AVO - Avoca Resources

[mikepretty]

I would think after a little time to digest the announcements tonight, things may look better for AVO tomorrow. a 23% increase to the higginsville resource is great news although it came on an interesting day.
I was surprised to see AVO fall below 220 support today but think tomorrow will see the SP back above this point.

 

[explod]

Another great day for AVO. As more notice the fundamentals of this company with the rising gold price we are going to enjoy a great ride.

Bell Potter had a buy rec. on this in todays Herald Sun.

Is this a good setup for a new breakout??? :-

 

[explod]

Avoca has been sailing along sideways on moderate to low volume for some time and wonder why the share price fall? The last ann. late Dec seemed to be very good ?

Also on closing market how can one offer 10 shares at $2.12, is someone trying to push down on this?

 

[michael_selway]

Avoca has been sailing along sideways on moderate to low volume for some time and wonder why the share price fall? The last ann. late Dec seemed to be very good ?

Also on closing market how can one offer 10 shares at $2.12, is someone trying to push down on this?

Hi Not Bad

Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS -2.7 9.1 16.9 19.8
DPS 0.0 0.0 0.0 0.0

Business Description
Avoca Resources Limited (AVO) is a gold exploration and development company focused on advancing the underground Trident gold project, located in Higginsville, WA.

 

[Nicks]

AVO are going for a ride up as I type.

Gold price hitting USD 900 ounce, fundamentals of AVO has been strong lately. Heading back up to the $2.60-$2.80 range we have seen common for AVO perhaps, although I think as the fundamentals sink in it will go higher this time.

Sometimes this happens, the market sits and bounces on a stock for a while and dijests, then wham it recorrects and goes for a sudden burst up and ususally then a long steady rise follows as the market has recorrect the valuation up. The recent excellent announcements and findings are kicking in.

IMO this could top previous peaks and hit $3 soon based on the market cap and the gold resource and gold price.

 

[pajm]

Hope you are right Nicks as SP movement a bit disappointing lately with the Gold momentum. Talk in papers of AVO being a takeover target in 2008. Any thoughts anyone?

 

[Nicks]

Well they have excellent resources which seem to be ever expanding. I like this stock because it is now at that point where all the hard work has been done. Resources (Gold) are secure and ready to come out of the ground and the timing could not be better with the price of gold!!
It would be an easy yet valuable takeover target so you could be right. A nice resource base for some of the bigger players to add to their resource base, some of which are desperate to do at the moment.

The major insti's are very bullish on AVO with many recommending it and with Gold price and resource base its fundamentals make for a simple financial calculation on the capital net worth of this company. Go have a look at their resource base, price of gold, costs and see for yourself.

 

[Kuade]

Fat Prophets have a positive outlook on Avoca, no doubt advising it as a buy to their membership -

"Cheap Mining Company #1

The West Australian emerging gold producer about which we have previously said…

"We remain overwhelmingly positive on this company's story. There are very few emerging, high quality gold producers in the Australian market, which means that the company should undergo a significant re-rating as first stand-alone gold production approaches during the middle of 2008." "


I doubled my holding today with AVO making it over the $2.00 mark with a solid amount of support behind it and upturning RSI. Gold also continues to remain strong with a continuing uptrend.

 

[explod]

Quarterly report out today which in my ivew contains the substance of a company about to take off. However you be your own judge. go to www.avocaresources.com.au

Current chart reflects the general market move but not the rising gold price.

 

[Nicks]

I honestly was quite happy with the report. It just has an overall optimistic future and I couldnt find anything that strategically I didnt like. There doesnt seem to be any fan fare with Avoca, they are just solidly getting on with the job and have the fundamentals going right - actual construction and milling equipment on the way.
So they are at the start of a real future with real production coming online very shortly. Everything is aligning like a solar eclipse - the timing of the production couldnt be better with the external environment, ie the POG and their resource base keeps increasing. This has been evident in the making for some time and should pay off for the patient. Anyone can get in when the gold starts coming out, but its those of us that can deduce what is in store from their fundamentals that will be rewarded.

 

[JTLP]

WHAT IS HAPPENING WITH AVO

I really don't understand it. Are they getting kept down for accumulation purposes or is something wrong in the wind?

They have so much press and broker backing that this price seems a little low

Surely, with POG increasing, production to begin soon and the fundamentals as sound as ever (as per quarterly), this one must be ready to move north?

 

[explod]

WHAT IS HAPPENING WITH AVO

I really don't understand it. Are they getting kept down for accumulation purposes or is something wrong in the wind?

They have so much press and broker backing that this price seems a little low

Surely, with POG increasing, production to begin soon and the fundamentals as sound as ever (as per quarterly), this one must be ready to move north?

Well I cannot understand your concern. In spite of the Australian gold sector weakness they are close to an all time high. Also note the volume, it is low but the price is climbing. Look at the 12 month chart and then the ones for the other major gold stocks NCM, LGL and OXR as examples.

