TORONTO, ONTARIO
-- (MARKET WIRE) --
11/24/10
--
Avion Gold Corporation
(TSX VENTURE: AVR)(OTCQX: AVGCF) ("Avion" or the "Company")
today announces its financial results for the third quarter of 2010. All amounts
are in
United States
dollars unless otherwise indicated.
Highlights include:
- During the third quarter the Company had earnings of
$13.6 million
, or
$0.04
per share, and cash flow from operations before working capital
adjustments of
$17.3 million
.
- During the third quarter, the Company sold 25,700 ounces of gold at an
average realized price of
US$ 1,233
per ounce, which was higher than the
average realized price of
US$ 1,194
for the previous quarter.
- Gold revenue for the third quarter was
$31.7 million compared to $13.9 million
for the comparable quarter last year.
- Net working capital as at September 30, 2010 was $38.1 million (including
cash and cash equivalents of $ 28.2 million).
- Underground development commenced at the Tabakoto deposit on
October 6, 2010. The Company also started waste rock stripping at its Dioulafoundou
deposit in late October.
- Subsequent to the end of the quarter, the Company bought out the 1%
royalty on the Tabakoto and Segala projects for a cash payment of $2 million.
Commenting on the third quarter results, Avion's Chief Financial Officer, Mr.
Greg Duras
stated: "Third quarter results achieved were very encouraging as the
Company generated significant income and operating cash flow. At current gold
prices, we believe the Company will have sufficient cash resources from
operations to finance its capital intensive programs, which are underway. The
Company has completed the third quarter of 2010 with a strong balance sheet and
is on track to complete its first full year of commercial production with strong
operational and financial results."
Financial Discussion
The Company reported net income of
$13,588,390
(
$0.04
per share) for the three months ended
September 30, 2010
compared to net income of
$444,261
(
$0.00
per share) for the three months ended
September 30, 2009
. Other comprehensive income for Q3-2010 amounted to
$2,247,567
(Q3-2009: other comprehensive income of
$2,602,078
), which represents the foreign exchange difference determined using the current
rate method to translate the financial statements to US$.
During Q3-2010, the Company sold 25,700 ounces of gold and generated
$31,702,673
in gold sales revenue. In Q3-2009, 14,796 ounces of gold was sold generating
$13,889,255
in gold sales revenue. Mine and processing expenses were
$11,763,087
(Q3-2009:
$9,765,102
), which includes
$278,773
, (Q3- 2009:
$78,260
) in amortized deferred stripping costs, and the Company recorded amortization
and depletion of
$2,807,928
(Q3-2009:
$962,192
). The Company is amortizing deferred property, plant and equipment related to
the
Mali
projects on a unit of production basis from the current mine plan over an
estimated 333,558 ounces (approximately four years). The Company was subject to
an aggregate NSR of 7% on metal sales during the quarter. Royalties expense
totaled
$2,078,488
for the ounces of gold sold during Q3-2010 (Q3-2009:
$1,287,968
). Subsequent to the end of the quarter, the Company bought out a 1% royalty for
$2,000,000
.
The Company also incurred a foreign exchange translation loss of
$1,029,595
during the Q3-2010 compared to
$422,728
during Q3-2009. The FCFA remained weak compared to the US$ during the quarter
and a large proportion of the Company's net assets are carried in FCFA.
Operations Discussion
Avion produced 23,609 ounces of gold during Q3-2010, which is an 89%
improvement over the 12,517 ounces produced in the third quarter of 2009. The
Tabakoto plant processed 178,800 tonnes of ore at an average grade of 4.28 g/t
Au and the average mill recovery for the quarter was 96.2%. This compares to
third quarter of 2009 production of 125,100 tonnes of ore at an average grade of
3.25 g/t Au and a mill recovery of 95.5%.
