Period ended June 30, 2013.
ST. PETER PORT, Guernsey, Aug. 7, 2013 /CNW/ -
Overview of the Company
Avnel'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").
Avnel operates the small underground Kalana gold mine (the "Kalana Gold Mine") located in the far northwest of the Kalana Permit extracting narrow quartz veins and with a gravity only recovery process.
The Kalana Permit was acquired by Avnel in late 2002 following which the existing plant and infrastructure were upgraded. Mining operations were resumed by SOMIKA in January 2004 with commercial production commencing in March 2004.
Avnel's strategic objective, through SOMIKA, is to commercially exploit underground reserves at the Kalana Gold Mine, whilst exploring for commercially viable opportunities for the exploitation of a bulk mineable deposit.
Avnel entered into an agreement (the "Option Agreement") with IAMGOLD Corporation ("IAMGOLD") on August 10, 2009 pursuant to which IAMGOLD had the right to earn a 51% interest in Avnel's interest in the Kalana Permit by spending $11 million over a three year period and making two payments to Avnel of $1 million each on August 10, 2009 and August 10, 2010. The IAMGOLD work programme focussed primarily on the evaluation of the Kalana Mine and its environs to examine the potential for a large scale, bulk mineable resource. The Option Agreement automatically lapsed on March 1, 2013 as IAMGOLD did not produce a Resource Study as defined in the Option Agreement within the timescale allowed.
IAMGOLD spent approximately $32.0 million on the Kalana Main Project between the periods, mid-August 2009 to February 28, 2013. The costs incurred by IAMGOLD are represented by loans to the Company's subsidiary Avnel Gold, Limited which were on lent to SOMIKA. IAMGOLD's loans to Avnel Gold, Limited are forfeited to Avnel.
Avnel has engaged Dundee Securities Limited as its exclusive financial advisor in assisting Avnel in exploring all options available to maximise the value of the Kalana Project and shareholder value.
Kalana Permit Exploration
Avnel has received an extensive geological database after the completion of 127,000 metres of drill holes at the Kalana Mine that has added value to the future development of a bulk mineable deposit. At the Kalanako prospect, IAMGOLD completed 27,000 metres of drilling. IAMGOLD reported that 14 gold anomaly targets were identified on the Kalana Permit that are worthy of additional exploration.
Avnel has been working with its consultants Roscoe Postle Associates ("RPA") and Snowden in analysing the database arising from the exploration program conducted by IAMGOLD. The final drill assay results (15,340 assays or 12% of the total assays) and the geological logging were received from IAMGOLD during the first quarter. RPA updated the data base with the new data and reviewed their geological model. RPA have recommended that higher grade assays from the 2010-2012 drill program might benefit from re-assaying by a more exhaustive assay method. RPA recommend that a screens metallic assay on a 1kg sample be implemented.
Avnel has received two geological models, one from RPA and one from IAMGOLD. The methodology of the two geology model differs and Avnel will review the models with Snowden Mining Industry Consultants.
IAMGOLD and RPA identified the technical challenge to evaluate grade associated with the high content of free milling gold (nuggets) in the Kalana Mine. Historically gold grades from drill holes have under estimated mined grades at Kalana.
IAMGOLD conducted a limited number of metallurgical tests to address the under estimation of gold in drill hole samples. The main variable was a larger sample weight than the standard 50 gram fire assay used for all assays reported to date.
In 2011 metallurgical test work was carried out with seven samples from two RC holes and underground samples (weighing 50-70kgs per sample) sent to Lakefield Laboratories in Canada. IAMGOLD have reported that the seven Kalana 50 kg metallurgical test samples mostly showed a significantly higher grade than the 50 gram fire assay results.
In 2012 a total of fifty bulk metallurgical samples were submitted for heavy concentrate analysis by using the Knelson concentrator at the SGS laboratory in Johannesburg. IAMGOLD reported that 50g fire assay results underestimate grade when the FA grade is 4g/t or higher. In the range 1g/t to 4g/t the FA and the bulk sample assays report similar results. In the range below 1g/t there appears to be some limited upgrade in bulk sample assays compared to 50g FA results.
