Avocet Mining Share Discussion Threads

[hectorp] 13/7/2005 08:06

My ist impression is theere is a go-ahead and capable management that has had to deal with several technical difficulties but would appear to me to be overcoming them: that they've been prudent and correct in their planning and exploration: that they are bullish of much greater resources to come: that the company is on the verge of becoming much more productive on an ever increasing resource base, but over a few years timeframe: though only by 50-80K ounces more in 2006. ALso I can't see the company increasing profitability growth by more than around 5% in 2006. THe great gains for AVM may be a bit further down the road.
negatively, the only blot is that EPS in fact fell from 12p to 11p per share.
I suspect this won't be a negative enough fact to hit the share price
To conclude the company may have a very promising and lucrative future, and I'd want to be a shareholder through 2007-8-9 ! .
H.

[brad1] 13/7/2005 08:04

nice start to the day!

[strongbow] 13/7/2005 07:59

Market likes it 83-85

[taylor20] 13/7/2005 07:52

Hmmm, headline figures better than I expected, will see what the market makes of it, lots of if, buts and howevers.

Will hold fire for now.

[strongbow] 13/7/2005 07:39

Looks good to me
Avocet Mining PLC
13 July 2005

AVOCET MINING PLC

PRELIMINARY AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2005


Year to Year to Year to Year to Year to
31 March 31 March 31 March 31 March 31 March
2001 2002 2003 2004 2005

US$'000 US$'000 US$'000 US$'000 US$'000

Turnover 36,672 36,500 48,547 68,844 71,060
Gross profit 3,864 4,010 6,788 17,064 18,559
Operating profit/(loss) 1,951 (14,712) 4,407 14,304 15,936
Pre-tax profit /(loss) 289 (15,671) 3,647 15,592 15,803
Profit/(loss) after tax and minority 38 (15,662) 2,157 11,280 11,686
interests
Basic earnings/(loss) per share 0.06c (23.84c) 3.03c 12.20c 11.26c

Gold produced (ozs) 99,750 107,340 134,580 179,930 172,938
Total cash cost (US$/oz) 225 225 219 232 278


• Operating profit up 11% at US$15.9 million

• Retained profit up 4% at US$11.7 million

• North Lanut mine in Indonesia brought into production

• ZGC interest increased to 75%; turnaround started

• Bank debt fully repaid

• Penjom gold resources increased by 54% over last 2 years

• Significant exploration results in Malaysia and Indonesia

________________________________________________________________________________
For further information please contact:
Avocet Mining PLC
John Catchpole (Chief Executive)
Jonathan Henry (Finance Director)
020 7907 9000

www.avocet.co.uk




CHAIRMAN'S STATEMENT

A continued rise in the gold price during the year to 31 March 2005 has once
again seen the Group achieve record profits. Although gold production was
slightly down on last year's figures, there were a number of notable
achievements. Penjom, in Malaysia, which is wholly owned by the Company,
continued its strong production and profitability, and extended its mine life
with further exploration successes. The restructuring of our subsidiary in
Tajikistan, now named JV Zeravshan LLC (ZGC), has given us a majority interest
in the company sufficient to invest in a turnaround of ZGC's operations. Also
during the year, our Indonesian project in North Sulawesi, North Lanut, in which
we have an 80 per cent interest, was brought into production. Operationally we
have strengthened our organisation with a number of senior management changes
and the way we run the Group's business units. With these achievements we
expect that gold production will increase in the current year to over 200,000
ozs. Further enhancing the Company's future is an expanding exploration
programme, the commencement of feasibility work on two mature projects owned by
ZGC and a debt-free balance sheet.

It is with pleasure that I report on our results for the year to 31 March 2005
together with an update on the Company's progress.

The Gold Market

2004 was an excellent year for the gold price, with December seeing gold reach a
seventeen year high of US$454/oz. Although gold traded at below the US$400/oz
level in the middle of the year, this was short lived and for the majority of
the year prices remained above this key level. In 2005 we have seen the gold
price trade in very close alignment to the US dollar until recently when the
price has once again started to ratchet itself up.

We have commenced deliveries into our outstanding spot deferred hedge position.
At the end of June the outstanding position had reduced from 80,000 to 66,000
ozs with an average delivery price obligation of approximately US$300/oz. We
have committed to deliver at least 4,000 ozs per month into this hedge position
for this fiscal year.