Capital projects
Avion has contracted
Byrnecut Offshore Pty Ltd
("Byrnecut"), a large international mining contractor based in
Perth, Australia
, to carry out underground development of the Tabakoto deposit. Portal
development at the bottom of the existing Tabakoto open pit commenced on
October 6, 2010
. The contract also includes underground development of the Segala deposit, to
commence in Q1, 2011.
Avion has received a cost estimate report on the Tabakoto plant expansion
that supports yearly production of 200,000 ounces of gold per year, subject to
completion of a technical report once new mineral resource models are generated
based on the 2010 exploration program and development of the Tabakoto
underground mine.
The cost estimate report, by an Australian engineering firm, recommended that
the Company install a 4,000 tonnes per day semi-autogenous grinding
("SAG") mill. The Company has also determined that keeping the
existing cone crushers and ball mill as a separate circuit will allow for less
down time during construction, greater flexibility when operating in the future,
and the potential to further increase gold production. With these assumptions,
the estimated cost of the expansion, using all new equipment, has been estimated
at
$57 million
. The opportunity exists to procure used equipment, and source from alternative
suppliers, in an effort to reduce capital costs. Detailed engineering is now
being done by an Engineering, Procurement, Construction Management ("EPCM")
firm,
GENIVAR Limited Partnership
of
Montreal
. The intent is to quickly verify the size of the proposed grinding equipment
and place orders for a SAG and a ball mill. Avion plans to increase plant
throughput from 2,000 tonnes per day to 4,000 tonnes per day. This project is
anticipated to be completed in 2012. Activities during 2010 will focus on
detailed engineering analysis, and ordering of long lead time equipment. Most of
the construction will take place in 2011, with commissioning planned in 2012.
Additionally, the Company has received final reports for all of the leach and
gravity gold recovery test work that has been performed on Segala and Tabakoto
sub-grade and low grade mineralized material. The results of this test work will
be considered in the final design configuration of the expanded plant. The test
work indicated that a significant amount of gold, even in the sub-grade
mineralization, can be recovered using a gravity circuit, with recoveries
between 72% and 87%, depending on the grind size. Heap leach test work studies
were halted once it became evident that gravity gold recoveries were as high as
those that might be expected by leaching.
It is estimated that mill source feed will be derived from underground
sources at Segala and Tabakoto. However management believes that recent
exploration success at the Dioulafoundou and Djambaye II zones and the
acquisition of
Axmin's Kofi Project
, have the potential as alternative feed sources for the Tabakoto mill.
Continued exploration, in 2010 has the potential to firm up these prospective
alternative ore sources. Studies would then evaluate which ore source would
provide the best return. The Company has received its Environmental Permit to
mine the Dioulafoundou Deposit. Preparations for mining, such as a stream
diversion, fencing around the deposit, and access road construction are
complete. Subsequent to Q3, the Company started waste rock stripping at
Dioulafoundou in late October. In 2011, the Company plans to supplement Segala
open pit ore with production from Dioulafoundou, and development ore from
Tabakoto and Segala underground operations.
Avion has signed capital lease agreements with
Volvo Construction Equipment AB
of
Sweden
and
Amalgamated Mining Inc.
of
Canada
for the supply of 12 underground haul trucks and a wheel loader, and two
underground
Caterpillar
loaders, respectively. The purchase of this equipment will reduce future
operating costs by decreasing the reliance on contractor-supplied mining
equipment.
Complete interim financial statements and related Management's Discussion and
Analysis are filed under the Company's profile on www.sedar.com.
All amounts are in
United States
dollars unless otherwise indicated.
About
Avion Gold Corporation
Avion is a Canadian-based gold mining company focused in
West Africa
that holds 80% of the Tabakoto and Segala gold projects in
Mali
. Gold production commenced at these projects in 2009 with just over 51,000
ounces produced; 2010 production is estimated at 75,000 to 85,000 ounces.
Production sustainability is supported and enhanced by an aggressive 2010 drill
program over an approximately 600 km(2)exploration package that both surrounds
and is near to our existing mine infrastructure. Additionally, a new1,670
km(2)exploration property in
Burkina Faso
is expected to continue to return good results from an ongoing drill program.
