Avesoro Resources Inc. - Financial Highlights for the Three and Nine Months Ended September 30, 2018

TSX: ASO
AIM: ASO

TORONTO, Nov. 13, 2018 /CNW/ - Avesoro Resources Inc., ("Avesoro" or the "Company"), the TSX and AIM listed West African gold producer, is pleased to announce the release of its unaudited financial results for the quarter ended September 30, 2018 (the "Quarter" or "Q3") and nine months ended September 30, 2018 ("YTD").

Financial Highlights:
YTD

• Gold production of 175,496 ounces, in line with full year 2018 guidance of 220,000 – 240,000 ounces, and a 247% increase versus the same period in the prior year ("YTD 2017");
• Revenues of US$225.1 million from gold sales of 174,812 ounces at an average realised gold price of US$1,288 per ounce;
• Operating cash costs US$719 per ounce sold, an improvement of 27% versus YTD 2017;
• All in sustaining costs ("AISC") of US$995 per ounce sold, a 34% improvement on YTD 2017;
• Company EBITDA margin of 32%, with EBITDA of US$72.8 million;
• Cash flow from operations of US$62.4 million; and
• Cash of US$8.6 million and debt of US$128.8 million at September 30, 2018.

Q3 2018

• Gold production of 47,177 ounces in the Quarter, a decrease of 22% on the previous quarter, due to a scheduled reduction in high grade mill feed from Youga's Balogo satellite deposit;
• Revenues of US$59.2 million from gold sales of 48,974 ounces in Q3 2018 at an average realised gold price of US$1,210 per ounce;
• Operating cash costs of US$877 per ounce sold in Q3 2018 versus US$698 in the previous quarter attributable to lower gold sales in the Quarter and an increase in unit mining costs at New Liberty;
• AISC of US$1,155 per ounce sold in Q3 2018 versus $985/oz in the previous quarter;
• Company EBITDA margin of 14%, with EBITDA of US$8.2 million in the Quarter;
• Operating cash flows of US$14.5 million in the Quarter; and
• Debt reduced by US$5.7 million during the Quarter.

Serhan Umurhan, Chief Executive Officer of Avesoro, commented on the results and operations:

"I am pleased to report that Avesoro produced 47koz in the Quarter taking year to date production to 175,496 ounces. We continue to generate solid revenues with strong EBITDA margins and remain on track to deliver our FY18 production guidance of 220-240 koz Au. Q3 2018 gold production was 22% lower than Q2 2018 in line with a scheduled reduction in mined grade at Youga due to a reduction in high-grade ore production from the Balogo pit and temporary mining of low-grade oxide material at Gassoré, where historical artisanal mining has depleted the near surface (<25m) oxide zone. Mining at Gassoré has now reached fresh rock and run of mine grade is increasing towards the reserve grade of 3.99g/t as anticipated.

Q3 total material moved of 9.78mt was in-line with that achieved in Q2, reflecting our continued underlying improvements in productivity despite rainfall in Burkina Faso being three times the historic average.

At New Liberty, quarter on quarter ore production increased by 21kt, run of mine grade remained stable and waste tonnes were unchanged. The wet season did however reduce our ability to fully utilise the larger New Liberty mining fleet during the Quarter which, combined with an increase in drill and blast costs and fuel prices resulted in higher unit mining costs than in the previous quarters of 2018. In Q4 we expect both mining rates, unit costs and grade to improve at New Liberty, and for this to continue through 2019.

During the Quarter, cash costs increased to $877/oz and the AISC to $1,155/oz due to lower production at Youga and a temporary increase in unit mining costs at New Liberty which added approximately US$100/oz to these numbers. Importantly, for the full year we remain on track to deliver guided production and all-in sustaining costs per ounce. However, full year cash costs are now expected to be 10-20% higher than the previous guidance primarily due to higher mining costs at New Liberty due to mining fleet utilisation being lower than planned.

Exploration continues across the portfolio where we target an additional 1Moz to our current mineral reserves. The US$25m budget includes assaying, engineering studies, resource modelling and the independent technical reports and is a discretionary investment which we believe is already adding significant shareholder value with updated NI 43-101 reports for both New Liberty and Youga expected early next year."

Update on Exploration Activity

The Company made the strategic decision in Q1 2018 to target the addition of 1Moz to its mineral reserves primarily through lower-risk infill drilling of existing mineral resources. Thus far in 2018,  176,000m of diamond core drilling has been drilled across the portfolio. The Company believes it remains on track to deliver on this target of 1Moz of additional reserves.

An updated NI 43-101 for New Liberty is expected to be published in late Q1 2019 which will include an underground prefeasibility study at the main New Liberty deposit combined with the first reserves from Ndablama, a satellite deposit 45km from the processing plant. Following that of New Liberty, the Company expects to publish an updated NI 43-101 for Youga which is anticipated to include additional reserves from Gassoré and Ouaré.

Table 1: Consolidated Financial Highlights

Metric	Q3 2018	Q2 2018	Q3 2018 vs Q2 2018	YTD 2018	YTD 2017	YTD 2018 vs YTD 2017
Gold production, oz	47,177	60,231	-22%	175,496	50,615	247%
Gold sold, oz	48,974	57,285	-15%	174,812	51,187	242%
Operating cash costs, US$/oz sold	877	698	26%	719	979	-27%
All in Sustaining Costs, US$/oz sold	1,155	985	17%	995	1505	-34%
Average Realised Gold Price, US$/oz	1,210	1,302	-7%	1,288	1,259	2%
Revenues, US$m	59.2	74.5	-21%	225.1	64.5	249%
EBITDA**, US$m	8.2	24.4	-66%	72.8	6.4	1039%
EBITDA margin, %	14	33	-58%	32	10	226%
Cash flow from operations, US$m	14.5	8.5	71%	62.4	-3.3	2018%
Capital spend, US$m	8.1	13.2	-39%	34.9	19.5	79%
Cash, US$m	8.6	12.7	-32%	8.6	2.0	331%
Debt, US$m	128.8	134.5	-4%	128.8	120.0	7%

Operating cash costs, AISC and EBITDA, are non-GAAP measures and are defined in the notes section of this announcement.

