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Avarone Metals Inc. (AVM)
Market: CDN Consolidated
$ 0.025
Oct 26, 2014, 5:14 AM EDT
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Anvil Mining Reports Second Quarter 2009 Results
TSX, ASX: AVM
Common shares outstanding 101.9 million
All amounts are expressed in US dollars, unless otherwise stated.

MONTREAL, Aug. 13 /CNW Telbec/ - Anvil Mining Limited (TSX, ASX: AVM), ("Anvil" or the "Company"), today announced a net loss for the second quarter ended June 30, 2009, of $11.3 million (-$0.13 per share), compared to net income of $8.5 million ($0.12 per share) for the second quarter of 2008. Net sales for the second quarter of 2009 totalled $7.7 million, compared to $59.8 million for the corresponding quarter in 2008. Negative cash flows from operating activities, before working capital movements, of $6.4 million (-$0.07 per share), compared to a positive cash flow of $24.6 million ($0.35 per share) in the second quarter of 2008. At June 30, 2009, the Company had a cash balance of $48.7 million, available for sale investments of $12.6 million, trade receivables of $5.4 million and almost no debt. Copper production for the second quarter of 2009 totalled 5,372 tonnes.

The Company's 2009 second quarter results were negatively affected by a number of factors including: significantly lower production and sales resulting mainly from the cessation of mining and processing operations at the Dikulushi and Mutoshi mines, lower realized copper prices and one-off charges of $6.1 million.

Bill Turner, President and CEO of Anvil, commented, "While the strategy put in place during the fourth quarter of 2008 and implementation of a range of further initiatives have involved significant one-off impacts on the Company's financial performance, we believe that the Company is now better positioned to move forward. The Kinsevere HMS plant which recommenced operations in late March 2009 is on target to produce 8,900 tonnes of copper through to the third quarter of 2009."

Mr. Turner further commented, "We are especially pleased to have reached agreement with Trafigura for a combined debt and equity financing arrangement for an aggregate amount of $200 million that represents a fully financed solution for the development of Kinsevere Stage II. With approximately 50% of the Stage II capital cost already incurred, this financing package will enable us to commence commissioning of Kinsevere Stage II in late 2010 and achieve commercial production in 2011. Annual production is expected to be 60,000 tonnes of Grade A copper cathode at an estimated "C1"(1) cash cost of $0.89 per pound of copper. We believe that Trafigura, an internationally renowned, independent commodities trading company, represents an excellent long-term partner for Anvil and we look forward to working with them to successfully complete Kinsevere Stage II and further develop the Company's interests in the DRC."

The complete second quarter 2009 unaudited financial statements together with the related Management's Discussion and Analysis (MD&A) are available on Anvil's website at www.anvilmining.com under the heading "Financial Reports" within the Investor Relations section.

------------------------------------------
(1) The C1 Cash cost is the mine gate cash cost that includes export
    duties and transportation and marketing charges but does not include
    royalties.

Cash and Liquidity

As at August 12, 2009, Anvil had approximately $40.0 million in cash, $10.5 million in available-for-sale investments and $5.2 million of receivables, the majority of which it expects to realize during the third quarter of 2009. During the next 12 months the Company's commitments include $12.2 million for Pas de Porte (entry premium) payments due to La Generale des Carrieres et des Mines ("Gecamines") with respect to the Kinsevere and Mutoshi amended agreements and $19.5 million that relates to the Kinsevere Stage II development. In July 2009, the Company paid to Gecamines the first tranche of the Pas de Porte of $10 million for Kinsevere, less an amount of $2.2 million due to Anvil by Gecamines with respect to past purchases of copper concentrates by Gecamines.

Kinsevere HMS Production

The Kinsevere HMS plant was restarted on March 27, 2009, with feed to the plant sourced from the Run of Mine ("ROM") stockpile and at June 30 has produced 21,655 tonnes of concentrate, grading 25.7% for 5,571 tonnes of copper. The HMS plant is expected to produce approximately 8,900 tonnes of copper contained in concentrates through to the end of the third quarter of 2009, at an operating cash cost at the mine gate of less than $0.50/lb Cu (inclusive of sunk costs). Table 1 below sets out the details of the performance of the HMS plant for the second quarter and year to date.

