Avion posts record first quarter despite Malian military coup

VANCOUVER — An end to a military coup in Mali, West Africa and strong first quarter production numbers boosted Avion Gold’s (AVR-T) shares 9% or 8¢, from a six-month low of 86¢, during the April 9 trading session.

The company nearly doubled its average-trade volume, as over 5 million units changed hands en route to a 94¢ daily close. Avion shares had tumbled 31% or 43¢ since the military coup broke out in Mali on March 21 — the African country hosts Avion’s Tabakoto-Ségala gold operations.

According to comments from senior vice president of exploration Don Dudek, released on the company website on April 9, the military-coup leaders in Mali have opted to relinquish control and restore the country’s constitution, allowing an interim government to take over parliament. The borders of the country have been re-opened in conjunction with the move, and the Speaker of the House will lead the government during the transition.

Despite a period of geo-political uncertainty, Avion managed to set a company record for gold production during the first quarter. The Tabakoto-Ségala gold mine milled 225,700 tonnes of ore at an average grade of 4 grams gold per tonne and a 90.2% recovery rate, resulting in 26,260 oz. of gold production.

“Record production in March was achieved despite a military coup in the last week of the month,” said Avion’s chief operating officer Andrew Bradfield. “The strong results are a testament to the hard work and dedication of the management team at the mine site, and higher than expected grades and lower dilution at the Tabakoto underground mine.”

The company reported it was able to maintain production levels due to careful planning, and saw only a modest drop-off from the political crisis,

“We have 4.5 million litres of fuel storage on site, so when this crisis started in Mali we had over 2 million litres in storage,” Dudek explained. “That would be good for about a month of production. So we were well situated to ride out a bit of a storm, and we have ten fuel trucks waiting to cross into Mali from Senegal, and we’ll have twenty-two additional trucks that will be on the road shortly.”

Avion was forced to move a number of staff members working at Tabakoto-Ségala out of Mali during the height of the crisis, but a core group remained to assure operations continued. The company is in the process of rotating employees back onto the site, and expects “normalcy regarding staffing by the end of the week.”

According to company reports, due to a lag time imposed at the Malian custom and import offices following the crisis, delays are expected on a US$29-million mill expansion scheduled for completion by the end of the second quarter. Avion is in the process of importing materials required to increase its mill capacity, from a throughput rate of 2,100 tonnes per day to 4,000 tonnes per day, in anticipation of a ramp-up in underground mining operations at the Tabakoto and Ségala sites expected toward the end of the year. Forward-looking production statements project 2012 throughput between 140,000 tonnes and 150,000 tonnes per day.

Along with the quarterly production report, Avion announced the hiring of Richard Allan as vice president of mining operations. Allan has been brought in due to his experience as senior director of mining at Barrick Gold (ABX-T, ABX-N, ABX-L), and is expected to assist in the company’s expanded production activities at the Tabakoto-Ségala mine, as well as plans to bring its Malian Kofi gold project into development next year.

“We needed some additional support at site as the company begins to transition from a one-mine operation to a multi-mine operation,” Dudek explained, “We do plan on bringing the Kofi project into production next year. We have the three pits that are in production right now, and we’re adding the two underground operations.”

Avion increased indicated resources at Kofi by 71% earlier this year to 6.9 million tonnes grading 2.25 grams gold for 500,000 oz. contained gold. Inferred resources increased 90% to 12.4 million tonnes carrying 1.77 grams gold for 702,000 oz. contained gold.

During 2011 Avion posted record earnings of US$43 million or 10¢ per share, with revenues totalling US$144 million on the back of rising gold prices. 91,200 oz. of gold were produced at total cash costs of US$746 per oz. and the company generated cash-flow before working capital adjustments of US$67.5 million, with US$21.2 million cash-in-hand to end the year.

Avion projects capital expenditures totalling US$120 million for 2012, including upgrades at the existing Tabakoto-Ségala operation and an US$11.4-million exploration program designed to expand the existing resource bases at Tabakoto-Ségala and Kofi. The company is also aiming to complete a preliminary economic assessment on its Hounde gold project in Burkina Faso, scheduled for release in the fourth quarter.