The Inata Gold Mine taking the next steps 19 th May 2010 Overview - - PowerPoint PPT Presentation

19th May 2010

The Inata Gold Mine – taking the next steps

Overview of Avocet Mining

2

Gold mining company, active in 2 highly prospective districts

• West Africa
• South East Asia
• Group Reserves and Resources of 1.5 Moz and 5.6 Moz

Excellent growth profile

• 2009 production: 109,000 oz
• 2010 target production: +200,000 oz
• 2011 target production: +240,000 oz

West Africa – new mine on schedule to double Group’s production in 2010

• Inata (Burkina Faso)

South East Asia – 2 operating mines

• Penjom (Malaysia)
• North Lanut (Indonesia)

Seruyung PENJOM (1.2 Moz) Doup (1.0 Moz) NORTH LANUT & Bakan (1.0 Moz) (South East Asia)

(West Africa) INATA (1.7 Moz) Koulékoun (0.7 Moz) Belahouro

Q1 results and 2010 objectives

3

Inata, Burkina Faso

Gold production of 19,838 oz in Q1 2010 Production target of 10,000 oz in May ‘10 Production after May ‘10 to exceed 10,000 oz per month Substantial upside along strike – initial drill results expected in Q3 2010

Production in South East Asia

Gold production of 25,039 oz in Q1 2010 Cash costs of US$735/oz in Q1 2010 Monthly production of 8,500 oz in Q2 2010, increasing to 9,500 oz in H2 2010

West African exploration

Geophysical and VTEM survey to define priority targets at Bélahouro underway Drilling commenced on Souma Trend Drilling to commence at key prospects in Guinea in Q4 2010

Cash position

• Cash at bank

US$47.1m1

• Net debt US$42.9m1

Project finance facility

• US$65m project

finance facility with Macquarie Bank

• First repayment by

September ‘10

Gold hedge

• 400,000 oz at an

average US$970/oz, required by project finance facility (Inata production only)

• Unhedged production

until first delivery in Q3 2010

• c.20% Group

production in 2010

• c.40% Group

production in 2011

Corporate facility

• US$25m corporate

revolving credit facility with Standard Chartered Bank

Financial summary

4

Oslo listing – on schedule

April

• Resolution of outstanding technical requirements and due diligence

April

• Introduction meeting with the Oslo Stock Exchange and final

application submitted

Late May

• Completion and approval of listing prospectus
• Approval of listing application at the Oslo Stock Exchange board

meeting, and public advertisement

Early / Mid June

• First day of listing in Oslo

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 

Strategy

“Avocet Mining is committed to becoming a leading gold mining and exploration company” Avocet’s medium-term strategy is to build a portfolio of gold mines producing in excess of 300,000 oz p.a.

Avocet Mining

Junior gold producers Mid-tier gold producers

.......

+300,000 oz p.a. and growing +5 M oz reserves +10 year mine lives Cash costs <$600/oz

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The Inata Gold Mine

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Gold Mining in Burkina Faso

• 2003 mining code
• Provides stability
• Demonstrates govt.

support for mining

• Rapidly expanding

mining sector

• Only 1 gold mine
• perating in 2007
• 6 gold mines to be
• perational by end 2010
• Mines to produce over

500,000 ounces in 2010

• Over 20 listed gold

producers and explorers

• perating in country

Prospective Birimian geology Gold deposit / resource 8

Inata (Avocet)

Mana (SEMAFO) Youga (Etruscan) Kalsaka (Cluff) Essakane (IAMGOLD) Taparko (High River) Producing gold mine in 2010

Chronology of Inata Project

2009 – present Avocet Mining PLC Step-out drilling commenced

April 2009 announced takeover of Wega in all-share deal June 2009 acquisition completed First gold pour in December 2009 and commercial completion by March 2010

2007-2009 Wega Mining ASA No drilling at Inata

Acquired Goldbelt Resources in 2007 for C$130 million in cash Entered US$65 million project finance facility agreement with MBL

