Companies: AVM   

Debt-free gold producer Avocet Mining is looking for acquisitions, as grades rise at its North Lanut mine in Indonesia.

The AIM-listed company lifted pre-tax profits 43 per cent to £11.5 million in the year to March on gold production of 178,300 oz, two-thirds of it from its wholly owned Penjom mine in Malaysia. Chief executive Jonathan Henry says different drilling techniques are expected to lead to a significant grade, resource and reserve increase at Avocet’s 80 per cent-owned North Lanut mine, which produced 48,170 oz of gold in the last financial year.

He says the same new techniques should enhance prospects at the company’s 80 per cent-owned Bakan project in Indonesia. With several exploration projects in the region under way and minority stakes in Toronto Venture Exchange-quoted Monument Mining (Malaysia) and Dynasty Gold (China), Henry argues the company has a promising project pipeline and should hold cash production costs to a reduced $300 an ounce, against today’s $761 market price.

But he says Avocet lacks anything to give production a major boost over the coming year or two. That is why acquisitions, probably in the South East Asia region, where he suggests political risks can be much less than in mining-favoured areas such as the Congo or Russia, are on the agenda.

At 151.75p, down from 234p last year, Avocet shares might repay a medium-term punt.

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