AVNEL GOLD MINING LIMITED (AVK: TSX) ANNOUNCES THIRD QUARTER 2010 RESULTS
TORONTO, Nov. 11 /CNW/ -
Period ended September 30, 2010.
Results of Operations
Mining Operations
The following table shows the production from the Kalana Gold Mine:
Three months ended Nine months ended September 30 September 30 ------------------ -------------------- 2010 2009 2010 2009 --------- --------- --------- --------- Tonnes milled: Underground ore 12,602 12,041 38,455 36,392 --------------------------------------- --------------------------------------- --------------------------------------- Gold grade - grams per tonne (g/t): Underground ore 7.60 12.85 8.03 12.70 --------------------------------------- --------------------------------------- --------------------------------------- Recovery rate - % 85.1 86.7 86.0 86.5 Gold production - ounces 2,620 4,314 8,540 12,856 Gold production from mill reline-ounces - - - 492 Cost per tonne milled $228 $287 $227 $283 Operating cost per ounce of gold sold $1,109 $829 $990 $760 Operating cost per ounce of gold produced $1,095 $802 $1,022 $802
Gold production of 2,620 ounces in the three months ending September 30, 2010 was 39% lower than the production in the third quarter of 2009. The lower gold production was due to lower head grade (41%) partly offset by a 5% increase in tonnes milled.
Tonnes milled in the nine months to September 2010 were showed a 6% increase from the September 2009 but grade was 37% lower at 8.03 g/t for the nine months to September 2010 compared to the same period in 2009.
The gold grade of ore milled in the third quarter of 2010 was 41% lower than that obtained in the third quarter of 2009.
Gold recovery of 85.1% in the third quarter of 2010 was 2% down on the third quarter of 2009, and 1% down on the nine months to September. This is due to lower head grades in the third quarter 2010.
Development advanced 308 metres in the third quarter of 2010 compared to the planned 160 metres and 58 metres in the third quarter of 2009. Development on 180m level intersected the down dip extentions of Vein 17. The Vein 17 west of the fault was disappointing but the Vein 17 east of the fault has encouraging grades of 8g/t over a development width of 2.2 metres. Development advanced 49 metres north on 180m level towards Vein 19A. This Vein should be intersected during the fourth quarter. The vein structure is expected to be complex but potentially higher grade.
Cash operating costs of $228 per tonne milled in the third quarter of 2010 were 21% lower than the cost per tonne in the corresponding period of 2009. Cash operating costs per ounce sold of $1,109 per ounce of gold sold in the third quarter of 2010 increased from $829 per ounce in the same period for 2009.
Selected Interim Information (In thousands of U.S. dollars except per share amounts) Three months ended Nine months ended September 30 September 30 ----------------------- --------------------- 2010 2009 2010 2009 ------------ ---------- ---------- ---------- Total Revenue............ 3,988 $ 4,396 $ 11,571 $ 15,618 Total Expenses........... 3,811 $ 5,418 $ 12,276 $ 19,943 Net profit/(loss)........ 2,153 $ (1,420) $ (2,069) $ (5,906) Profit/(loss) per share 0.016 $ (0.018) $ (0.021) $ (0.075) Weighted average shares outstanding 133,338,755 80,625,931 99,197,164 78,570,078 Balance Sheet September September 30, 2010 30 2009 ---------- ---------- Working Capital $ 2,940 $ (12,322) Total Assets............. $ 25,309 $ 26,759 Shareholders' Equity..... $ 19,430 $ 7,105
Results of Operations
Revenue, which included a $1,000,000 introduction fee from the IAMGOLD Joint Venture, decreased to $3,988,000 in the third quarter of 2010 from $4,396,000 in the same quarter of 2009, resulting in revenues for the nine months to September showing a decrease from $15,618,000 in 2009, to $11,571,000 in 2010. Gold sales of 2,429 ounces decreased in the third quarter of 2010 compared to 3,492 ounces sold in the third quarter of 2009. Average sales price increased from $970 per ounce in the third quarter of 2009 to $1,228 per ounce in the third quarter of 2010. Gold sales for the nine months to September 2010 at 8,970 ounces decreased from 15,470 ounces in the same period in 2009. The average gold price achieved in the nine months to September 2010 was $1,176 per ounce compared to the average gold price of $943 per ounce in 2009.