Financial Results

A nine per cent increase, to US$414/oz, in the average realised price of all
gold sales from the Group's three operations allowed turnover for the Group to
increase by three per cent to US$71.1 million. This, together with the
commencement of revenues from our new mine at North Lanut in Indonesia, more
than offset a four per cent decline in sales from Penjom of 119,197 ozs and a
17.5 per cent reduction from ZGC of 45,787 ozs. With sales from North Lanut of
6,108 ozs, the Group sold a total of 171,092 ozs of gold during the year.

Gross profit increased for the fourth consecutive year by nine per cent to
US$18.6 million giving a gross margin of 26 per cent. A higher realised gold
price more than offset increased cash costs at Penjom and ZGC. Penjom's cash
costs were US$203/oz with cash costs at ZGC increasing to US$439/oz. Cash costs
at North Lanut were US$500/oz, reflecting the start up phase of the mine and the
time lag before gold production flows from the heap leach pads. The total cost
of gold sold by the Group was US$319/oz, inclusive of US$32/oz for depreciation
and US$12/oz for the amortisation of Penjom's deferred waste stripping costs.

Operating profit increased 11 per cent to US$15.9 million. However, operating
cashflow declined by 26 per cent to US$17.1 million, mainly as a consequence of
the build up in supply inventories at ZGC and gold inventories at Penjom. This
cash flow more than covered scheduled debt repayments of US$6.0 million and
funded an increase in capital expenditures from US$12.2 million to US$17.2
million. This capital included the completion of development of the North Lanut
mine, ZGC's partial refurbishment and gold exploration by the Group.

The Group's pre-tax profit for the year increased marginally to US$15.8 million.
Although the Group continued to expand its activities administrative costs
reduced by five per cent to US$2.6 million. Profit after taxation and minority
interests rose four per cent to US$11.7 million, whereas earnings per share
reduced eight per cent to 11.3 cents per share following the additional shares
issued at a September 2003 equity placing to fund the construction of the North
Lanut gold mine.

The Group's year-end cash balances decreased by US$11.5 million to US$12.1
million whereas its net current assets fell by only US$1.7 million to US$22.9
million. With its strengthened balance sheet, the Company obtained a US$10
million revolving credit facility from Macquarie Bank of Australia which remains
undrawn and a U$1 million overdraft facility from Barclays Bank which also
remained undrawn at the year-end.

For the first time for many years, the Group had no debt at the year-end.

Operations and Projects

Penjom

Production at Penjom, although short of last year's record, was a healthy
119,850 ozs, some seven per cent ahead of internal predictions. Estimates of
ore resources once again proved to be conservative for the year, understandable
given the mine's complex geology, with ore grades and ore tonnes exceeding those
modeled by 28 per cent and 20 per cent, respectively. This made for less
depletion of the ore reserves than expected. Plant recoveries were maintained
at approximately 90 per cent, although mill throughput was down by six per cent
from the previous year, mostly due to down time while a new Knelson concentrator
was installed in the gravity circuit during the first half of the year.

A revised mining plan was adopted mid year on the basis of interim exploration
results which added 210,700 ozs to Penjom's ore resources. In order to access
the larger resource, the stripping of waste was accelerated which was partially
accounts for the increase in the average cash cost for the year to US$203/oz.
This reduced to US$196/oz during the second half of the year, as improvements
made to the plant during the first half came on line. It should be noted that
like all mining operations globally, Penjom has seen a marked increase in the
prices of its main consumables over the past two years. Diesel and kerosene
prices have increased in excess of 100 per cent; steel for grinding media by 46
per cent; and cyanide by 22 per cent. These alone account for over 20 per cent
of total costs at the Penjom operation.

The underground exploration drive, or E-Drive, into the east wall of the main
Kalampong pit was successfully completed during the year. This showed the
viability of future underground operations at Penjom and also, through diamond
drilling from underground, proved the continuity of the Penjom mineralisation
outside current pit limits. In March 2005 the E-Drive was closed, as scheduled,
as the east wall of the main Kalampong pit was extended in order to incorporate
new open pit reserves into the mine plan.