In order to extend the operation of the HMS plant beyond the end of the third quarter 2009, during August, the Company plans to resume mining in the Stage I Central (Tshifufia) Pit where ore faces and broken stocks with an inventory of approximately 825,000 tonnes with a grade in excess of 5.0% copper are available.

             Table 1. Performance of Kinsevere HMS Plant
-------------------------------------------------------------------------
                                                      Second        Year
                                                     Quarter     to date
                                                       ended          at
                                                     June 30,   June  30,
                                                        2009        2009
-------------------------------------------------------------------------
Ore mined (tonnes)
-------------------------------------------------------------------------
Ore processed(1)                                      83,084      85,780
-------------------------------------------------------------------------
HMS feed grade (%Cu)                                     7.9         8.0
-------------------------------------------------------------------------
Contained copper (tonnes)                              6,566       6,837
-------------------------------------------------------------------------
HMS copper recovery (%)                                 70.9        70.9
-------------------------------------------------------------------------
Copper produced in concentrate (tonnes)                5,372       5,571
-------------------------------------------------------------------------
Copper sold(2) (tonnes)                                3,060       4,121
-------------------------------------------------------------------------
Operating cash cost (ex mine-gate)
$/tonne of concentrate                                   484         734
-------------------------------------------------------------------------
1. Ore processed relates to ore processed through the HMS plant.
2. At July 31, 2009, the Company held a stockpile of 5,295 tonnes of
   copper contained in concentrate.

Kinsevere Stage II

On August 10, 2009 the Company announced that it had reached agreement with Trafigura Beheer B.V. ("Trafigura") for a combined debt and equity financing arrangement for an aggregate amount of $200 million that represents a fully financed solution for the development of Kinsevere Stage II. Under the terms of the equity financing, Trafigura will subscribe for Anvil equity units by way of private placement, which will result in proceeds to Anvil of $100 million. Each Anvil equity unit will be issued at a price of C$2.20 and consist of one common share of Anvil and 0.232 of one common share purchase warrant. The equity financing will be undertaken in two tranches, the first of which will bring Trafigura's aggregate equity interest in Anvil to 19.9% and the second of which, will increase Trafigura's shareholding to approximately 36% of the issued and outstanding common shares of Anvil, with an opportunity to increase its shareholding to approximately 39% on a fully-diluted basis should it exercise the common share purchase warrants.

Trafigura will also make available to the Company a loan facility with a total commitment of $100 million. The term of the loan facility is five years from the first drawdown and all amounts outstanding under the loan facility will bear interest at a rate per annum equal to LIBOR plus 4%, plus the cost of political risk insurance.

The second tranche of the equity financing, the debt finance and the additional agreements described below are subject to normal regulatory approvals and shareholder approval.

In addition to the agreements reached in connection with the equity and debt financing, the Company has reached agreement with Trafigura on the principal terms of an offtake agreement, a technical services agreement and an ancillary rights agreement.

In July 2009, the Company re-engaged with Ausenco Limited ("Ausenco"), signing a contract for recommencement of work on engineering and design work relating mainly to electrical, piping and instrumentation, which was approximately 80% complete at the time the project was placed on hold in November 2008. The Company is also working to put in place a Lump Sum Turnkey contract for completion of the construction and fabrication works, the awarding of which is conditional upon receiving the normal regulatory approvals and shareholder approval of the funding package with Trafigura.

As at August 12, 2009 approximately $199 million ($179.5 million spent, $19.5 million committed) of the budgeted cost of $394 million had been invested. The increase in capital cost is a result of several factors including: redundancy payments to Kinsevere Stage II personnel; payment of demobilisation costs to contractors; charges associated with the cancellation of the engineering and design works; penalties in connection with the cancellation and suspension of orders; provision for reestablishment of contracts and remobilisation and some escalation primarily due to the contract being a LSTK contract rather than an engineering, procurement and construction management contract.