Avnel recorded net profit of $2,153,000 ($0.016 per share) for the three months ended September 30, 2010 compared to net loss of $1,420,000 ($0.018 per share) in the third quarter of 2009. Metal sale revenues decreased by 12% in the third quarter of 2010 compared to the third quarter of 2009 due to lower gold sales volumes, partly offset by higher gold prices which rose 26% in the quarter. Operating costs in the third quarter decreased by 30% due to lower operating and depreciation charges. Operating costs in the nine months to September 2010 decreased by 38% compared to the same period in 2009.
As compared to the balance sheet as at December 31, 2009, Avnel's cash and cash equivalents as at September 30, 2010 increased by $1,049,000 to $3,076,000. The increase comprised of the net of cash used by operating activities of $1,033,000, which included a $1,000,000 introduction fee from the IAM Gold Joint Venture, less net cash utilised on capital equipment of $118,000 and net cash proceeds from the private placement in August 2010 of $2,200,000.
Working capital has moved from a deficit of $12,779,000 at December 31, 2009 to a surplus of $2,940,000 at September 30, 2010. This is due to the debt conversion and private placement in August 2010.
Total assets decreased from $25,530,000 as at December 31, 2009 to $25,309,000 at the end of the September, 2010.
Shareholders' equity increased to $19,430,000 at September 30, 2010 from $5,139,000 at the end of 2009. This increase is due to the debt conversion and private placement in August 2010.
Exploration
SOMIKA
IAMGOLD continued with the exploration program to meet the requirements of the Joint Venture Agreement. During the third quarter total expenditure was $1,376,000 with the cumulative to date expenditure being $4,263,000. IAMGOLD also paid Avnel the $1.0 million second joint venture fee in August 2010.
On October 18, 2010 Avnel issued a press release as shown below:
"Avnel Gold Mining Limited (TSX: AVK) ("Avnel" or the "Company") reports that it has been informed by IAMGOLD, the Company's joint venture partner for the Kalana exploration programme, that sample preparation protocols have not been consistently followed by SGS, the independent laboratory engaged in the programme, during parts of 2010. The issue is being intensively investigated by SGS and IAMGOLD and remedial action has been initiated.
The SGS laboratory at Kalana has been closed temporarily and will be re-commissioned when more experienced SGS personnel are seconded to the laboratory and additional equipment installed. All reverse circulation and diamond drilling samples analysed to date will be re-analysed at SGS's sample preparation laboratory in Bamako and analytical laboratory in Kayes. It is IAMGOLD's objective that all the re-assaying is completed before the end of 2010.
Preliminary investigations indicate that some sample material for pulverisation was lost during the sample preparation phase, and that drill samples were found discarded on the project site. IAMGOLD report that they believe the QA/QC protocols were properly applied to pulverised samples, but that the loss of sample material may have distorted the representivity of those samples. IAMGOLD has reported to Avnel that there is a reasonable possibility that SGS's failure to apply appropriate sample preparation laboratory protocols occurred at an early stage of the initial drill campaign in 2010 and, accordingly, errors may have been introduced into the assay results reported in the "Kalana Project Update" press release of June 21, 2010. IAMGOLD reports that the underground grab sample assays reported in the Kalana Project Update are unaffected and that the geological observations therein remain valid. Additional observations since Kalana Project Update have further refined the geological model, and continue to serve as a sound technical framework for the ongoing exploration programme being conducted by IAMGOLD.
To date 9,821 metres of diamond drilling and 11,646 metres of reverse circulation drilling have been completed at the Kalana mine and its environs and assays in respect of 7,821 metres have been received from SGS.
A drill campaign commenced on October 10, 2010 with 6,500 metres diamond drilling and 10,000 metres reverse circulation drilling planned at both Kalana and the Kalanako satellite target. This programme is scheduled for completion by year end.
Mike Donnelly, Senior VP Exploration IAMGOLD, is quoted as saying "We view the sampling and assay shortcomings as unfortunate and are taking the necessary steps to verify the integrity of the data related to the samples that we have collected to date, and that appropriate processes are in place to prevent anything like this from re-occurring. We continue to be enthusiastic about the potential of Kalana. Our exploration plans have not changed, and two drills arrived on site in October following the rainy season and are currently working."
Howard Miller, CEO of Avnel says, "Avnel is concerned that there has been an operational issue in the sample preparation laboratory. We will give close attention to the remedial steps being taken and the company will cooperate with the implementation of those steps and all aspects of the programme. We look forward to reporting re-assayed results to shareholders as soon as they become available."