IAMGOLD reported initial indications are that the bulk samples analysed in Johannesburg and metallurgical samples previously analysed in Canada display the same behaviour as illustrated by the "Poisson effect" during sub-sampling with the global under-estimation of grade using a classical FA 50g approach.
Avnel has appointed Snowden to review the sampling procedures utilised at Kalana deposit which demonstrates a high coarse gold nugget effect. Snowden completed the study in July 2013 after reviewing all historical reports and data on the Kalana deposit, and has reported that alternative assay protocols may be more suitable to optimise the coarse gold mineralisation present in the Kalana deposit. Dr Simon Dominy, from Snowden, an expert in this field, has reviewed the nature of the coarse gold mineralisation at Kalana and concluded the veins bear dominant coarse gold mineralization, potentially >35% plus 100 micron based on a liberated gold study and up to 75% based on Screen Fire Assay (SFA) results. The IAMGOLD protocols are likely to underestimate gold grade. Three options were considered for improved protocols for sample preparation and assay. These included the use of metallic screen fire assays, Leachwell cyanide extraction method and laboratory-scale gravity processing of bulk samples. The use of these protocols will reduce the sampling error inherent in the IAMGOLD sample protocol. After discussion with Snowden, Avnel agreed to select SFA as the option to be used for the re-assay of samples from the 2010-2012 drill programs. SFA has been chosen as the most appropriate protocol for re-assaying the RC and diamond drill pulp rejects available from the IAMGOLD drilling campaigns.
The selection of samples for re-assay commenced in June 2013 and the results of approximately 20,000 samples are expected in December 2013. These results will be used by Snowden to prepare a NI 43-101 Mineral Resource Estimate in early 2014.
Fougadian Exploration Permit
On October 17, 2006, Avnel was awarded the Fougadian Exploration Permit which lies south of the Kalana Permit. The Fougadian Exploration Permit covers an area of 150 square kilometres including a portion of the Niessoumala exploration area. The permit was awarded in accordance with the 1999 Mining Code and a foundation agreement (the "Foundation Agreement") was signed between Avnel Mali, a 100% wholly-owned subsidiary of Avnel, and the Government of the Republic of Mali. The Foundation Agreement provides for the exploration and exploitation of Group 2 minerals as defined in the 1999 Mineral Code. Group 2 minerals include gold and silver, and base metals, but exclude precious stones, semi-precious stones and fossils.
Avnel applied for a renewal of the Fougadian Exploration Permit and this was granted in March 2010, with the commencement date December 2009. Avnel has specified a new area of 75 sq. km as required by the Malian Code. This area lies in the northern half of the original permit and includes the largest anomaly Avnel 1 (Maramele). The renewal was for 3 years and Avnel has committed to expenditures of $1.9 million over this period. As at December 31, 2012 expenditure totalled US$1.8 million.
The Permit expired in December 2012. Avnel is applying for a two year extension of the permit and is confident this will be granted during the third quarter, 2013. It is IAMGOLD's responsibility to obtain the necessary renewal at its cost.
Joint Venture Arrangements Agreement Fougadian Permits
In 2010, Avnel Gold and IAMGOLD entered into the Joint Venture Arrangements Agreement whereby IAMGOLD has the option to acquire up to an initial 51% interest in Avnel's 90% interest in the Fougadian Exploration Permit as described below.
The Fougadian Exploration Permit held by Avnel previously comprised 150 sq. km. to the south of and abutting the Kalana Exploitation Permit. Avnel relinquished the southern half of its ground in accordance with the Malian Mining Code and was granted a new exploration licence on the northern half on March 23, 2010. IAMGOLD applied for an exploration permit in respect of the southern 75 sq. km and this was granted on June 20, 2012. The combined permits are referred to as the "Fougadian Exploration Permit".
Following the military coup in Mali in March 2012, IAMGOLD halted the planned drilling program. A ground geophysics program was completed over the Avnel 1 (Maramele) target by SAGAX. 192 line kilometers were completed and results received. The results confirm the previous interpretations.
