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FINANCIAL HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018

August 13, 2018

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13 August 2018

Avesoro Resources Inc.

TSX: ASO

AIM: ASO

FINANCIAL HIGHLIGHTS FOR THE THREE AND SIX MONTHS

ENDED JUNE 30, 2018

Avesoro Resources Inc., (“Avesoro” or the “Company”), the TSX and AIM listed West African gold producer, is pleased to announce the release of its unaudited financial results for the quarter (the “Quarter” or “Q2”) and six months (“H1”) ended June 30, 2018.

Financial Highlights:

H1 2018

  • Gold production of 128,319 ounces, in line with full year 2018 guidance of 220,000 – 240,000 ounces and a 318% increase versus H1 2017 (“HoH”);
  • Revenues of US$165.9 million from gold sales of 125,838 ounces at an average realised gold price of US$1,318 per ounce, versus revenues of US$39 million and gold sales of 30,375 ounces in H1 2017;
  • Operating cash costs US$658 per ounce sold in H1 2018, an improvement of 37% HoH;
  • All in sustaining cash costs (“AISC”) of US$932 per ounce sold in H1 2018, a 40% HoH improvement;
  • Company EBITDA margin of 39%, with EBITDA of US$64.6 million versus EBITDA of US$1.1 million in H1 2017;
  • Operating cash flows of US$47.9 million, compared to an outflow of US$7.4 million in H1 2017; and
  • Cash of US$12.7 million and debt of US$134.5 million at June 30, 2018.

Q2 2018

  • Gold production of 60,231 ounces in the Quarter, a decrease of 12% on the previous quarter, as a result of planned lower grades at the Youga mine;
  • Revenues of US$74.5 million from gold sales of 57,285 ounces in Q2 2018 at an average realised gold price of US$1,302 per ounce;
  • Operating cash costs of US$698 per ounce sold in Q2 2018;
  • AISC of US$985 per ounce sold in Q2 2018;
  • Company EBITDA margin of 33%, with EBITDA of US$24.4 million in the Quarter; and
  • Operating cash flows of US$8.5 million in the Quarter.

Serhan Umurhan, Chief Executive Officer of Avesoro, commented: “We delivered a strong operational and financial performance during the first half of 2018 producing over 128,000 ounces of gold across our two mines at an operating cash cost of US$658 and all-in-sustaining cost of US$932 per ounce sold. Both New Liberty and Youga are performing in line with expectations helping the Company to generate US$47.9 million in cash flow so far this year. Following a particularly strong Q1 2018 performance, the Youga mine is now performing at a normalised production rate. New Liberty’s performance continues to improve with a further seven percent increase in gold production during the Quarter and unit cost reductions in all key areas of operations.

We continue to make good progress with our substantial exploration drilling programme across both Liberia and Burkina Faso, with 89,900 metres of diamond drilling having been completed across our portfolio so far this year, representing 52% of the full year budget. We expect these activities to provide further increases in shareholder value in addition to the 29% increase in mineral reserves at Youga already announced earlier in the Quarter.

We now look forward to delivering another strong performance in the second half of 2018 and we maintain our full year production guidance of 220,000 – 240,000 ounces of gold at an all-in-sustaining cost of between US$960 and US$1,000 per ounce sold.”

Table 1: Consolidated Financial Highlights

Metric

Q2 2018

Q1 2018

Q2 2018

H1 2018

H1 2017

H1 2018

vs

vs

Q1 2018

H1 2017

Gold production, oz

60,231

68,088

-12%

128,319

30,735

318%

Gold sold, oz

57,285

68,553

-16%

125,838

31,390

301%

Operating cash costs, US$/oz sold

698

624

12%

658

1,043

-37%

All in Sustaining Costs, US$/oz sold

985

889

11%

932

1,543

-40%

Average Realised Gold Price, US$/oz

1,302

1,333

-2%

1,315

1,243

6%

Revenues, US$m

74.5

91.4

-18%

165.9

39.0

325%

EBITDA**, US$m

24.4

40.2

-39%

64.6

1.1

5,773%

EBITDA margin, %

33

44

-26%

39

3

1,281%

Cash flow from operations, US$m

8.5

39.4

-78%

47.9

-7.4

747%

Capital spend, US$m

13.2

13.6

-3%

26.8

12.0

123%

Cash, US$m

12.7

23.0

-45%

12.7

2.8

354%

Debt, US$m

134.5

137.3

-2%

134.5

119.6

12%

Operating cash costs, AISC and EBITDA, are non-GAAP measures and are defined in the notes section of this announcement.