Conclusion of DRC Government Review of Anvil's Mining Agreements

During July 2009 the Company finalised an amendment agreement with Gecamines and the Government of the Democratic Republic of Congo ("DRC") on the revised terms of its Mutoshi Joint Venture ("JV") Agreement. As a result, the Company's interest in the Mutoshi JV has reduced from 80% to 70% and an additional Pas de Porte payment of $14.4 million is payable to Gecamines in two tranches; $7.2 million is to be paid within 6 months of the amended agreement and the balance ($7.2 million) within 18 months. The finalisation of the Mutoshi JV negotiations, together with the amendment agreement reached on the Company's Kinsevere Lease Agreement and the Dikulushi Mining Convention, brings to an end the DRC Government's review of the Company's mining agreements.

Cancellation of Q2 Conference Call and Webcast

Please note that the second quarter 2009 conference call, previously scheduled to take place at 8:30 a.m. (Canada, Toronto time) today, Thursday August 13, 2009, has been cancelled due to the recent update provided at the conference call held on Monday August 10, 2009 on the agreement reached with Trafigura regarding a $200 million funding package; the status of Kinsevere Stage II and the Company's cash position.

Anvil Mining Limited is a copper producer whose shares are listed for trading on the Toronto Stock Exchange (as common shares) and the Australian Securities Exchange (as CDIs) under the symbol AVM.

Caution Regarding Forward Looking Statements: This news release contains "forward-looking statements" and "forward-looking information", based on assumptions and judgements of management regarding future events and results. Such "forward-looking statements" and "forward-looking information which may include, but is not limited to the operation of the Kinsevere HMS plant, the liquidation of the Company's available-for-sale investments and the Company's plans for expansions of the Kinsevere copper mine. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "is expecting", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes", or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might", or "will" be taken, occur or be achieved. The purpose of forward-looking information is to provide the reader with information about management's expectations and plans for 2009. Readers are cautioned that forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Anvil and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include, among others, the actual market prices of the available-for-sale investments, the actual market price of copper, changes in project parameters as plans continue to be evaluated, and the possibility of cost overruns, as well as those factors disclosed in the Company's filed documents. There can be no assurance that the Stage II expansion of the Kinsevere copper mine will proceed as planned or that the transactions proposed with Trafigura will be successfully completed within expected time limits and budgets or that, when completed, the expanded production facility will operate as anticipated.


                               Appendix
            Key Financial and Production Data (unaudited)

-------------------------------------------------------------------------
                                   3 months ended        6 months ended
                                       June 30               June 30
                                   2009       2008       2009       2008
-------------------------------------------------------------------------
Revenues: ($ millions)(1)           7.7       59.8        9.4      135.1
-------------------------------------------------------------------------
Operating (loss) / profit :
 ($ millions)                      (7.7)      16.0      (22.1)      49.7
-------------------------------------------------------------------------
Provision for impairment:
 ($ millions)                      (0.2)         -       (3.9)         -
Exploration expenditure
 written off ($ millions)          (3.2)         -       (3.2)         -
-------------------------------------------------------------------------
Net (loss)/ Income:
 ($ millions)                     (11.3)       8.5      (30.2)      30.0
-------------------------------------------------------------------------

PRODUCTION STATISTICS:

Consolidated Group
Copper produced in
 concentrates (tonnes)            5,372     10,521      5,571     22,548
Silver produced in
 concentrates (ounces)                -    248,816          -    731,472

Per Mine
Kinsevere mine
Ore mined (tonnes)                    -    578,350          -  1,520,731
Ore processed (tonnes)(2)        83,084     94,403     85,780    186,394
Copper grade (% Cu)                 7.9       10.0        8.0        9.6
Contained copper in ore
 (tonnes)                         6,566      9,424      6,837     17,823
Recovery Cu (%)                    70.9       68.3       70.9       63.3
Copper produced in
 concentrates (tonnes)            5,372      6,433      5,571     11,288
Copper produced in blister
 (tonnes)                             -          -        461          -
-------------------------------------------------------------------------
Costs of production ($)

