Avocet Mining Share Discussion Threads

[kojak78] 22/7/2005 19:21

When the XAU was at 87 Avocet was at 97p. Now the XAU is at 93. Taking into account the weakened pound Avocet needs to advance 54% just to get on par with the XAU. We have lost 35% vs. the XAU so far.

I don't know who has sold all the 80000 shares but I'm glad he has lost US$5.8 mio in future gains of this gold stock bull market.

[deswalker] 22/7/2005 18:09

Suspect it was the same seller this afternoon. A big coincidence that we get to US opening with mainly buys and then in the space of an hour 80,000 are sold.

Someone was desperate to reduce. Based on publicly available information this seems absolutely crazy to me. They either know something or they've lost the plot. I suspect it's the latter.

[kojak78] 22/7/2005 17:58

Prediction: in 2008 price of gold will be above 850 and Avocet will earn more than its market cap of today resulting in the magic p/e ratio of 1.

[kojak78] 22/7/2005 17:30

Today could be a new low for this year translated into US$.. excellent exploration update, excellent earnings and no reaction at all.

[andy] 22/7/2005 00:02

Kojak,

An excellent post if I may say so.

[kojak78] 21/7/2005 23:51

Whenever I use the term "POG" i mean price of gold, not Peter Hambro.

The interesting fact is that Peter Hambro has 55 mio oz in resources under Russian standards. Very comparable to Avocet's 22 mio oz. 17 mio are attributable to Avocet, I don't know if Peter Hambro owns 100% of resources but I guess so. That would imply a 30:100 ratio of Avocet vs. Peter Hambro based on resources. Avocet has more production and Peter Hambro lower cash costs. Peter Hambro's projects are much better explored as Tajikistan saw very little exploration mainly in the 80s. That leaves much more upside potential to Avocet. And it is clear that such a 30:100 ratio is the most conservative factor one can make between the two stocks. An agressive factor above 100:100 could be calculated by assuming Avocet is worth more than Peter Hambro because it has higher production.

The actual factor between the two stocks in the market is 140 mio vs. 800 mio or 17.5 : 100 leaving 70% potential to Avocet vs. Peter Hambro in the most conservative case.

And no, I would not ever invest in Peter Hambro. It's a well run company with very good assets, but I decided that political risk in Russia is too high. Remember Nicky Oppenheimer pulling out of Russian diamond projects a few years ago? The second negative issue is that all mines are situated in Russia. I think a mining company needs in house capabilities to find/acquire, explore, develop and mine deposits all over the world in all countries. Peter Hambro may have that skill and may have decided against non Russian mines because of the bulk of possibilities in Russia, but at least the fact remains that the company remains a local gold producer operating in a single environment.

It is a sad fact that the market gives so much credit to a company with these two very major issues while it is so hard on other companies with only minor problems.

Remember: buying Russian miners is about investing in Russian gold mining. Buying Avocet (or Oxus) is about buying into Central Asian Tien Shan Belt gold mining. State operated Muruntau in Usbekistan is the biggest open pit gold mine in the world.
All the great gold mining regions of the world have one thing in common: stable political environment + large gold resources + not too cold climate + dry environment. So I prefer Central Asia and Mongolia to Russia.

[trader horne] 21/7/2005 14:37

Kojak,
were you implying in an earlier post that POG will be a more rewarding stock ?

[goml] 21/7/2005 12:40

If a company doesn't work out that an ore body is economically mineable at 'resource' stage they would be pretty incompetent to embark on expensive infill drilling to upgrade its designation to 'reserve'.

[deswalker] 21/7/2005 12:16

Establishing a resource requires one set of criteria to be met which are mainly geological.

Establishing a reserve requires the above set of criteria to be suplemented by another quite different set of criteria which are more economics based.

Details of these different types of criteria can be found by googling on "JORC".

HTH,IMO

[jk8] 21/7/2005 12:10

luckyluke - is that right? Doesn't the use of a cut-off limit what can be mined profitably. So if it is below a certain level it does not become a resource in the first place. If i understand goml then resource can be converted to reserve by further drilling.

[luckyluke007] 21/7/2005 12:01

JK8,

Another way of looking at it is a "resource" is everything that has been calculated is in the ground. The reserve is what one can mine profitably.

[jk8] 21/7/2005 11:03

Thanks goml

[goml] 21/7/2005 10:55

Reserves are 'proven' resources, usually in accordance with JORC standards if you are a conservative operator like AVM. It's principally the scale of drilling undertaken that differentiates the two.

[jk8] 21/7/2005 10:22

Kojak - what's the technical difference between reserves and resources please.

[sandoval] 20/7/2005 00:44

Kojak, I agree avm are undervalued but don't you think the fund managers know that too. The Russian risk/reward isn't stopping investors piling into oil co's.

[doobydave] 19/7/2005 23:00

Header updated with tonight's Minesite article.

[kojak78] 19/7/2005 22:58

Nope, POG has nothing to do with it. Avocet is undervalued 3x or 4x based on current gold prices..

Trans Siberia and Highland are operating in Russia which means extremely high political risk. Avocet's earnings are generated in countries of the former western block and the bulk of resources/reserves is in Tajikistan which is under western influence, too. If ZGC was based in Russia I would not be such a fan of the company.

[sandoval] 19/7/2005 21:45

I don't think it's just AVM having problems. Trans siberia and Highland have had bad hits lately. POG is being manipulated so is it any wonder the big money is staying away.

[bionicdog] 19/7/2005 20:19

Why?
That is a new article is it not?

[corrientes] 19/7/2005 20:13

Groundhog day ?

[bionicdog] 19/7/2005 19:44

Minews Story
Date: July 20, 2005

Avocet Mining Should be Poised For A Strong Run Over The Next 2/3 Years.