Table 2: Key Operational Financial Highlights

Metric	Q3 2018	Q2 2018	Q3 2018 vs Q2 2018	YTD 2018	YTD 2017	YTD 2018 vs YTD 2017
New Liberty
Gold production, oz	27,456	29,808	-8%	85,134	50,615	68%
Mining cost, US$/t	3.00	2.42	24%	2.67	2.55	5%
Processing cost, US$/t	23.29	24.53	-5%	24.11	26.79	-10%
Operating cash costs, US$/oz sold	849	781	9%	825	979	-16%
All in Sustaining Costs, US$/oz sold	1,113	1,038	7%	1,082	1,505	-28%
Youga
Gold production, oz	19,721	30,423	-35%	90,362	87,048	4%
Mining cost, US$/t	1.93	1.90	2%	1.99	1.81	10%
Processing cost, US$/t	20.71	18.64	11%	19.63	19.14	3%
Operating cash costs, US$/oz sold	958	616	55%	630	492	28%
All in Sustaining Costs, US$/oz sold	1,113	852	31%	848	720	18%

Outlook

During the final quarter of 2018, the Company expects to see improved productivity following the end of the rainy season and improved mill feed grades at both New Liberty and Youga.

The Company maintains its full year production guidance of 220,000 – 240,000 ounces of gold and all-in-sustaining cost of between US$960 and US$1,000 per ounce sold. Full year operating cash cost guidance has been revised to between US$726 and US$792 per ounce sold.

Analyst and Investor Call

The company will be hosting a conference call for investors and analysts on November 13, 2018 at 08:00 EST / 13:00 GMT

There will be an accompanying presentation that can be downloaded from http://avesoro.com/wp-content/uploads/2018/11/Avesoro-Q3-2018-Results-Presentation.pdf

The access details for the conference call are as follows:

Location	Phone Type	Phone Number
United Kingdom	Freephone	0800 358 9473
United Kingdom, Local	Local	[phone]
United States	Freephone	[phone]
United States, Local	Local	[phone]
Canada	Freephone	[phone]
Canada, Local	Local	[phone]

Password: 98790530#

International dial in numbers URL:

http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

Financial Statements and MD&A

The Financial Statements are appended to this announcement. Both the Financial Statements and the accompanying Management Discussion and Analysis are available for review at the Company's website, www.avesoro.com and on www.sedar.com.

Notes

Non-GAAP Financial Measures: The Company has included certain non-GAAP financial measures in this press release, including operating cash costs and all-in sustaining costs ("AISC") per ounce of gold sold and EBITDA. These non-GAAP financial measures do not have any standardised meaning. Accordingly, these financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with International Financial Reporting Standards ("IFRS").

Operating cash costs and AISC are a common financial performance measure in the mining industry but have no standard definition under IFRS. Operating cash costs are reflective of the cost of production. AISC include operating cash costs, net-smelter royalty, corporate costs, sustaining capital expenditure, sustaining exploration expenditure and capitalised stripping costs. The Company reports cash costs on an ounces of gold sold basis.

The Company calculates EBITDA as net profit or loss for the period excluding finance costs, income tax expense and depreciation. EBITDA does not have a standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes and the effects of changes in working capital balances and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.

Other companies may calculate these measures differently and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

About Avesoro Resources Inc.

Avesoro Resources is a West Africa focused gold producer and development company that operates two gold mines across West Africa and is listed on the Toronto Stock Exchange ("TSX") and the AIM market operated by the London Stock Exchange ("AIM"). The Company's assets include the New Liberty Gold Mine in Liberia ("New Liberty") and the Youga Gold Mine in Burkina Faso ("Youga").

New Liberty has an estimated Proven and Probable Mineral Reserve of 7.4Mt with 717,000 ounces of gold grading 3.03g/t and an estimated Measured and Indicated Mineral Resource of 9.6Mt with 985,000 ounces of gold grading 3.2g/t and an estimated Inferred Mineral Resource of 6.4Mt with 620,000 ounces of gold grading 3.0g/t. The foregoing Mineral Reserve and Mineral Resource estimates and additional information in connection therewith, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated November 1, 2017 and entitled "New Liberty Gold Mine, Bea Mountain Mining Licence Southern Block, Liberia, West Africa" and is available on SEDAR at www.sedar.com.

Youga has an estimated Proven and Probable Mineral Reserve of 11.2Mt with 660,100 ounces of gold grading 1.84g/t and a combined estimated Measured and Indicated Mineral Resource of 16.64Mt with 924,200 ounces of gold grading 1.73g/t and an Inferred Mineral Resource of 13Mt with 685,000 ounces of gold grading 1.70g/t. The foregoing Mineral Reserve and Mineral Resource estimates and additional information in connection therewith, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated July 31, 2018 and entitled "Mineral Resource and Mineral Reserve Update for the Youga Gold Mine, Burkina Faso" and is available on SEDAR at www.sedar.com.

For more information, please visit www.avesoro.com

Qualified Persons

The Company's Qualified Person is Mark J. Pryor, who holds a BSc (Hons) in Geology & Mineralogy from Aberdeen University, United Kingdom and is a Fellow of the Geological Society of London, a Fellow of the Society of Economic Geologists and a registered Professional Natural Scientist (Pr. Sci.Nat) of the South African Council for Natural Scientific Professions.  Mark Pryor is an independent technical consultant with over 25 years of global experience in exploration, mining and mine development and is a "Qualified Person" as defined in National Instrument 43 -101 "Standards of Disclosure for Mineral Projects" of the Canadian Securities Administrators and has reviewed and approved this press release. Mr. Pryor has verified the underlying technical data disclosed in this press release.

