Junior gold producer Avocet Mining (AIM: AVM) said its Penjom and North Lanut project continued to operate in line with expectations, reporting increases in gold production and revenues during the third quarter , also restructuring its project facility to bring the Inata project to positive cashflow.

The South Asia and West Africa operating miner produced 28,724 ounces during the three months to 30 September, up 4% from the previous quarter as output at Penjom in Malaysia and North Lanut in Indonesia increased 5% and 4% respectively.

Total gold sales reached US$27.9 million, up 7% quarter on quarter and 12% year on year as the average realised gold price rose to US$966/oz (ounce) compared to US$925/oz in the previous quarter and US$870/oz a year ago, while cash costs per oz were roughly the same as in the previous quarter at US$595/oz.

The company also provided an update on its Inata project in Burkina Faso, which was acquired in the purchase of Wega Mining earlier this year.

Avocet has hedged an additional 50,000 oz at a fixed price of US$1,056/oz to draw down the remaining US$9.2 million available under the US$65 million project facility with the Macquarie Bank and the US$25 million available under its Standard Chartered Bank facility, giving it a net cash position of US$62 million with a net debt of US$28 million. The funds are sufficient to bring Inata to positive cashflow, currently estimated at US$40 million, prior to cash flow generated by Penjom and North Lanut.

Inata now has 400,000 ounces hedged at an average price of US$970/oz for delivery over 45 months commencing in September 2010, which represents 45% of its mine life based on the current reserve estimates.
A first gold pour at Inata is still slated for January 2010.

“Our efforts remain focused on shortening the remaining schedule while still allowing for a smooth production ramp up. As we approach first gold at Inata, we are pleased to report that the Inata project facility is now in compliance for the first time since Avocet's involvement,” said Chief Executive of Avocet Jonathan Henry.

Shares in Avocet added 2.5% on the news.

Very good news for MMY neighbour, great future for MMY.