Exploration drilling throughout the year (and continuing into the current
financial year) continues to identify resource expansions at Penjom. The 10
most significant results received from reverse circulation drilling during the
year have been, using a 100 g/t top cut, 12m at 16.5 g/t, 6m at 34 g/t, 8m at 30
g/t, 8m at 35 g/t, 9m at 38 g/t, 9m at 17 g/t, 7m at 46 g/t, 7m at 31 g/t, 4m at
174 g/t and 6m at 43 g/t. This should add significantly to the reserves at
Penjom, which will be updated later this year. The current life-of-mine plan
contains 395,550 ozs as of 31 March 2005.

ZGC

In November 2004 our interest in ZGC was increased from 49 to 75 per cent with
the formation of a new holding company in Tajikistan, JV Zeravshan LLC, in which
the government of Tajikistan now owns 25 per cent. However, completion of this
restructuring had been expected some time ago and its delay caused us to hold
back much needed capital investments. As a result, the capacity of ZGC's mining
fleet was insufficient for the removal of waste to meet planned ore production
from the Jilau Main open pit which is the mainstay of future gold production
from Jilau's operations. Instead, low grade ore from stockpiles had to be used
to supplement mill feed causing a 19 per cent decrease in the average grade of
ore processed and an equivalent drop in gold production, to 44,240 ozs, when
compared to last year. Combined with significant increases in the prices of
diesel, steel and cyanide, which now account for approximately 30 per cent of
total costs at the operation, this pushed unit cash costs well above US$400/oz.

Reasonable progress was made with respect to the development of a dump leaching
facility intended for the processing of low grade ores which would otherwise be
rejected as waste from open pit operations. Following successful trials, and a
positive scoping study, this low capital cost project has been largely completed
for an initial capacity to treat 2.5 million tonnes of ore annually at an
expected cash production cost of under US$200/oz.

ZGC owns two gold projects with well developed ore resources. Taror, which is
near Jilau's operations, is an underground mine containing over 1.8 million ozs
of gold resources. It contains mostly complex, refractory ore which contains
copper in the form of chalcopyrite which caused a previous operator to abandon
the mine in the early 1990's. Chore represents a less refractory deposit which
has been partially developed from underground and has an ore resource containing
over 0.9 million ozs. A pre-feasibility study conducted by the Company's
predecessor in 2000 showed that, for a base case, the development of a 500,000
tonne per year combined operation for Taror and Chore using biological
pre-treatment could add annual gold production of 130,000 ozs over a 16 year
life with average cash costs of US$170/oz, after copper credits, and a capital
cost of approximately US$70 million. During the year, underground operations
were restarted at Taror in order to selectively feed Jilau's plant. However,
results have shown that a dedicated process system would be more economic and
pilot scale testwork is now planned, using third party consultants, on various
processes that should be less capital intensive than those previously proposed.

During the past year, although the focus was on operational issues, exploration
work in the area of Jilau's operations did identify small low-grade resources at
Laylee and Vera, and a potential resource expansion to the south of the
Khirskhona open pit. We remain confident that there is further scope to add
significantly to the reserves at Jilau, where the current life-of-mine plan
contains 1,059,100 ozs as of 31 March 2005.

North Lanut

Following our decision in September 2003 to build a new mine in Indonesia,
construction was completed in September 2004 and gold production commenced ahead
of schedule in October 2004. The North Lanut gold mine is the first foreign
owned gold mine of any significance in Indonesia to commence production in over
six years. The Indonesian government has been keen to attract further foreign
investment in the country. However, recent proposed amendments to the mining
laws as well as the Indonesian's government handling of the much publicised
Newmont Mining Corporation Buyat Bay case, have shown that there is some way to
go before foreign investors return in their droves to Indonesia. With an
established base in the country, this should be seen as an advantage and
opportunity for the Company.

Following a particularly wet rainy season during the first quarter of the mine's
operating life we spent the majority of the last six months bringing operations
at the Riska deposit to their rated capacity.. A number of senior management
changes have been made in order to bring in appropriately qualified personnel
for mining operations following a period of construction. A mining fleet has
been ordered for delivery in the first half of this year. We have seen some
delays in the delivery of a number of pieces of equipment due to increased
demand from a buoyant global mining sector. Meanwhile the operation has been
working under an inefficient mining fleet with multiple contractors. This has
disrupted the production of ore for processing on the dump leach pads and had an
adverse effect on gold production during the start-up phase which was 8,900 ozs
compared to a projected 16,000 ozs.

