7d697ad2-2abf-4513-bd4c-940d929947ff.pdf
Avnel Reports that the Kalana Main DFS Remains on Track for Completion in the First Quarter of 2016 and Files Third Quarter 2015 Financial Statements and MD&A
Third Quarter 2015 Highlights:
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Completed a 30,143 m drill program over 181 holes
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Commenced the formal Public Participation Process for the Kalana Main ESIA
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Completed the geotechnical work program for the DFS
Subsequent to September 30, 2015:
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Announced an updated Mineral Resource estimate for the Kalana Main Project.
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Reported that the pit-constrained in situ Measured plus Indicated Mineral Resource has increased to 2.69 million ounces of gold for the Kalana Main deposit
(19.9 million tonnes grading 4.20 g/t Au above a 0.9 g/t Au cut-off grade)
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Reported that the diluted Measured plus Indicated Mineral Resource has increased to 2.81 million ounces of gold for the Kalana Main deposit
(30.6 million diluted tonnes at a diluted grade of 2.85 g/t Au above a 0.9 g/t Au cut-off grade)
MD&A Outlook
The Company continues to expect that the DFS for the Kalana Main Project will be completed by the end of the first quarter of 2016, as engineering is well advanced. For example, geotechnical test work and modelling was completed during the third quarter of 2015 and was utilised in the Whittle optimisation for the updated Mineral Resource estimate ('MRE') reported on October 5, 2015 (the 'September 2015 MRE'). Metallurgical test work and process plant design are scheduled to be completed in the fourth quarter of 2015. Mine design scheduling is scheduled to be completed in the first quarter of 2016.
Based upon the initial findings from ongoing technical studies, the process plant is expected to be a conventional gravity plus carbon-in-leach ('CIL') system. The processing rate of the process plant design is expected to be finalised during the fourth quarter of 2015.
In parallel with the DFS, the Company is preparing a new ESIA to satisfy the requirements of the Equator Principles with the intention of pursuing international financing for the construction of an open pit mine at Kalana Main. The ESIA is being prepared to conform to the requirements of the International Finance Corporation's Performance Standards, the World Bank Group's Environmental, Health, and Safety guidelines, and other financial institutions that are signatories to the Equator
Principles. The requisite baseline environmental, health and safety, and socio-economic studies for the ESIA were completed during the second quarter of 2015.
The formal Public Participation Process for the ESIA commenced in August 2015 and is expected to conclude in December 2015. The draft ESIA and other associated documentation, including a draft Community Resettlement Action Plan for a portion of the Village of Kalana, is scheduled to be submitted to the Malian authorities in December 2015. Following the review of the draft ESIA, the Company expects to submit the final ESIA for approval in early 2016. Accordingly, the Company continues to anticipate receiving approval of the ESIA and a new Environmental and Mining Permit by the end of the first quarter of 2016. The Kalana Exploitation Permit was awarded to Avnel in 2003 with an initial term of 30 years and, pursuant to the Company's Foundation Agreement with the Government of Mali, the only significant approval required to develop new mines is an ESIA.
As a result of these activities, the Kalana Main Project is expected to be sufficiently advanced for the Company to consider a construction decision during 2016, subject to receipt of a positive DFS, approval of the ESIA from the Malian authorities, and the availability of project financing.
Operations at the small, Soviet-era, underground mine at Kalana continue to benefit from the ongoing weakness in local currencies relative to the US dollar, which contributed to lower than budgeted operating costs. In the first nine months of 2015, operations also benefitted from higher than budgeted gold production that resulted in higher cash flow and lower unit costs than budgeted. Despite these positive developments, the Company does not expect the underground mine to be profitable under the prevailing gold price environment. The Company continues to operate the underground mine to offset the cost of providing underground access to facilitate due diligence activities necessary to secure mine development financing and help maintain socio- economic stability in the local community. The Company plans to continue operations through the completion of the DFS to enable a smooth transition for the workforce to a proposed open pit mining operation at the Kalana Main Project.
Mining Operations
The following table summarises the production from the Kalana Gold Mine:
Three months ended Sept 30
Nine months ended Sept 30
2015 2014 2015 2014
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Tonnes milled:
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13,346
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12,633
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37,927
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37,266
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Average grade processed (g/t Au):
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6.27
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6.69
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7.58
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6.57
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Recovery rate (%)
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77.8
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77.7
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79.9
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80.3
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Gold production (ounces)
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2,092
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2,092
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7,379
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6,325
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Cost per tonne milled
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$200
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$247
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$212
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$261
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Operating cost per ounce of gold sold
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$1,330
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$1,505
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$1,092
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$1,526
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Operating cost per ounce of gold produced
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$1,273
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$1,494
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$1,089
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$1,540
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Gold Sales
Gold sales data is as follows:
Three months ended Sept 30
Nine months ended Sept 30
2015 2014 2015 2014
Ounces sold 2,043 2,112 7,376 6,399
Average realized gold price ($/oz) 1,114 1,279 1,183 1,294
Gold production of 7,379 ounces in the nine months to September 30, 2015 was 17% higher than the nine months to September 30, 2014. The increase in production is attributable to a 15% increase in average grade processed to 7.58 g/t Au in the nine months to September 2015, compared to 6.57 g/t Au in the nine months to September 2014. Average gold recovery of 79.9% in the nine months to September 2015 is in line with the budgeted rate of 80%, although lower than the 80.3% achieved in the comparative period of 2014.