2004 – 2007 Goldbelt Resources Ltd 69,000m

TSX-V listed Acquired properties in January 2004 for cash and shares worth US$6.5 million Outlined reserves and resources of 0.944 Moz and 1.7 Moz respectively

1998 – 2004 BHP - Resolute Ltd Joint Venture Metres drilled: 49,000m

Joint venture with BHP (1998-2001) Resolute sole operator until 2004 Resolute outlined 750,000 oz resource 9

Wega transaction

• Offer for all outstanding shares in Wega declared wholly unconditional
• n 17 June ‘09 and settled on 24 June ‘09
• 97% acceptances received from Wega shareholders
• Takeover completed in 70 days
• Issued 72.6 million Avocet shares, representing 37.3% of the enlarged

company

• Overall transaction value: US$109 million (plus assumed debt)
• Gold price at time of settlement: US$931/oz
• Acquired:
• Inata Gold Mine and surrounding exploration licences (Bélahouro)
• Houndé group of licences
• Divestment announced January ‘10
• Present transaction value: c.US$6.5 million
• Guinean exploration licences
• 58.1% stake in TSX-listed Merit Mining
• Divestment announced in November ’09
• Present transaction value: c.US$5.5 million
• 36% stake in privately-owned Metallica Mining

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Inata management team

Interim Chief Executive Officer (from 1 June ‘10) Brett Richards Chief Executive Officer Jonathan Henry Executive Vice President, Operations West Africa Richard Gray General Manager, Operations – Inata Gold Mine Colin Belshaw Directeur General – General Manager, Administration (West Africa) Saidou Ide 11

Inata management team

General Manager, Operations – Inata Colin Belshaw

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Inata – on track to produce +100,000 oz p.a.

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AVM Ownership 90% Location Burkina Faso Reserves (oz) 1 932,400 Resources (oz) 1 1,693,200 Production (oz) 2010

• c. 100,000

2011

• c. 140,000

Cash costs ($/oz) LoM 525-575 Estimated Mine Life (years) 7+

• 19,838 oz produced in initial 3 months
• First gold pour 20 December ‘09
• Gold production of 9,166 oz in April ‘10
• Project remains ahead of schedule
• Production of +10,000 oz beyond May ‘10
• Gold to be sold at spot prices until Q3
• Steady ramp up continues on schedule
• Plant recoveries currently >93%
• Commercial production moved forward from

Q3 to 1 April 2010

• Set to produce over 100,000 oz in 2010
• Final construction cost: US$195m

Inata – ramp up

• Recoveries budgeted to increase

to 90-95% over ramp up period; actual recoveries to date over 93%

• Extensive rectification work carried
• ut by Avocet since June ‘09

takeover of Wega Mining

• LoM mine grade estimate is

2.07 g/t

• Mined tonnages reconciling well

with resource model

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Project geology, mineralisation and ore

• Deposit hosted in Birimian greenstone belt
• Birimian (2.1-2.2 Ga) volcano-sedimentary series
• Gold mineralisation at Inata is commonly associated with mesothermal

stockwork and sheeted quartz–sulphide veining

• Extensive weathering and lateritisation of the mineralisation and

surrounding host rocks, resulting in oxide mineralisation up to 100 m depth

• Recoveries seen during production have corroborated pre-production

testwork, which indicated recoveries of 90-95% Au

• The Bond work index determination showed the oxide ore to be soft to

moderately soft (Wi of 6-10.5 kWh/t), increasing to 15.0 kWh/t for sulphide ore

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Inata orebody – broad zone of mineralisation

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• Simple structure at deposit scale
• Broad spacing of drill holes at depth
• Peripheral holes contain significant

mineralisation

• 41m @ 7.12 g/t Au (INDD0040)
• Kriged model smoothes grades
• Better grade definition in data
• Will be able to mine higher grades
• High confidence in deposit model
• Reflected in reconciliation to date

