Avocet Mining Share Discussion Threads

[holdontight] 18/1/2006 08:17

Goml...I agree.

[saucepan] 18/1/2006 08:01

Reference last night's discussion: today's announcement should get the analysts re-doing their sums.

[phillis] 18/1/2006 07:59

Cautious clever

[goml] 18/1/2006 07:47

well i just hope they're not being too clever for their own good here.

[lordgnome] 18/1/2006 07:19

If nothing else, this explains yesterday's little tree shake and the strong finish and underpins the recent share performance. Our dear friends in the city obviously knew that this was on the way. Conspiracy theorist? Moi?

[saucepan] 18/1/2006 07:10

Avocet Mining PLC
18 January 2006


Avocet Mining PLC
7th Floor 9 Berkeley Street
London W1J 8DW
Tel [phone]
Fax [phone]
E-mail
[e-mail]

www.avocet.co.uk




AVOCET ENHANCES CASH FLOW AND REDUCES GOLD PRICE RISK


Avocet Mining PLC ('Avocet' or 'the Company') is pleased to announce that it has
taken advantage of recent high volatility in the current gold market to reduce
the Company's existing sales commitment, retain the Company's leverage to higher
gold prices and protect the Company to any potential drop in the gold price
below US$450/oz over the next three years. This represents an improvement in
next year's earnings of approximately US$ 4.5million at current gold prices.
Additionally, this transaction underpins the Company's ability to fund expansion
opportunities.

Avocet currently delivers approximately 4,000 ounces of gold per month into an
historical hedge position of 80,000 ounces with a delivery price that has
averaged approximately US$300/oz. As part of this transaction Avocet has reduced
this position to 22,000 ounces at a fixed forward price of US$313/oz with final
delivery scheduled for no later than mid July 2006.

The Company has purchased European put options (the ability to deliver at a
certain price, exercisable at specific periods) for 10,000 ounces per month at
US$450/oz over a 36 month period from April 2006 to March 2009. The Company has
also sold European call options (the ability for a third party to purchase from
the Company at a certain price, exercisable at specific periods) for 10,000
ounces per month at US$700/oz over the same period from April 2006 to March
2009.

The options affect 57% of Avocet's current annual gold production of
approximately 210,000 ounces which will continue to realise spot prices if they
are between US$700/oz and US$450/oz. Avocet fully expects its gold production to
increase in the next three years as ZGC's Jilau mine in Tajikistan increases
production substantially and new projects under feasibility come on stream. All
production above 10,000 ounces per month, which is currently 43% of estimated
annual production, will be sold at spot prices. This, together with the
increased production over the next few years, gives the Company upside to a
rising gold market.

The transaction counterparty is Macquarie Bank, the Company's principal banker.
Macquarie has already granted the Company a US$10 million revolving credit
facility. The transaction was entered into for zero cash consideration. No
margin calls apply.
Nigel McNair Scott, Chairman of the Company, commented on this transaction:

'The strong volatility in the current gold market has provided an opportunity
for the Company to eliminate its $300/oz gold hedge by July this year and
replace it with a structure that provides exposure to the increasing gold price,
while protecting the Company's cash flow should the market fall below $450/oz.'

Avocet is a mining company listed on the AIM market of the London Stock
Exchange. The Company's principal activities are gold mining and exploration in
Malaysia (as 100% owner of the Penjom mine, the country's largest gold
producer), Tajikistan (as 75% owner and operator of the ZGC, Tajikistan's
principal gold mine), and Indonesia (as 80% owner of the North Lanut gold mine
in North Sulawesi). The Company has a number of advanced mining and exploration
projects in Asia and owns 24% of Dynasty Gold Corporation, a Canadian listed
exploration company active in Western China.
_____________________________________________________________
For further information please contact:

Avocet Mining PLC

John Catchpole (Chief Executive)

Jonathan Henry (Finance Director)
020 7907 9000

[holdontight] 17/1/2006 20:35

Absolutely. AVM remains a BUY at this level and even so at £2, IMO

[kojak78] 17/1/2006 20:09

Iamgold and Agnico looked into AVM and decided against a takeover (they have pursued other opportunities).

Keep in mind that Elliot + Management + Artemis hold now above 50% and any hostile takeover would bring with it all those nasty value estimates etc. Remember Normandy takeover from the first Anglodolg offer until the last Newmont/Franco-Nevada offer? Share price doubled during that takeover and much of the Newmont offer was in cash.

[pecker1] 17/1/2006 19:43

HOT,

Doubt it's a predator. With gold at $550, there are probably some funds wanting to put a toe in the water. What is available? Peter Hambro - yes but fully valued. OXS - yes but Jerooy. So AVM? Why not, geographically diversified, profitable, recovered from tungsten debacle etc.

Just a thought.

[holdontight] 17/1/2006 19:17

Volume today was 750k ish......you know, and I hate to even entertain the idea, but would not surprise me if someone were to buy AVM.....I do hope not, as they would probably get it for £2'ish. Maybe one of the Inst's has increased holding or maybe we have a new one involved.....????? Or maybe we have hit the radar in US and are due a US/Canada type of rating.....maybe the Dynasty deal helped with this.....????

[kojak78] 17/1/2006 19:04

Of course I make different assumptions, I use the current gold price and current production.

I ask myself the question: If current conditions would last forever, which profit would Avocet make in one full financial year.

Of course the profit a gold miner makes depends on the *average* gold price during one year, not current prices or spikes.

Conditions will change. I assumed 220,000 oz production, 105,000 half-year production annualized + 10,000 for the newest dump leaching facility in Tajikistan. Remember that Taror/Chore (feasibility in 18 months) will increase production by 130,000 oz. And the gold price won't be lower in 2007 than it's now.

[holdontight] 17/1/2006 18:51

Think you'll find the above are based on last year's earnings, which incl various incidentals and exceptionals.....they are of course wrong.....you can do the maths yourself....Kojak's will be quite close to actual.

[holdontight] 17/1/2006 17:26

No....they are a bargain......p/e should be nearer 30 in bull market and with exploration potential.

[kojak78] 17/1/2006 17:18

BTW

Gold $560
cash costs $260 (slightly lower because of ending of waste stripping at Jilau + dump leaching startup)
production 0.22 mio

=$66 mio
-$15 mio overhead + capex + exploration
$51 mio
-tax (30%)
=$35.7 mio = GBP20.25 mio = 19.3p/share net earnings = p/e 7 at 136p share price

Do you know any other gold producer with forward p/e 7?

[kojak78] 17/1/2006 16:59

That's the share price movement I expect from AVM. That's why I never traded AVM.. and won't do that in the future.

Wait for a correction and buy more. That's all one can do.

Besides: I tried to call the top. I have to admit so far I was wrong. But I have the ability to make wrong guesses without loosing financially. With holding small EDV and RSG positions my non-tradable AVM position is still 97% of all gold stocks I own.

[andy] 17/1/2006 16:07

saucepan,

Thaks, another decent day.

[holdontight] 17/1/2006 16:04

Yep.....also the initial move back up was contrary to golds move down......supports the rerating argument rather than just a move up with gold. That of course portends greater move yet to come.....imo

[saucepan] 17/1/2006 16:00

Some big trades to show later?

[holdontight] 17/1/2006 15:30

looks like it.....who knows where we end up if so..:)

[corrientes] 17/1/2006 15:02

Look at the time. Could it be the Yanks ?

[holdontight] 17/1/2006 14:51

Well, we are now up on the day!!!!! :)

[saucepan] 17/1/2006 14:51

To get back into the blue after today's earlier price movements is very encouraging IMHO, especially on a day of such weakness for gold.