27 October 2016
2016 Q3 production and suspension of operations at Inata
Avocet Mining PLC ("Avocet" or "the Company") today announces production and cash costs for the third quarter of 2016 from the Inata gold mine and that operations at Inata have been suspended from today.
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Total gold production at Inata for the quarter was 17,694 ounces at a cash cost of US$1,047 per ounce, compared with 21,086 ounces produced in the second quarter of 2016 at a cash cost of US$903 per ounce
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Suspension of operations at Inata pending resolution of gold seizure
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Tri-K transaction with Managem aiming to complete before end 2016
Q3 Production
Production in the quarter was lower than in Q2, as anticipated, as a result of lower recoveries due primarily to the treatment of ore types with a higher preg-robbing index (PRI), and the impact of maintenance work on the plant.
Ore mined in the quarter was from Minfo North, Centre West and South East, while work continued towards the completion of the North Pit pushback (finally completed in October). Ore supply to the mill was a combination of harder higher grade but carbonaceous material from the mine, and marginal, predominantly oxide material from stockpiles.
Plant availability, and therefore throughput, was also impacted by mechanical issues, including a main circuit breaker failure in the powerhouse in August.
Suspension of operations at Inata
Following the seizure of a gold shipment from the Inata mine on 7 October 2016, no further shipments have been made. On 24 October 2016, a hearing was held at which the Company challenged the legality of the gold seizure, and requested its lifting. A verdict is due to be heard on 7 November.
Accordingly, given the potential threat of further seizure of gold shipments before the verdict, Société des Mines de Bélahouro SA ("SMB", the owner of the Inata gold mine) has taken the decision to temporarily suspend operations at Inata from today. A skeleton crew will remain on site to ensure that the mill is properly maintained to ensure a smooth re- start once a resolution to the current situation has been found and it is appropriate to do so.
A prolonged cessation of operations may mean that the mine cannot be re-started without significant investment, if at all, and will likely have a material adverse effect on both SMB's and the Company's financial position. In particular, funding will likely be required to support the Company's head office operations ahead of the completion of the Tri-K
transaction (as detailed below), which, subject, inter alia, to shareholder and regulatory approvals, will result in the receipt by the Company of an initial consideration of US$4.0m (approximately US$2.5m after costs). However, meetings are due to be held in Ouagadougou, the capital of Burkina Faso, in the coming days between representatives of the mine, its workforce, and government officials to try to find a resolution to the situation and to avoid a prolonged cessation.
If funding is required before completion of the Tri-K transaction and such funding is not available from Inata or the Company is unable to secure alternative funding, the Company will likely enter an insolvency process in which circumstance it is highly unlikely that any value will remain for shareholders.
Update on Tri-K transaction
The transaction announced on 10 October 2016 to enter into a Joint Venture agreement with Managem SA with respect to the Tri-K project in Guinea remains subject, inter alia, to shareholder approval, as well as the ratification of a Mining Convention by the Guinean parliament. The Company is aiming to complete the transaction before the end of 2016.
FOR FURTHER INFORMATION PLEASE CONTACT
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Avocet Mining PLC
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Bell Pottinger
Financial PR Consultants
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J.P. Morgan Cazenove Corporate Broker
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David Cather, CEO Jim Wynn, FD
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Daniel Thöle
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Michael Wentworth-Stanley
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+44 20 3709 2570
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+44 (0)20 3772 2555
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+44 20 7742 4000
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NOTES TO EDITORS
Avocet Mining PLC ("Avocet" or the "Company") is an unhedged gold mining and exploration company listed on the London Stock Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The Company's principal activities are gold mining and exploration in West Africa.
In Burkina Faso the Company owns 90% of the Inata Gold Mine. The Inata Gold Mine poured its first gold in December 2009 and produced 74,755 ounces of gold in 2015. Other assets in Burkina Faso include five exploration permits surrounding the Inata Gold Mine in the broader Bélahouro region. The most advanced of these projects is Souma, some 20 kilometers from the Inata Gold Mine.
The Company also holds an interest in the Tri-K project in Guinea. On 10 October 2016, the Company announced that it had agreed to dispose of 40% of the project to Managem, a Moroccan group listed on the Casablanca stock exchange, subject to, inter alia, shareholder approval, and which will increase upon completion of a bankable feasibility study for a CIL plant at the site, the incurring of expenditures of at least US$10 million, and the enlarging of the ore reserve, to 70% (in the event of an increase of the reserve to 1 million ounce or more) or 60% (if less than 1 million ounces).
Appendix 1
Inata Gold Mine quarterly production information 2015-16
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2015
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2016
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Q1
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Q2
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Q3
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Q4
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2015
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Q1
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Q2
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Q3
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YTD
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Ore mined (k tonnes)
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393
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397
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233
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290
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1,313
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310
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397
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214
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921
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Waste mined (k tonnes)
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1,420
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3,563
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4,349
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3,494
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12,826
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2,993
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2,855
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2,505
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8,353
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Total mined (k tonnes)
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1,813
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3,960
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4,582
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3,784
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14,139
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3,303
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3,252
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2,719
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8,734
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Ore processed (k tonnes)
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437
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471
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448
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509
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1,865
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544
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537
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478
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1,559
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Average head grade (g/t)
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2.50
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2.27
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1.50
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1.22
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1.85
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1.21
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1.32
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1.46
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1.33
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Process recovery rate
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52%
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67%
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72%
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89%
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67%
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91%
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93%
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83%
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89%
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Gold Produced (oz)
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17,011
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22,848
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17,517
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17,379
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74,755
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20,528
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21,086
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17,694
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59,308
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Cash costs (US$/oz)
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Q1
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Q2
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Q3
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Q4
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2015
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Q1
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Q2
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Q3
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YTD
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Mining
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262
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313
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362
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335
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318
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291
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298
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346
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310
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Processing
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540
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408
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486
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430
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462
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375
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347
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417
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378
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Administration
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236
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155
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188
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251
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203
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183
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163
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182
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176
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Royalties
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75
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76
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71
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78
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75
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75
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95
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102
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90
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1,113
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952
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1,107
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1,094
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1,058
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925
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903
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1,047
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954
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