W E

Resource model reconciliation

• Mined grades

reconciling well with resource model

• RC drilling and rip-line

surveying methods used to test in pit mine grade

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Plant to mine reconciliation

• ROM pad feed grade and

tonnage reconciles well with plant actual

• Slight increase in grade

and ounces but too early to determine significance

Tonnes Grade Ounces Tonnes Grade Ounces Dec-09 62,000 2.6 5,000 62,000 2.3 5,000 Jan-10 75,000 2.5 6,000 75,000 2.6 6,000 Feb-10 77,000 2.5 6,000 77,000 2.9 7,000 Mar-10 61,000 2.8 6,000 56,000 2.9 5,000 Apr-10 70,000 2.8 6,000 74,000 2.9 7,000 Total 345,000 2.6 29,000 344,000 2.7 30,000 PLANT FEED DATA RECONCILIATION Months Mining Values Plant Values

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Mining equipment

• Existing mining fleet:

− Excavator: 1 x PC2000 − Excavator: 1 x PC1250 − Primary Loader: 1 x 988H − Backup Loader: 1 x WA800 − Dump Trucks: 6 x HD785-7 − Dozer: 1 x 375A − Grader: 1 x GD825A − Water Truck: 1 x HD475-7

− Blast Hole Drill Rig: Atlas Copco L8

• Ordered 2nd mining fleet:

− Excavator: 1 x PC1250 − Dump Trucks: 6 x 777F − Dozer: 1 x D9R − Wheel Dozer: 1 x 834H − Grader: 1 x 16M − Water Truck: 1 x HD475-7 − Blast hole drill rig: Atlas Copco L8 + RC attachment

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Life of mine plan

• Current life of mine plan outlines the

following:

• 7 year initial mine life, subject to ore body

extensions and/or additional greenfields discoveries

• Overall strip ratio of 7.4 (rising from 6.1 in

2010 to 9.3 in 2012, declining thereafter)

• Existing plant capacity of 2.25 Mt p.a.
• LoM plant feed grade of 2.07 g/t
• Budgeted recoveries of 90-95%; currently

>93%

• Gold production of +100,000 oz in 2010;

140,000 oz p.a. in 2011

• LoM cash costs of US$525-575/oz (incl.

government royalties)

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Mining schedule

• Optimisation of pit designs and LOM schedule
• Schedule focuses initially on higher grade

Inata North pit

• Mining fleet performing as budgeted
• Mining in 2.5 m flitches to reduce dilution
• Currently achieving 430k BCM per month
• Production to increase to 810k BCM per

month with arrival of 2nd fleet Q3 2010

• Large stockpile of ore maintained on ROM
• Stockpile of 500,000 tonnes at +2.6 g/t (as
• f 31 March ‘10)
• Stripping of second pit, Inata Central,

underway, with mining to commence in July 2010

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Inata North Sayouba Inata Central Inata South

Mining challenges and opportunities

• Operator training
• Mining is new to Burkina Faso
• Lack of skilled operators
• Commencement of drill and blast
• perations
• Minimising dilution and ore loss
• Resource model performing well
• Diesel consumption and tyre wear

lower than expected

22

Plant key components

• 1 x 110 kW Primary Crusher
• 1 x 1490 kW SAG Mill
• 1 x 1500 kW Ball Mill
• 1 x 1000 kW Ball Mill
• 6 x 1980 m3 CIL Tanks
• 1 x Falcon Concentrator

23

Process flow chart

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Gomde barrage

• Capacity of 120 Mm3
• Current monthly usage of 0.3 Mm3
• Evaporation in dry season accounts for 5.2 Mm3 per month

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Processing constraints and solutions