IAMGOLD completed 8,836 meters of air core drilling during the quarter and the samples have been submitted to SGS Mineral Laboratories in Bamako. Drilling was focused on the Maramale and Zambala targets on the Fougadian North permit. Field work has been suspended during the annual rainy season. During the fourth quarter it is planned to complete 16,000m of air core drilling on the Fougadian South permit. The 2013 budget is $1 million.
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Selected Annual Information
(In thousands of U.S. dollars except per share amounts) |
| |
| | | Three months ended June 30 | | Six months ended June 30 |
| | | 2013 | | 2012 | | 2013 | | 2012 |
| Total Revenue.................................... | | 4,684 | | 4,393 | | 8,881 | | 9,427 |
| Total Expenses................................... | | 5,625 | | 4,894 | | 9,882 | | 9,946 |
| Other income/(expenses).................... | | 42 | | 2,760 | | 1,322 | | 7,392 |
| Net (loss)/profit.................................... | | (899) | | 2,259 | | 321 | | 6,873 |
Net (loss)/profit from continuing
operations attributable to parent | | (430) | | 2,174 | | 797 | | 7,703 |
Net (loss)/profit per share
attributable to parent | | ($0.002) | | $0.011 | | $0.004 | | $0.040 |
| Weighted average shares outstanding | | 191,743,724 | | 191,743,724 | | 191,739,724 | | 191,739,724 |
| | | | | | | | | |
| Balance Sheet | | | | June 30, 2013 | | June 30, 2012 | | Dec 31, 2012 |
| Working capital surplus | | | | 12,078 | | 12,541 | | 12,226 |
| Total assets........................................ | | | | 29,247 | | 31,070 | | 31,051 |
| Shareholders' equity........................... | | | | 33,566 | | 32,662 | | 32,750 |
Results of Operations
Metal revenues reduced to $8,881,000 in the half year to June 30, 2013 from $9,427,000 in the half year to June 30, 2012. This was as a result of a reduction in the realised average sales price of gold from $1,643 per ounce in the half year to June 30, 2012 to $1,496 per ounce in half year to June 30, 2013 being partly offset by increased gold ounces sold from 5,720 ounces in the half year to June 30, 2012 to 5,922 ounces in the half year to June 30, 2013.
Total expenses reduced from $9,946,000 in the half year to June 30, 2012 to $9,882,000 in the half year to June 30, 2013. Operating costs per ounce of gold produced for the half year to June 30, 2013 reduced from $1,199/oz. to $1,164/oz.
Avnel recorded a net profit of $321,000 ($0.004 attributable profit per share) for the half year to June 30, 2013, compared to a net profit of $6,873,000 ($0.040 attributable profit per share) in the comparative period in 2012. Included in the first half year of 2013, is an accounting finance gain on the fair value of derivative financial instruments of $1,600,000, arising from a reduction in the Company's share price from December 31, 2012. This compared to a profit of $7,444,000 in the half year to June 30, 2012. These fair value accounting gains reported have no cash effect on the Company.
As compared to the balance sheet as at December 31, 2012, Avnel's cash and cash equivalents as at June 2013, decreased by $738,000 from $7,979,000 to $7,241,000. This decrease was mainly due to working capital movements as a result of delayed VAT refunds.
There was a working capital surplus of $12,078,000 as at June 30, 2013 compared to working capital surplus of $12,226,000 as at December 31, 2012. The working capital figure reported at December 31, 2012 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 $31,051,000 as at December 31, 2012 to $29,247,000 at June 30, 2013.
Total stockholders' equity also increased to $33,566,000 as at June 30, 2013 from $32,750,000 at December 31, 2012. The retained deficit reduced by $1,026,000 as a result of the net profit made in the half year to June 30, 2013.
Second Quarter Results
Metal revenues increased to $4,684,000 in the quarter to June 30, 2013 from $4,393,000 in the quarter to June 30, 2012. This was as a result of increased gold ounces sold from 2,740 ounces in the quarter to June 30, 2012 to 3,372 ounces in the quarter to June 30, 2013 partly offset by a reduction in the realised average sales price of gold from $1,599 per ounce in quarter to June 30, 2012 to $1,386 per ounce in quarter to June 30, 2013.