Operating cash costs per
 tonne of concentrate
 (ex mine gate) $/t                 484        278        734        321
-------------------------------------------------------------------------
Dikulushi mine
Ore mined (tonnes)                    -     33,159          -     63,470
Ore processed (tonnes)(3)             -    110,990          -    210,523
Feed grade (% Cu)                     -        3.1          -        4.2
Contained Copper in Ore
 (tonnes)                             -      3,399          -      8,903
Recovery Cu (%)                       -       76.7          -       84.2
Copper produced in
 concentrates (tonnes)                -      2,607          -      7,491
Silver produced in
 concentrates (ounces)                -    248,816          -    731,472
Operating cash cost (ex mine
 gate) (after silver credits)
 ($/lb)                               -       0.73          -       0.39
-------------------------------------------------------------------------
Total cash costs from
 operations ($/lb)                    -       1.24          -       0.89
-------------------------------------------------------------------------

Mutoshi mine
Ore mined (tonnes)                    -    200,035          -    287,991
Ore processed (tonnes)(4)             -    130,693          -    237,427
Copper grade (% Cu)                   -        3.7          -        4.0
Contained copper in ore
 (tonnes)                             -      4,872          -      9,545
Recovery Cu (%)                       -       30.4          -       39.5
Copper produced in
 concentrates (tonnes)                -      1,481          -      3,768
-------------------------------------------------------------------------
Costs of production: ($)
Operating cash costs per
 tonne of concentrate
 (ex mine gate)                       -      1,164          -        871
-------------------------------------------------------------------------
1. Includes provisional and final pricing adjustments and treatment and
   refining charges.
2. Kinsevere commenced production in June 2007 as an HMS processing
   operation.
3. Ore processed at Dikulushi relates to ore processed through the ball
   mill and flotation plant.
4. Ore processed at Mutoshi and Kinsevere relates to ore processed
   through the HMS plants.


               Consolidated Balance Sheets (unaudited)
          (Expressed in thousands of United States dollars)

                                                     June 30 December 31
                                                        2009        2008
                                                           $           $
ASSETS
Current assets
Cash and cash equivalents                             48,677      45,033
Restricted cash                                          964         871
Accounts receivable                                    9,478      24,243
Inventories                                           23,964      31,064
Available-for-sale investments                        12,635      24,032
Prepaid expenses and deposits                         33,142      51,258
                                                    ---------------------
                                                     128,860     176,501
Equity accounted investment                                -       1,320
Long-term inventory                                   10,651      10,651
Long-term receivable                                  13,411      12,464
Exploration and acquisition expenditure               49,790      51,352
Property, plant and equipment                        320,120     280,334
                                                    ---------------------
                                                     522,832     532,622
                                                    ---------------------
                                                    ---------------------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities              29,059      34,731
Income taxes payable                                     414         463
Other liabilities                                      1,759       2,460
Current portion of long-term debt                        535         362
                                                    ---------------------
                                                      31,767      38,016
Future income tax liability                           19,167      24,431
Long-term debt                                           195         321
Asset retirement obligations                          13,410      12,980
                                                    ---------------------
                                                      64,539      75,748
Non-controlling interest                               1,118       1,909
                                                    ---------------------
                                                      65,657      77,657
                                                    ---------------------
Shareholders' equity
Equity accounts                                      412,444     383,419
Retained earnings                                     40,805      70,987
Accumulated other comprehensive income                 3,926         559
                                                    ---------------------
Total shareholders' equity                           457,175     454,965
                                                    ---------------------
                                                     522,832     532,622
                                                    ---------------------
                                                    ---------------------


     Consolidated Statements of Income and Comprehensive Income
                             (unaudited)
           (Expressed in thousands of United States dollars
                      except per share amounts)

                                   3 months ended        6 months ended
                                       June 30               June 30
                                   2009       2008       2009       2008
                                      $          $          $          $

Sales                             7,738     59,789      9,384    135,056
Operating expenses              (11,371)   (27,928)   (23,823)   (61,986)
Amortization                     (4,032)   (15,897)    (7,697)   (23,390)
                               ------------------------------------------
                                 (7,665)    15,964    (22,136)    49,680
                               ------------------------------------------

Other income                        125      2,428        446      5,247
Share of loss in associates           -          -          -       (336)