• Cyclones – insufficient number of cyclones, high ball mill recirculating load
• Larger vortex finders installed in April
• Cyclone capacity increased 30%
• Re-circulating load through Ball Mills reduced from 370% to 290%
• Water supply – water line not adequate to achieve full process capacity
• Gomde piping for increased water supply upgraded in March – now resolved
• Conveyors – capacity currently limited to 300tph
• Upgraded gearboxes to be installed end of May
• Cyclone feed pumps – under capacity due to ore specific gravity
• Replacement pumps with 560kW motors to be installed by end of July
• Inter-tank piping – higher slurry capacity required
• Change out of existing piping as required to match ramp up

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   

Cash costs (excl. royalties)

• Diesel - price set by government in FCFA (current equivalent – US$0.81/litre); sourced from Benin
• Reagents – principally cyanide, lime and grinding media; synergies in supply with S.E. Asian operations
• Labour – high initial requirement for expats, declining in subsequent years
• Presently employing 369 nationals (105 local area) and 52 expats
• From 2011, higher mining costs from full year of second fleet mean cash costs before royalties of

approximately US$70 m p.a.

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Total costs April to December 2010 – US$50-55 m

Inata – capex (April-December 2010)

• Capex estimated at US$5-7 million in 2011 and US$3-4 million per year

thereafter

• Excludes c.US$10 million spares inventory

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Total April to December 2010 – US$25 million (excluding spares and rehabilitation)

Health, safety, environment and training

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• Implementation of formal HSE policies,

procedures and inspections, using international mining standards

• Conduct regulatory reporting in areas of health,

safety and environmental management

• Established on-site waste management

program, and local waste management project in the community

• Established formal monitoring and control

programs for water, air and soil discharges

• On-site reforestation and restoration of

disturbed areas

• Significant operations training conducted to date
• f national employees, due to minimal education

levels and lack of historical mining experience

Community relations

• Significant investment in projects that

have directly benefited the local communities including:

• Development of new village and farming

assistance

• Roads
• Improvement of medical centres
• Water supply
• Emphasis with regards to local

recruitment & developing local business

• pportunities (e.g. recycling committees)
• Inata Foundation: future focus of funding
• f community related projects
• Key sustainable development projects

include livestock improvement, agriculture, agronomy and micro- enterprising

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Achievements and Opportunities

 Skilled management team with diverse worldwide mining experiences  Safety culture  Completed construction  De-bottlenecking and commissioning  Mining on schedule  Implemented AccPac financial software  Motivated national team  Effective community relations  Gomde barrage water storage  Potential to outperform resource model and extend mine life via resource

development

 Potential to expand plant capacity  Potential for heap leaching of sub-grade ore

        

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• Burkina Faso is one of the poorest countries in the world
• Per capita GDP of US$1,200
• Gold exports represent 4% of GDP in 2009
• >20% of government budget financed from international aid
• Majority of infrastructure investments externally financed
• 80% of the population relies on subsistence agriculture
• Only 1 operating gold mine in Burkina Faso in 2007; 6 operational

gold mines by end 2010

• Member of West African Monetary and Economic Union (WAEMU)
• Currency is the Community of

Francophone Africa Franc (FCFA)

• FCFA backed by French Treasury
• Trades at fixed rate with the Euro
• Convertible at 656 FCFA per Euro
• Current exchange 515 FCFA per US$

Burkina Faso economy

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Burkina Faso economy

• Listed as one of the top 10 economic reformers in the World Bank

report “Doing Business 2009”

• Tax relief measures taken 1 January ‘08 include:
• Corporate income tax rate reduced from 35% to 30%
• 20% for mining companies
• Tax on dividends from 15% to 12.5%
• 6.25% for mining companies
• Investment and mining codes permit full repatriation of profits
• 100% ownership of companies
• 90% for mining companies with 3% royalties*
• Many tax exemptions for mining industry
• Full exoneration on VAT and custom duties during construction
• 7.5% custom duties for operation period

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* 3% royalty increase proposed in March 2010 from 3% to 5% - subsequently suspended pending discussions with mining companies

Inata – upside potential

• Only main zone modelled
• Significant mineralisation outside of model
• At depth
• Parallel zones (in pit)
• Along strike

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Belahouro – Inata the tip of the iceberg