Exploration within the area of operations included in-fill drilling of the
Effendi deposit which increased its estimated resource by 16,000 ozs to 118,000
ozs and gave indications of a further resource expansion. Resources of
approximately 50,000 ozs were also delineated for the Talugon deposit. The
latest life-of-mine plan as of 31 March 2005 contains 304,100 ozs.

Exploration Projects and Joint Ventures

In Malaysia, the exploration programme over the last year has shown the
potential of additional Penjom style targets, with the identification of six
targets for new tenement application in peninsular Malaysia. We have been
working with the Malaysian government to remove impediments to modern gold
exploration in the country caused by a difficult tenement situation as much of
land is tied up by oil palm and forestry interests.

At the start of the year the Company consolidated its interest in Damar
Consolidated Exploration Sdn Bhd to 100 per cent. Damar holds the Buffalo Reef
prospect, located approximately 40 kilometres to the north east of Penjom, where
the Company's past exploration has identified 92,500 ozs of gold resources. The
majority of these resources are represented by near surface oxide ore.
Exploration was undertaken during the year with good results. Metallurgical
test work is ongoing, prior to a decision on how to proceed with the property.
Buffalo Reef could become a small satellite producer to Penjom.

In Indonesia, within our Contract of Work (CoW) in North Sulawesi, we commenced
the evaluation of drill targets in the highly prospective Bakan District and we
identified future targets in the Pusian District.

Elsewhere in Indonesia we commenced work on the Idenburg property, which
represents an expansion of Avocet's presence in Indonesia and possibly the best
exploration play in the Company's portfolio capable of producing a multi-million
ounce, high-grade (7-10 g/t Au) reserve amenable to conventional CIL processing.
By spending US$2.5 million over a two year period, we will earn a 51 per cent
interest in the company that owns the Idenburg CoW, which includes exploration
and mining rights over 108,600 hectares (approximately 420 square miles) in the
Idenburg area of Papua Province (formally Irian Jaya) on the island of New
Guinea. New Guinea hosts some of the world's largest gold deposits, including
multi-million ounce reserves at the Grasberg and Porgera mines. We have also
obtained exploration permits over a 115,000 hectare area in South Sulawesi which
includes a grass roots project with similarities to the Penjom area.


Group Resources and Reserves

Group Mineral Resource Summary(1) (ounces)

Measured & Indicated Inferred Total
Balance at 31 March 2004 4,891,000 1,322,000 6,213,000
Balance at 31 March 2005 4,668,000 1,625,400 6,293,400
Additions after depletion 57,700 22,900 80,600

1 Includes minority interests.


The above mineral resource is after 202,900 ozs depleted from the resource base
during the year. It includes 2.8 million ozs attributed to ZGC's Taror and
Chore projects and does not include over 10 million ozs of gold categorised
under the Russian system as C and P resources in a number of deposits at ZGC
which we have yet to evaluate. The majority of the increase comes from
additional resources established at Penjom, as ZGC and North Lanut concentrated
on operational and start-up issues during the year.

From the current balance of mineral resources for Penjom, North Lanut and ZGC's
existing operations at Jilau, the Group's latest estimate of mine production
before processing losses is summarised below.

Group Life-of-Mine Production at a US$400/oz(1) (ounces)

Forecast at 31 March 2004(2) 1,922,405
Depleted during the year 202,900
Additions 39,205
Forecast at 31 March 2005 1,758,700
Including:
Proven & Probable Reserves 1,350,100
Inferred Resources 408,600

1 Includes minority interests.
2 Forecast from 31 March 2004 was based on a US$375/oz gold price.


The resource additions do not include the anticipated expansion to the Penjom
resource defined by drilling during the year. This expansion will be quantified
by modelling and mine planning later in 2005.

Outlook

The recent break out of the gold price against its alignment of the US dollar,
as seen over the majority of the last six months, is a positive sign for the
gold price going forward. Although the fundamentals of gold continue to be
removed from short term pricing adjustments, a widening supply deficit,
continued strong demand from Japanese investors, and now also China, provides
yet more support for current price levels or a shift to higher levels.

