Avion Flying Fast In West Africa

Avion Resources (AVR-V, AVRCF-O) has managed to beat its own guidance for the first month and a half of production at its Segala gold mine in Mali, and in doing so, has fuelled a remarkable turnaround from the doldrums of November.

The Toronto-based company’s shares recently traded at 42¢ apiece — a long ways north of the 3¢-mark it touched late last year.

Driving that stock market success has been the company’s ability to reach commercial production roughly two months ahead of schedule at its Segala and Tabakoto gold project in West Africa.

The secret to the company’s impressive pace?

“We just had more tonnes go through the mill than we thought we would,” says Avion spokesman Rene Bharti. “The grade was higher than we thought and there were no real delays.”

While multiple down days are anticipated as a mine ramps up to commercial production, Bharti says the mill only had three or four off days and he credits the steadiness of production to the relative newness of the equipment.

“The machines are only two years old and the equipment performed as good or better than we thought,” he says of the gear that Avion inherited from Nevsun Resources (NSU-T, NSU-X) at the project.

Nevsun was unable to make the project economic and sold it to Avion in May 2008 for $20 million.

Bharti says Avion’s success began with its bringing in noted open-pit mining specialist John Begeman as its chief executive officer.

Once at the helm, Begeman guided the company to start with the geologically simpler Segala open-pit deposit instead of working the Tabakoto deposit, 6 km away. Tabakoto has a more complicated structure that Avion believes will be better mined via selective underground methods.

“Our plan has been to work on Segala, get it into production and figure out Tabakoto while we’re generating cash flows,” Bharti explains.

He credits the decision to have a key member of management on site at all times as crucial to helping things run more smoothly.

The change in approach has ushered in more economic numbers.

Where Nevsun was operating with a high strip ratio of 16:1, according to Bharti, switching to Segala has brought that number down to 6:1.

Initial production at the site began on Feb. 17 and the crusher and mill, which began by operating at 1,800 tonnes per day, are on track to reach the target of 2,200 tonnes per day.

Total gold production for the year is expected to come in at 66,000 oz. at a cash cost of US$509 per oz.

As of March 31, Avion had managed to turn out 6,211 oz. gold — again beating its own guidance of 5,200 oz. The cash cost for that production came in at just US$423 per oz.

Those lower cash costs were in part due to lower operating costs, which were attributed to the company’s policy of processing stockpiled ore while developing the Segala pit.

Avion’s success in achieving com- mercial production bodes well for its plans to get to 100,000 oz. per year of production by 2011.

The company holds 80% of the Tabakoto and Segala deposits, with the government holding the remaining 20%. The project sits 200 km south of Kayes.

Avion shares have traded in a 12- month window of 3.5-56¢. The company has 113 million shares outstanding.

In May, Avion announced it had increased measured and indicated resources by 169% at Tabakoto and Segala.

Measured and indicated resources in the Tabakoto open pit now stand at 4.1 million tonnes grading 3.3 grams gold per tonne, totalling 439,300 oz. at a cutoff grade of 1 gram gold per tonne.

Inferred resources at the open pit are estimated at 2.5 million tonnes grading 3.52 grams gold for 285,900 oz. gold.

Underground measured and indicated resources are now about 2.7 million tonnes grading 3.73 grams gold for 321,800 oz. gold at a cutoff grade of 2 grams gold.

Inferred underground resources total 3.4 million tonnes grading 3.68 grams gold for 400,500 oz. gold at the same cutoff grade.

Avion says the pit-areas resources, which form the bulk of the resource estimate, include a series of mineralized structures along a 1.8-km-long part of a northerly trending zone.

The company plans to upgrade resources and better define the mineralized structures in hopes of increasing capacity at the plant to 200,000 oz. per year from 100,000 oz.

Avion reports that total measured and indicated resources for the Tabakoto and Segala deposits are 18.4 million tonnes grading 2.55 grams gold for about 1.5 million oz. gold — but this time at a 0.5 gram gold cutoff grade, which the company notes hasn’t been verified as economical.