Table 2: Key Operational Financial Highlights

Metric

Q2 2018

Q1 2018

Q2 2018

H1 2018

H1 2017

H1 2018

vs

vs

Q1 2018

H1 2017

New Liberty

           

Gold production, oz

29,808

27,870

7%

57,678

30,735

88%

Mining cost, US$/t

2.42

2.51

-4%

2.47

2.38

4%

Processing cost, US$/t

24.53

24.52

0%

24.53

27.34

-10%

Operating cash costs, US$/oz sold

781

846

-8%

813

1,043

-22%

All in Sustaining Costs, US$/oz sold

1,038

1,095

-5%

1,066

1,543

-31%

Youga

           

Gold production, oz

30,423

40,218

-24%

70,641

48,922

44%

Mining cost, US$/t

1.90

2.40

-21%

2.11

1.57

34%

Processing cost, US$/t

18.64

19.63

-5%

19.14

18.76

2%

Operating cash costs, US$/oz sold

616

470

31%

530

537

-1%

All in Sustaining Costs, US$/oz sold

852

707

21%

767

821

-7%

Outlook

During the second half of 2018, the Company expects to see further improvements in unit cost performance as mining volumes increase following the commissioning of additional heavy mining equipment at both New Liberty and Youga and also the increased plant throughputs that have been enabled through process plant optimisation activities undertaken during H1 2018.

The Company maintains its full year production guidance of 220,000 – 240,000 ounces of gold at an operating cash cost of US$620 to US$660 per ounce sold and all-in-sustaining cost of between US$960 and US$1,000 per ounce sold.

Following the Mineral Resource and Reserve upgrade for Youga published during Q2 2018, the Company’s extensive drilling campaigns continue to progress at pace in both Liberia and Burkina Faso with 89,900 metres of diamond drilling completed during H1 2018. The Company now looks forward to further updating the market on the results of its Mineral Resource upgrade work at New Liberty during Q3 2018 and its infill drilling campaign at the Ndablama deposit during Q4 2018.

Analyst and Investor Call

The company will be hosting a conference call and webcast for investors and analysts on August 13, 2018 at 08:00 EST / 13:00 BST

The access details for the conference call are as follows:

Location

Phone Type

Phone Number

United Kingdom

Freephone

0800 358 9473

United Kingdom, Local

Local

+44 333 300 0804

United States

Freephone

+1 855 857 0686

United States, Local

Local

+1 631 913 1422

Canada

Freephone

+1 416 216 4189

Canada, Local

Local

+1 844 747 9618

Password: 33464313#

Webcast URL:

http://arkadinemea-events.adobeconnect.com/e2w8a53msk4o/event/registration.html

Financial Statements and MD&A

The Financial Statements are appended to this announcement. Both the Financial Statements and the accompanying Management Discussion and Analysis are available for review at the Company’s website, www.avesoro.com and on www.sedar.com.

In preparing the Company’s interim financial statements for the period ended June 30, 2018, Management noted an error in the calculation of the fair valuation of related party loans with Mapa Insaat ve Ticaret A.S. that requires the restatement of the audited consolidated statement of financial position as at December 31, 2017 and unaudited interim consolidated statement of financial position as at March 31, 2018. The impact of the restatement of the audited consolidated statement of financial position as at December 31, 2017 is to increase the current portion of borrowings by US$2.0 million, increase the non-current portion of borrowings by US$3.2 million and reduce the capital contribution in equity by US$5.2 million. The impact of the restatement of the unaudited interim consolidated statement of financial position as at March 31, 2018 is to increase the current portion of borrowings by US$2.8 million, increase the non-current portion of borrowings by US$4.9 million and reduce the capital contribution in equity by US$7.7 million. The adjustments have no impact on profit nor cash flows for the year ended December 31, 2017 nor for the three months ended March 31, 2018. The repayment terms, rates and amounts payable pursuant to the loan agreements are unchanged.

The Company will re-file on SEDAR the restated audited consolidated financial statements as of and for the year ended December 31, 2017 and the restated unaudited interim consolidated financial statements as of and for the three months ended March 31, 2018.

Notes

Non-GAAP Financial Measures: The Company has included certain non-GAAP financial measures in this press release, including operating cash costs and all-in sustaining costs (“AISC”) per ounce of gold sold and EBITDA. These non-GAAP financial measures do not have any standardised meaning. Accordingly, these financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with International Financial Reporting Standards (“IFRS”).