Forward Looking Statements

Certain information contained in this press release constitutes forward looking information or forward looking statements within the meaning of applicable securities laws. This information or statements may relate to future events, facts, or circumstances or the Company's future financial or operating performance or other future events or circumstances. All information other than historical fact is forward looking information and involves known and unknown risks, uncertainties and other factors which may cause the actual results or performance to be materially different from any future results, performance, events or circumstances expressed or implied by such forward-looking statements or information. Such statements can be identified by the use of words such as "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "would", "project", "should", "believe", "target", "predict" and "potential".  No assurance can be given that this information will prove to be correct and such forward looking information included in this press release should not be unduly relied upon.  Forward looking information and statements speak only as of the date of this press release. 

Forward looking statements or information in this press release include, among other things, statements regarding full year 2018 production guidance of 220,000 to 240,000 ounces of gold at an operating cash cost of between US$726 to US$792 per ounce sold and an all-in sustaining cost of between US$960 and US$1,000 per ounce sold, statements regarding improvements in its unit cost base, increased mining rates, increased plant throughputs, publishing of an updated Mineral Resource and Mineral Reserve for New Liberty during Q1 2019; declaring first mineral reserves at Ndablama; declaring reserves at Gassoré and Ouaré; and targeting the addition of 1Moz of additional reserves.  

In making the forward looking information or statements contained in this press release, assumptions have been made regarding, among other things: general business, economic and mining industry conditions; interest rates and foreign exchange rates; the continuing accuracy of Mineral Resource and Reserve estimates; geological and metallurgical conditions (including with respect to the size, grade and recoverability of Mineral Resources and Reserves) and cost estimates on which the Mineral Resource and Reserve estimates are based; the supply and demand for commodities and precious and base metals and the level and volatility of the prices of gold; market competition; the ability of the Company to raise sufficient funds from capital markets and/or debt to meet its future obligations and planned activities and that unforeseen events do not impact the ability of the Company to use existing funds to fund future plans and projects as currently contemplated; the stability and predictability of the political environments and legal and regulatory frameworks including with respect to, among other things, the ability of the Company to obtain, maintain, renew and/or extend required permits, licences, authorizations and/or approvals from the appropriate regulatory authorities; that contractual counterparties perform as agreed; and the ability of the Company to continue to obtain qualified staff and equipment in a timely and cost-efficient manner to meet its demand.

Actual results could differ materially from those anticipated in the forward looking information or statements contained in this press release as a result of risks and uncertainties (both foreseen and unforeseen), and should not be read as guarantees of future performance or results, and will not necessarily be accurate indicators of whether or not such results will be achieved. These risks and uncertainties include the risks normally incidental to exploration and development of mineral projects and the conduct of mining operations (including exploration failure, cost overruns or increases, and operational difficulties resulting from plant or equipment failure, among others); the inability of the Company to obtain required financing when needed and/or on acceptable terms or at all; risks related to operating in West Africa, including potentially more limited infrastructure and/or less developed legal and regulatory regimes; health risks associated with the mining workforce in West Africa; risks related to the Company's title to its mineral properties; the risk of adverse changes in commodity prices; the risk that the Company's exploration for and development of mineral deposits may not be successful; the inability of the Company to obtain, maintain, renew and/or extend required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities and other risks relating to the legal and regulatory frameworks in jurisdictions where the Company operates, including adverse or arbitrary changes in applicable laws or regulations or in their enforcement; competitive conditions in the mineral exploration and mining industry; risks related to obtaining insurance or adequate levels of insurance for the Company's operations; that Mineral Resource and Reserve estimates are only estimates and actual metal produced may be less than estimated in a Mineral Resource or Reserve estimate; the risk that the Company will be unable to delineate additional Mineral Resources; risks related to environmental regulations and cost of compliance, as well as costs associated with possible breaches of such regulations; uncertainties in the interpretation of results from drilling; risks related to the tax residency of the Company; the possibility that future exploration, development or mining results will not be consistent with expectations; the risk of delays in construction resulting from, among others, the failure to obtain materials in a timely manner or on a delayed schedule; inflation pressures which may increase the cost of production or of consumables beyond what is estimated in studies and forecasts; changes in exchange and interest rates; risks related to the activities of artisanal miners, whose activities could delay or hinder exploration or mining operations; the risk that third parties to contracts may not perform as contracted or may breach their agreements; the risk that plant, equipment or labour may not be available at a reasonable cost or at all, or cease to be available, or in the case of labour, may undertake strike or other labour actions; the inability to attract and retain key management and personnel; and the risk of political uncertainty, terrorism, civil strife, or war in the jurisdictions in which the Company operates, or in neighbouring jurisdictions which could impact on the Company's exploration, development and operating activities.

Although the forward-looking statements contained in this press release are based upon what management believes are reasonable assumptions, the Company cannot provide assurance that actual results or performance will be consistent with these forward-looking statements. The forward looking information and statements included in this press release are expressly qualified by this cautionary statement and are made only as of the date of this press release.  The Company does not undertake any obligation to publicly update or revise any forward looking information except as required by applicable securities laws.

Condensed Interim Consolidated Financial Statements (Unaudited)

Avesoro Resources Inc.

For the Three and Nine Months Ended September 30, 2018 and 2017
(stated in thousands of US dollars)

Registered office:	199 Bay Street
	Suite 5300
	Commerce West Street
	Toronto
	Ontario, M5L 1B9
	Canada
Company registration number:	776831-1
Company incorporated on:	1 February 2011

Avesoro Resources Inc.
Interim Consolidated Statements of Income and Comprehensive Income
(stated in thousands of US dollars)
Unaudited