Provision for impairment of
 assets                            (258)         -     (4,935)         -
Exploration expenditure
 written off                     (3,224)         -     (3,224)         -
General, administrative and
 marketing                       (3,208)    (7,021)    (5,842)   (12,413)
Foreign exchange gains              905        334      1,545        382
Stock based compensation            254       (433)    (1,106)    (1,000)
Interest and financing fees        (280)       748       (518)      (857)
                               ------------------------------------------
(Loss) / earnings before
 income tax and
 non-controlling interest       (13,351)    12,020    (35,770)    40,703

Income tax recovery /
 (expense)                        1,692     (3,712)     5,234     (9,309)
Non-controlling interest
 share of loss / (gain)             310        208        354     (1,439)
                               ------------------------------------------
Net (loss) / income             (11,349)     8,516    (30,182)    29,955

Other comprehensive income,
 net of  taxes
Net unrealized gain on
 available-for-sale
 investments                      3,367        200      3,367        342
                               ------------------------------------------
Total comprehensive (loss) /
 income                          (7,982)     8,716    (26,815)    30,297
                               ------------------------------------------
                               ------------------------------------------

Basic (loss) / earnings
 per share ($)                    (0.13)      0.12      (0.37)      0.42
Diluted (loss) / earnings
 per share ($)                    (0.13)      0.12      (0.37)      0.42



           Consolidated Statement of Cash Flows (unaudited)
          (Expressed in thousands of United States dollars)

                                   3 months ended        6 months ended
                                       June 30               June 30
                                   2009       2008       2009       2008
                                      $          $          $          $

Cash flows from operating
 activities
Net (loss) / earnings for
 the period                     (11,349)     8,516    (30,182)    29,955
Items not affecting cash
  Amortization                    4,032     15,897      7,697     23,390
  (Gain) on derivative
   instruments                        -       (960)         -          -
  Share of loss in associates         -          -          -        336
  (Gain) / Loss on sale of
   assets                            52        (31)        42        257
  Exploration expenditure
   written off                    3,224          -      3,224          -
  Provision for impairment
   of assets                        258          -      4,935          -
  Accretion expense                 215          -        430          -
  Non-controlling interest
   share of (loss) / income        (310)      (208)      (354)     1,439
  Unrealized foreign exchange
   losses                          (552)       467         59        550
  Future tax                     (1,719)       530     (5,265)     3,063
  Stock based compensation         (254)       433      1,106      1,000
Changes in non-cash working
 capital                          1,025     (7,008)    11,806    (23,362)
                               ------------------------------------------
                                 (5,378)    17,636     (6,502)    36,628
                               ------------------------------------------
Cash flows from investing
 activities
Payments for property, plant
 and equipment                   (9,649)   (55,956)   (27,297)   (95,198)
Proceeds from sale of assets        342         61        352        240
Payments for exploration and
 evaluation expenditure             (42)   (10,592)    (1,108)   (15,359)
Proceeds of principal
 repayments from investments     11,060      6,057     11,528      7,305
                               ------------------------------------------
                                  1,711    (60,430)   (16,525)  (103,012)
                               ------------------------------------------
Cash flows from financing
 activities
Proceeds from issue of shares
 (net of issue expenses)         27,199        302     27,199        518
Proceeds from borrowings
 (net of fees incurred)               -          -          -        800
Repayment of borrowings               -        (38)         -        (38)
Movement in restricted cash         (79)    (1,291)       (93)    (1,193)
Disbursements on behalf of
 Dikulushi Trusts                  (434)    (2,304)      (437)    (3,099)
                               ------------------------------------------
                                 26,686     (3,331)    26,669     (3,012)
                               ------------------------------------------
Net increase / (decrease) in
 cash and cash equivalents       23,019    (46,125)     3,642    (69,396)
Cash and cash equivalents at
 beginning of the period         25,617    192,498     45,033    215,754
Effects of exchange rate
 changes on cash held in
 foreign currencies                  41       (187)         2       (172)
                               ------------------------------------------
Cash and cash equivalents at
 end of the period               48,677    146,186     48,677    146,186
                               ------------------------------------------

%SEDAR: 00020549E

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