TORONTO, July 15, 2019 /CNW/ - Avesoro Resources Inc. ("Avesoro" or the "Company"), the TSX and AIM listed West African gold producer is pleased to announce that the Company's subsidiaries, Burkina Mining Company SA ("BMC") and Netiana Mining Company SA ("NMC"), have entered into an open pit mining contract (the "Contract") with Orkun Group Sarl ("Orkun") at the Youga Gold Mine ("Youga") in Burkina Faso. The Company is also providing an update on the Company's funding shortfall position for 2019.
FUNDING POSITION UPDATE
The prevailing gold price has strengthened considerably since the Company's announcement on June 10, 2019averaging c.US$1,385 per ounce since that date. If the gold price averages c.$1,400 per ounce during H2 2019 the Company, on its current production guidance, would generate c.US$11 million more revenue from H2 2019 gold sales than was anticipated in the June 10, 2019 announcement.
Furthermore, under the terms of the mining contract with Orkun, the contractor assumes responsibility for all future mining fleet overhaul costs. As a result, the Company has reduced its expected H2 2019 capital expenditure requirement by c.US$4 million.
Based on the assumptions above, the H2 2019 funding gap would reduce to US$10 - US$15 million from our previous guidance of a shortfall of between US$25 – US$30 million later in 2019. The funding gap includes US$12.9 million of debt provided by a related party lender falling due for repayment in 2019. The Company is holding constructive discussions with the related party about deferral of these debt repayments.
The Company continues to review other options to further reduce the H2 2019 funding gap, including potential reductions in capital expenditure requirements that may also be realised at New Liberty if a similar agreement can be reached with the preferred mining contractor for that mine as has been achieved with Orkun at Youga.
The Special Committee is also exploring options to fill the H2 2019 funding shortfall gap and address the current general working capital needs of the business following the reduction in the annual production guidance by 30,000 ounces as announced on June 10, 2019 arising from operational challenges experienced earlier in the year.
YOUGA MINING CONTRACT
The mining programme under the Contract is based on the excavation of between 800,000 to 900,000 bank cubic metres ("BCM") of material per month, including a minimum of 120,000 tonnes of ore delivered to the ROM pad, per month. Over the life of mine, the Contract is based on the excavation of a minimum of 42 million BCM ("Minimum TMM") of material over the life of mine which can be increased, at the Company's option, to 60 million BCM on the same terms.
The Contract price of excavation during the Minimum TMM period is US$4.26 per BCM (approximately US$1.60 per tonne) reducing to US$3.75 per BCM thereafter (approximately US$1.41 per tonne) for the remainder of the Contract.
Orkun will pay an earn-in fee of US$0.51 per BCM to acquire BMC's existing heavy mining equipment ("HME") fleet. The earn-in fee will be offset against the amounts invoiced by Orkun. Upon completion of the Minimum TMM, ownership of BMC's HME fleet will transfer to Orkun. However, Orkun assumes full responsibility for the on-going upkeep and maintenance of the HME from commencement of the Contract.
Orkun has also committed to supplement the existing HME fleet with US$5 million of additional equipment at its own cost. This includes five excavators, 15 haul trucks and auxiliary equipment to ensure that the contracted material movement is achieved. The first batch of this additional HME is due to arrive at Youga in early Q3 2019.
BMC and NMC retain responsibility for mining geology, planning and certain other costs which are included in the total cost of mining reported by the Company.
Serhan Umurhan, Chief Executive Officer of Avesoro, commented: "This contract will enable Avesoro to significantly reduce its future mining costs at Youga. Outsourcing the mining activity will also enable us to reduce our direct employee headcount and overall business complexity thereby reducing G&A costs.
The responsibility for future fleet maintenance costs has also been transferred to Orkun, thereby significantly reducing the Company's 2019 funding shortfall that was announced on June 10, 2019.
To achieve the material movement targets set out in the contract, Orkun will also supplement the existing Youga mining fleet with five additional excavators and 15 haul trucks at its own cost. This should ensure a minimum of 120,000 tonnes of ore is delivered to the ROM pad each month and that the Youga Processing Plant is maintained at full operating capacity."
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 17Mt with 1,365,000 ounces of gold grading 2.49g/t and an estimated Measured and Indicated Mineral Resource of 20.47Mt with 1,748,200 ounces of gold grading 2.66g/t and an estimated Inferred Mineral Resource of 3.0Mt with 271,000 ounces of gold grading 2.8g/t. A supporting Technical Report summarising the PFS, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated January 31, 2019 and entitled "NI 43-101 Pre-Feasibility Report, Mineral Resource and Mineral Reserve Update for the New Liberty Gold Mine, Liberia" and is available on SEDAR?at www.sedar.com.
Youga has an estimated Proven and Probable Mineral Reserve of 14.7Mt with 814,900 ounces of gold grading 1.72g/t and a combined estimated Measured and Indicated Mineral Resource of 22.16Mt with 1,189,100 ounces of gold grading 1.67g/t and an Inferred Mineral Resource of 7.6Mt with 377,000 ounces of gold grading 1.5g/t. A Technical Report dated 20 June 2019 prepared in accordance with the requirements of National Instrument 43-101 and entitled " NI 43-101 Technical Report Mineral Resource and Mineral Reserve Update for the Youga Gold Mine, Burkina Faso" is available on SEDAR at www.sedar.com and on the Company's corporate website www.avesoro.com.
For more information, please visit www.avesoro.com
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 statements regarding the Company's funding requirement reducing to US$10 – US$15 million at a US$1,400 / oz gold price in H2 2019; statements regarding the timing and delivery of HME to Youga in Q3 2019; statements regarding the delivery of a minimum of 120,000 tonnes of ore to the ROM pad, per month; and statements regarding potential reductions in capital expenditure requirements that may also be realised at New Liberty.
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 and retain qualified staff (including employees and contractors) 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 resign, 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.
SOURCE Avesoro Resources Inc.
For further information: Avesoro Resources Inc., Geoff Eyre / Nick Smith, Tel: +44(0) 20 3405 9160; Camarco (IR / Financial PR), Gordon Poole / Nick Hennis, Tel: +44(0) 20 3757 4980; Berenberg (Joint Broker), Matthew Armitt / Detlir Elezi, Tel: +44(0) 20 3207 7800; finnCap (Nominated Adviser and Joint Broker), Christopher Raggett / Scott Mathieson / Camille Gochez, Tel: +44(0) 20 7220 0500; Hannam & Partners (Joint Broker), Rupert Fane / Ingo Hofmaier / Ernest Bell, Tel: +44(0) 20 7907 8500