	Three months ended September 30,                  2018	Three months ended September 30,                  2017	Nine months ended September 30,                  2018	Nine months ended September 30,                  2017
	$'000	$'000	$'000	$'000
Gold sales (Note 2)	59,247	25,452	225,147	64,464
Cost of sales
- Production costs (Note 2)	(45,646)	(18,187)	(137,827)	(52,250)
- Depreciation (Note 2)	(21,930)	(6,924)	(58,931)	(21,103)
Gross (loss)/profit	(8,329)	341	28,389	(8,889)
Expenses
Administrative and other expenses (Note 3)	(2,988)	(1,796)	(6,999)	(4,776)
Exploration and evaluation costs	(2,494)	(466)	(9,018)	(1,333)
Loss on lease termination	-	-	(566)	-
(Loss)/Profit from operations	(13,811)	(1,921)	11,806	(14,998)
Derivative liability gain/(loss)	-	3	105	(173)
Foreign exchange gain/(loss)	644	(16)	(1,267)	(179)
Finance costs	(3,177)	(2,726)	(10,350)	(8,349)
Finance income	6	9	181	15
(Loss)/Profit before tax	(16,338)	(4,651)	475	(23,684)
Tax credit/(charge) for the period (Note 4)	219	-	(9,636)	-
Net loss after tax	(16,119)	(4,651)	(9,161)	(23,684)
Attributable to:
- Owners of the Company	(15,807)	(4,651)	(11,960)	(23,684)
- Non-controlling interest	(312)	-	2,799	-
Other comprehensive income Items that may be reclassified subsequently to profit or loss:
Fair value gains/(losses) on investments	-	(24)	22	(28)
Currency translation differences	(36)	109	(76)	(83)
Total comprehensive loss	(16,155)	(4,566)	(9,215)	(23,795)
Attributable to:
- Owners of the Company	(15,843)	(4,566)	(12,014)	(23,795)
- Non-controlling interest	(312)	-	2,799	-
Basic loss per share, (US$) (Note 5)	(0.194)	(0.087)	(0.147)	(0.445)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Avesoro Resources Inc.
Interim Consolidated Statements of Financial Position
(stated in thousands of US dollars)
Unaudited

	September 30, 2018 $'000	December 31, 2017 $'000
Assets
Current assets
Cash and cash equivalents	8,596	17,787
Trade and other receivables (Note 6)	28,400	25,286
Inventories (Note 7)	52,409	36,932
Other assets	1,737	1,710
	91,142	81,715
Non-current assets
Property, plant and equipment (Note 8)	231,302	249,552
Intangible assets - Exploration and evaluation assets (Note 9)	3,755	-
Investments	-	21
Deferred tax asset	2,643	4,554
Other assets	1,103	1,196
	238,803	255,323
Total assets	329,945	337,038
Liabilities
Current liabilities
Borrowings (Note 10)	23,211	37,964
Trade and other payables	69,068	41,003
Income tax payable	6,108	12,358
Finance lease liability (Note 11)	248	1,913
Derivative liability	-	105
Provisions	3,282	523
	101,917	93,866
Non-current liabilities
Borrowings (Note 10)	104,634	101,335
Trade and other payables	-	463
Finance lease liability (Note 11)	697	5,875
Provisions	10,320	10,439
	115,651	118,112
Total liabilities	217,568	211,978
Equity
Share capital (Note 12)	353,686	353,653
Capital contribution	52,742	54,022
Share based payment reserve	8,694	7,840
Acquisition reserve	(33,060)	(33,060)
Fair value reserve	-	(487)
Cumulative translation reserve	(542)	(466)
Deficit	(272,581)	(260,156)
Equity attributable to owners	108,939	121,346
Non-controlling interest (Note 13)	3,438	3,714
Total equity	112,377	125,060
Total liabilities and equity	329,945	337,038

The accompanying notes are an integral part of these condensed interim consolidated financial statements.                                      

Avesoro Resources Inc.
Interim Consolidated Statements of Cash Flows
(stated in thousands of US dollars)
Unaudited

	Nine months ended September 30, 2018	Nine months ended September 30, 2017
	$'000	$'000
Operating activities
Net loss after tax	(9,161)	(23,684)
Tax for the period	9,636	-
Profit/(Loss) before tax	475	(23,684)
Items not affecting cash:
Share-based payments (Note 3)	854	890
Depreciation (Note 8)	59,146	21,372
Unrealized foreign exchange loss/(gain)	390	(127)
Derivative liability (gain)/loss	(105)	173
Interest expense	10,350	8,229
Loss on lease termination	566	-
Impairment of inventories	-	3,319
Changes in non-cash working capital
Increase in trade and other receivables	(3,114)	(9,889)
Increase/(decrease) in trade and other payables	22,909	(3,628)
(Increase)/decrease in inventories	(15,477)	92
Income taxes paid	(13,597)	-
Cash flows from/(used in) operating activities	62,397	(3,253)
Investing activities
Payments to acquire property, plant and equipment	(29,280)	(19,473)
Payments to acquire intangible assets	(5,659)	-
Decrease/(increase) in other assets	66	(545)
Proceeds from sale of available for sale investment	44	-
Cash flows used in investing activities	(34,829)	(20,018)
Financing activities
Proceeds from borrowings (Note 10b)	6,150	18,800
Repayments of borrowings (Note 10)	(31,717)	-
Finance charges	(8,149)	(6,996)
Dividend payment to non-controlling interest	(1,480)	-
Payment of finance leases	(1,317)	-
Proceeds from exercise of stock options (Note 12)	33	-
Cash flows (used in)/from financing activities	(36,480)	11,804
Impact of foreign exchange on cash balance	(279)	35
Net decrease in cash and cash equivalents	(9,191)	(11,432)
Cash and cash equivalents at beginning of period	17,787	13,429
Cash and cash equivalents at end of period	8,596	1,997

Significant non-cash transactions during the nine months ended September 30, 2018 includes the acquisition of new heavy mining equipment for $10.3 million in exchange for new related party loans (Note 10c) and the termination of the generators held as finance leases (Note 8).   

