Avocet Mining

West Africa-focused Avocet Mining (AVM) hopes to expand estimated resources at Koulekon in Guinea from 1.1m to between five and 10m oz of gold. So says chief executive officer Brett Richards, who adds he expects the eventual figure to be 'nearer 10 than five'.

He points out the company expects annual cash flow of $60m (£37.5m) from its low-grade Inata gold mine in Burkina Faso, where it hopes to lift annual production from an expected 165,000 oz this year to 245,000 oz, with extraction costs of around $700 to $750 an ounce against a current gold price of some $1,640 an ounce. With almost $200m received from selling its south-east Asian mining assets, Avocet also hopes to take its Inata resource from a recently-increased 3.36m oz to between seven and eight million oz and boost its other interests in Burkina Faso's Belahouro region, such as the Souma Trend, currently boasting one million oz potential.

Richards says he sees Guinea, housing Koulekon within the company 's 1,000-sq km Tri-K permit block there, as 'more prospective' than Burkina Faso. He argues Koulekon has similarities to fully-listed Rangold Resources' Lula mine in Mali and says the Guinea government has an option to buy another 20% of the project, taking its stake to 35%, at a cost of $50m, which would pay a quarter of the likely cost of going into production there by 2014.

According to Richards, the gold price, recently wobbling from record levels, would have to fall to below $1,000 or $900 an ounce to upset Avocet's plans. The company has started paying dividends and the shares yield a prospective 3% at 232.25p, against Growth Company Investor's 2009 recommendation at 73.75p and more recent highlighting at 190.75p.

Down from a year's peak of 286.75p, the shares should rally further, unless gold is on a significant downtrend and that could be unlikely in the current state of international financial affairs.