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• Inata is a small part of a large

district

• Several targets highlighted by soil

geochemistry / orpailleurs

• Large areas concealed by sand
• Potential not yet touched
• VTEM to provide systematic,

unbiased dataset

• Prioritisation of drill targets
• Development of pipeline
• Targeting new resources

Figure shows RC/DD drilling overlain on gold-in-soil image

Country Birimian Geology (km2) Gold Resources (M oz) Gold Resources (%) Ghana 45,000 110 60 Mali 124,000 33 18 Guinea 27,000 12 7 Burkina Faso 60,000 12 7 Cote d’Ivoire 113,000 8 4 Senegal 6,000 3 2 Mauritania ? 3 2

West Africa – prospectivity

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Significant areas of Birimian rocks with relatively few

• unces = underexplored

... but, not all “Birimian” is the same > each belt is a portion of an arc complex

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• Subjective assessment of

technical prospectivity

• Top-ranked countries
• Guinea, Côte d’Ivoire
• Mid-tier countries
• Mali, Ghana, Burkina Faso
• Low-tier countries
• Niger, Senegal, Mauritania

West Africa – technical ranking

Conclusions

• Inata successfully brought into
• peration after difficult

construction phase

• Skilled management team with

diverse worldwide mining experiences

• Production and exploration upside

substantially greater than expected – already being exploited

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Appendices

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Board of Directors and Senior Management

Senior Management Board of Directors

• Has been Finance Director of Helical Bar plc since 1987.

• Appointed

• Finance Director since July ‘07 having previously been CFO

• He is the Chief Executive Officer of Datum AS, Avocet's

• f

• Managing Director of UBS Investment Bank and also a

• He is a mining engineer with over 30 years experience in

40

• Richard joined Avocet in June ‘09 following the acquisition
• f Wega Mining. He has had a successful career in

• Peter is a geologist with over 20 years experience in gold

• Hans-Arne

• f Wega Mining, having joined from Vyke Communications

• Exec. Vice President

• Brett joined Avocet in November ’09 and is a human

• perations

• Jim joined Avocet in November ‘08 and was appointed

• A mining engineer with over 23 years experience, including

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Year end results - income statement

(US$000 except as stated) 9 months ended 31 December ‘09 9 months ended 31 December ‘08 Variance Comment Ounces sold (oz) 83,174 83,164 0.0% Ounces in line with prior year Average gold price (US$/oz) 995 855 +16.4% Revenue 82,945 71,230 +16.4% Revenue up on higher gold prices Cash costs (53,354) (49,561)

• 7.7%

Average cash cost up from US$600/oz to US$650/oz Cash production margin 29,591 21,669 +36.6% Deferred strip adjustment (6,032) 6,080 Cost deferred in 2008 during major strip but amortised in 2009 - no adjustments in future Other costs/financing* (15,671) (15,296)

• 2.5%

Higher depreciation and lower interest income compensated by increase in inventory Exceptional items (18,443) 19,119 (Detailed on next slide) Result for the period before tax

• After exceptional items

(10,555) 31,572

• 133.4%
• Before exceptional items

7,888 12,453

• 36.7%

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Year end results – exceptional items

(US$000 except as stated) 9 months ended 31 December ’09 9 months ended 31 December ’08 Comment Exploration impairments (10,486) (7,981) Revised evaluation of projects (mainly Indonesia) against higher hurdle rates following acquisition of West Africa prospects Deferred stripping impairment (7,957)

• Lower grades than predicted in Penjom resource model, for ore

stripped & capitalised in prior years Profit on gold collar mark to market

• 24,768

Mark to market gain on hedge liability prior to buy back of hedge Profit on disposal

