On May 10th West Africa-focused gold miner Avesoro Resources published a glowing financial update, with gold production and sales more than trebling in the first quarter of 2018, which helped quarterly revenue rise to US$91.4 million. This incredible figure represents more than 90% of the full year 2017 revenue of $98 million reported by the company in March, after it was able to complete a successful turnaround at the New Liberty Gold Mine in Liberia. Avesoro’s annual performance was also bolstered by the acquisition of two producing gold mines in Burkina Faso, which combined with the revival of New Liberty to create a positive spiral in the company’s fortunes, propelling it towards mid-tier status.
“We are delighted with the continued strong operational performance delivered in the first quarter,” says Avesoro’s CEO and director Serhan Umurhan.
“All of our mines performed in line with expectations, leaving us on track to meet 2018 production guidance. We go forward in 2018 from a position of strength.”
New Liberty is the first and largest commercial gold mine in Liberia’s fledgling industry, after achieving first marketable production as recently as March 2016. However, dark clouds were quick to form around Liberia’s inaugural large-scale gold mine.
Just two months after reaching full production, Avesoro (then operating under the name Aureus Mining) was forced to suspend operations at New Liberty amid commissioning delays and a tailings leak, which was exacerbated by a deteriorating financial position and retreating gold prices.
MNG Gold’s intervention
It was at this point that Turkish gold miner MNG Gold swooped in to arrest the company’s decline, signing a deal to become the majority shareholder of Aureus and providing cash injection totalling $150 million to rescue the New Liberty mine, before renaming the company Avesoro.
After refreshing the boardroom with several appointments from MNG’s team, Avesoro commenced a new strategy for New Liberty, introducing a number of initiatives to boost operations at the mine.
“Primary amongst these was the decision to transition to an owner-operator mining model, which significantly reduced the ongoing costs of mining operations. We also purchased additional fleet to allow for an increased mining rate and to catch up on the stripping shortfall the company inherited.”
Furthermore, Avesoro has improved equipment availability, recruited additional high-quality staff for both the mining operation and process plant, undertaken a proactive maintenance schedule and optimised the process plant allowing for an increased throughput from 90ktpm to 140ktpm.
Factor in improved tailings and surface water management and the result is a stable and profitable mine, which was not much more than a far-fetched notion back in mid-2016. However, fast forward to Avesoro’s Q1 2018 production report and irrefutable evidence emerges of the turnaround at New Liberty.
The mine produced a record quarterly gold output of 27,870 ounces (oz), a 9% increase on the production sum achieved in the previous three-month period at the end of 2017.
Addressing the size of the task the company had on its hands, Umurhan says: “It has undoubtedly been challenging, but we knew there was a quality asset here and that we had the capabilities within the team to bring it into stable production.
“As the most recent record production results have shown, we have succeeded in achieving that. I would like to thank all our staff who have shown great determination in bringing about this result.”
The next challenge for Avesoro at New Liberty is to continue delivering high standards in line with the company’s renewed mine plan and production targets. However, the miner has also devised plans to extend the LOM at New Liberty.
“We have a lot of inferred gold ounces below the pit shell that are not currently included within the mine plan and have just completed a 52-hole drill programme with the aim of increasing the confidence level in theses ounces, with extremely encouraging results to date confirming the resource model.”
The results of this drilling programme will be combined with near mine exploration that is currently underway. “2018 is an exciting year for exploration across the whole group,” reveals Umurhan.
Welcome to Burkina Faso
Avesoro also delivered strong output growth from the Youga and Balogo gold mines in Burkina Faso during the first quarter of the year, with the combined production figure of both mines increasing by 39% on the last quarter to 40,218 oz.
This is an impressive result considering Avesoro purchased the mines only last year in what the company called a ‘transformational’ move, in the sense that it gives them the chance to grow their portfolio and expand their geographic reach in the West Africa region.
In particular, Avesoro was able to apply its skills at the Youga mine to deliver the highest quarterly production from the process plant in a decade and has already extended the mine life and devised a more cost-effective mining process.
The Balogo mine is also held in high regard by the company despite its previous owner struggling to raise the necessary finance that would reflect its true potential. Avesoro began mining the high-grade asset in March 2017.
“To date, the average mined grade from Balogo has been approximately 18 grams per tonne (g/t) and during the quarter this has fed through to the process plant, with the feed grade for the quarter increasing by 37% to 4.5 g/t.”
Youga and Balogo are proven gold-producing assets that complement the New Liberty mine and provide an instant boost to Avesoro’s production portfolio, in addition to adding high quality exploration upside that will provide further organic growth in the future.
Taking into account the additional output from the Youga and Balogo mines, Avesoro’s total Q1 production figure came to 68,088 oz, which represents an all-time high return and keeps the company on track to meet its 2018 guidance of between 220,000 oz to 240,000 oz.
“Our primary ambition is to become a premier mid-tier gold producer and that ultimately means we have to reach 500,000 oz [annual production rate] and the acquisition of Youga and Balogo has been a significant first step in reaching that target,” Umurhan proclaims.
“We will continue to focus on delivering on our production guidance through 2018 whilst also assessing various other M&A opportunities. We have a very strong platform to grow from both organically and by acquisition.”
A golden horizon
Umurhan also has a reasonable right to believe that external market conditions will further sweeten the fruits of success born out of Avesoro’s increased operational productivity. Gold is widely considered a ‘safe haven’ commodity and will continue to be perceived in this way by investors long into the future.
Interest in gold as a portfolio buffer also peaks during times of geopolitical tension or upheaval and this is when gold spot prices tend to rise, which is only good news for international gold mining companies, and Avesoro’s CEO and director expects gold to rise in the face of escalating tensions between the world’s two largest economies.
“President Trump’s foreign policy and the current brewing trade war with China have increased political instability and uncertainty in these regions and we are seeing investors turn to gold as a traditional haven.
After completing a turnaround at New Liberty and bolstering its production portfolio with the two Burkina Faso acquisitions, Avesoro is well on the way to a golden horizon.
In the short term, the company is confident it can soon reach a 300,000 oz annual production target through organic growth and exploration across its three mines, but in the long term it will look to achieve a 500,000 oz annual guidance through M&A activity and is currently assessing various opportunities throughout the continent.