Selected Information for the Three and Nine-Month Periods Ending September 30 (In thousands of U.S. dollars except per share amounts)
Three Months Ended September 30
Nine Months Ended September 30
2015 2014 2015 2014
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Total revenue
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2,280
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2,709
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8,746
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8,302
|
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Total expenses
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3,953
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4,561
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12,034
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14,285
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Other income/(expenses)
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2,488
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(1,227)
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1,707
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(1,365)
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Net profit/(loss)
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825
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(3,079)
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(1,581)
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(7,348)
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Net profit/(loss) from continuing
operations attributable to
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1,352
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(2,304)
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(422)
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(5,560)
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parent
|
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Net profit/(loss) per share
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$0.004
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($0.009)
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($0.001)
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($0.026)
|
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attributable to parent
Weighted average shares
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304,330,124
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246,538,072
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284,372,981
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210,209,219
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outstanding
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Balance Sheet
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Sept 30, 2015
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Sept 30, 2014
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Dec 31, 2014
|
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Working capital surplus
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10,953
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11,219
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9,817
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Total assets
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30,166
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27,883
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25,930
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Total non-current liabilities
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8,316
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6,374
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8,593
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Shareholders' equity
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34,149
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31,915
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28,072
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Results of Operations
Total revenue increased to $8,746,000 in the nine months to September 30, 2015, from $8,302,000 in the nine months to September 30, 2014. The increase in revenue is a result of a 15% increase in ounces sold from 6,399 ounces in the nine months to September 30, 2014 to 7,376 ounces in the nine months to September 30, 2015. The increase in revenue was partly offset by a 9% decrease in
the realised average sales price of gold from $1,294 per ounce in the nine months to September 30, 2014, to $1,183 per ounce in the nine months to September 30, 2015.
Total expenses reduced by 16% from $14,285,000 in the nine months to September 30, 2014 to
$12,034,000 in the nine months to September 30, 2015. The reduction in expenses is attributed to the strengthening of the US dollar relative to the West African CFA franc ('CFA') and the South African rand. Lower mining costs, resulting from a reduction in the rate of underground mining and an increase in the processing of surface stockpiles, have also contributed to lower operating expenses. Exploration costs expensed was nil in the nine months to September 2015, compared to
$392,000 in the nine months to September 2014. Operating costs per ounce of gold sold for the nine months to September 30, 2015 reduced from $1,526 per ounce to $1,092 per ounce, which is attributable to lower operating costs and higher gold sales in the current period relative to the comparative period.
Avnel recorded a net loss of $1,581,000 ($0.001 attributable loss per share) for the nine months ended September 30, 2015, compared to a net loss of $7,348,000 ($0.026 attributable loss per share) in the nine months to September 30, 2014. Included in the nine months to September 30, 2015 is a profit on the fair value of derivative financial instruments of $1,897,000, compared to a loss of
$719,000 in the nine months of 2014, arising from a change in the fair value of warrants
outstanding. The fair value accounting gains and losses reported have no cash effect on the Company.
As compared to the condensed consolidated statement of financial position as at December 31, 2014, Avnel's cash and cash equivalents as at September 30, 2015 increased by $1,466,000, from
$7,709,000 to $9,175,000. The increase was the result of cash provided by a brokered 'bought deal' financing in May 2015 of $8,925,000 that was partly offset by the cost of exploration and evaluation expenditures of $5,497,000. The Company had working capital of $10,953,000 as at September 30, 2015, compared to working capital of $9,817,000 as at December 31, 2014. Total assets increased from $25,930,000 as at December 31, 2014 to $30,166,000 at September 30, 2015.
Total non-current liabilities reduced from $8,593,000 as at December 31, 2014 to $8,316,000 at September 30, 2015, mainly due to the re-valuation of the warrants issued in May 2015 and the warrants issued in 2014. The fair value of these derivative financial instruments has no cash effect on the Company.
Total stockholders' equity increased to $34,149,000 as at September 30, 2015 from $28,072,000 as at December 31, 2014.
Associated Documents
This news release should be read in conjunction with the Company's condensed interim consolidated financial statements for the three and nine-month periods ended September 30, 2015 and September 30, 2014 and the associated MD&A for these periods, which are available from the Company's website, www.avnelgold.com, and on SEDAR (www.sedar.com).