Period ended March 31, 2014 .
ST. PETER PORT , Guernsey, May 14, 2014 /CNW/ -
Overview of the CompanyAvnel's principal assets are an 80% indirect interest in Société d'Exploitation des Mines d'Or De Kalana, S.A. ("SOMIKA") and a 100% indirect interest in the Fougadian Exploration Permit, through its subsidiary, Avnel Mali SARL. The State of Mali holds the remaining 20% interest in SOMIKA which owns a long tenure (30 years plus two 10 year extensions) Exploitation Permit over 387.4 square kilometres located in South West Mali ("the Kalana Permit").
A small underground mine (name plate capacity 60,000 tonnes per year with a gravity only gold recovery plant) was designed and built by the Russians (SONAREM & SOGEMORK) between the mid-1960's and 1985 and operated by the Russians until 1991 under a Soviet financial and technical aid programme to Mali. Avnel continues to operate the small underground mine principally for exploration purposes and to maintain socio economic stability in the local community. The mine operates as a narrow vein hard rock mine (below the weathered horizon) with gravity gold recovery.
The Kalana Permit was acquired by Avnel through a privatisation tender awarded in December 2002 and the permit was transferred to Avnel's 80% owned subsidiary, SOMIKA in April 2003. Mining operations were resumed by SOMIKA in January 2004 with commercial production commencing in March 2004 .
On 24 March 2014 the Company announced a Mineral Resource Estimate ("MRE") and a Preliminary Economic Assessment ("PEA") of a bulk mineable project at Kalana, both completed by Snowden Mining Consultants Ltd ("Snowden"). The MRE, based on a 0.9g/t cut-off grade, shows indicated resources of 8.5m tonnes at a grade of 4.53g/t resulting in contained gold of 1.25m ounces and inferred resources of 2.1m tonnes at a grade of 3.76g/t resulting in 0.25m ounces of contained gold. The PEA, at a gold price of $1,110 and discount factor of 10% indicates an after tax and imputed interest net present value of $194 million and an internal rate of return of 53%. A Technical Report as required by National Instrument 43-101, prepared by Snowden , has been filed on SEDAR.
Avnel's strategic objective, through SOMIKA, is to advance the development of Kalana Main project by completing a pre-feasibility and feasibility study to commercially exploit the bulk mineable project the Kalana Gold Mine, whilst exploring for commercially viable opportunities the remainder of the Kalana exploitation
Results of OperationsSelected Interim Information
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(In thousands of U.S. dollars except per share amounts)
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Three months ended March 31
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2014
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2013
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Total revenue....................................................................................................
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2,784
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4,197
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Total expenses.................................................................................................
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4,868
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4,257
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Other (expense)/income.................................................................................
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(85)
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1,280
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Net (loss)/profit.................................................................................................
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(2,169)
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1,220
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Net (loss)/profit from continuing operations attributable to
owners of the parent........................................................................................
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(1,694)
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1,230
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Net (loss)/profit per share attributable to owners of the parent...............
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($0.009)
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$0.006
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Basic weighted average shares outstanding.............................................
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191,743,724
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191,743,724
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Balance Sheet
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March 2014
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December
2013
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Working capital surplus...................................................................................
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6,983
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8,629
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Total assets........................................................................................................
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24,140
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26,524
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Total non-current liabilities..............................................................................
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2,331
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3,004
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Shareholders' Equity.........................................................................................
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30,151
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31,845
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Metal revenues reduced to $2,784,000 in the quarter to March 31, 2014 from $4,197,000 in the quarter to March 31, 2013 . This was as a result of reduced gold ounces sold from 2,551 ounces in the quarter to March 31, 2013 to 2,135 ounces in the quarter to March 31, 2014 and a 21% reduction in the realised average sales price of gold from $1,641 per ounce in quarter to March 31, 2013 to $1,301 per ounce in quarter to March 31, 2014 .
Total expenses increased from $4,257,000 in the quarter to March 31, 2013 to $4,868,000 in the quarter to March 31, 2014 , arising from exploration costs of £300,000 together with finished goods movement. Operating costs per ounce of gold produced for the quarter to March 31, 2014 increased from $1,169 /oz. to $1,519 /oz.
Avnel recorded a net loss of $2,169,000 ( $0.009 attributable loss per share) for the quarter to March 31, 2014 , compared to a net profit of $1,220,000 ( $0.006 attributable profit per share) in the comparative period in 2013. Included in the first quarter of 2013, is an accounting finance gain on the fair value of derivative financial instruments of $1,600,000 , compared to a nil profit in the quarter to March 31, 2014 . This fair value accounting gain reported had no cash effect on the Company.
As compared to the balance sheet as at December 31, 2013 , Avnel's cash and cash equivalents as at March 2014 , decreased by $2,032,000 from $5,799,000 to $3,767,000 . This decrease was mainly due to $559,000 losses incurred in the period.
There was a working capital surplus of $6,983,000 as at March 31, 2014 compared to working capital surplus of $8,629,000 as at December 31, 2013 . The working capital figure reported at December 31, 2013 excludes the other derivative financial liability reported on the Company's balance sheet which had no cash liability to the Company.
Total assets reduced from $26,524,000 as at December 31, 2013 to $24,140,000 at March 31, 2014 .
Total shareholders' equity reduced to $30,151,000 as at March 31, 2014 from $31,845,000 at December 31, 2013 . The retained deficit increased by $1,684,000 as a result of the losses made in the quarter to March 31, 2014 .
OutlookAvnel is examining its options to proceed with the work necessary to complete a pre-feasibility and feasibility study leading to the development of a new bulk mine at Kalana and the ongoing exploration of its 387sq.km Kalana Permit where new gold prospects at Kalanako and Djirila have been identified.
