Avocet Mining Share Discussion Threads

[dixi] 05/5/2005 16:59

Bud - thanks for sharing your info with us. I bought more AVM with cash from OXS sale after the Jerooy news broke - yet now I am now back were I started last August. Pretty disappointed really and must admit this fall has wrong-footed me - only just dawned how far this has come down.

I hope that any statements from AVM reverse this downward pressure, I am now looking to add more shares if news is taken positively - but these days who knows what'll happen!

[chipperfrd] 05/5/2005 11:17

Thanks Bud.

Share looks good value. Added a few on a cfd today.

[goml] 04/5/2005 20:40

ditto bud, many thanks.

[mieke] 04/5/2005 17:48

Bud - greeat bit of research well done, thanks for sharing it with us.

[andy] 04/5/2005 16:41

bud,

cheers!

[kojak78] 04/5/2005 15:48

budevenwiser,

I invest in gold by taking the secure road. I don't buy exploration stocks, only producers. If you compile a list of all pure gold miners in the world (excluding Norilsk etc.) and take the biggest 30 producers you'll have a good starting point. Avocet is one of these 30 biggest pure gold producers in the world already.
In fact, according to my data, Avocet is the cheapest gold producer of all of them.
Oceana and DRDGold are cheap, too. DRDGold cost US$500/produced oz. Price to cash flow is 4.6 or so. (including debt and fully diluted 317 mio shares).
Avocet does cost 107.3 mio shares * 0.73 * 1.9 = US$148.8 mio
Avocet has cash + hedge book losses, both about the same size. 2005 end of year annualized production will be 270 according to your figures and 275 to mine (I used higher production at Penjom and way lower production in Tajikistan and 70000 oz in North Lanut, total cash costs 222).
Your figures would translate into 110@210 + 45@455 + 55@100 + 60@190 + 270@224
The only thing that can go wrong is dump leaching in Tajikistan and perhaps 50000 oz in North Lanut, we have used 110 instead of 135 for Penjom, high cash costs for North Lanut etc. To be totally conservative let's say 250000 oz @ 240 US$. Those figures translate into 47 mio cash flow or a price to cash flow ratio of 3.1, that's 33% cheaper than DRDGold and they have fallen nearly 90%. Production is valued at 600/oz. These prices are just insane if you think about it. What we need is somewhat high valuation on reserve oz (which would be justifiable because of the huge blue sky potential) and normal valuation levels on earnings and production figures. I expect Avocet to gain 230% in relation to other gold stocks. Furthermore the average performance of the XAU in the 12 month after the Gold/XAU ratio hit 5 is 90%! I don't know how much of the 230% we will gain in the next 12 month, unfortunately we did so well at 97 when the XAU stood at 87.. but I expect at least 100% in relation to the XAU which could very well add 90% over the next 12 months again. So a share price of 275p to 450p is entirely possible in just 12 months.

[budevenwiser] 04/5/2005 15:38

well i've added another 40k 2x 20 since i spoke , both at mid at the time

[pecker1] 04/5/2005 15:33

bud,

Excellent post - thanks. Very good news about the hedge. Perhaps the other 30,000 oz will come from Buffalo Ridge, near penjom?

IMHO,this must be at a very favourable buying point now on a l-t risk/reward basis.

[taylor20] 04/5/2005 15:22

Thanks for sharing that, very encouraging - unlike the share price down again (Evo also stated they expected the hedge to be paid off over this and next year).

Soon be on a PE of 10 at this rate!

Annoyed with myself for topping up too early though (82p), don't really want AVM to take up any larger proportion of my portfolio than it already is.