Penjom continues to perform well and the addition of further resources will
allow us to announce further increases to the mine life in due course.
Exploration success has vindicated the decision to spend additional money on
exploration in and around the main open pit over the last two years. This
year's exploration budget for Malaysia is US$1.0 million. Included is 12,500
metres of reverse circulation drilling in and around the Kalampong open pit. We
expect ongoing exploration to continue to adjust open pit resources upward and
validate Penjom's eventual future as an underground mine. In the short term
production costs are likely to rise as we develop a larger open pit and
particularly if consumable prices remain at current elevated levels. However,
in the longer term, with ore stockpiles containing in excess of 153,000 ozs,
overall unit cash costs will decrease. Penjom's gold production for the first
quarter of this financial year is estimated to be 29,000 ozs.

At ZGC a new management team is overseeing the delayed capital improvement and
expansion plan. We expect to spend US$5 million this year on the mining fleet,
plant and infrastructure refurbishment and the installation of a 2.5 million
tonne per year dump leach facility, a funding commitment reduced from earlier
estimates. The dump leach facility should produce its first gold during
September 2005. With Taror to be removed as a supplemental source of ore for
Jilau's plant, we have reduced our annual production target for Jilau to
approximately 85,000 ozs within the next two years. Nevertheless, ZGC's
performance for this year should exceed last year's as it gears up for its
expansion. Costs are likely to remain at current levels until higher grade ore
from the Jilau Main pit is mined and treated. We expect to see this in the
third quarter of this financial year. In the meantime, exploration continues
and pilot work will be undertaken on Taror and Chore. If this is successful
both projects could add at least an additional 130,000 ozs of annual gold
production to ZGC. ZGC's gold production for the first quarter of this year is
estimated to be 9,700 ozs.

As well as the review of Taror and Chore ore bodies, we have initiated a review
of the ten million ozs of Russian category C and P resources on our land
position. This includes 7.7 million ozs around the Chore ore body where we
intend to set up a field office. Our exploration budget for ZGC for the current
year is US$2.1 million, including the Taror and Chore initiatives.

It is always pleasing to bring a new gold mine into production especially after
an hiatus of almost ten years. The North Lanut mine in Indonesia will, we
believe, be the first of a number of ventures in Indonesia, which is a vast
country with phenomenal gold resource potential. The mine has recovered after
a difficult start and the new management team are confident of producing in
excess of 50,000 ozs this year. The dump leach operation will be a low cost
producer and we expect it to repay the Company's investment in less than two
years. We expect that the replacement of contractors with our own mining fleet
will greatly improve the mine's operations. North Lanut's gold production for
the first quarter of this year is estimated to be 10,800 ozs.

With Effendi adding to the resources at North Lanut and Bakan holding the
potential to become a stand alone operation we are confident our exploration
dollars are well spent. For the current year, the Company has budgeted US$2.3
million for exploration in Indonesia, US$1.1 million of which will be spent
within the Mongondow CoW where North Lanut is located. We have commenced
drilling at the Idenburg Joint Venture in West Papua and expect to receive
initial results from this programme shortly. We are also in discussions with a
number of parties regarding additional opportunities in Indonesia.

With solid operational cash flow combined with zero debt and an unutilised US$10
million credit facility from Macquarie Bank, the balance sheet of the Company
remains strong.

As you will see in the notice of the Annual General Meeting, we are asking
shareholders to continue to give the Company the flexibility to operate in a
dynamic environment. The resolutions are similar to those approved last year,
which grant the Company the ability to issue up to 100 per cent of its issued
share capital for acquisitions and to issue one third of its issued share
capital for cash through a private placement. Although it is not the directors'
current intention to avail of these facilities we wish to keep the ability to
move expeditiously should such an opportunity arise. Last year shareholders
approved a restructuring of the balance sheet through a court approved process
in order to be in a position to pay a dividend. To date the Company has not
applied to the courts, however it is our intention to do so during the current
year.

The Company's progress over the past year and the increasing scope of its
exploration and mining projects gives me increasing confidence for the future
success of the Company. We remain dedicated to getting the most out of our
existing assets and this could not be achieved without dedication and hard work
from our management and all our employees. To them my thanks and continued best
wishes for the future.