• 2,332

Profit on sale of ball mill (18,443) 19,119 Profit before and after exceptional items for 9 months ended 31 December 2009 Before exceptionals Exceptionals Total Comment Profit before tax 7,888 (18,443) (10,555) Tax (4,316) 2,228 (2,088) High tax on underlying profit due to losses not utilised; no tax relief on exploration impairments Profit after tax 3,572 (16,215) (12,643) Minority interest (440) 51 (389) Attributable to Avocet shareholders 3,132 (16,164) (13,032) EPS (undiluted, US cents) 1.83 (9.46) (7.63) 42

Year end results - cash flow

9 months ended 31 December 2009 9 months ended 31 Dec 2008 (US$000) Existing Wega acquisition/ Inata Total Total Comment Operating cash flow 18,302 (1,163) 17,139 12,051 Higher gold prices in 2009; ore stockpile at Inata Interest and tax (85)

• (85)

(13,986) High tax paid on account in Indonesia in 2008 Capex (4,321) (42,526) (46,847) (20,169) Less spend in South East Asia & construction at Inata Exploration (7,695) (1,218) (8,913) (9,776) Higher spend in 2008 on evaluation of Banda properties, Bakan & resource development at N Lanut Wega acquisition

• (21,143)

(21,143)

• Pre-acquisition funding & transaction costs

Loans

• 34,200

34,200

• Standard Chartered & Macquarie draw downs

Other 287

• 287

(23,961) Gold collar close out in 2008 Net cash flow 6,488 (31,850) (25,362) (55,841) Improved cash generation in South East Asia Cash at start of period 72,418 122,596 Cash at end of period 47,056 66,749 43

Year end results - balance sheet

At 31 December 2009 At 31 December 2008 (US$000) Existing Wega/Inata Total Total Comment Goodwill 10,331

• 10,331

8,679 Relates to acquisition of North Lanut Exploration 14,812 3,247 18,059 29,055 Lower in 2009 due to impairments Tangible fixed assets 65,819 233,974 299,793 71,774 Inata includes • US$195m construction costs

• US$28m capitalised licenses
• US$11m pre-production costs

capitalised since start of mining in early 2009 Other non-current assets 15,294

• 15,294

16,524 Deferred tax assets & investments in Dynasty & Monument Working Capital 15,727 (17,255) (1,528) 11,468 Net funds/(debt) 35,039 (77,983) (42,944) 66,755 Inata column includes US$65m Macquarie loan plus Avocet’s US$25m loan from Standard Chartered drawn down to underpin Inata construction Other Liabilities (19,861) (1,768) (21,629) (16,380) Deferred tax liabilities & closure provisions 137,161 140,215 277,376 187,875

Penjom – operating statistics

• mining

• processing

• royalties and overheads

• deferred stripping
• (80)

• 45

North Lanut – operating statistics

• mining

• processing

• admin. and royalties

46

Group Reserves and Resources

• Proven

• Probable

• Reserves subtotal

• Measured

• Indicated

• Measured + Indicated

• Inferred

• Resources subtotal

47

Malaysian Reserves and Resources

• Proven

• Probable

• Reserves subtotal

• Measured

• Indicated

• Measured + Indicated

• Inferred

• Resources subtotal

48

Indonesian Reserves and Resources

• Proven

• Probable

• Reserves subtotal

• Measured

• Indicated

• Measured + Indicated

• Inferred

• Resources subtotal

49

Burkina Faso Reserves and Resources

• Proven
• Probable

• Reserves subtotal

• Measured
• Indicated
• Measured + Indicated
• Inferred

• Resources subtotal

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• Proven
• Probable
• Reserves subtotal

• Measured
• Indicated
• Measured + Indicated
• Inferred

• Resources subtotal

Guinean Reserves and Resources

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www.avocet.co.uk Cautionary note

• The information contained in this confidential document ("Presentation") has been prepared by Avocet Mining PLC (the "Company").

• While the information contained herein has been prepared in good faith, neither the Company nor any of its shareholders, directors,
• fficers, agents, employees or advisers give, have given or have authority to give, any representations or warranties (express or

• f any other written or oral information made or to be made available to any interested party or its advisers (all such information being

• r for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the

• Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company

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