Diamond Drilling & Resources
Diamond drilling commenced in February 2010 and 40 holes totalling 9,800 metres were completed at the Kalana Mine by the end of May. The first phase drill program was designed to test:
- potential extensions of known veins and inter vein material between high grade veins - potential mineralisation outside of the known Mineral Resources - the results of recent underground drilling in the aureole around the central intrusion
IAMGOLD's diamond drilling up to the end of May was located outside the existing Kalana Mine and targeted potential additions to the known Mineral Resources. The holes were drilled on the eastern, northern, western and southern boundaries of the mine. Holes are drilled at sixty degrees to an average depth of 250 metres. One hole (DDH-39) was drilled to a depth of 487 metres and was located within the existing mining area.
Potential Extension of known mineralisation within the mine
Eight holes (DDH 1, 6, 7, 8, 27, 28, 29 and 30) were drilled to test possible extensions of known veins currently being exploited. Diamond drill hole DDH-28 showed that Vein 17 extends east of the main fault as has been shown by mine development. The intersection shows that the vein may continue approximately 50m beyond the current mine development on 150m elevation. The holes also indicate that Vein 17 is part of a mineralised, stockwork zone that may generate significant ore tonnes at lower grades. This has been further supported in recent mine development where a twenty degree inclined winze of 75m assayed 4.5g/t over 75m of development. The inclined area is estimated to be equivalent to 15m vertical thickness.
DDH-27 intersected Vein 17 close to the 180m elevation and a new haulage is being developed to access Vein 17 between 180 metre and 165 metre elevations.
Two diamond drill holes (DDH-29 and DDH-30) intersected possible extensions of Vein 18 and Vein 18C approximately 50 metres west of the current mining blocks.
DDH 39 was collared south of the Kalana diorite intrusion and drilled north at sixty degrees through the diorite to a final hole depth of 480 metres. The hole traversed 224 metres of diorite. Beyond the diorite the hole intersected twelve metres of hornfels, strongly altered and silicified with sulphides. The remainder of the hole showed quartz veins and stockwork, with areas of strong alteration and breccias zones.
DDH 1 (last hole drilled) was collared west of the Kalana Mine and drilled north-east to a depth of 329 metres. The hole was targeting an area north of existing mine development to test the up dip extension of the Vein 19 and 19A and Vein 20 Mineral Resources. This area has been partially tested by underground diamond drilling by SOMIKA in 2008. Multiple grains of visible gold were observed throughout the hole. The hole traversed a zone of vertical, thin quartz veins that have not previously been reported.
Potential Mineralisation beyond the Known Mineral Resources
An east-west drill line of six holes (DDH 33 to 38) was completed north of the known Mineral Resources. Holes were drilled from east to west dipping at sixty degrees. The holes were testing reported vertical structures in previous exploration and interpretation of geophysical data. The holes intersected vertical quartz vein structures as well as flat dipping quartz vein zones.
Visible gold was observed in some of the drill core.
An east-west drill line of six holes (DDH 20 to 25) was completed south of the known Mineral Resources. Holes were drilled from East to West dipping at sixty degrees. Both vertical and flat dipping quartz veins and stockworks were intersected.
This drill line above was extended to the east with seven holes (DDH 13 to 19). Holes were drilled from east to west dipping at sixty degrees. These holes were testing the inferred Mineral Resources at Kalana II which are associated with an extension of the diorite from the centre of the Kalana Mine to the east. DDH 18, 19 and 20 intersected quartz veins that may be extensions of the Vein 1, 2 and 4 with visible gold observed. DDH13, 15 and 16 intersected breciatted quartz vein and stockwork and diorites.
A north-south drill line of four holes (DDH 9 to 12) was completed over the Kalana II area. Holes were drilled from South to North at sixty degrees. The holes tested the extension of mineralisation north and south of the east-west striking diorite intrusion.
Potential mineral resources south of the Kalana Diorite Intrusion
A north-south fence of four holes (DDH 2 to 5) was completed. The holes were drilled from south to north at sixty degrees. These holes were testing a zone south of the Kalana diorite intrusion where Avnel completed three underground diamond drill holes in 2008 with long intersections of lower grade mineralisation. DDH 4 intersected quartz vein and stockworks associated with Veins 1 and 3 in the Kalana Mine.
