Avocet Mining

HOLD

10/08/2010 Robert Tyerman

Avocet Mining says drilling in the Souma Trend of Burkina Faso's Dynamite prospect in West Africa has yielded 'positive gold grades'.

With highlights including three metres with 11.2 grammes of gold per tonne of ore, three metres at 12 grammes a tonne, three metres at 10.7 grammes a tonne and 18 metres at a more modest 2.6 grammes a tonne, chief executive Brett Richards argues these initial results from Dynamite prove the Souma Trend hosts 'significant gold mineralisation'.

He suggests Dynamite might generate an 'attractive satellite or independent mining operation' to AIM-quoted Avocet's flagship Inata gold mine in Burkina Faso, which boasts 900,000 oz of established gold reserves and potential resources of 1.6m oz. The mine produced nearly 11,500 oz of gold in June alone and Avocet has spoken of doubling its reserves and production there in two years, as it seeks to dispose of its original South-East Asian interests for around £120m.

Recommended here the other day as a 'strong-nerved medium term punt' at 125.25p, Avocet shares have eased to 119.5p. However, the medium-term case remains and strong-nerved investors could do worse than hang in for now.

Tags: AIM, Commodities, Emerging markets

Sector: Mining

Companies: Avocet Mining

Market cap: £238m

PE Forecast: 8.2

Share price: 119.5p