[budevenwiser] 04/5/2005 15:13

right where to start
just had a nice long half hour chat with john catchpole was in a board meeting when i rang but very courteously rang back as soon as he came out of it
4th qaurter production numbers will be released in the next week , they will be within budget , the reason they are falling as comperable to last years numbers is that because of the high grades recovered from penjom they were 20 000 ounces ahead of budget last year plus the problems with zeravshan .
zeravshan
i worked out what i thought would be total cost of production per ounce at this moment in time and asked if it was close and was more or less spot on ( clues are in the interims ) $455 an ounce . reason for this is high diesel costs from massive amounts of stripping to gear up for doubling of production which is the only way of getting costs down.
when will zeravshan see an improvement in production ?.
within six months.
when will zeravshan be producing 100 000 ounces as per avm forecasts ?.
within 9 months on an anuallised basis .
the 4th qaurter production numbers are within budget as forecast so no nasty suprises
my conclusion regarding zeravshan from other questions asked is they are plodding along with production at this level for the next 6 months but in the background are investing millions updating machinery and stripping away massive amouunts of waste ready for a big push in the seond half of 05 - 06
penjom
4th quarter numbers are in budget as forecast
it is now running at full capacity around 50 000 tonnes a month
have not touched the ore stockpile yet as this is more or less used for blending ( parts of stockpile are high and low grade so depending on grade of ore being processed ie if low will mix in some high grade if high will mix in some low )added they keep being suprised by high grade ore turnig up which they did not know about because drilling had missed it
my conclusion regarding penjom is it is still the ever dependable cash cow it has been the last couple of years , ounces produced will depend on grades of ore but from what i can gather avm try to keep grade at a constant so will probably keep producing 110 000 ounces a year
north lanut
best bit till last
you stated in the interims that you will reach full production within 3 months have you ?.
not quite because of it being heap leach it takes time to reach full production
how soon will you reach stated target of 5000 ounces or more a month ?.
within a month
what about costs ?
these will be higher than anticipated because of problems with the fleet , we could not get our own on time so had to use contractors , this is now nearly resolved and this will bring down costs to less than $200 an ounce.
my concusion from other questions is north lanut will be a jewel for avm in a month it will be producing 60 000 ounces or more on an anualised basis with costs below $200
kali sua sinta
have you started drilling yet ?.
drill rigs have been flown in by helicopter 3 weeks ago and are being set up but have not had word back as yet that drilling has commenced
what about infrastructure ?.
if drilling confirms that a mine is viable there is a road very cloe by that just needs upgrading and extending a short distance
couple of general questions
why do you think avm has a low rating to its peers pog hgm oxs ?.
well if you also include american companies that are probably valued at around 10 what we are and are producing much less gold it all comes down to blue sky promises and resources , even though avm has a mine in the fsu we still use jorc standards i could put 10 million ounces of reseves on our books tomorrow if i used russian standards instead .we only state what we will do and can do we would sooner be a little to consevative
i know the whole sector has taken a hit this past 6 weeks why do you think avm has taken such a big hit of around 25% ?
the only thing i can think of is sector thing , we do know of a certain culprit , a hedge fund which has sold a very large amount but has been taken up by other institutions and we also know of some shareholders selling just before end of tax year to lock in gains , it is also hurting me also because the shares i own were not given me i paid for them out of my own pocket
are you still sticking with your 300 000 onces forcast for end of 05 - 06 ?.
YES we are still sticking with that forecast by end of year end 05 - 06 we will be producing 300 000 .
my concusion from this is where is the other 30 000 ounces coming from
zeravshan = 100 000
penjom = 110 000
north lanut = 60 000
so could there be a suprise
what about debt ?.
we are now totally debt free , have money in the bank and all our expenses and investments are self funded
what about reducing the hedge
WE HAVE ALREADY COMMENCED PAYING IT DOWN AND IT IS BEING REDUCED ON A MONTHLY BASIS
nice suprise
added , the market may like a couple more things when numbers are released
overall concusion all in all j.c seemed a very likeable and honest man and i now feel much better after speaking to him , it looks like there are some exciting times ahead in the next 12 months for avm and the market has priced it completly wrong on a short term basis no nasty suprises . hope this helps

[mieke] 03/5/2005 08:04

Must be time this week for production figures?

[goml] 29/4/2005 09:51

This share has now officially gone nowhere for a year and a half.

If this is not yet the time to buy AVM then it is getting very close.

[kojak78] 28/4/2005 11:52

I remember someone saying the earnings forecast for 2005/06 has to make some provisions for North Lanut as that mine hasn't proven itself yet.

I thought about that. I decided to compare Avocet, a proven producer with an existing reserve base, with Novagold. Guess what? Novagold tries to get to 700000 oz production a few years down the road. They have proven nothing as a producer, only explored, current earnings and production nil..
If Novagold could produce 700000 oz someday which much uncertainty.. nobody will argue that Avocet isn't worth 3/7 of Novagold then.