Operating cash costs and AISC are a common financial performance measure in the mining industry but have no standard definition under IFRS. Operating cash costs are reflective of the cost of production. AISC include operating cash costs, net-smelter royalty, corporate costs, sustaining capital expenditure, sustaining exploration expenditure and capitalised stripping costs. The Company reports cash costs on an ounces of gold sold basis.

The Company calculates EBITDA as net profit or loss for the period excluding finance costs, income tax expense and depreciation. EBITDA does not have a standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes and the effects of changes in working capital balances and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.

Other companies may calculate these measures differently and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

Contact Information

Avesoro Resources Inc.

Geoff Eyre / Nick Smith

Tel: +44(0) 20 3405 9160

 

Camarco

(IR / Financial PR)

Gordon Poole / Nick Hennis

Tel: +44(0) 20 3757 4980

finnCap

(Nominated Adviser and Joint Broker)

Christopher Raggett / Scott Mathieson / Camille Gochez

Tel: +44(0) 20 7220 0500

Berenberg

(Joint Broker)

Matthew Armitt / Sara MacGrath / James Brooks

Tel: +44(0) 20 3207 7800

Hannam & Partners (Advisory) LLP

(Joint Broker)

Rupert Fane / Ingo Hofmaier / Ernest Bell

Tel: +44(0) 20 7907 8500

About Avesoro Resources Inc.

Avesoro Resources is a West Africa focused gold producer and development company that operates two gold mines across West Africa and is listed on the Toronto Stock Exchange (“TSX”) and the AIM market operated by the London Stock Exchange (“AIM”). The Company’s assets include the New Liberty Gold Mine in Liberia (“New Liberty”) and the Youga Gold Mine in Burkina Faso (“Youga”).

New Liberty has an estimated Proven and Probable Mineral Reserve of 7.4Mt with 717,000 ounces of gold grading 3.03g/t and an estimated Measured and Indicated Mineral Resource of 9.6Mt with 985,000 ounces of gold grading 3.2g/t and an estimated Inferred Mineral Resource of 6.4Mt with 620,000 ounces of gold grading 3.0g/t. The foregoing Mineral Reserve and Mineral Resource estimates and additional information in connection therewith, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated November 1, 2017 and entitled “New Liberty Gold Mine, Bea Mountain Mining Licence Southern Block, Liberia, West Africa” and is available on SEDAR at www.sedar.com.

Youga has an estimated Proven and Probable Mineral Reserve of 11.2Mt with 660,100 ounces of gold grading 1.84g/t and a combined estimated Measured and Indicated Mineral Resource of 16.64Mt with 924,200 ounces of gold grading 1.73g/t and an Inferred Mineral Resource of 13Mt with 685,000 ounces of gold grading 1.70g/t. The foregoing Mineral Reserve and Mineral Resource estimates and additional information in connection therewith, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated July 31, 2018 and entitled “Mineral Resource and Mineral Reserve Update for the Youga Gold Mine, Burkina Faso” and is available on SEDAR at www.sedar.com.

For more information, please visit www.avesoro.com

Qualified Persons

The Company’s Qualified Person is Mark J. Pryor, who holds a BSc (Hons) in Geology & Mineralogy from Aberdeen University, United Kingdom and is a Fellow of the Geological Society of London, a Fellow of the Society of Economic Geologists and a registered Professional Natural Scientist (Pr. Sci.Nat) of the South African Council for Natural Scientific Professions. Mark Pryor is an independent technical consultant with over 25 years of global experience in exploration, mining and mine development and is a “Qualified Person” as defined in National Instrument 43 -101 “Standards of Disclosure for Mineral Projects” of the Canadian Securities Administrators and has reviewed and approved this press release. Mr. Pryor has verified the underlying technical data disclosed in this press release.

Forward Looking Statements

Certain information contained in this press release constitutes forward looking information or forward looking statements within the meaning of applicable securities laws. This information or statements may relate to future events, facts, or circumstances or the Company’s future financial or operating performance or other future events or circumstances. All information other than historical fact is forward looking information and involves known and unknown risks, uncertainties and other factors which may cause the actual results or performance to be materially different from any future results, performance, events or circumstances expressed or implied by such forward-looking statements or information. Such statements can be identified by the use of words such as “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “would”, “project”, “should”, “believe”, “target”, “predict” and “potential”. No assurance can be given that this information will prove to be correct and such forward looking information included in this press release should not be unduly relied upon. Forward looking information and statements speak only as of the date of this press release.

