21 September 2011
Vatukoula Gold Mines plc
("Vatukoula" or "the Company")
Operational Update for the Fourth Quarter and Twelve Months ended 31st August 2011
Vatukoula Gold Mines Plc (AIM:VGM), the AIM listed gold producer, is pleased to announce
its unaudited preliminary operational results from its 100% owned Vatukoula Gold Mine in Fiji
for the fourth quarter and year ended 31st August 2011 (‘Q4’).
Highlights (unaudited)
Gold produced (ounces)
Gold sold (ounces)
Average gold price received per ounce (US$)
Mine (loss) / profit for the period (unaudited)*
3 months
ended Aug
2011 (Q4)
10,670
12,066
1,636
£0.2 million
3 months
ended May
2011 (Q3)
11,395
11,652
1,453
£(2.8)million
12 months
ended Aug
2011
52,157
53,461
1,429
£(0.4) million
12 months
ended Aug
2010
56,214
54,642
1,145
£9.7 million
*Mine (loss) / profit for the period exclude any (losses) / gains from movements in unrealised foreign exchange rates.
Operational Highlights

Gold sold was approximately level at 12,066 ounces for Q4 and 53,461 for the year
ended August 2011

Underground ore delivered increased by 40% compared to the previous year to
336,085 tonnes and increased to 91,753 tonnes in the Q4 as compared to Q3 2011

Underground development for the fourth quarter was 6,751 metres up from 6,349
metres achieved in the third quarter. The underground development for the year was
24,453 up from 8,720 metres achieved in the previous year. These significant
increases are the result of our on-going development programme

As a result of the continued development programme, roughly 42% of the ore mined in
the quarter was sourced from development drives

The total cost per ton of ore mined and milled reduced from US$166 / tonne in the third
quarter to US$ 128 / tonne in the fourth quarter. For the year ended August 2011 the
cost per tonne increased to US$144 / ton from US$101 / tonne in the previous year,
reflecting an increase in underground tonnages mined and milled as a percentage of
the total ore processed, and an increase in underground mining costs

