Avnel Gold (AVK.TO): production doubles but loses $7.1-m
2006-03-31 17:24 ET - News Release
Mr. Roy Meade reports
AVNEL GOLD MINING LIMITED (AVK: TSX) ANNOUNCES 2005 ANNUAL RESULTS PERIOD ENDED DECEMBER 31, 2005.
Gold production at Avnel Gold Mining Ltd.'s Kalana mine increased by 100 per cent from 7,396 ounces in 2004 to 14,923 ounces in 2005 and cash costs reduced to $484 per ounce of gold sold, down from $791 per ounce sold in 2004. Gold production in quarter four was 5,222 ounces, the highest quarterly gold production since the mine started in 2004. The increase in production is due to higher underground grade mined and higher gold recoveries in the plant.
Avnel Gold Mining recorded a net loss of $7.1-million (29 cents per share) for the 12 months ended Dec. 31, 2005, and a net loss of $1.7-million (three cents per share) for the fourth quarter, compared with net losses of $5.4-million ($58.00 per share) and $1.9-million ($19.27 per share) respectively for the same periods of 2004. The high loss per share for the year 2004 results from there being only 200,000 shares outstanding prior to the initial public offering on June 30, 2005, when a further 47,193,605 shares were issued.
Exploration: Avnel commences to drill define two recently discovered high-grade mineralization zones.
Following on the success of the June, 2005, percussion drill program at the 387-square-kilometre Kalana exploitation permit in southern Mali, the company has completed a technical report which concluded that a follow-up diamond core and reverse circulation drill program would be justified in order to drill define and expand the newly discovered, high-grade gold zones at grid 8. A diamond drill program began in November, 2005, and results will be available in April, 2006. It is planned to continue a reverse circulation drilling on grid 8 in quarter two, 2006
The Djirila Main zone is interpreted as a northeast-trending, fault-controlled, quartz-vein-stockwork zone located on the northwest side of Djirila hill. This zone is characterized by high-grade gold mineralization and produced high gold assay intervals (for example, 73.6 grams per tonne over two metres from 70 to 72 m in RC-09a and 45.9 g/t Au over four m from 114 to 118 m in RC-15). In addition, the Djirila Main zone also contains significant widths of lower-grade intersections (for example, 5.4 g/t Au over 36 m from 64 to 100 m in RC-09a).
The Djirila South zone is interpreted as a northeast-trending, fault-controlled, quartz-vein-stockwork zone located on the southeast side of Djirila hill. This zone is characterized by wide intersections of lower-grade mineralization and produced several significant gold assay intervals (for example, 4.1 g/t Au over six m from 17 to 23 m in RAB-090 and 8.3 g/t Au over 22 m from 35 to 57 m in RAB-118).
Operations
The Kalana mine was initially developed and mined by Sogemork from 1985 to 1991. The mine was then put on care and maintenance until Somika (80-per-cent subsidiary of Avnel Gold) commenced production in 2004. The mine has limited developed ore reserves and it is planned to complete the necessary shaft sinking and haulage development to enable the mine to achieve an annual production rate of 60,000 tonnes and an average 26,000 ounces of gold over an initial eight-year period. During 2006 underground production will increase as new mining areas are exposed by continuing development.
Production data for the Kalana mine for the periods ended Dec. 31, 2005, and 2004 are as follows. The following table shows the production from the Kalana gold mine:
2005 2004
Tonnes milled 34,885 35,667
Gold grade
-- g/t 15.5 9.4
Recovery rate 86.1% 68.6%
Gold production
-- ounces 14,923 7,396
Cost per
tonne milled $155 $144
Operating cost
per ounce of
gold sold $484 $791
Tonnes milled in 2005 were 2 per cent below the production achieved in 2004 and 20 per cent below the budgeted production. Gold production at 14,923 ounces was 1 per cent below budget, reflecting higher grades and gold recovery. During 2005, underground production has mainly come from mining of a new ore reserve block below the lowest haulage level (100 m below surface). The ore reserve block is being developed down dip and rock is scraped up dip to the haulage level. This mining method will limit the production capacity of the mine until ore can be gravitated to new haulages being developed on the 150 and 180 levels lower in the mine. Productivity of the underground crews is improving, but at a slower rate than anticipated.
The gold grade of underground ore mined of 17.12 g/t in 2005 was 62 per cent higher than that obtained in the previous year (10.58 g/t). The grade was also 3.35 g/t higher than budget of 13.77 g/t because average stoping widths were reduced and actual grades of ore mined were significantly higher than that indicated by the reserve model. The mill grade of 15.5 g/t (2004 -- 9.4 g/t) obtained was lower than the underground grade as it was reduced by the processing of 4,614 tonnes of coarse sand (2004 -- 4,604 tonnes) at 4.9 g/t (2004 -- 4.7 g/t). In the fourth quarter, 8,442 tonnes, including 235 tonnes of coarse sand, were milled at a mill head grade of 21.96 g/t. Gold recovery was 87.6 per cent and 5,222 ounces were produced
Gold recovery in 2005 also exceeded both the prior year and the budgeted rate. This was because of improved performance in the recovery section, lower-than-budgeted throughput and higher-than-budgeted head grades. When ore production increases in the future, it is expected that the recovery rate will decrease to between 79 per cent and 84 per cent, depending on head grades and plant performance. Gold production increased to 14,923 ounces, approximately double the production achieved in 2004.
Mine development totalled 249 metres in 2005 compared with 168 metres in 2004. Underground development increased to 103 metres during quarter four 2005 but progress was unsatisfactory at No. 2 shaft. The shaft is being sunk from 125 metres below surface to a final depth of 200 m below surface. Shaft sinking has advanced 61 metres but only eight metres were achieved during the fourth quarter. During the quarter the station steelwork and a mid-shaft loading facility were installed at the 150-level shaft station. The mid-shaft loading facility will enable the 150-level haulage (previously named the 250 level) to be developed while sinking of the shaft and development of the 180-level station is completed. The 150 level was advanced 17 metres. The development of the 150 level is five months behind schedule. The main factor delaying the shaft sinking was inexperienced mining crews and turnover of the expatriate staff. The expatriate staff for mine development has been increased from two to six and the Malian mining crews have been increased.
We seek Safe Harbor.