Forward looking statements or information in this press release include, among other things, statements regarding full year 2018 production guidance of 220,000 to 240,000 ounces of gold at an operating cash cost of between US$620 to US$660 per ounce sold and an all-in sustaining cost of between US$960 and US$1,000 per ounce sold, statements regarding improvements in its unit cost base, increased mining rates, increased plant throughputs, publishing of an updated Mineral Resource and Mineral Reserve for New Liberty during Q3 2018 and the Ndablama deposit during Q4 2018.

In making the forward looking information or statements contained in this press release, assumptions have been made regarding, among other things: general business, economic and mining industry conditions; interest rates and foreign exchange rates; the continuing accuracy of Mineral Resource and Reserve estimates; geological and metallurgical conditions (including with respect to the size, grade and recoverability of Mineral Resources and Reserves) and cost estimates on which the Mineral Resource and Reserve estimates are based; the supply and demand for commodities and precious and base metals and the level and volatility of the prices of gold; market competition; the ability of the Company to raise sufficient funds from capital markets and/or debt to meet its future obligations and planned activities and that unforeseen events do not impact the ability of the Company to use existing funds to fund future plans and projects as currently contemplated; the stability and predictability of the political environments and legal and regulatory frameworks including with respect to, among other things, the ability of the Company to obtain, maintain, renew and/or extend required permits, licences, authorizations and/or approvals from the appropriate regulatory authorities; that contractual counterparties perform as agreed; and the ability of the Company to continue to obtain qualified staff and equipment in a timely and cost-efficient manner to meet its demand.

Actual results could differ materially from those anticipated in the forward looking information or statements contained in this press release as a result of risks and uncertainties (both foreseen and unforeseen), and should not be read as guarantees of future performance or results, and will not necessarily be accurate indicators of whether or not such results will be achieved. These risks and uncertainties include the risks normally incidental to exploration and development of mineral projects and the conduct of mining operations (including exploration failure, cost overruns or increases, and operational difficulties resulting from plant or equipment failure, among others); the inability of the Company to obtain required financing when needed and/or on acceptable terms or at all; risks related to operating in West Africa, including potentially more limited infrastructure and/or less developed legal and regulatory regimes; health risks associated with the mining workforce in West Africa; risks related to the Company’s title to its mineral properties; the risk of adverse changes in commodity prices; the risk that the Company’s exploration for and development of mineral deposits may not be successful; the inability of the Company to obtain, maintain, renew and/or extend required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities and other risks relating to the legal and regulatory frameworks in jurisdictions where the Company operates, including adverse or arbitrary changes in applicable laws or regulations or in their enforcement; competitive conditions in the mineral exploration and mining industry; risks related to obtaining insurance or adequate levels of insurance for the Company’s operations; that Mineral Resource and Reserve estimates are only estimates and actual metal produced may be less than estimated in a Mineral Resource or Reserve estimate; the risk that the Company will be unable to delineate additional Mineral Resources; risks related to environmental regulations and cost of compliance, as well as costs associated with possible breaches of such regulations; uncertainties in the interpretation of results from drilling; risks related to the tax residency of the Company; the possibility that future exploration, development or mining results will not be consistent with expectations; the risk of delays in construction resulting from, among others, the failure to obtain materials in a timely manner or on a delayed schedule; inflation pressures which may increase the cost of production or of consumables beyond what is estimated in studies and forecasts; changes in exchange and interest rates; risks related to the activities of artisanal miners, whose activities could delay or hinder exploration or mining operations; the risk that third parties to contracts may not perform as contracted or may breach their agreements; the risk that plant, equipment or labour may not be available at a reasonable cost or at all, or cease to be available, or in the case of labour, may undertake strike or other labour actions; the inability to attract and retain key management and personnel; and the risk of political uncertainty, terrorism, civil strife, or war in the jurisdictions in which the Company operates, or in neighbouring jurisdictions which could impact on the Company’s exploration, development and operating activities.

Although the forward-looking statements contained in this press release are based upon what management believes are reasonable assumptions, the Company cannot provide assurance that actual results or performance will be consistent with these forward-looking statements. The forward looking information and statements included in this press release are expressly qualified by this cautionary statement and are made only as of the date of this press release. The Company does not undertake any obligation to publicly update or revise any forward looking information except as required by applicable securities laws.