Over the quarter the Company sought increased efficiencies in the mine, including a
split firing mining technique whereby the waste and ore are blasted and removed
separately.
David Paxton, CEO of Vatukoula Gold Mines, commented:
“The last quarter of our financial year again highlighted our ongoing efforts to get the
underground infrastructure up to the level required to achieve our near term production
targets. Although we have achieved a much higher rate of development than that achieved
last year, we still envisage that during the coming year we will again be focusing on
underground development.
I am nonetheless delighted to report that as a result of more efficient mining practices and
some higher grade material currently being mined towards year end, production has improved
substantially.
Underground development will continue at the increased rate until we are in a position to
sustain production at our targeted rate. We expect this increased rate of development to
continue until Q2 2012. We expect to produce approximately 65,000 ounces of gold in the
financial year ending August 2012. ”
Introduction
Over the quarter the mine shipped and sold 12,066 ounces of gold, drawing down from the
gold in the circuit. For the twelve months a total of 53,461 ounces were shipped and sold, in
line with the twelve months to end-August 2010.
Production Summary
3 months
ended August
2011 (Q4)
3 months
ended May
2011 (Q3)
12 months
ended
August
2011
12 months
ended
August
2010
Underground Mining / Sulphide Processing
Development (metres)
6,751
6,349
24,453
8,720
91,753
90,352
336,085
240,024
4.29
4.06
5.00
7.43
46,612
31,486
160,923
198,507
1.43
1.01
1.39
2.01
139,584
120,413
498,123
438,691
3.19
3.28
3.77
4.98
77.96%
79.09%
81.20%
84.66%
Gold produced (ounces)
10,670
11,395
52,157
56,214
Gold shipped (ounces)
12,066
11,652
53,461
54,642
1,479
1,721
1,338
814
128
166
144
101
1,636
1,453
1,429
1,145
£0.2 million
£(2.8)million
£(0.5) million
£9.6 million
Sulphide Ore delivered (tonnes)
Sulphide head grade (grams / tonne)
Oxide Plant
Ore delivered (tonnes)
Oxide head grade (grams / tonne)
Total (Sulphide + Oxide)
Ore processed (tonnes)
Average ore head grade (grams / tonne)
Total Recovery (%)
Cash Costs
Total cash cost / shipped ounce*(US$) (unaudited)
Total cash cost / tonne (US$) (unaudited)
Average realised gold price (US$ / ounce)
Mine (loss) / profit for the period (unaudited)**
*
**
excludes amortization and depreciation, unrealised foreign exchange rate movements and provisions
Mine (loss) / profit for the period exclude any (losses) / gains from movements in unrealised foreign exchange.
Underground Mining and Development
Underground mining has continued to focus on development, which will provide the necessary
infrastructure and access to ore-bodies, in order for the mine to reach its targeted production
levels in future years. During the last quarter we completed 6,751 meters of development, and
for the year ended August 2011 we completed 24,453 metres of development. This was
almost a threefold increase over the 8,720 meters development in the previous year.
The increase in the development tonnages continued to have an adverse effect on the overall
grade mined and gold delivered to the mill. In the fourth quarter approximately 42% of the ore
delivered to the mill was from development. Once the development programme is completed
we will be targeting a significantly lower figure for the development / stoping tonnage ratio.
Mine management has initiated programs to reduce the dilution in both development and
stoping, which include:
i)
ii)
A reducing of the amount of dilution in the stopes by the use of better mining
practices, and
minimising waste from development with split firing techniques where this
practice is suitable. Split firing is a technique whereby the waste is blasted first
and removed, followed by the blasting of the ore portion.
In addition to these programs we are introducing mining practices to reduce cost, increase
recoveries and improve productivity which include:
i)
ii)
iii)
The introduction of truck chutes where applicable – so that ore from the mining
sections are loaded directly into trucks, thereby reducing the need for
underground loaders, and
the introduction of water cannons in the underground stopes. The gold at
Vatukoula can occur as fines, and we expect more of the fine material to be
recovered with this technology, and
the completion of a detailed ventilation program. This highlighted a number of
initiatives that we are undertaking to improve the working conditions in the
mine.
We believe that once we have caught-up with development, the mine will be restated to our
longer term forecast gold production, which will in turn reduce our operating cost on a per
ounce basis, to targeted levels.
Eighteen Level Decline
To develop the eighteen level decline we are currently carrying out a drill sterilisation
programme which will allow mine management to design the decline without impacting any
potential ore bodies. We expect the drilling programme to be completed in Q1 2012.
Surface Operations
Production from the surface oxide process delivered 46,612 tonnes in the fourth quarter. This
is an increase of 48% over the third quarter’s production. Additional oxide material has been
mined from surface excavations in the near mine area. The grade delivered was 1.43 grams
gold per tonne. Additional oxide material has been sourced from near mine areas. Oxide
production for the year totalled 160,923 tonne at a grade of 1.39 grams gold per tonne. The
oxide plant currently accounts for approximately 10% of the mine’s gold production.
Milling Operations
The Vatukoula Treatment Plant (“VTP”) continues to operate satisfactorily. During the quarter,
the the VTP processed 139,584 tonnes of combined sulphide and oxide ores at an average
grade of 3.19 g/t.
Recoveries ran at 77.96% which was lower than the same period last quarter 79.09%. The
lower recovery is attributable to the high sulphide content material delivered from open pit
mining, which is less amenable to recovery in the surface oxide process.
Financial Results and Operating Costs
The Mine made a net profit (prior to unrealised foreign exchange gains) of £0.2 million
(unaudited) in Q4 compared to a loss of £2.8 million (unaudited) during Q3. The increase in
