JOHANNESBURG (miningweekly.com) – West African miner Avocet revealed on Thursday that it had entered discussions with Macquarie Bank Limited (MBL) to buy back a significant portion of its hedge book as indications of a lower mineral reserve at its Inata gold operation, in Burkino Faso, emerged.
The company, which was “exploring all options” to fund the buy-back, said the gold mineral reserves were expected to reach between 900 000 oz and 1.2-million ounces as at December 2012.
This represented a 650 000 oz to 900 000 oz reduction compared with the mineral reserve of 1.85-million ounces recorded at December 2011.
“MBL and the company are in discussions regarding arrangements to ease near-term liquidity constraints,” Avocet said, noting that reducing its hedge book would increase cash flow generation and maximise funds to finance corporate activities and support its investment plans at other projects.
An accurate mineral reserve estimation and the resultant noncash impairment would be determined by March after an analysis of several factors, including the stripping ratios, capital expenditure and timing of cash flows.
The revised mineral reserve excluded the Souma deposit, 20 km east of Inata, which had a mineral resource in excess of 500 000 oz.
“Avocet will undertake a step-out drilling programme at Souma aimed at evaluating the expanded resource potential and generating a new mineral reserve by the end of 2014,” the company said.
The Inata mine was expected to produce about 135 000 oz of gold at a cash cost of about $1 050/oz to 1 100/oz during 2013.
The operation produced 135 189 oz at a cash cost of $1 000/oz in the 2012 full year, compared with the 166 744 oz produced at $693/oz in 2011.