Avoca is about to start production later this year. With a rising gold price of late and a resultant pickup in the gold stock sector, which must come through soon, AVO will reward to the upside. The stockmarket is shaky to say the least, AVO is doing fine thank you. Love it, bout the best gold stock on the ASX.

Just my humble opinion.

 

[Sean K]

Well I cannot understand your concern. In spite of the Australian gold sector weakness they are close to an all time high.

I must be looking at the wrong chart explod. Isn't an all time high about $2.70, currently, $1.88...

 

[explod]

I must be looking at the wrong chart explod. Isn't an all time high about $2.70, currently, $1.88...

Absolutely, blurring eyes at this late hour, SBM was my mix up. Yes AVO down with the rest. My apologoes it is one of the worst effected as pointed out.

The stocks in the gold sector are down as the gold bugs are fully loaded but the newcomers were burnt off by the general market correction. A little patience still required.

My feelings for AVO are still the same. I also love SBM but on a value basis AVO would be No. 1.

 

[JTLP]

Well, without trying to jinx AVO, they are having a nice run lately. Finally seems to be a sentiment turn around in the stock which is good.

When is the expected production date?

And how is that chart looking?

Any thoughts Nicks/Explod???

 

[Nicks]

http://www.aspectfinancial.com.au/d...Jyb3JwYWdlcy9wZGZkZWxheWVkLmpzcA==&popup=true

June 2008, then the gravy will start flowing. Timimg couldnt be any better. They have no hedging. Rising POG is going to fully benefit AVO. Cash reserves are good. See above link.

 

[pajm]

Article in Monday's Eureka Report identifies AVO as 1 of 5 emerging domestic gold producers (along with Norton, Dioro, Monarch and Citigold). ("PORTFOLIO POINT: Five companies aspiring to join the big league deserve investors’ consideration – and close monitoring").

 

[Kuade]

PAJM: Any chance you could post the report or copy and paste the gist of it? It would be interesting to read the full article.

 

[pajm]

Can do Kuade.........enjoy. Tables settings thrown out with copy and paste.



New kids on the gold block
By Troy Schwensen



PORTFOLIO POINT: Five companies aspiring the join the big league deserve investors’ consideration – and close monitoring.


Investors have few choices if they are seeking a locally owned gold miner producing more than 100,000 ounces of gold a year in Australia. In fact, they could count the number of companies on one hand. The recent success of Canadian company Northgate in its bid for ASX-listed Perseverance leaves just five remaining companies that meet the criteria.

Top five Australian-owned domestic producers
Company Annual
production (oz) * Share price
(Feb 19, 2007) Share price
(Feb 19, 2008) Gain (%)
Newcrest Mining 1,385,000 21.92 34.28 56%
St Barbara 164,500 0.52 0.90 73%
Resolute Mining ^ 133,000 1.64 2.20 35%
Equigold 117,500 1.52 3.81 151%
Dominion Mining 114,000 1.94 4.13 113%
Average 382,800 86%
All Ordinaries 5,969.30 5,688.60 -5%
* Domestic gold production for calendar 2007
^ Just Ravenswood production (excluding Golden Pride in Tanzania)


The share prices of these five companies have performed extremely well over the past 12 months, in light of the uncertain investment climate and rising gold prices. Since February 2007 these companies have averaged gains of 86%, while the All Ordinaries index lost 5%. All these companies produce respectable quantities of gold in a politically stable part of the world, which begs the obvious question: “Which companies could join this exclusive club over the coming 12–18 months?

Finding new gold projects is tough, with many companies preferring to head offshore and develop projects in politically riskier environments such as the Philippines, Thailand, Ghana, Mali, China or Egypt. The risks are high, but so are the rewards for the management teams that have the experience and smarts to get it right.

Back in the Australia, as gold prices have risen 38% over the past year, the following five companies will potentially be producing 100,000 ounces or more per year in Australia over the next 12–18 months:

Australia’s emerging domestic gold producers
Company Current annualised
production * Forecast annual
production Share price
(Feb 19, 2007) Share price
(Feb 19, 2008) Gain (%)
Norton Gold Fields 179,000 150,000 0.10 0.39 290%
Avoca 16,000 170,000 1.25 1.92 54%
Dioro Mining 68,000 141,000 1.32 1.47 11%
Monarch Gold 30,000 125,000 0.80 0.52 -35%
Citigold 18,000 100,000 0.38 0.37 -4%
Average 61,600 137,200 63%
* December Quarter 2007 production multiplied by four to provide an indicative annualised rate


These five companies provide a very interesting mix, with many challenges ahead in the quest to join the established five over the coming months and years. Norton, Monarch and Dioro have chosen to purchase some of their production ounces and have recently acquired projects with established infrastructure from major international gold mining companies.