Nigel McNair Scott

12 July 2005

[goml] 12/7/2005 20:20

A hedge fund crises would certainly see a rush for gold that's for sure!

[yikyak] 12/7/2005 19:20

G-8 Meet To `Manage'
Hedge-Fund Crisis

by Lothar Komp and Nancy Spannaus

The meeting of the Group of Eight industrialized nations, to be held in Scotland July 6 to 8, is reported as dealing with issues like debt forgiveness for the world's poorest nations, and global warming. But just a week before the scheduled meeting, the Bank for International Settlements (BIS) released its annual report, indicating that a very different set of topics is likely to be on the agenda: how to manage the barrage of risks that could devastate the global financial system. The BIS report summarized the discussions ongoing among governments and international banking circles about whether the world needs a new "international macro-financial stabilization framework," and said that three approaches to this question are being discussed:

1)The establishment of a single international currency;


2)Reverting to "a system more like that of Bretton Woods"; and


3)"Informal cooperative solutions," that is, crisis management.


more.................................

[brad1] 12/7/2005 14:12

The question is do I top up right now or wait till results are out (Think I'll wait as I've already topped up recently!). I'm pretty sure they wont be great, but if they come anywhere close to last years then this has surely got to rocket and break the £1 resistance level. Future looking very bright for this growth producer. Any adverse reaction to results and I will hang fire and wait for a better buy opportunity, but hopefully that won't occur. Good luck.

[taylor20] 12/7/2005 09:29

I also topped up yesterday, although may see it marked down tomorrow, offering another buying opportunity.

Currently difficult to buy any quantity online:

Offer: 7500 @ 84p
Bid: 37.5k @ 82p.

[andy] 12/7/2005 08:45

hectorp,

I agree, I think poor(ish) results are already factored in, so I don't expect a drop.

I think the reduction in the hedge will be seen as positive, and it'll be interesting to see how much has already gone.

I topped up yesterday, and feel AVM will soon begin to reward the patient shareholders.

[hectorp] 12/7/2005 08:35

We've already had quite some drift down from 106p, I belive most holders are expecting mediochre results, but are in for the longer term. THe future however does look rather bright if one takes a 2-3 year view from now.

[jk8] 12/7/2005 08:28

My speculation is that the good news is now out and that the results (financially speaking) will be poor. The only question then is will people sell on the results or buy on the dreams of tomorrow. My hope is that they sell on the results and then i can pick some up more cheaply!!

[strongbow] 11/7/2005 18:36

Edging up every day. After today's news we should be £1 +. Anyone care to speculate on the results?

[andy] 11/7/2005 16:49

yikyak,

lol!



goml,

The council tax could!

[goml] 11/7/2005 15:30

yikyak, that could NEVER happen.................

[yikyak] 11/7/2005 13:52

Andy, "Seriously though, I take your point".

And I yours, it seems as though we now have something specific to discuss following the news release so we'll save the more general sector conversations for the quiet periods. Bear in mind one point though, when I talk of a £60 stockprice in ten years time I expect to be celebrating with a pint of beer that's just cost me eight quid thinking about my council tax bill that has just come in at £7500 for the year.

[hectorp] 11/7/2005 07:48

Idenburg (51%) appears very promising !

[andy] 10/7/2005 00:56

yikyak,

if AVM ever achieves £60 plus, I will have retired!

Seriously though, I take your point.

[andy] 09/7/2005 13:13

goml,

I agree, but we seem to have digressed from AVM!

[goml] 09/7/2005 11:17

EXCELLENT, INTELLIGENT DEBATE CHAPS. A pleasure to read. A word of caution though for anyone else reading this who's less familiar with these arguments. Don't think for a minute that the doom scenario's painted here are either....a) a racing certainty, or ....b) going to happen in short time spans. The only way to benefit in the end-game talked about is to be very very patient....and accept that there will be testing times ahead for gold investors. Clearly the governments of our day have too much to lose in this game and won't go down quietly, they are staffed by clever people who know exactly how to perpetuate the current myth well into the short term (years) future!

[hectorp] 08/7/2005 18:42

gawd that was a clever post.