net profits and the movement into a profitable position is attributable primarily to lower cash
costs per tonne.
In Q4 total cash costs per tonne mined and processed were US$128 per tonne, down 23% as
compared to Q3 costs of US$166 per tonne. This was a result of a decrease in the direct
underground mining expenses. For the year ended August 2011 the cash costs per tonne
increased from US$101 to US$144. The majority of this variance is attributable to the
increase of underground ore mined and milled as a percentage of the total ore mined and
milled. As underground ore is more expensive to mine and mill compared to surface ore, the
change in percentage has had an adverse impact on our total cash costs per tonne.
Total cash costs per ounce of gold produced for Q4 was US$ 1,479 down from US$ 1,721 in
Q3. The decrease in the operating cost on a per ounce basis is attributable to a reduction in
costs on a per ton basis. Compared to the previous year, cash costs per ounce for the year
ended August 2011 increased from US$814 to US$1,338. Although a portion of this rise is a
result of the increased production costs per tonne milled, it is mainly attributable to the
development programme which results in lower grade ore being mined and processed and in
turn reduced gold production.
Exploration
During the year ended August 2011, our drilling campaigns focused on the near surface
potential at Vatukoula and on vertical and lateral extensions of the current ore bodies. Both of
these programmes have completed the first phase of drilling with results expected in October
2011.
In the coming year we will focus the drilling on resource and reserve definition. We anticipate
that we will be drilling between 25,000 and 30,000 metres in the coming year from 3 surface
and 3 underground rigs.
Power
An updated full Bankable Feasibility Study by the Fiji Sugar Corporation (“FSC”) is in the
process of completion. Initial plans are for a 32MW power station of which Vatukoula Gold
Mines will require between 10MW and 15MW. The FSC have stated that discussions are
underway with potential financing partners. Vatukoula is in discussions with the FSC to assit
in this aspect and we envisage partnering in the project as an equity partner. If we are unable
to partner in this manner we will simply enter into an off take agreement for our requirements.
Qualified Person Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the
information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial
Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business
School. Kiran is the Finance Director of VGM.
Enquiries
Vatukoula Gold Mines plc
David Paxton
Kiran Morzaria
W.H. Ireland Limited
+ 44 (0)20 7440 0643
James Joyce
+ 44 (0)20 7220 1666
Pelham Bell Pottinger
+44 (0)20 7861 3232
Philippe Polman
Notes to the Editor
To align itself with general market practices the Company, during the period adopted the Gold Institutes
recommended methodology in the calculation of Total Cash Costs on a per ounce basis. The basis of the
calculation is outlined below:
Per ounce
of Gold (1)
Gold Institute Production Cost Standard
Direct mining expenses
(2)
xxx
Stripping and mine development adjustments
(3)
xxx
(4)
(xxx)
xxx
Third-party smelting, refining and transportation costs
By-product credits
Other
xxx
Cash Operating Costs
xxx
Royalties
xxx
(5)
xxx
Total Cash Costs
(1) Per ounce of gold sold (shipped) in accordance with each company's own reporting practices.
(2) Direct mining expenses include all expenditures incurred at the site, including inventory changes, site specific
corporate charges (e.g. insurance, computer services, etc.) and in-mine drilling expenditures that are production
related (e.g. in-fill drilling, grade control, etc.). Exploration expenditures are not included in direct mining
expenses.
In case of a joint venture or partnership, management or overhead fees charged by that operation's operator,
that are in addition to site-specific corporate charges, should be included in each company's mine-site cash
expenditures.
(3) These adjustments include normalization of stripping costs at open-pit operations and normalization of costs
associated with developing and accessing new production areas in underground operations, Footnote disclosure
of the total amount of these adjustments is encouraged.
(4) Information with respect to by-product credits, on an operation-by-operation basis, should be disclosed in
each company's external reporting documents.
(5) Information with respect to royalties, on an operation-by-operation basis, should be disclosed in each
company's external reporting documents.
Historical Quarterly Data Based Gold Institute production Cost Standards
Quarter
ended
Aug
2011
(Q4)
Quarter
ended
May
2011
(Q3)
Quarter
ended
Feb
2011
(Q2)
Quarter
ended
Nov
2011
(Q1)
Quarter
ended
Aug
2010
(Q4)
Quarter
ended
May
2010
(Q3)
Quarter
ended
Feb
2010
(Q2)
Quarter
ended
Nov
2010
(Q1)
Underground Mining /
Sulphide Processing
Development (metres)
Sulphide Ore delivered
(tonnes)
6,751
6,349
5,610
5,744
2,650
2,371
2,036
1,663
91,733
90,352
73,086
80,914
72,444
65,944
58,230
43,406
Sulphide head grade
(grams / tonne)
4.29
4.06
5.40
6.48
8.81
5.87
6.60
8.63
46,612
31,486
30,143
52,682
54,279
56,856
43,472
43,900
1.43
1.01
1.30
1.64
2.24
1.87
1.99
1.92
Ore processed (tonnes)
Average ore head grade
(grams / tonnes)
139,584
120,413
103,480
134,646
126,688
123,372
102,302
86,329
3.19
3.28
4.19
4.53
5.99
4.07
4.64
5.29
84.28%
Total Recovery (%)
77.96%
79.09%
81.87%
84.47%
86.54%
82.43%
84.38%
Gold produced (ounces)
10,670
11,395
11,442
18,650
20,092
11,913
14,787
9,422
Gold shipped (ounces)
12,066
11,652
11,687
18,055
19,251
11,299
15,267
8,826
1,479
1,721
1,530
876
807
816
718
982
128
166
173
117
123
75
107
100
1,636
£0.2
million
1,453
£(2.8)
million
1,365
£(2.0)
million
1,308
£4.2
million
1,193
£ 4.2
million
1,155
£ 2.0
million
1,099
£ 3.1
million
1,091
£ 0.3
million
Oxide Plant
Ore delivered (tonnes)
Oxide head grade (grams
/ tonnes)
Total (Sulphide + Oxide)
Cash Costs
Total cash cost / shipped
ounce*(US$) (unaudited)
Total cash cost / tonne
(US$) (unaudited)
Average realised gold
price (US$ / ounce)
Mine (loss) / profit for the
period (unaudited)**
*
**
excludes amortization and depreciation, unrealised foreign exchange rate movements and provisions
Mine (loss) / profit for the period exclude any (losses) / gains from movements in unrealised foreign exchange.