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Avesoro Resources sees revenues leap following major Burkina Faso acquisition (ASO)

10 May 2018 | by: James Moore

West African gold producer Avesoro Resources (LSE:ASO) advanced this morning after revealing that it achieved record gold production and cash flow last quarter. Shares in the firm were up 6.4pc, or 17.5p, to 290p after it revealed that production hit a record 68,088oz in the three months ended 31 March, up 140pc on the previous quarter.

As a result, it saw revenues increase by 174pc last quarter to $91.4m – this is more than 90pc of the revenues it generated over the whole of 2017. Furthermore, it achieved record quarterly gold sales of 68,553oz at an average price of $1,333/oz, and saw operating cash costs per ounce sold improve by 19pc quarter-on-quarter to $624. The business also saw operating cash flows increase by 177pc over the quarter to $39.4m, bringing its cash balance to a strong $23m as at the end of the period. Finally, net debt decreased by $17.5m to $106.6m.

On the results, chief executive Serhan Umurhan said: On the back of the significantly increased cash flow from our assets, the company has strengthened its balance sheet during the Quarter, and reduced net debt by US$17.5 million including a US$10.7 million scheduled debt repayment against the New Liberty project finance facility. We remain on track to achieve our 2018 production and cost guidance of 220,000 to 240,000 ounces of gold at an operating cash cost of US$620 to US$660 per ounce and an AISC of US$960 to US$1,000 per ounce.

‘Additionally, we are progressing well with the New Liberty infill, Ndablama, Youga and Balogo drilling campaigns. We look forward to updating the market later in the current quarter on our progress towards increasing the company’s mineral resources and subsequently extending the mine lives at our existing operations through conversion to mineral reserves”.

Avesoro has no doubt been helped along by its acquisition of two additional mines in Burkina Faso last December, which ramped up its output from 70,000-80,000oz to an expected 200,000oz per year. It purchased these mines from 73.5pc major shareholder Avesoro Holdings for a total of £51.2m ($69.5m), with £37.6m ($51m) of this figure funded through consideration shares.

According to Avesoro, it is now the seventh largest gold producer on the London market as a result of the acquisition of the Youga and Balogo mines. The firm’s other key asset is New Liberty, a gold mine based in Liberia with an estimated proven and probable measured and indicated mineral resource of 9.6m tonnes, containing 985,000 ounces of gold.

The company’s shares have enjoyed a rapid rise this year thanks to its strong news flow, a decent macro backdrop, and the recovery of ground lost before the acquisition news dropped. Last month, we highlighted the business as a possible buy, pointing out that it had tested the top of its 12-month-long down trending channel eleven times to date and remained above it.

 

Author: Daniel Flynn

Disclosure: The Author does not own shares in the company mentioned above

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