Avocet Mining Share Discussion Threads

[kojak78] 16/3/2005 15:32

Ok, here's my GoldDow30, the 30 biggest pure gold miners in the world measured by production. I've assumed 120+60+40 = 220 production for avocet. 120 for penjom is very conservative, 40 for tajikistan, too. 60 for north lanut will come upstream the next months. Reserves are 1.9 mio oz scheduled for prodction, the 1 mio oz jorc figure can't be compared with other companies. Sorry for the bad tabs.
As you can see the only companies cheaper than Avocet are Resolute, Oceana and DRD Gold. Resolute is hedged heavily, DRD has debt and near bankruptcy and Oceana has higher cash costs.

These are *all* gold companies, so Avocet is the lowest valued gold producer in the world. Although I own Agnico-Eagle and DRD for diversification, maybe oceana next.

Agnico doesn't look very attractive, but they have the lowest cash costs that could fall below zero because of zinc byproduct credits. perhaps I should have excluded them because I didn't include Freeport..
The only companies missing are diversified miners like Rio Tinto etc. and Russian/Chinese speculative companies.

German source, means ","="." and vice versa.

BTW. 1300t gold production and 20000t reserves and 90 bn. market cap for all of 'em..

Nr. Name Produktion Reserven Market Cap $/Res. $/Prod.
1 Newmont 6989 92,4 20030 216,77 2865,93
2 AnglogoldAshanti 6407 83,8 9920 118,38 1548,31
3 Barrick 4958 89 13570 152,47 2736,99
4 Gold Fields 4254 77,5 6160 79,48 1448,05
5 Placer Dome 3652 59,9 7670 128,05 2100,22
6 Harmony 3428 55,6 3370 60,61 983,08
7 Buenaventura 1644 14,9 3050 204,70 1855,23
8 *Kinross 1613 19,4 2320 119,59 1438,31
9 Goldcorp/Wheaton 1126 12 5110 425,83 4538,19
10 *DRD Gold 913 11,7 205 17,52 224,53
11 Newcrest 868 28 4857 173,46 5595,62
12 Cambior 695 3,5 624 178,29 897,84
13 Centerra 641 4,4 1275 289,77 1989,08
14 Lihir 599 21 1174 55,90 1959,93
15 Iamgold 432 3,7 991 267,84 2293,98
16 Meridian 314 1,8 1770 983,33 5636,94
17 *Resolute 307 1,8 213 118,33 693,81
18 Northgate 304 2,1 317 150,95 1042,76
19 *Agnico Eagle 272 7,9 1300 164,56 4779,41
20 *Queenstake 243 0,9 101 112,22 415,64
21 Glamis 234 6,3 2210 350,79 9444,44
22 Bema 230 8,6 1090 126,74 4739,13
23 Croesus 226 0,6 126 210,00 557,52
24 Western Areas 215 28,9 580 20,07 2697,67
25 Randgold 204 2,4 771 321,25 3779,41
26 Hecla 190 1,3 693 533,08 3647,37
27 *Oceana 185 2,6 206 79,23 1113,51
28 *Avocet 220 1,9 195 102,63 886,36
29 Golden Star 148 3,8 1347 354,47 9101,35
30 Kingsgate 146 1,1 152 138,18 1041,10
41657 648,8 91397 140,87 2194,04

[jk8] 16/3/2005 14:46

Gold price tracking up - share price doing the opposite. I think we need some positive exploration data soon (please).

[yikyak] 15/3/2005 15:16

This guys been pretty reliable over the last few years so I thought this worthy of a post:

I discovered this remarkable Reverse H&S pattern repeatedly in different years of gold charts. Each time the Reverse H&S appeared, it was followed by a substantial bullion rally. Well, the same pattern has produced an 'encore' or déjà vu if you will. The first chart shows gold for the past 12 months. Take particular note of the well delineated Reverse H&S with a severed neckline at about 424.



Previous 'events' or exhibitions of the Reverse H&S pattern are seen in 1976, 1977 and 1978 - see charts:

1976


1977


1978


Subsequent H&S rallies data -
1976 gold rose 32% from head low in 10 weeks
1977 gold rose 23% from head low in 18 weeks
1978 gold rose 51% from head low in 24 weeks

Average....rose 35% within 17 weeks

Based upon the current déjà vu precedent of gold's Reverse H&S, I venture to forecast the POG based upon past averages:

Gold could rise to $556 by July 4th this Independence Day. And it goes without saying a surge in the POG will fuel gold stocks into orbit.

