Avocet Mining is experiencing temporary lower gold production but is expecting to recover lost production to reach levels of previous years.

Gold production is down 11% to 92,000 ounces. Avocet has announced its operational issues to September 30 in advance of its interim result release expected on November 15.

The Central and South-east Asian gold producer has recorded average cash costs in the order of US$439 per ounce, an increase of more than 50% on the same period last year.

Its average realised price is expected to be US$580 per ounce, an increase of 44% over the same period last year.

Its gross margin is expected to be 18% compared to 20% for the previous year.

In its exploration program, Avocet has reported a resource of more than 500,000 ounces at Bakan in Indonesia.

Furthermore, it has recorded significant trenching results from its South Sulawesi prospect in Indonesia; drilling restarted at Idenburg in Indonesia and drilling continues at Penjom to extend resources.

Malaysia

Gold production at the Penjom mine is expected to be approximately 50,000 ounces for the first half year. This will be a 17%decrease on the same period last year.

There has been a significant increase in reserves at Penjom of 199,100 ounces. This has resulted in the design of a much larger pit which has necessitated substantial waste stripping in the short term and also resulted in a temporary increase in the waste-to-ore stripping ratio.

During this period the mine has had to rely on lower grade stockpiles for gold production which has, in turn, resulted in a lower amount of gold being produced during the period. These factors, together with significantly higher consumable prices, have temporarily pushed unit production costs up to approximately US$380 per ounce.

The company believes production next year should be maintained at an annual rate of at least 100,000 ounces per annum and cash costs will reduce owing to the reduction of the waste-to-ore stripping ratio as the mine deepens to access higher grade ore and replaces the smaller contractor-operated trucks with a new fleet of larger owner-operator trucks. Additionally, the remaining gold in stockpiles has been re-valued in line with the company's gold put option position of US$450 per ounce. This has added approximately US$4 million to pre-tax profit.

Exploration continues in and around Penjom with drilling results being encountered that expect to continue to add to the resources and further extend the life of the mine. These results will be announced shortly.

Indonesia

Unseasonal rainfall at the North Lanut operation has required the mine to conduct some re-engineering of the waste dumps and storm water ponds for the dump leach.

Avocet has also brought forward the decision to hire articulated dump trucks for ore and waste haulage. This has coincided with the cancellation of government-funded fuel subsidies, which has resulted in significantly increased diesel prices. These factors have translated into a higher production cost of over US$320 per ounce compared to US$191 per ounce for the previous year. In spite of these challenges, the mining team has maintained gold production at the forecast rate of approximately 50,000 ounces per annum.

At Bakan, located close to North Lanut, Avocet continues to drill the Durian and Osela deposits. This drilling should allow the company to bring the recently announced inferred resource of 533,000 ounces up to the measured and indicated category so that feasibility work can begin at the start of next year.

Avocet's exploration program at South Sulawesi has produced some significant trenching results and further ongoing trenching results are expected to be announced later this year. Drilling has restarted at the Idenburg property in West Papua where the company is exploring for a high-grade gold resource through scout drilling of areas of known gold mineralisation, including the Sua area, which was drilled last year. Avocet is also in negotiations over a number of additional prospects in Indonesia.

Tajikistan

A number of management changes have recently been made at ZGC in Tajikistan to improve day to day operations at the mine. These changes, together with changes to operational practices, have been made to continue planned stripping of waste from the high wall of the Jilau Pit which has been delayed.

This has impacted on gold production the company had forecast at the beginning of the year. The mine has continued to operate on the processing of stockpiled material and lower grade material mined on the periphery of the main orebody at the Jilau Pit. Production for the first half year was on a similar level to last year at approximately 18,000 ounces, but production costs have escalated to more than US$700 per ounce.

The new management team is now implementing a series of changes to improve operational efficiencies and is undertaking a strategic review of the operation. This will be completed by mid November.

China

Avocet has spent just US$1 million on its earn-in to the Hatu project and is awaiting the drilling results from a recent program, which it will announce in December. A revised resource to be announced by April next year.

Metallurgical testwork will start at the company's laboratory in Penjom by November.

Avocet is a mining company listed on the AIM market of the London Stock Exchange. The company's principal activities are gold mining and exploration in Malaysia (as 100% owner of the Penjom mine, the country's largest gold producer), Tajikistan (as 75% owner and operator of ZGC, Tajikistan's principal gold mine), and Indonesia (as 80% owner of the North Lanut gold mine in North Sulawesi). The company has a number of advanced mining and exploration projects in Asia and owns 26% of Dynasty Gold Corporation, a Canadian listed exploration company active in Western China.