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Avesoro Resources Inc.
Interim Consolidated Statements of Changes in Equity
(stated in thousands of US dollars)
Unaudited

	Total Equity Attributable to Owners
	Share capital   $'000	Capital contribution   $'000	Share- based payment reserve   $'000	Acquisition reserve   $'000	Fair value reserve   $'000	Cumulative translation reserve   $'000	Deficit     $'000	Total     $'000	Non-controlling Interest   $'000	Total Equity   $'000
Balance at January 1, 2017	283,506	48,235	6,770	-	(453)	(400)	(232,682)	104,976	-	104,976
Loss for the period	-	-	-	-	-	-	(23,684)	(23,684)	-	(23,684)
Other comprehensive loss for period	-	-	-	-	(28)	(83)	-	(111)	-	(111)
Total comprehensive loss for period	-	-	-	-	(28)	(83)	(23,684)	(23,795)	-	(23,795)
Related party loan (Note 10)	-	4,524	-	-	-	-	-	4,524	-	4,524
Share-based payments	-	-	890	-	-	-	-	890	-	890
Balance at September 30, 2017	283,506	52,759	7,660	-	(481)	(483)	(256,366)	86,595	-	86,595
Balance at January 1, 2018	353,653	54,022	7,840	(33,060)	(487)	(466)	(260,156)	121,346	3,714	125,060
(Loss)/Profit for the period	-	-	-	-	-	-	(11,960)	(11,960)	2,799	(9,161)
Other comprehensive income/(loss) for period	-	-	-	-	22	(76)	-	(54)	-	(54)
Total comprehensive income/(loss) for period	-	-	-	-	22	(76)	(11,960)	(12,014)	2,799	(9,215)
Exercise of stock options (Note 12)	33	-	-	-	-	-	-	33	-	33
Share-based payments (Note 3)	-	-	854	-	-	-	-	854	-	854
Dividends paid to non-controlling interest	-	-	-	-	-	-	-	-	(3,075)	(3,075)
Related party loans (Note 10)	-	1,698	-	-	-	-	-	1,698	-	1,698
Payment of related party loans (Note 10b)	-	(2,978)	-	-	-	-	-	(2,978)	-	(2,978)
Reserve transfer on sale of investment	-	-	-	-	465	-	(465)	-	-	-
Balance at September 30, 2018	353,686	52,742	8,694	(33,060)	-	(542)	(272,581)	108,939	3,438	112,377

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Avesoro Resources Inc.
Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
For the three and nine months ended September 30, 2018 and 2017
(in thousands of US dollars unless otherwise stated)

1 Nature of operations and basis of preparation

Avesoro Resources Inc. ("Avesoro" or the "Company"), was incorporated under the Canada Business Corporations Act on February 1, 2011. The focus of Avesoro's business is the exploration, development and operation of gold assets in West Africa, specifically the New Liberty Gold Mine in Liberia and the Youga gold mine in Burkina Faso. 

On December 18, 2017 the Company completed the acquisition of the Youga gold mine and the Balogo satellite deposit in Burkina Faso through the acquisition of the entire issued share capital of MNG Gold Burkina SARL, Cayman Burkina Mines Ltd., MNG Gold Exploration Ltd., AAA Exploration Burkina Ltd. and Jersey Netiana Mining Ltd. and their subsidiaries from Avesoro Jersey Limited ("AJL"), the Company's majority shareholder, for a total consideration of US$70.2 million comprised of the issuance of US$51.5 million of new common shares in the Company (see Note 12) and a cash component of US$18.7 million.

These condensed interim consolidated financial statements ("interim financial statements") have been prepared in accordance with International Accounting Standard ("IAS") 34, "Interim Financial Reporting".  They do not include all disclosures that would otherwise be required in a complete set of financial statements.  They follow accounting policies and methods of their application consistent with the audited consolidated financial statements for the year ended December 31, 2017.  Accordingly, they should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2017. 

These interim financial statements were authorised by the Board of Directors on November 12, 2018.

New accounting policies

The Company adopted the following revised or new IFRS standards that have been issued effective January 1, 2018.  The impact of the standards on the Company's accounting policies and financial statements is discussed below:

IFRS 9, Financial Instruments introduces new requirements for the classification and measurement of financial assets and liabilities.  IFRS 9 replaced the multiple classification and measurement models for financial assets that exist under IAS 39 Financial Instruments, and the basis on which financial assets are measured will determine their classification as either, at amortized cost, fair value through profit and loss, or fair value through other comprehensive income.

Although the investment in Stellar Diamonds plc remains measured at fair value with fair value gains or losses recognised in other comprehensive income, on disposal of the investment the cumulative change in fair value remains in other comprehensive income and is not recycled to the income statement.  The adoption of IFRS has no other material impact on the consolidated financial statements. 

IFRS 15 Revenue from Contracts with Customers provides that an entity should recognize revenue to depict the transfer of goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. The Company has assessed the impact of this change on the amount of revenue recognised and determined it to be not significant.

IFRS 16 Leases introduces a single lease accounting model, in which leases are capitalised as assets with an associated lease liability with the exception of certain low value leases and leases with a term under 12 months. The Company is in the process of assessing the impact of IFRS 16 and do not believe there to be a material impact to the consolidated financial statements. 

Going concern

The condensed interim consolidated financial statements have been prepared on a going concern basis.  As at September 30, 2018, the Company has net current liabilities of $10.8 million and has approximately $24.3 million of debt repayments due in the next twelve months. 

The cash generation of the Company significantly improved following the acquisition of the Youga gold mine and the Balogo satellite deposit in December 2017 and the continuing improvement of mining operations at New Liberty.  Accordingly, the Company expects to meet its current liabilities through its cash generation capacity.  In addition, the Company has an undrawn facility of $23.7 million with AJL as at September 30, 2018 which it can call upon for general working capital purposes. 

The Company's forecasts and projections show that the Company has adequate resources to continue in operational existence for the foreseeable future.  Thus, it continues to adopt the going concern basis of accounting in preparing the consolidated financial statements.

2  Segment information

The Company is engaged in the exploration, development and operation of gold projects in the West African countries of Liberia, Burkina Faso and Cameroon. Information presented to the Chief Executive Officer for the purposes of resource allocation and assessment of segment performance is focused on the geographical location of mining operations.  The reportable segments under IFRS 8 are as follows:

• New Liberty operations;
• Burkina operations which include the Youga gold mine and the Balogo satellite deposit;
• Exploration; and
• Corporate.