These properties are the subject of an approximate
US$ 12 million dollar
, 60,000 metre plus, drill-focused exploration program in 2010, which is
expected, based on results to date, to add new resources and future
opportunities for Avion. Avion continues to progress towards its longer term
goal of producing 200,000 ounces of gold per year and is evaluating and
developing an underground mine plan for the Segala and Tabakoto deposits. Avion
has a highly skilled management team, with a focus on growth and consolidation
within
West Africa
.
Cautionary Notes
The ability of Avion to increase production to 200,000 ounces of gold per
year has not been the subject of a feasibility study and there is no certainty
that the proposed expansion will be economically viable.
This press release contains "forward-looking information" within
the meaning of applicable Canadian securities legislation. Forward-looking
information includes, without limitation, statements regarding the development
potential and timetable of the
Mali
projects; the future price of gold; the estimation of mineral resources;
conclusions of economic evaluation (including scoping studies); the realization
of mineral resource estimates; the timing and amount of estimated future
production, development and exploration; costs of future activities; capital and
operating expenditures; success of exploration activities; mining or processing
issues; currency exchange rates; government regulation of mining operations; and
environmental risks. Generally, forward-looking information can be identified by
the use of forward- looking terminology such as "plans",
"expects" or "does not expect", "is expected",
"budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or
"does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results
"may", "could", "would", "might" or
"will be taken", "occur" or "be achieved".
Forward-looking information is subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, level of activity,
performance or achievements of the Company to be materially different from those
expressed or implied by such forward-looking information, including but not
limited to: general business, economic, competitive, geopolitical and social
uncertainties; the actual results of current exploration activities; foreign
operations risks; other risks inherent in the mining industry and other risks
described in the annual information form of the Company, which is available
under the profile of the Company on SEDAR at www.sedar.com.
Although the Company has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause results not
to be as anticipated, estimated or intended. There can be no assurance that such
information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward- looking information. The
Company does not undertake to update any forward-looking information, except in
accordance with applicable securities laws.
Cautionary Non-GAAP Statements
Avion believes that investors use certain indicators to assess gold mining
companies. The indicators are intended to provide additional information and
should not be considered in isolation or as a substitute for measures of
performance prepared with GAAP. "Cash flow from operating activities before
changes in non-cash working capital" is a non-GAAP performance measure
which could provide an indication of the Company's ability to generate cash
flows from operations, and is calculated by adding back the change in non-cash
working capital to "Cash provided by (used for) operating activities as
presented on the Company's consolidated statements of cash flows. "Cash
cost per ounce produced" is a non-GAAP performance measure which could
provide an indication of the mining and processing efficiency and effectiveness
at the Mine. It is determined by dividing the relevant mining and processing
costs excluding royalties by the ounces produced in the period. There may be
some variation in the method of computation of "cash cost per ounce
produced" as determined by the Company compared with other mining
companies. In this context, "ounces produced" includes in-process and
dore inventory along with ounces of gold sold in the period. "Cash costs
per ounce produced" may vary from one period to another due to operating
efficiencies, waste to ore ratios, grade of ore processed and gold recovery
rates in the period.
The following table provides a reconciliation of mining and processing costs
per the financial statements and cash operating for the purposes of calculating
cash costs per ounce produced.
Three months ended Nine months ended
September 30, 2010 September 30, 2010
Mining and processing expenses 11,763,087 38,573,597
By-product silver sales credit (86,582) (236,911)
Inventory movements and adjustments 71,000 420,098
Cash operating costs 11,747,505 38,756,784
Divided by ounces of gold produced 23,609 61,541
Cash cost per ounce produced 498 630
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS
THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Contacts:
Avion Gold Corporation
Michael McAllister
Manager, Investor Relations
(416) 309-2134
info@aviongoldcorp.com