The development programme for 2014 will be focused on the Kalana Main Project highlighted by the MRE-PEA published in March 2014 (" Snowden 2014 report"). As part of the PFS-FS, a RC and DD drilling program totalling 31,000m is under consideration to convert some inferred resources into indicated resources and to target mineralization that is within the pit shell in the northern and western areas of the potential mine that has not been drilled. In quarter 2 a re-assay campaign, using LeachWell 2kg + FA on tails, is programmed on the remaining 5,000 mineralized samples from Kalana to evaluate the potential higher grade as shown in the 2013/14 campaign.
The potential location of infrastructure for the new Kalana Main project has been identified and a sterilisation program is planned for quarter 2. The program includes 3,000m of air core drilling and geochemical sampling of termite mounds.
It is planned to commence a metallurgical test program in 2014. The details of the test program will be finalised in the second quarter after the appointment of the EPCM Engineer for the PFS. The results of the test program will be used to design the new gold extraction process and the capital and operating cost for a new gold plant.
Avnel plans to continue the evaluation of the Kalanako prospect that is located 2.5 kilometres north-east of the Kalana Mine. The Kalanako prospect was extensively drilled during 2010 and 2011. During 2014 it is planned to complete a re-assay campaign, using Leachwell 2Kg + FA on the tails, on 2,500 samples from the mineralised zones. There is potential that the original fire assay results have under-estimated the grades as has been confirmed at the Kalana Main project. The Kalanako prospect will be geologically modelled. A 4,000m air core drill program is planned for the second quarter to test the mineralised trend north of the Kalanako prospect
For the remainder of 2014, Avnel is planning gold production of 6,157 ounces from 40,000 tonnes of ore milled, at an average grade of 5.9g/t. This plan is very sensitive to grade, gold price and costs. The plan assumes that the major underground ore sources will be Veins 20, 21 and 20C. Development during the first quarter 2014 has exposed new ore blocks to mine from Vein 21 and Vein 20C. The 25,000 tonnes of underground ore will be augmented by 15,000 tonnes of lower grade ore on surface stockpiles. The Company intends to sustain the operation as long as feasible while the development program progresses. This is important to reduce the social impact on the community and to cover the costs of underground pumping. Once underground mining operations are temporarily stopped, the mine will be placed on care and maintenance. The underground water pumping system will remain in operation, subject to technical requirements, to permit access for future exploration activity.
The mine plans to advance development 100 metres during the remainder of 2014. Development will continue to focus on opening up Vein 21 and Vein 20C below the 180m level. Dependent on results, development will continue.
It is forecast that the mineable ore available from the current mine infrastructure is approximately 25,000 tonnes at 6.5g/t containing 5,000 ounces. This assumes that ongoing development of Vein 21 and Vein 20C below 180m level will be successful. This will allow mining to average 3,500 tonnes per month to October 2014 . The surface ore stockpile is 28,000 tonnes at a grade of 5.0g/t.
ABOUT THE COMPANYAvnel is a producing gold mining company operating the Kalana Mine in south-west Mali and is engaged in the exploration of the 30-year Kalana Exploitation Permit encompassing 387.4 sq km around and to the south of the Kalana Mine.
Avnel's principal asset is an 80% interest in Société d'Exploitation des Mines d'Or de Kalana ("SOMIKA") which is the holder of a 387.4 sq km exploitation permit which is situate in south west Mali .. On 24 March 2014 the Company announced a Mineral Resource Estimate ("MRE") and a Preliminary Economic Assessment ("PEA") of a bulk mineable project at Kalana, both completed by Snowden Mining Consultants Ltd ("Snowden"). The MRE, based on a 0.9g/t cut-off grade, shows indicated resources of 8.5m tonnes at a grade of 4.53g/t resulting in contained gold of 1.25m ounces and inferred resources of 2.1m tonnes at a grade of 3.76g/t resulting in 0.25m ounces of contained gold. The PEA, at a gold price of $1,110 and discount factor of 10% indicates an after tax and imputed interest net present value of $194 million and an internal rate of return of 53%. A Technical Report as required by National Instrument 43-101, prepared by Snowden , has been filed on SEDAR.
Avnel also holds the Fougadian Exploration Permit covering an area of 75 sq. km. to the south of the main Kalana Exploitation Permit area and abutting it. During the period of the pre-feasibility study and feasibility study it is anticipated the present underground mine as described above will continue. If the feasibility study is positive it is contemplated that the underground mine will close. The infrastructure of the underground mine sits atop the conceptual new open pit.
Technical Information and Qualified Person/Quality Control Notes
Technical information in this publication regarding the Mineral Resource Estimate and Preliminary Economic Assessment regarding the Kalana Main Project is summarised or extracted from technical reports prepared by Snowden Mining Industry Consultants (Pty) Ltd (' Snowden ") entitled "Kalana Mineral Resource Estimate and Preliminary Economic Estimate" dated 31 March 2014 . The Technical Report was prepared by Allan Earl , Executive Consultant, and Ivor Jones , Executive Consultant, each of whom are independent "Qualified Person" as such term is defined in National Instrument 43-101 –Standards of Disclosure for Mineral Projects. The full text of the Technical Report is available for review on the System for Electronic Document Analysis (SEDAR) located at www.SEDAR.com.
Technical information in this publication arising subsequent to the date of the Technical Reports, if any, regarding the Kalana Main Project and the Kalana Permit is provided by Avnel management under the supervision of Roy Meade , a Company director, and Dr. Olivier Femenias , VP Geology, both of whom are a non-independent "Qualified Person" as such term is defined in National Instrument 43-101.
Forward-Looking Information
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts are forward-looking statements. Although Avnel believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Avnel does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE AVNEL GOLD MINING LTD.