Avion posts record March production despite Mali’s coup d’tat

An end to a coup d’état 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 with over 5 million units changing hands en route to a 94¢ daily close. Avion shares had tumbled 31%, or 43¢, since the coup on March 21. The African country hosts Avion’s Tabakoto-Segala gold operations.

According to comments from senior vice-president of exploration Don Dudek, released on the company website on April 9, the coup leaders have opted to relinquish control and restore the country’s constitution, allowing an interim government to take over.

The country’s borders have been fully reopened in conjunction with the move, and the speaker of the house will lead the government during the transition.

Despite the political uncertainty, Avion set a company record for gold production during the first quarter. The Tabakoto-Segala 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. gold production.

“Record production in March was achieved despite a military coup in the last week of the month,” says 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 maintained production levels because of 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 explains, “which 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 moved staff members working at Tabakoto-Segala out of Mali during the height of the crisis, but a core group remained to assure operations continued. The company is rotating employees back onto the site, and expects “normalcy regarding staffing.”

According to company reports, owing 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 that was scheduled for mid-year. 

Avion is 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 Segala 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.

Avion has hired Richard Allan as vice-president of mining operations. He has experience as senior director of mining at Barrick Gold (ABX-T, ABX-N), and is expected to assist in the company’s expanded production activities at the Tabakoto-Segala 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 explains. “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 contained oz. gold. Inferred resources increased 90% to 12.4 million tonnes carrying 1.77 grams gold for 702,000 contained oz. 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. It produced 91,200 oz. gold at total cash costs of US$746 per oz. and 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 anticipates capital expenditures totalling US$120 million for 2012, including upgrades at the Tabakoto-Segala operation and an US$11.4-million exploration program designed to expand the existing resource bases at Tabakoto-Segala 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.