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the three months ended September 30, 2018:

	New Liberty operations	Burkina operations	Exploration	Corporate	Total
	$'000	$'000	$'000	$'000	$'000
Profit/(Loss) for the period	(13,768)	3,047	(2,552)	(2,846)	(16,119)
Gold sales	33,925	25,322	-	-	59,247
Production costs
- Mine operating costs	(26,532)	(20,433)	-	904	(46,061)
- Change in inventories	1,589	(1,174)	-	-	415
	(24,943)	(21,607)	-	904	(45,646)
Depreciation	(19,942)	(1,907)	(110)	(17)	(21,976)
Segment assets	230,441	84,630	7,803	7,071	329,945
Segment liabilities	(163,997)	(41,017)	(5,679)	(6,875)	(217,568)
Capital additions
- property, plant and equipment	5,181	2,788	-	-	7,969
- intangible assets	-	-	2,300	-	2,300

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the nine months ended September 30, 2018:

	New Liberty operations	Burkina operations	Exploration	Corporate	Total
	$'000	$'000	$'000	$'000	$'000
Profit/(Loss) for the period	(27,505)	33,803	(8,903)	(6,556)	(9,161)
Gold sales	108,442	116,705	-	-	225,147
Production costs
- Mine operating costs	(73,228)	(62,342)	-	904	(134,666)
- Change in inventories	(298)	(2,863)	-	-	(3,161)
	(73,526)	(65,205)	-	904	(137,827)
Depreciation	(51,142)	(7,706)	(227)	(71)	(59,146)
Capital additions
- property, plant and equipment	28,902	15,522	40	-	44,464
- intangible assets	-	-	5,659	-	5,659

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the three months ended September 30, 2017:

	New Liberty operations	Burkina operations	Exploration	Corporate	Total
	$'000	$'000	$'000	$'000	$'000
Loss for the period	(2,536)	-	(553)	(1,562)	(4,651)
Gold sales	25,452	-	-	-	25,452
Production costs
- Mine operating costs	(15,292)	-	-	-	(15,292)
- Impairment of ore stockpile	(3,319)				(3,319)
- Change in inventories	424	-	-	-	424
	(18,187)	-	-	-	(18,187)
Depreciation	(6,924)	-	(104)	(5)	(7,033)
Segment assets	208,093	-	13,314	1,581	222,988
Segment liabilities	(135,480)	-	(89)	(824)	(136,393)
Capital additions
– property, plant and equipment	8,975	-	-	-	8,975

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the nine months ended September 30, 2017:

	New Liberty operations	Burkina operations	Exploration	Corporate	Total
	$'000	$'000	$'000	$'000	$'000
Loss for the period	(17,911)	-	(1,554)	(4,219)	(23,684)
Gold sales	64,464	-	-	-	64,464
Production costs
- Mine operating costs	(48,126)	-	-	-	(48,126)
- Impairment of ore stockpile	(3,319)	-	-	-	(3,319)
- Change in inventories	(805)	-	-	-	(805)
	(52,250)	-	-	-	(52,250)
Depreciation	(21,104)	-	(253)	(15)	(21,372)
Capital additions
– property, plant and equipment	21,545	-	-	-	21,545

3  Administrative and other expenses

	Three months ended		Nine months ended
	September 30, 2018	September 30, 2017	September 30, 2018	September 30, 2017
	$'000	$'000	$'000	$'000
Wages and salaries	599	445	1,726	1,197
Legal and professional	563	606	1,522	1,282
Depreciation	46	109	215	269
Share based payments	288	301	854	890
Tax on subsidiary dividends	957	-	1,758	-
Other expenses	535	335	924	1,138
	2,988	1,796	6,999	4,776

4  Income taxes

Tax for the period comprises of:

	Three months ended		Nine months ended
	September 30, 2018	September 30, 2017	September 30, 2018	September 30, 2017
	$'000	$'000	$'000	$'000
Current tax	219	-	(7,664)	-
Deferred tax	-	-	(1,972)	-
	219	-	(9,636)	-

5  Earnings per share ("EPS")

	Three months ended		Nine months ended
	September 30, 2018	September 30, 2017	September 30, 2018	September 30, 2017
	$'000	$'000	$'000	$'000
Net loss after tax attributable to Owners of the Company	(15,807)	(4,651)	(11,960)	(23,684)
Weighted average number of outstanding shares for basic EPS	81,575,260	53,247,590	81,565,260	53,247,590
Basic EPS (US$)	(0.194)	(0.087)	(0.147)	(0.445)

6  Trade and other receivables

	September 30, 2018	December 31, 2017
	$'000	$'000
Trade receivable	156	416
Other receivable	14,095	10,690
Due from related parties (Note 14)	2,793	1,015
Pre-payments	11,356	13,165
	28,400	25,286

Other receivables include a VAT receivable from the Burkina Faso Government amounting to $10.8 million as at September 30, 2018 (December 31, 2017: $8.9 million).

7  Inventories

	September 30, 2018	December 31, 2017
	$'000	$'000
Gold doré	2,577	3,986
Gold in circuit	3,122	2,561
Ore stockpiles	4,518	6,688
Consumables	42,192	23,697
	52,409	36,932

Ore stockpiles as at September 30, 2018 are stated at their net realisable values after cumulative write-down at New Liberty of $2.3 million (December 31, 2017: US$2.9 million).

