Avion wants to be consolidator in W Africa, targets 500 000 oz/y

20th May 2009 By: Liezel Hill

TORONTO (miningweekly.com) - Toronto-based Avion Resources, which started producing its first gold this year from operations in Mali, sees itself as a potential consolidator of gold assets in West Africa, and is aiming to reach annual production of half a million gold ounces within four or five years, chairperson Stan Bharti said on Wednesday.

Avion bought the then shuttered Tabakoto mine and the nearby Segala deposit last year from fellow Canadian Nevsun Resources, and declared commercial production at the now-combined operation earlier this month.

The company expects to produce 66 000 oz this year, and 100 000 oz in 2010, but is already studying a potential expansion to double the processing capacity at Tabakoto, which would bump production up to 200 000 oz/y, as early as 2011.

On Tuesday, Avion published new openpit and underground resource figures for Tabakoto and Segala, which now total 10,82-million tons, grading 3,48 g/t gold, totalling 1,21-million ounces of gold.

Inferred resources stand at 10-million tons, grading 3,5 g/t gold, totalling 1,39-million ounces.

Nevsun began production at Tabakoto in June 2006, but failed to turn a profit at the mine, and finally placed it on care-and-maintenance in 2007, to allow the company to focus on its lucrative Bisha project, in Eritrea.

The big challenge with the Mali assets was "proving they could work", particularly as investorsĀ  could not help but be reminded of Nevsun's experience with the operations, Bharti commented.

"But I think we are now pretty confident now that this asset works. The recoveries are good, the grades are as forecast, the mill is working fine, there have been no negative surprises so far."

With cash in the bank and the reasonable expectation of ongoing cash flow, Avion has begun looking at further ways to grow.

The company announced this month it has bought a 16% stake in Midlands Minerals, which has two gold projects in Ghana and some exploration ground in Tanzania.

Avion is a passive shareholder at this stage, but plans to meet with Midlands management and may consider increasing its ownership to 19,9% of the company.

"Strategically, it's a very good fit for us...this is an asset that has got a good resource base, its in a great country - Ghana - with good geology, and very good potential," Bharti said.

"We also believe the gold market is going to get stronger, the valuations will get higher, so to buy something right now at this valuation, we thought it was a great opportunity."

Avion will also continue to consider other opportunities, he said.

"The long term vision for Avion is to be a consolidator, we think there is great opportunity in Western Africa to be the next consolidator."