LSE and Oslo-listed, West Africa focused gold junior Avocet Mining is intent on developing its mining project portfolio as its second gold project, Tri-K in Guinea, assesses funding options – a necessity in light of geological and production challenges at its Burkina Faso-based mine Inata. “Our new project approach is refl ective of market conditions which call for smaller, cost-eff ective start-up operations while maintaining visibility for longer-term growth alternatives as market conditions improve,” finance director MIKE NORRIS tells LAURA CORNISH.
The combination of cash constrained markets and a weaker gold price has seen companies move away from large, capital intensive projects. New project development, especially in the junior sector, requires small-scale, lower capital expenditure (capex), easy-to-build mining operations which can move into production quickly and start generating cash quickly as well. This is the approach Avocet Mining is taking for its project development, primarily in Guinea where it hopes to elevate its status from a single mine operator once Tri-K becomes operational. “What we are configuring at the moment is reflective of tight market and finance conditions – spending tens of millions of dollars rather than hundreds of millions. This is the only practical and eff ective short-term tactic which best ensures the successful development of new mining projects. The key however is making sure we have visibility for quick and easy expansions and growth in the longer term as our circumstances, and market circumstances allow,” Norris outlines.
Tri-K – A bigger future for Avocet
Situated in north-east Guinea, Avocet is focused heavily on the advancement and development of its Tri-K gold project, which Norris describes as the company’s “new mining frontier”. Tri-K has a 480 000 oz maiden ore reserve (7.9 Mt averaging 1.89 g/t). A feasibility study completed in 2013 has revealed a viable and “robust” fi ve to seven year heap leach operation with good grades of 1.89 g/t at 7.9 Mt, producing in the region of 50 000 – 70 000 ozpa of gold for less than $800/oz – based on the nearsurface oxide zone which equates to only 20% of the total resource. “Our recent focus on the project has been adjusting the capex profi le (decreasing the capital and operating costs) to improve cash flows as the gold price has weakened. And it is shaping up to be more robust than a few years back when our original capex numbers were signifi cantly higher.” “It is exciting to have a new focus, which for a long period has been Inata. We are currently working with a number of parties on financing the project and looking at how best to proceed with its development and operational structure. Our intention is to complete all fi nancing and development planning shortly and to start construction of Tri-K in 2016,” Norris reveals. This is certainly a realistic goal – the project was awarded its mining licence in April which should undoubtedly assist in fast-tracking its fi nancial and development requirements. The feasibility study, as well as environmental and social impact assessments, has been submitted to and accepted by the Guinean government as well. That said, it has the potential to be the first new gold project developed under the new mining code, which was revised in April 2013. Tri-K’s development plan and long-term potential perfectly fit Avocet Mining’s strategy – developing small start-up mines but looking into and evaluating their larger, future potential. Metallurgical test work to date, based on CIL processing methods, suggest that Tri-K material is amenable to standard CIL techniques as the mine progresses deeper into harder and more metallurgically-complex ore bodies. “The project could have a higher production and/or longer life if we are able to explore these opportunities down the line.”
Overcoming metallurgical challenges at Inata
Situated towards the northern tip of Burkina Faso, the 10% government-owned and 90% Avocet-owned Inata gold mine has been in operation since the end of 2009 and “has had some very good years, but has been on a bumpy ride more recently,” Norris points out. Production has been steadily declining from the multi-open pit mining operation as it has progressed to deeper levels – from 135 000 oz of gold in 2012, to 118 000 oz in 2013 and 86 000 oz in 2014. Its average head grade is 1.77 g/t. Mining is currently in excess of 150 m in certain pits although the original design intended to go no deeper than 120 m. “The reason for our gold production decline is partly metallurgical,” Norris explains. “The material we are processing has become more diffi cult as we mine deeper. This has caused a lot of challenges and subsequently we have produced less gold and seen a decrease in our desired level of effective production and profi tability.” Over the last year Avocet Mining has spent time and eff ort addressing Inata’s metallurgical difficulties and has introduced an additional plant circuit (in September 2014) to improve gold recovery. “We have further improved our costs by reducing labour and general costs – generally, revisiting our capex to best manage our cash flows.” This has delivered successful results already, and allowed the mine to continue operating without further funding.
The mine is now recuperating from its diffi cult period, which also includes a workforce strike at the end of the 2014. The additional plant circuit Norris describes as a “small add-on” to the main carbon-in-leach plant circuit which addresses the increasingly carbonaceous ore quality which makes gold recovery diffi cult. More specifi cally, it is a carbon-blinding circuit which incorporates kerosene to coat some of the negative carbon in the ore that “robs” the gold. The second part of this process entails “mopping” up the excess kerosene so that it doesn’t contaminate the rest of the CIL gold recovery process. “The new circuit has been providing the kind of benefit we envisage, not as fully in some areas as we would like or on all ore types however.” As a result, Avocet is conducting additional test work to further optimise the circuit as it evaluates the right recipes of chemicals and reagent quantities for the various ore types. “It is not a simple exercise.” So for now, Avocet Mining’s 2015 expectations are optimistic but cautious: “We expect to produce about 86 000 oz this year but are hoping for more than that.” Another challenge on Inata’s horizon is its remaining lifespan – which has decreased from five years in 2014 to between two and three years currently as resources continue to deplete and recoveries remain lower. “We have not had the funds over the last couple of years to invest in near-mine exploration and resource development to extend the life of mine.
We are however still committed to this mine and want to extend its lifespan if there is an uptick in gold price.” To date the company has injected some cash into a property adjacent to the mine that falls within its exploration territory. The Souma project has a proven 0.78 Moz resource and could provide additional satellite ore feed to the Inata plant. “Alternatively, it could represent a standalone heap leach operation and we are doing some drilling and metallurgical test work to establish that.” “Overall, there is a good deal of gold in and around the Inata mine and exploration properties and where we are able, we intend to explore these and establish what production possibilities they could yield in the future.” MRA