8  Property, plant and equipment

	Mining assets $'000	Capitalised stripping costs $'000	Mine closure and rehabilitation $'000	Assets held under finance lease $'000	Machinery and equipment $'000	Vehicles $'000	Leasehold improvement $'000	Total $'000
Cost
At January 1, 2017	175,290	-	2,223	13,629	16,392	1,884	83	209,501
Additions	8,322	16,229	544	2,025	27,752	996	-	55,868
Acquisitions	24,895	-	3,445	-	30,639	204	-	59,183
Impairment	-	-	-	(3,896)	-	-	-	(3,896)
Foreign exchange	-	-	-	-	10	8	3	21
At December 31, 2017	208,507	16,229	6,212	11,758	74,793	3,092	86	320,677
Additions	11,413	10,414	81	-	22,556	-	-	44,464
Transfer from intangible assets (Note 9)	1,904	-	-	-	-	-	-	1,904
Termination of finance leases	-	-	-	(7,000)	-	-	-	(7,000)
At September 30, 2018	221,824	26,643	6,293	4,758	97,349	3,092	86	360,045
Accumulated depreciation
At January 1, 2017	14,909	-	116	651	1,622	1,020	66	18,384
Charge for the period	23,754	1,838	296	2,933	3,622	303	19	32,765
Acquisitions	13,442	-	1,878	-	5,633	39	-	20,992
Impairment	-	-	-	(1,020)	-	-	-	(1,020)
Foreign exchange	-	-	-	-	3	-	1	4
At December 31, 2017	52,105	1,838	2,290	2,564	10,880	1,362	86	71,125
Charge for the period	31,468	15,611	908	1,786	8,934	439	-	59,146
Termination of finance leases	-	-	-	(1,528)	-	-	-	(1,528)
At September 30, 2018	83,573	17,449	3,198	2,822	19,814	1,801	86	128,743
Net book value
At December 31, 2017	156,402	14,391	3,922	9,194	63,913	1,730	-	249,552
At September 30, 2018	138,251	9,194	3,095	1,936	77,535	1,291	-	231,302

9  Intangible assets - Exploration and evaluation assets

	September 30, 2018	December 31, 2017
	$'000	$'000
Ouaré	3,755	-
	3,755	-

Ouaré, located 36 kilometres north east of the Youga processing plant, is the subject of an infill drilling campaign to upgrade the confidence level and classification of the existing mineral resources.  Resource modelling and pit design from the National Instrument 43-101 – Standards of Disclosure of Mineral Projects published on June 19, 2018 shows that this satellite deposit will add further mine life to the Youga Gold Mine.

Intangible assets related to exploration and evaluation costs on Gassore East prospect of $1.9 million were transferred to mining assets under property, plant and equipment following commencement of mining operations within the prospect during the quarter ended September 30, 2018.

10  Borrowings

	September 30, 2018	December 31, 2017
	$'000	$'000
Current
Bank loan - Senior Facility Tranche A	15,003	14,741
Bank loan - Senior Facility Tranche B	-	9,737
Shareholder loan - Other	-	8,106
Related party loan	8,208	5,380
	23,211	37,964
Non-current
Bank loan - Senior Facility Tranche A	59,806	58,668
Bank loan - Subordinated Facility	10,656	10,846
Shareholder loan - Working Capital Facility	9,907	14,938
Shareholder loan - Other	3,956	-
Related party loan	20,309	16,883
	104,634	101,335

(a)  Bank loans

On December 17, 2013 the Company entered into an agreement for an $88 million project finance loan facility with Nedbank Limited and FirstRand Bank Limited (collectively the "Lenders"), (the "Senior Facility"), and also entered into a subordinated loan facility agreement for $12 million with RMB Resources (the "Subordinated Facility").  On December 9, 2015 the Company entered into an agreement for an additional $10 million Tranche B Senior Facility ("Tranche B Facility", together with the Senior Facility and the Subordinated Facility the "Loan Facilities") provided by the Lenders.  These Loan Facilities, which have been fully drawn, financed the development of the Company's New Liberty Gold Mine.  $22.4 million of the Senior Facility principal has been repaid to date including $10 million during the nine months ended September 30, 2018.

(b)  Shareholder loan

Working Capital Facility

In 2017, the Group borrowed $18.8 million from AJL through a working capital facility to meet liabilities arising on the termination of legacy procurement contracts, make advanced payments to suppliers to secure lower unit cost pricing and to accelerate the acquisition of capital items that will increase process plant throughput at New Liberty. 

The loan payable to AJL is recognised at fair value calculated as its present value at a market rate of interest and subsequently measured at amortised cost.  The difference between fair value and loan amount is credited to equity as a capital contribution as the loan is from its majority shareholder.

New loans of $6.2 million during the nine months ended September 30, 2018 were allocated to an increase in loan payable of $4.9 million and additional capital contribution of $1.2 million.  Principal repayments totalling $13.7 million were made during the nine months ended September 30, 2018 of which $10.8 million was allocated as a reduction to the loan payable and $2.9 million as a reduction to capital contribution.

Interest expense on the non-current loan payable to AJL for the nine months ended September 30, 2018 was $0.8 million (nine months ended September 30, 2017: $nil).

Other

The other shareholder loan payable to AJL was assumed on acquisition of the Youga gold mine and Balogo satellite deposit of which $4.1 million was repaid during the nine months ended September 30, 2018.

(c)  Related party loan

In 2017 the Company entered into equipment and finance facility agreements with Mapa İnşaat ve Ticaret A.Ş. ("Mapa"), a company controlled by Mehmet Nazif Gűnal, Non-Executive Chairman of the Company, to facilitate the purchase of heavy mining equipment.  The loan principal of these agreements includes a mark-up of 2.5% over the cost incurred by Mapa in procuring the equipment. The equipment finance loans are unsecured, with interest charged at 6.5% per annum on the US$ denominated loan and 5.5% per annum on the Euro denominated loan amount. The loans are repayable in cash in eight equal semi-annual instalments, the first of which fell due six months after utilisation of the loan.

During the nine months ended September 30, 2018, the Company entered into further equipment and finance facility agreements with Mapa amounting to $10.3 million.  The same as the loans entered into in 2017, these loans were initially recognised at fair value calculated as its present value at a market rate of interest and subsequently measured at amortised cost.  The difference of $0.5 million between the loan amount of $10.3 million and fair value of $9.8 million has been credited to equity as a capital contribution from a related party.

Interest expense on the related party loan to Mapa for the nine months ended September 30, 2018 was $1.4 million (nine months ended September 30, 2017: $nil).  Interest repayment was $1.0 million during the nine months ended September 30, 2018 (nine months ended September 30, 2017: $nil).