PLEASE remember past performance is no guarantee of future results. Do your own DD.

In the above event HUI should be well over 300.

[richgit] 15/3/2005 10:58

Quality will win in the end,as some of those that have been performing
on false promises-get caught out-with several more to follow.
I note Minmet has shown its true colours-again.!!!!!

[kojak78] 14/3/2005 23:56

nontheless evolution is understating avocet's figures.

2006 is based on 210000 oz production, 258 cash costs and 375 received.
the optimistic case would be 140 + 80 + 100 = 320000 oz, cash costs near 200 and POG received 520.

evolution comes up with US$26.3 mio 2006 EBITA, the optimistic case gives us 96 mio, tremendous leverage to POG here!
deduct 10 mio overhead + capex and assume 30% tax rate and you get 60 mio which is p/e 3.3 and not 10 or whatever you calculate at unrealistic gold price scenarios. That will give us about 500p with a p/e of 16.5 vs. a XAU of 175 at POG 520.
Of course evolution is right about lower received revenue due to the hedge, but this is a one time effect and shouldn't be used in calculating future valuation multiples.
Evolution even uses reserve figures of 1 mio oz!! 300000 oz from Penjom. At a rate of 130000 ozpa production and 90% recovery that equates to 2 remaining years of production. Come on, Penjom will exist much longer than that. I guess 5 to 10 years, let's assume 7 years and we're still conservative as exploration could add more out of pit reserves in the future.
That's 1 mio oz of reserves for Penjom alone.
Indonesia is 243,000 which seems at the low end, but we'll leave it there.
Then there's Tajikistan, I think there are at least 1 mio oz for 10 years of production not including Taror. All in all well above 2 mio oz. A 300,000 oz producer with quality mines should have 10 years of production, unfortunately Avocet isn't able to prove reserves due to the very complex geology at Penjom. So forget about the JORC standard and just do your own math, evolution isn't able to do that as they would be liable for potential losses.

I assume 300000 oz of production, 2.5 mio oz in reserves and 6 mio oz in resources, I get an average share price of 240p and not 130p. And that's before gold shares gain 75 or 100% this year and next year. So in the end POG 520 and Avocet management pulling off 300,000 oz of production and JORC classification of reserves gives you 500p. I'll make that bet.

[taylor20] 14/3/2005 14:57

kojak78, Don't really want to post the whole note on here, copyright issues etc.

re: gold price they state:

"Our assumptions regarding gold price are that continued weakness in the US dollar
will be present throughout this calendar year as the US economy wrestles its
balance of payments under control. This scenario is likely to hold the gold price
north of $400/oz we are expecting an average gold price of $410/oz this FY and
$425/oz next. We use a longterm gold price of $375/oz in our models. We expect
that Avocet will close out its 80,000 oz hedge on the Penjom operation over the
next two years giving a received price of $375/oz in FY 2006 and $363/oz in FY2007
for gold production from Penjom."

Which kind of ties up with their response to jsandrews email.

[taylor20] 14/3/2005 14:52

JK8, see post 238.

And to further prove my psychic abilities, I see the share price at 150p by the end of August... ;)

[kojak78] 14/3/2005 14:50

Using POG 365 130p sounds ok. But POG is 442..

[jk8] 14/3/2005 14:43

Thanks Taylor20 - are they giving a recommendation to AVM with a target price?

[taylor20] 14/3/2005 14:43

Obviously they rate it a BUY with target price of 130p (based on peer comparison).

[taylor20] 14/3/2005 14:41

There's 16 pages of it, with slides from a company presentation embedded, first page:

"An exciting time for Avocet as production blossoms into a roaring gold
market, with the addition of a third producing mine. The company has
increased its exploration acreage and has strong cashflow to grow the
resource base.

Penjom Operation
The Malaysian operation continues to outperform the plan due to the
nuggety nature of the ore, which has made it difficult to estimate grades.
Avocet's conservative approach has been to employ a top cut at 100g/t but
even at this level the model underestimates grades typically by 15 to 20%.
Recent production from higher-grade zones in the pit has seen production
exceed the model grades by over 40%. The recent upgrade to the mill has
simplified the process and should see cost savings in terms of both
consumables and manpower, while maintaining and possibly increasing
recovery.

