Wednesday, gold mining company Avocet Mining Plc (AVM.L) announced preliminary results for fiscal 2009, reporting a decline in profit that reflected a 33% decrease in gold production coupled with increased production cash costs. The company also said it has completed the acquistion Norway-based Wega Mining as of Wednesday.
For the year, pre-tax profit declined to US$33.88 million from US$37.58 million in fiscal 2008. Excluding exceptional items, profit before tax was US$15.0 million compared to US$52.4 million in the previous year.
Exceptional items totaled US$18.9 million, which included US$24.8 million mark to market gain on the group's gold collar that was liquidated during the year, as well as a US$2.3 million profit on disposal of a ball mill, and exploration impairments totaling US$8.2 million.
Net earnings attributable to shareholders decreased to US$24.52 million or 20.15 cents per share from US$28.35 million or 23.19 cents per share in the prior year. Adjusted net earnings attributable to shareholders declined to US$10.75 million or 8.84 cents per share from US$33.08 million or 27.06 cents per share last year. London-based Avocet's net profit for the year was US$24.23 million compared to US$31.91 million last year.
Net revenues were down to US$97.04 million from US$128.70 million year ago, as total gold production dropped 33% to 110 thousand ounces from 165 thousand ounces last year.
The company noted that despite a 13% rise in realised gold prices, profitability was impacted by production declines and a 21% increase in total production cash costs, primarily in fuel and reagent costs.
Looking ahead, the company said the economic uncertainty and the impending threat of inflation leads many analysts to forecast a short term strengthening of price.
Commenting on the acquisition of Wega Mining, Avocet said that it allows Avocet to increase its gold production at a time when the gold price remains strong, and to acquire several exciting exploration projects, which together make the transaction compelling from the perspective of adding value.
AVM is currenty trading at 79.75 pence, down 0.31% on the London Stock Exchange.
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