11  Finance lease liability

The finance lease liability as at September 30, 2018 relates to the fuel storage facility at New Liberty Gold Mine following termination of the lease arrangement on the generators at nil consideration.  Such assets have been classified as finance leases as the rental period amounts to a major portion of the estimated useful economic life of the lease assets and the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased assets.

	September 30, 2018	December 31, 2017
	$'000	$'000
Gross finance lease liability
-       Within one year	354	2,820
-       Between two and five years	817	7,191
	1,171	10,011
Future finance cost	(226)	(2,223)
Present value of lease liability	945	7,788
Current portion	248	1,913
Non-current portion	697	5,875

12  Equity

(a)  Authorised

Unlimited number of common shares without par value.

(b)  Issued

	Shares	$'000
Balance at January 1, 2017	53,247,590	283,506
Issued to AJL on acquisition of Youga gold mine (i)	20,334,928	51,459
Equity financing (i)	7,974,490	20,248
Share issuance costs (i)	-	(1,568)
Exercise of stock options (ii)	3,750	8
Share consolidation adjustment	(498)	-
Balance at December 31, 2017	81,560,260	353,653
Exercise of stock options (ii)	15,000	33
Balance at September 30, 2018	81,575,260	353,686

(i)      The Company acquired the Youga gold mine and the Balogo satellite deposit on December 18, 2017 for a total consideration of US$70.2 million which comprises of the issuance of 20,334,928 new common shares in the Company at a price of GBP£1.90 per share and a cash component of US$18.7 million.  The cash component was funded through the issuance of 7,974,490 new common shares at a price of GBP£1.90 per share through a private placement.  The directly attributable costs of issuance of these new common shares amounted to $1.6 million.

(ii)     During the period ended September 30, 2018, the Company issued 15,000 new common shares on exercise of 15,000 stock options at a price of GBP£1.575 per stock option.  In 2017, the Company issued 3,750 new common shares on exercise of 3,750 stock options at a price of GBP£1.575 per stock option.

(c)  Stock options

Information relating to stock options outstanding at September 30, 2018 is as follows:

		Nine months ended September 30, 2018		Year ended December 31, 2017
	Number of options	Weighted average exercise price per share	Number of options	Weighted average exercise price per share
		Cdn$		Cdn$
Beginning of the period	2,829,428	4.96	1,242,695	9.12
Options granted	61,000	4.58	1,745,000	3.41
Options exercised	(15,000)	2.66	(3,750)	2.66
Options expired	(13,362)	70.32	(5,570)	105.00
Options forfeited	(222,828)	3.61	(148,947)	17.86
Share consolidation adjustment	(5)	-	-	-
End of the period	2,639,233	4.75	2,829,428	4.96

13  Non-controlling interest

Non-controlling interest represents the Government of Burkina Faso's 10% share of Burkina Mining Company and Netiana Mining Company, the subsidiaries which respectively hold the Youga gold mine and the Balogo satellite deposit.

14  Related party transactions

a) Borrowings

New drawdowns and repayments of the shareholder loan to AJL, new drawdowns and repayments of equipment finance loans with Mapa and interest repayments to Mapa in relation to the equipment finance loans during the nine months ended September 30, 2018 are disclosed in Note 10.

(b) Provision/(purchases) of goods and services

The Company also provided/(purchased) the following services from related parties:

	Three months ended		Nine months ended
	September 30, 2018	September 30, 2017	September 30, 2018	September 30, 2017
	$'000	$'000	$'000	$'000
Technical and managerial services provided by the Company to: Avesoro Services (Jersey) Limited, a subsidiary of Company's parent company	-	137	-	351
Technical and support staff services provided by the Company to: MNG Gold Liberia Inc., a subsidiary of Company's parent company	170	-	316	-
Sale of consumables by the Company to: MNG Gold Liberia Inc., a subsidiary of Company's parent company	1,068	-	1,606	-
Sale of consumables and catering services by the Company to: Faso Drilling Inc., a subsidiary of Company's parent company	336	-	336	-
Drilling services provided to the Company by: Zwedru Mining Inc., a subsidiary of Company's parent company	(357)	-	(2,211)	(377)
Drilling services provided to the Company by: Faso Drilling Company SA., a subsidiary of Company's parent company	(1,761)	-	(5,608)	-
Charter plane services provided to the Company by: MNG Gold Liberia Inc., a subsidiary of Company's parent company	(90)	(55)	(270)	(55)
Travel services provided to the Company by: MNG Turizm ve Ticaret A.S., an entity controlled by the Company's Chairman	(14)	(19)	(20)	(34)
Management services provided by the Company to: Atmaca Services Liberia Inc., a subsidiary of Company's parent company	-	2,000	-	2,000
Technical and procurement services provided to the Company by: MNG Orko Madencilik A.S., an entity controlled by the Company's Chairman	-	(350)	-	(350)
Administration services provided to the Company by: Avesoro Services (Jersey) Limited, a subsidiary of Company's parent company	-	(45)	-	(90)

Included in trade and other receivables is a receivable from related parties of $2.8 million as at September 30, 2018 (December 31, 2017: $1.0 million).  Included in trade and other payables is $2.8 million payable to related parties as at September 30, 2018 (December 31, 2017: $0.5 million).   

(c) Acquisition of heavy mining equipment

In addition to the equipment financed by Mapa (Note 10c), the Company also acquired during the nine months ended September 30, 2018 trucks from Mapa for US$0.4 million to supplement the hauling capacity at Balogo.

SOURCE Avesoro Resources Inc.

Avesoro Resources Inc., Geoff Eyre / Nick Smith, Tel: [phone]; Camarco, (IR / Financial PR), Gordon Poole / Nick Hennis, Tel: [phone]; finnCap, (Nominated Adviser and Joint Broker), Christopher Raggett / Scott Mathieson / Camille Gochez, Tel: [phone]; Berenberg, (Joint Broker), Matthew Armitt / Sara MacGrath, Tel: [phone]; Hannam & Partners (Advisory) LLP (Joint Broker), Rupert Fane / Ingo Hofmaier / Ernest Bell, Tel: [phone]

Related Links

https://avesoro.com/