Riska, North Lanut
The mine poured first gold during our visit from what looks like a low cost
operation. The plant is a simple resin in leach treating pregnant solution
from a low cost dump leach operation. This means there are no tailings to be
disposed giving the project low environmental impact. The plant was
constructed on time although the budget appears to have slipped with
capital costs 25% higher than anticipated as commodity prices rose and a
weakening dollar forced up prices of capital equipment.

ZGC, Tajikistan
The move to 75% interest in the operations will see increased investment in
the mine. The processing of low-grade ore through dump leaching should
add an additional 25,000 oz per annum at a marginal cost of $100/oz
according to the company. A challenging road lies ahead for the operation
but the Avocet team has demonstrated that it thrives on adversity.

Exploration Potential
Avocet has only recently begun to address its exploration potential, being
cash flow restrained until last year. The existing production assets have the
potential to grow resources through nearby exploration targets. The new
Idenburg project also in Indonesia adds further to the potential. Work to
date on these projects has identified exciting anomalies and targets."

[jk8] 14/3/2005 14:34

Taylor20 - can't access the site yet - what are the key points of the note please.

[taylor20] 14/3/2005 14:25

New Evo Note out on Avocet @

[goml] 13/3/2005 10:20

thanks for that mieke, very significant, more than many (not including those here of course) realise. the 30y t-bond is sitting bang on its 200dma. if it slices straight through next week then it looks almost certain that it will mark the start of a very serious down leg for the dollar.

[mieke] 13/3/2005 08:24

Published on 12 Mar 2005 by The Age (au). Archived on 13 Mar 2005.
Asian banks offload their greenbacks

by Josh Gordon

The US dollar's status as the world's main reserve currency is under threat as Asian banks back away from the superpower's ballooning twin deficits.

Over the past three years, central banks in the region have been scaling back their holdings of US dollars amid jitters about the United States' ever-expanding current account and budget deficits, which collectively soaked up at least $US1000 billion ($A1265 billion) of foreign currency last year.

A report by the Bank for International Settlements has estimated that the share of deposits held in US currency by Asian banks dropped to 67 per cent in the September quarter of 2004, from about 81 per cent of total deposits three years earlier.

The figures suggest that a dramatic but not widely publicised regional shift away from the US dollar is under way.

They follow a warning from Japanese Prime Minister Junichiro Koizumi that the Japanese central bank should consider diversifying out of US dollars. Korea expressed similar sentiments last month.

The report said the shift had been most pronounced in India, where the ratio of reported US-dollar holdings has plummeted from around 68 per cent to 43 per cent over the three years to September 2004. China has also been scaling back its holdings, taking its share from 83 per cent to 68 per cent.

[jk8] 11/3/2005 16:22

Maybe there's going to be a private placing - that would stop the shares going north?

[jk8] 10/3/2005 22:17

Perhaps the Indonesian Government suing Newmont Mining is having a depressing impact on the share price??

[doobydave] 10/3/2005 19:02

jsandrew,

Good. I think that's the best route for Avocet to go:

1) Avocet continue to sell the majority of their gold at spot prices
2) ...but slowly reduce the hedge position, which exerts a disproportionate drag on the share price
3) ...whilst retaining most of their profit for exploration and mine development, laying the base for a more than healthy future.

Thanks for taking the trouble and reporting back. Well done.
DD

[jsandrew] 10/3/2005 18:50

certainly reassured me......

[jsandrew] 10/3/2005 18:49

heres the email reply i swiftly received, might be of interest








James (my name)
Thanks for your interest in Avocet. I also appreciate your comments on
the appearance of our company.
Our current hedging position is that we hold a spot deferred position of
80,000 ounces at an average price of $300/oz. It is not 80,000 ounces
per year, as you state, and it is spot deferred; this means the position
rolls with the gold lease rates and appreciates in value, although only
marginally, and also that the company can decide when to deliver against
the hedge rather than the third party dictating our delivery schedule.
We are currently selling all gold at spot prices, although we do intend
to start deliveries into the hedge. Our policy going forward is to
manage the business in the interests of our shareholders. Currently
shareholder sentiment is for exposure to the gold price, and Avocet
offers just this.
I hope this helps.
Regards

Jonathan Henry
Finance Director
Avocet Mining PLC
7th Floor
9 Berkeley Street
London
W1J 8DW