Novagold costs 600 mio fully diluted. Capital costs for several smaller projects is projected at ca. 100 mio. Donlin Creek will be 600 mio, NG has a 30% share. Galore Creek will be at least as expensive as a new road must be build etc.
600 + 100 + 180 + 180 = 1060 mio
3/7 * 1060 mio = 454 mio

so far Avocet, as a proven producer, costs only 1/3 of Novagold, a wanna-be producer that could produce 700000 oz if all things turn out right for them.

[kojak78] 27/4/2005 18:14

Well, I guess we can be glad to be invested in Avocet. You have to see things in perspective. I think we're near an important bottom in gold stocks, a multi-decade bottom. So far gold has risen 70%, the stocks 80%.. in Euros the average gold stock holder has made 25% since 2000, annually 4.5%. If timed perfectly. In fact, 90% or so of European gold stock investors are at losses and the ones that bought in 2002/03/04 have major losses.

Back in 1996 the XAU was at 150 with gold at the same price..

DRDGold is now cheaper than back in 2000. Back then the price was about equal to todays, but Durban was near bankruptcy. Now they make huge cash flows with costs at 312..

And guess what, Avocet at 76p is as cheap as DRDGold, the cheapest stock in the gold universe. The difference is that we don't have seen a 85% loss but 500 or 600% gains.

Buying Avocet at 12 pence was like bying Harmony at 50 cents a share or DRDGold at 12 cents a share..

If I had to invest my money, I'd buy the low valued stocks like Avocet, DRDGold, Oceana.. and add soem interesting ones like Troy, Croesus. Last but not least I'd try to bet on a South African reemergence by buying Gold Fields which really has top quality mines.

And even if all is lost, if the 'great gold bull' that wasn't so far is at the end, even then Avocet would be a great bargain at p/e 6.4 ;-)

[yikyak] 27/4/2005 16:35

I don't know when the sectors going to turn but when it does it's going to be violent. At the moment the hedge funds are covering short positions in the pm equities and hence the reason for when cash gold spikes up they continue to short the stocks to kill any momentum that might build.........just in case you got the idea that gold stocks should rise when cash gold rises! By breaking the relationship to the upside between cash gold and related equities they are keeping a lot of buyers on the sidelines. I guess we are just going to have to wait for them to reverse positions. Frustrating, very frustrating if you are a buy and holdem like myself but we will be left with a sector with almost no weak hands left which is bullish to the extreme for the next leg up.

As for promotion, a time will come to promote the company but that time has not yet arrived because we are still climbing the sectors wall of worry. Once over the pr guns will start firing.

[hectorp] 27/4/2005 15:20

I've a long buy list .. for later. The sector will over-react and create great value.

[jk8] 27/4/2005 15:11

Down to 50p i hope - I want to buy back in and recoup my losses!!!!!

[hectorp] 27/4/2005 14:16

Like OXS and Griffin, Avocet at least is not simply an explorer. I suspect we will see solid recovery here in a few months. If you hold I suspect you'll kick youself if you sell.
I dont hold AVM this year as yet, but I thought I'd try to cheer you all up.
H.

[pecker1] 27/4/2005 14:06

bud,

With sector sentiment dire, it's not surprising that this has suffered. Resignation of COO also shows they have a serious challenge on their hands to sort out Zeravshan.Hopefully, Lanut is OK, and as you say Penjom should be doing very well.

But I do wonder sometimes whether AVM is its own worst enemy. Whatever the undoubted talents of Catchpole and Henry, both are beancounters to the core who display zero acumen in marketing and promotion. Frankly, for a £100m market cap company (or what was)this is simply not good enough. For example, if you have to offload a COO, at least have an ongoing shareholder communication strategy that offers positives to counteract the negatives. I'm not talking about spin here just commonsense progress reports on exploration, penjom etc.

Investors are now spoilt for choice with a profusion of mining stocks.Unlike many of the shells and other rubbish, AVM has got good assets and a good story to tell.Pity it doesn't see this as a priority to go alongside sorting out Tajikistan.

[zaky] 26/4/2005 21:56

Any thoughts on where AVM is headed? been a pretty depressing few months :-((

[yikyak] 26/4/2005 12:48

Interesting to note that as soon as gold spiked in the cash market the AIM pm's got hit into the red. Someones playing with the market.

How crooked can Londons AIM become before investors take flight?