Recently acquired projects
Company Project name Vendor Date Cost
($Am) Cost per
oz ($) ^ Reserves (million oz) Resource (million oz)
Norton Gold Fields * Paddington Mine Barrick Gold 26/04/2007 39 28 0.625 1.4
Monarch Gold Mt Magnet Mine Harmony Gold 8/11/2007 65 24 0 2.7
Dioro Mining South Kal Mine Harmony Gold 3/12/2007 45 24 0.26 1.9
^ This represents the cost per resource ounce paid by the company.
* Norton has since announced an upgrade on the January 15, 2008, after a significant drilling program and the conversion of the resource from Canadian 43-101 standards to JORC.


The three mining projects acquired by Norton, Monarch and Dioro were sold primarily due to deteriorating economics which no longer adhered to the strict performance criteria of the vendor companies. They had little in the way of remaining reserves, generally just one to three years’ worth. The primary challenge for Norton, Monarch and Dioro is to expand on existing reserves via extensive exploration programs, whilst keeping the mines operational and profitable. These projects each come with extensive resource bases of one to three million ounces, providing ample opportunity for reserve upgrades. Norton Goldfields recently announced an upgrade of its Paddington resource from 1.4 million ounces to more than three million ounces after significant drilling and a resource conversion to JORC. (Joint Ore Reserves Committee, the ASX industry standard for resource verification).

Monarch has chosen to place Mt Magnet on care and maintenance and concentrate its efforts on exploration programs and the successful commissioning of its existing Davyhurst operation near Kalgoorlie. The advantage of these types of projects is of course the established infrastructure and the readily available mining personnel (both scarce and expensive in the present environment).

Citigold and Avoca have been developing projects the traditional way by establishing a resource via extensive exploration and then developing mines in their own right. One of the advantages of following this process is that the company management tends to gain a much better understanding of what they are working with. The disadvantage can be the time and significant cost it takes to get these projects up and running which tends to test investor patience. Dioro Exploration is developing its 49%-owned WA-based Frog’s Leg project in the WA Goldfields, and intends to process the ore at their recently acquired South Kal mine, which is within trucking distance. This recent acquisition has given Dioro a strategic advantage that has effectively fast tracked it towards becoming a significant producer in 2008-09.


Development projects
Company Project name Total development
costs ($A m) ^ Cost per oz ($) # Reserves (million oz) Resource (million oz)
Avoca Mining Higginsville GF 130 93 0.63 1.4
Citigold Charters Towers GF 60 6 0.33 10.4
Dioro Mining* Frogs Leg 40 80 0.3 0.5
^ This represents exploration and development costs for the respective projects plus any remaining anticipated capital expenditure to bring these projects into commercial production at the planned rates.
# This represents the total development cost divided by the resource base.
* Represents Dioro’s 49% stake in the project


All these emerging producers are in similar positions, with extensive resource bases, relatively small reserves, and mines that are in or near commercial production. The rewards for the companies that get this process right will be immense. Some companies will fail. View Resources, which had been listed on the ASX, recently went into voluntary administration after failing in its attempts to bring the Bronzewing project back into commercial production. Although a rising gold price provides a safety margin for these companies, poor management or fluctuations in mining fortunes can quickly negate these benefits.

Investors should consider three important factors if they are considering putting money into developing gold mining companies:

Healthy balance sheets. The uncertain nature of gold mining, even for the more established players, lends itself to unexpected events which can leave companies at the mercy of their creditors. Ensure companies have healthy balance sheets and access to contingency funds in the event of unexpected delays. Debt and any gold price hedging can potentially pose very significant risks.

Good management. Difficult to quantify, but a proven track record usually speaks for itself. For example, Monarch has raised tens of millions of dollars to make acquisitions (its global resource is now more than five million ounces). Michael Kiernan, the former chief executive of Consolidated Minerals, fronts the company and has a stellar reputation of building successful mining houses against the odds.

Significant insider ownership. This generally aligns management’s interests with that of its shareholders. For example the directors of Citigold own more than 13.5% of the company, with Mark Lynch the chief executive owning most of this stake. The Lynch family has been heavily involved in the development of the Charters Tower’s Gold Field project for two decades. This sort of commitment inspires investor confidence, which is clearly demonstrated by the loyalty and patience of Citigold’s shareholders. Regular capital raisings and prudent purchasing of equipment and infrastructure by management has ensured that Citigold remains largely debt-free and unhedged going into this important production phase.

Prudent, ongoing analysis needs to be done to monitor adverse developments – breaches of debt covenants, negative operating cash flow, chief executive resignations, directors selling shares, etc. In other words, these are not the sort of investments that can be made and simply forgotten. For those proactive investors who make the effort and have access to timely information, substantial returns can certainly be made with significantly less risk than one might think.


Troy Schwensen is editor of The Global Speculatorand a research analyst for GoldNerds.

 

[Nicks]

Thanks for the article, it's very useful. Any chance you can post the link as the formatting is a bit out.