Total expenses increased from $4,894,000 in the quarter to June 30, 2012 to $5,624,000 in the quarter to June 30, 2013, arising from finished goods movement. Operating costs per ounce of gold produced for the quarter to June 30, 2013 reduced from $1,247/oz. to $1,160/oz.
Avnel recorded a net loss of $899,000 ($0.002 attributable loss per share) for the quarter to June 30, 2013, compared to a net profit of $2,259,000 ($0.011 attributable profit per share) in the comparative period in 2012. Included in the June quarter of 2012, is an accounting finance gain on the fair value of derivative financial instruments of $2,847,000. There was zero comparative derivative financial instrument profit in the June 2013 quarter. These fair value accounting gains reported have no cash effect on the Company.
Avnel's cash and cash equivalents decreased by $158,000 in the quarter to June 30, 2013 from $7,399,000 to $7,241,000.
Outlook
Snowden Mining Industry Consultants have reviewed the gold sampling procedures for the Kalana deposit. Following their report Avnel has commenced a program to re-assay the selected 2010-2012 drill hole samples using a new sampling protocol, namely screen fire assay. This methodology will better capture the coarse mineralisation in the deposit and reduce the sampling error in the standard 50g fire assay protocol used by IAMGOLD. The sample preparation and screen fire assaying will be carried out by SGS Mineral Services laboratory in Bamako. Approximately 20,000 samples will be re-assayed and the results will be available by December 2013.
Avnel has appointed Snowden Mineral Industry Consultants to complete a Mineral Resource Study utilising the new assay data. This report will be available by February 2014. Snowden consultants have visited Kalana to review the exploration data and the geological model. Snowden reported at the end of the site visit that the exploration data base meets international standards. During the next four months Snowden will work closely with Avnel to update the geological model and incorporate new assay data.
On completion of the Mineral Resource Study Avnel will consider the commencement of a Pre-Feasibility Study.
For the remainder of 2013, Avnel is planning gold production of 5,100 ounces from 25,000 tonnes of ore milled, at an average grade of 7.6g/t. This plan is very sensitive to grade and gold price. The plan assumes that the major ore sources will be Vein 20 and Vein 18D. Assuming a gold price of $1,300 per ounce, cash costs may exceed revenues. The company has initiated a productivity drive that aims to reduce this cash loss The Company intends to sustain the operation as long as feasible while the exploration 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 to prevent flooding of the mine and permit access for future exploration activity. The estimated cost of care and maintenance is $190,000 per month including administration costs in Mali.
The mine plans to advance ore development 107 metres during the remainder of 2013. Development will focus on opening up Vein 18D below the 180m level and Vein 20 below the 180m level. Dependent on results, development will continue.
It is forecast that the potential mineable reserves available from the current mine infrastructure are approximately 52,000 tonnes at 7.5g/t containing 13,000 ounces. This assumes that ongoing development of Vein 20 and Vein 18D below 180m level will be successful and the average gold price will be $1,300 per ounce. This will allow mining to average 4,200 tonnes per month to June 2014.
Current Events in Mali
Following the turmoil in the north of Mali and the military coup d'état on March 21, 2012, stability has been restored with the intervention of French and ECOWAS troops. The First round Presidential elections were held peaceably on July 28, 2013 with a high vote turn out. The conduct of the election has been internationally acclaimed and a second round "run-off" is expected to take place shortly.
The Annual Financial Statements and Annual Information Form are available on Sedar (www.avnelgold.com).
ABOUT THE COMPANY
Avnel 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 the Kalana Exploitation Permit. The Kalana Project is situate in south west Mali. The 387.4 sq km exploitation permit has a NI-43-101 compliant resource of 1,020,000 oz (at an average grade of 10.4 g/t) in the measured and indicated category, and 249,000 oz (at an average grade of 3.4 g/t) in the inferred category. 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.
Technical Information and Qualified Person/Quality Control Notes
Information in this release arising subsequent to the date of the 2005 Snowden Technical Report regarding the Kalana Gold Mine and exploration activity is provided by Avnel management under the supervision of Roy Meade (a director of the Company) who is a non-independent "Qualified Person" as such term is defined in National Instrument 43-101. Portions of the information are based on assumptions, qualifications and procedures which are not fully described herein.
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.
