Companies: AVM   

John Catchpole is resigning as Avocet Mining boss, after a 20 per cent annual gold production increase to 208,530 oz.

Domestic issues have obliged Catchpole to stand down at AIM-quoted Avocet, which he has turned from a once-ailing former tungsten producer into a thriving gold miner, with the declared goal of producing one million oz of gold a year. Finance director Jonathan Henry is to replace him as chief executive of the company, which raised revenues from its mines in Malaysia, Indonesia and Tajikistan 26 per cent to £50 million in the year to March.

Reserves rose 62 per cent to 2.7 million oz and resources increased 17 per cent to 7.2 million oz. But, with costs also on the increase, pre-tax profits rose only 2.5 per cent to £9 million and that includes a £600,000 write-back on previous provisions on a tungsten mine closure.

Cash costs rose 19 per cent to $242 an ounce at the company's major mine at Penjom in Malaysia, against today's $634.5 market price, and surged 44 per cent to $634 an oz at ZGC in Tajikistan, a particularly deep open pit operation. This has squeezed margins.

Exploration drilling suggests a potential resource of 533,000 oz at a new project at Baku in Indonesia. House broker Evolution sees pre-tax profits accelerating nearly fourfold to £35 million this year.

The market will regret Catchpole's departure, despite Henry's qualities. But, with Baku still to come and a 26 per cent stake in Toronto-quoted and China-focused Dynasty Gold, Avocet's medium to long term prospects look good — as long as costs can be kept down and gold remains in vogue.

At 180p, up 2.5p this morning, Avocet's shares have more than doubled since our recommendation at 76.5p in May last year. We suggested partial profit-taking at 176.75p last month, while retaining some for future potential, and that still applies.

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