Brokers downbeat on Avocet Mining's reserve re-estimate
Thu 11:32 am by Giles Gwinnett Westhouse notes this is another "disapppointing" update from the company and says it will now be reviewing its numbers
City analysts took a dim view this morning of West Africa-focused Avocet Mining's (LON:AVM)'s re-estimate of mineral reserves at its Inata mine in Burkina Faso.
The company's shares plummeted over 44% this morning after it said
test work had now put the reserve figure at between 900,000 and 1.2
million ounces compared to the December 2011 estimate of 1.85 million
ounces.
The latest figure is net of depletion during 2012 of 160,000 ounces
meaning the effective decrease is 0.49 mln to 0.79 mln ounces.
Westhouse notes this is another "disapppointing" update from the company and says it will now be reviewing its numbers.
It rates the stock 'neutral' and targets a price of 70p.
"The knock on effect of this is that while production will remain at
around the 2012 level of 135,000 ounces for 2013, it is now expected to
fall to around 100,000 ounces for the rest of its mine life, below our
expectation of around 160,000 ounces.
"Avocet anticipates that Inata's new LOM (life of mine) will be until
2020, which is shorter than our previous expectation of it running
until 2027."
Further, Westhouse notes that because of these new numbers, Westhouse
has started talks with Macquarie Bank with regards to the hedge
arrangements at Inata, currently 33,000 ounces a year until 2018, in
order to increase cash flow generation and support potential investment
plans.
Canaccord Genuity highlights that with an estimated 175,000 ounces
hedged at US$950 per ounce remaining, to be delivered at 33,000 ounces
per year to 2018, there was "now insufficient" reserve tail or head room
in the annual cash flows for Avocet to sustain the current delivery
schedule.
"Therefore Avocet is looking to possibly buy back a portion of the
hedge. We estimate around 60,000 ounces would need to be bought back at a
cost of around US$50mln," notes analyst Tim Dudley.
"This will require new funds, potentially via an equity raise. We
therefore cut our target price 55% to 40p a share and move to a 'hold'
recommendation."
Investec added: "This is yet another disappointing result from Avocet and raises further significant concerns over the asset base.
"Clearly the need to clear the hedge book as the production outlook
may be less than previously expected is a major issue. One benefit
Avocet did have was a strong balance sheet; however, indications are
that this is not enough."
The previously reported mineral reserve of 1.85 million ounces was based on a gold price of US$1,400 per ounce.
The firm said today the completed re-estimation is expected to be finished by next month.
Avocet shares fell 44.17% to 28.75p.
http://www.proactiveinvestors.…e-re-estimate--53698.html
Bin zwar nicht drin, da aber Avocet nun schon seit 10 Jahren ein steter Begleiter ist, auch für mich eine traurige Woche 
Caldera