by $407,000 in the quarter to Sept 30, 2013 from $7,241,000 to $6,834,000.
Snowden Mining Industry Consultants have reviewed the gold sampling procedures for the Kalana deposit. Following their report Avnel has commenced a program to re-assay the selected 2010-2012 drill hole samples using a new sampling protocol, namely Leachwell. This methodology will better capture the coarse mineralisation in the deposit and reduce the sampling error in the standard 50g fire assay protocol used by IAMGOLD. The sample preparation and cyanide leaching is being carried out in a laboratory in Burkina Faso.
Approximately 20,000 samples will be re-assayed and the results are expected by March 2014.
Avnel has appointed Snowden Mineral Industry Consultants to complete a Mineral Resource Study utilising the new assay data. Snowden consultants have visited Kalana to review the exploration data and the geological model. Snowden reported at the end of the site visit that the exploration data base meets international standards. Snowden will work closely with Avnel to update the geological model and assess the impact on the potential mineral resource by January 2014. This assessment will utilise the existing data base using IAMGOLD assay results. After receipt of the final re-assay results in March 2014, Snowden will complete the Mineral Resource Study in April 2014.
On completion of the Mineral Resource Study Avnel will consider the commencement of a Pre-Feasibility Study.
For the remainder of 2013, Avnel is planning gold production of 2,200 ounces from 12,600 tonnes of ore milled, at an average grade of 6.7g/t. This plan is very sensitive to grade and gold price. The plan assumes that the major ore sources will be Vein 20 and Vein 17. Assuming a gold price of $1,300 per ounce, cash costs will exceed revenues. The company has initiated a productivity drive that aims to reduce this cash loss.
It is forecast that the potential mineable reserves available from the current mine infrastructure are approximately 26,000 tonnes at 6.75g/t containing 6,000 ounces. This assumes that ongoing development of Vein 20 and Vein 17 will be successful and the average gold price will be $1,300 per ounce. This will allow mining to average 4,200 tonnes per month to March 2014
The mine plans to advance development 160m during the remainder of 2013. Development will focus on opening up Vein 17 above the 180m level, vein 20 below 180m level and Vein 21 below 180m level. Development will continue during 2014 to access additional ore to extend mining beyond the first quarter 2014.
The Company intends to sustain the operation as long as feasible while the exploration program progresses. This is important to reduce the social impact on the community and to cover the costs of underground pumping. Once underground mining operations are temporarily stopped, the mine will be placed on care and maintenance. The underground water pumping system will remain in operation to prevent flooding of the mine and permit access for future exploration activity. The estimated cost of care and maintenance is $190,000 per month including administration costs in Mali.
Current Events in Mali
Following the turmoil in the north of Mali and the military coup d'état on March 21, 2012, stability has been restored with the intervention of French and ECOWAS troops. The First round Presidential elections were held peaceably in July and August, 2013 with a high voter turnout. The conduct of the election has been internationally acclaimed. The new President was inaugurated in September 2013 and the new government appointed.
ABOUT THE COMPANY
Avnel is a producing gold mining company operating the Kalana Mine in south-west Mali and is engaged in the exploration of the 30-year Kalana Exploitation Permit encompassing 387.4 sq km around and to the south of the Kalana Mine.
Avnel's principal asset is an 80% interest in Société d'Exploitation des Mines d'Or de Kalana ("SOMIKA") which is the holder of the Kalana Exploitation Permit. The Kalana Project is situate in south west Mali. The 387.4 sq km exploitation permit has a NI-43-101 compliant resource of 1,020,000 oz (at an average grade of 10.4 g/t) in the measured and indicated category, and 249,000 oz (at an average grade of 3.4 g/t) in the inferred category. Avnel also holds the Fougadian Exploration Permit covering an area of 75 sq. km. to the south of the main Kalana Exploitation Permit area and abutting it.
Technical Information and Qualified Person/Quality Control Notes
Information in this release arising subsequent to the date of the 2005 Snowden Technical Report regarding the Kalana Gold Mine and exploration activity is provided by Avnel management under the supervision of Roy Meade (a director of the Company) who is a non-independent "Qualified Person" as such term is defined in National Instrument 43-101. Portions of the information are based on assumptions, qualifications and procedures which are not fully described herein.
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts are forward-looking statements. Although Avnel believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Avnel does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE: AVNEL GOLD MINING LTD.
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