The latest results from AIM listed Avocet Mining are mostly good, but there are a couple of points on which investors should keep a close eye. To be fair they are considerably better than the curate's egg which was only good in parts, so we will start with the good bits. The company sold 171,092 ozs of gold during the year to end March 2005 and the new mine at North Lanut in Indonesia only contributed 6,108 ozs to this as it had to contend with some very wet weather. Nevertheless it is up and running and should produce around 50,000 ozs this year with the cash cost falling as gold production flows from the heap leach pads. The important thing is that the company now has no debt; its operating profit increased by 11 per cent ; and there are mutterings about paying a dividend in the reasonably near future.

The Penjom mine in Malaysia is the work horse of the company and produced 120,000 ozs of gold last year. How long its resources stretch ahead of it is impossible to say, but it probably has more years ahead of it than when it first went into production five years ago and Nigel McNair Scott, chairman of the company, is confident that there is at least another million ozs of mineable ore with future underground operations looking viable now that the underground exploration drive has confirmed mineralization beyond the limits of the current pit. Having said that, the geology of the mine is complex and ore grades and ore tonnes exceeded those modelled by 28 per cent and 20 per cent last year so the chairman may be erring on the conservative side.

Exploration is key to the company's future at all three of its projects and here Peter Flindell, who joined the company as chief geologist in 2002, is playing a blinder.. During his career with Newmont, part of which was spent as exploration manager of the western Pacific region, he played a leading role in the exploration and development of the two million ounce Mesel gold mine in North Sulawesi, Indonesia, and was responsible for the discovery of Avocet's North Lanut project which is about 40 km from Mesel. He was also involved in the early assessment and evaluation of Newmont's US$2 billion Batu Hijau copper-gold mine in Sumbawa, Indonesia. He likes the region and has identified six targets for new tenement applications in Malaysia. Good results are also reported from the Buffalo Reef prospect about 40 kms from Penjom and could become a satellite producer.

In Indonesia also a number of drill targets are being evaluated in the region around North Lanut and elsewhere in Indonesia great hopes are expressed that the Idenburg property may prove to host a multi-million ounce , high grade reserve amenable to conventional carbon-in-leach recovery treatment. Avocet is going to spend US$2.5 million over 2 years to earn a 51 per cent interest in the company which owns Idenburg and this brings with it exploration as well as mining rights over 420 sq miles of Papua province on the island of New Guinea where the huge Porgera and Grasberg mines are situated. Exploration permits have also been obtained over an area in South Sulawesi which has geology similar to that at Penjom.

The venture in Tajikistan has caused pain to Avocet ever since its acquisition three yers ago, but there are now real signs that it could start to pay for itself. Avocet's interest in Zeravshan, the holding company, has now increased to 75 per cent and it is in partnership with the government. This took longer than expected and delayed capital investment in the mining fleet at the Jilau Main open pit which, in turn, hit production. Price increases in diesel, steel and cyanide also pushed up costs, but that has been par for the course in mining over the past year. In order to mitigate the impact a dump heap leaching operation facility will now treat low grade ore categorised as waste in the past.

Zeravshan also has two other gold projects which are at advanced stages. Taror is an underground mine with complex refractory ore and Chore is less advanced and the ore less refractory. At one stage the company was thinking about trucking ore from Taror to Jilau, but has now returned to first base and is seeking an efficient recovery system for the combined mines using, perhaps, biological pre-treatment. There have been many advances in this technology in recent years so Avocet is re-visiting a pre-feasibility study carried out in 2000 which worked on a base case of 500,000 tonnes/year throughput to produce 130,000 ozs over a 16 year life at a cash cosst of US$170/oz. The important thing is to get Jilau operating efficiently and the other mines into production as the Russians left no doubt that resources in the region totalled at least 6 million ozs.

Lastly there is hedging. The sooner Avocet gets rid of its outstanding spot deferred hedge position, the sooner it can think of paying a dividend. Last year Avocet only delivered 14,000 ozs at the average delivery price obligation of US$300 so lost US$1.6 million against its average sale price. This year it is going to deliver 48,000 ozs which will cost it US$5.76 million and it will still have another 18,000 ozs to go. A sad commentary on the positions into which banks force junior companies requiring development capital. The said bank, Macquarie, is currently offering the company a revolving US$10 million credit facility. Some shareholders may think it should put the facility where the monkey puts its nuts. There is always another bank round the corner.

[kojak78] 19/7/2005 15:50

The only other thing they can try to do is the dividend. They could pay the full 2006 earnings or 10p to 11p in dividend. After the hedge book is closed and after deciding to finance Taror by credit.

But I guess they will pay a symbolic dividend like most others do: just 1% or 2%

I guess if someone did a gold-eagle article about Avocet they's rocket 60% or so the very next day.. unfortunately it is very complicated for U.S. citizen to buy Avocet. Amex listing the way to go?

[corrientes] 19/7/2005 15:48

I think they keep a low profile because they want to keep their salary. Also, I am becoming a bit more suspicious as it seems to me that a dividend will always be at the end of the rainbow. A great many mining directors are paid their fees as much by the shareholders as by the earnings, maybe more so.Why rock the boat.

[pecker1] 19/7/2005 15:37

Des Walker,

I was going to suggest you ring their PR company to give them a roasting but then I remembered they fired them to save money.

Kojak says "we have to get more people to know Avocet". Precisely. Unfortunately when when you get a company run by two beancounters, whatever their other strengths, you have a mentality that would rather save a few thousand than promote the company to new investors that, if professionally done, could add millions on to the market cap. There is a good story to tell but nobody does so.

[kojak78] 19/7/2005 15:37

BTW, if management decided to pay out all 2007 earnings as a dividend it would amount to 26p.