We have long regarded Avoca Resources as a highly attractive, emerging gold play. In a sector dominated by projects with high-cost operations and flagging profitability, this company is set to be a fresh new face on the block, with strong operating margins.
Avoca has recently confirmed that its brand new $77 million underground gold mine has been commissioned. Amazingly, it is the first new gold operation in Western Australia since 2001.
Avoca's Higginsville gold project boats a +1 million ounce gold resource base that is continuing to grow in size. Based on the most up-to-date resource estimate announced in late-2007, the Higginsville resource base comprises 1.35 million ounces of gold.
We feel the upside potential remains enormous. Avoca currently controls the gold belt between the 15 million ounce St Ives and six million ounce Norseman goldfields.
We remain overwhelmingly positive on this company's story. There are very few emerging, high-quality gold producers in the Australian market. With the shares currently trading at around $1.85*, Avoca Resources is currently trading on a price-earnings multiple of around 11 times forecast 2009 consensus earnings.
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