Avocet targets growth after setback

18/03/2010 Robert Tyerman

Avocet, whose assets include the Malaysian Penjom mine, targets a return to growth

Gold producer Avocet Mining hopes its Wega acquisition will take 2010 group output to 200,000 oz after a flat nine months.

The AIM-quoted company saw pre-tax profits before exceptional costs fall 34.6 per cent to $7.9 million (£5.2 million) in the nine months to December on gold production down by 370 oz to 82,174 oz. Avocet’s Penjom mine in Malaysia saw output fall 11 per cent to 46,577 oz, while cash costs rose 21 per cent to $710 an ounce, while North Lanut in Indonesia upped production 20 per cent to 35,597 oz with cash costs falling 9.3 per cent to $569 an ounce.

In fact, London-based Avocet recorded a $10.5 million loss for the nine-month period after $18.4 million of impairment costs. These relate to projects on which Oslo-quoted Wega had been embarked when the company bought it in a £52.5 million share deal last April, but which chief executive officer Jonathan Henry decided not to put into the enlarged Avocet.

What he does like about Wega is its Inata project in Burkina Faso, West Africa, which went into production in December, ahead of schedule and showing higher-than-expected gold grades. Henry says Inata is the basis for lifting annual production targets from nearly 110,000 oz of gold last year to 200,000 oz in 2010 and 240,000 in 2011.

Avocet shares, which have traded between 64.25p and 110.5p over the past 12 months and were highlighted by Growth Company Investor at 73.75p last April, now change hands at 105.25p, valuing the company at £204.5 million. Hold on for now.