RC Drilling
The RC drilling campaign commenced in May 2009 and now completed totalled 11,346 metres and was designed to test:
- Further extensions to the Kalana Mine zone - The Kalanako Prospect with a strike of over 3 km and a width of 1 km where Russian drilling delineated a historical non-compliant C1 + C2 resource of 600,000 tonnes @ 3.6 g/t over a foot print of 400 metres by 200 metres. This Prospect has a strong magnetic signal correlating with a strong geochemical signal - The Dadjan Prospect supported by both a magnetic and geochemical signal. - 5,234 metres have been drilled at the Kalana Mine zone and 1,000 metres at the Kalanako Prospect during the second quarter
Geochemical Sampling of Termite Mounds
It is planned to collect samples of termite mounds over the total Permit. During the first quarter 5,907 samples were collected in the northern area near the Kalana Mine. The sample density is one per hectare. The sampling continued in the second quarter in the southern area of the Permit. The density of samples will be one per 2 hectares. During the second quarter 90% of the planned samples in the south were collected. 4,472 square kilometres were collected. By the end of quarter 3 a total of 14,793 samples had been collected.
All samples will be prepared and assayed by SGS at the Kalana Mine Site with encouraging results.
Regolith mapping and recording of orpaillage workings were conducted at the same time as sampling of termite mounds.
It is planned to re-assay 5% of the samples to check the quality of data, following the laboratory problems reported above.
Underground Sampling
During 2009 3,753 underground samples were collected from the workings in the mine. Samples were collected from the main haulages and crosscuts to access the major quartz veins that have been mined. The assay results were received in the first quarter. The average grade was 2.17g/t. 25% of the assays are above 0.7g/t with an average value of 8.5g/t. It was decided to re-assay samples where the grade was higher than 0.7g/t utilising fire screen assay with a screen size of 106 micron. Preliminary results suggest that the screen fire assays are approximately 20% higher than the standard fire assays without significant relation to the grade of the sample. Further re-assaying is planned to evaluate the impact of screen fire assaying and different sample preparation protocols.
The lithological and mineralogical descriptions were integrated into a Geosoft program that produced a lithological and mineralogical map of the underground tunnels. The maps showed extensive zones of pyrite and arsenopyrite.
Geophysics
- Interpretation of the airborne geophysics program in 2009 is ongoing using field data from the regolith mapping program. A structural and lithological network (lineaments, faults, bedding, major boundaries etc.) has been drawn; gold corridors and numerous circular structures have been identified. The interim results confirm the known major structures on the Permit. - At the Kalanako prospect, where drilling occurred in the 1980s, the magnetic anomaly indicates that the north-west trending zone between two structures may be wider than currently understood. This is being tested by RC drilling during 2010. - The survey also identified an anomaly associated with artisanal workings at Dadjan, a few kilometres south of Kalana. This is being tested by RC drilling during 2010. Current exploration activities around the Kalana Mine In line with IAMGOLD's statement on 18 October, 2010 that their "...exploration plans have not changed" they recommenced an aggressive campaign for the fourth quarter 2010. with the objective of: - Completing 6,500m of diamond drilling and 10,000m of reverse circulation drilling before the end of the year at both Kalana and the Kalanako satellite target. - Underground grab samples in the galleries of the Kalana mine are continuing apace and structural modelling is ongoing.
Importantly, SGS Mineral Services have implemented an action plan both to re-assay all the potentially compromised samples from the drill campaign in the first half year and to re-open the dedicated SGS sample preparation facility at the Kalana mine under the supervision of senior SGS management and personnel.
Duplicates of all of the potentially compromised samples are being sent away for re-assay at SGS's facility at Bamako and Kayes in Mali. The dedicated SGS laboratory at Kalana is now doing the sample preparation and assays for both the underground grab samples and drill samples being generated by the current campaign.
It is likely that an appropriate suite of assay data will only become available at year end.
The IAMGOLD geologists report that they are encouraged by the results of the drilling and grab sampling which commenced in this quarter during which those two campaigns will be completed.
Additional information is available in the MD&A for the quarter ended September 30, 2010 which is available on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and the Company's website www.avnelgold.com.
Caution Regarding Forward Looking Statements:
Statements regarding the corporation's plans with respect to the Kalana Mine and exploration of the Kalana Permit are forward-looking statements. There can be no assurance that the planned ongoing development of the Kalana Gold Mine will be completed as forecast or that the exploration program on the Kalana Permit will identify minerals resources.
The TSX has neither approved nor disapproved the form or content of this information release.
For further information: Howard Miller, Chief Executive Officer, Phone +44 207 589 9082, 416 726 8174, Email: [email protected], Website: www.avnelgold.com
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