Avanco Resources : Quarterly Activities Report 31 Jan 2017

Avanco Resources (ASX: AVB)

31 January 2017

Suite 3, 257 York Street

Subiaco, WA 6008 Australia.

PO Box 1726

West Perth, WA 6872, Australia

Tel: [phone]

Fax: [phone]

Contacts:

Nicholas Bias

Head of Corporate Affairs [e-mail] Tel: [phone]

Phil Retter Investor Relations

NWR Communications [e-mail] Tel: [phone]

For the latest news:

www.avancoresources.com

Directors:

Colin Jones Tony Polglase Simon Mottram Luis Azevedo Vern Tidy

Luiz Ferraz

Management: Wayne Phillips Scott Funston Nicholas Bias Otávio Monteiro

FOURTH QUARTER 2016 ACTIVITIES REPORT

Avanco Resources Limited ("Avanco" or "the Company") is pleased to present its Fourth Quarter 2016 Activities Report for the period ending 31 December 2016. During the quarter the Antas Mine continued to ramp-up, achieving record production, and passing a decisive milestone as it recorded positive cash flows. The Company remains debt free, with cash balances increasing to $22.9 million at year-end. In addition, the Company made good progress developing its new project pipeline, advancing construction activities at the Pedra Branca Copper-Gold Project and announcing a maiden resource at the CentroGold Project.

HIGHLIGHTS

• Production guidance exceeded, with record quarterly production of 4,010t of copper (FY2016 11,188t) and 2,839oz of gold (FY2016 7,779oz)
• Record quarterly concentrate sales of 13,868t (FY2016 36,765t) and provisional sales revenue of US$23.0m (FY2016 US$58.2m)
• C1 unit cash costs improved 2% to US$1.22/lb compared to the previous quarter (FY2016 US$1.10/lb). Record free cashflow from operations increased to US$7.5m (FY2016 US$10.3m)
• Cash increased by US$3.5m after capital expenditure to US$22.9m at 31 December 2016 - the Company continues to be debt-free
• Excellent safety performance with no lost-time injuries
• Infrastructure construction at Pedra Branca advanced; rights purchased from copper major to prospective license along strike
• Maiden resource estimates at CentroGold announced

Q4 2016	Q3 2016	Variance	FY 2016
Copper in concentrate produced (tonnes)	4,010	3,330	+20%	11,188
Gold in concentrate produced (ounces)	2,839	2,246	+26%	7,779
Copper in concentrate sold ('000lbs)	8,328	7,178	+16%	21,931
Gold in concentrate sold (ounces)	2,604	2,292	+14%	6,847
C1 cash cost (US$/lb)	1.22	1.25	-2%	1.10

Commenting on the results, Mr Tony Polglase, Managing Director said: "In 2016 Avanco passed the main milestone of any mining company when the Antas Mine came in to production, notably in our case, ahead of schedule and below budget. The final quarter of 2016 saw us pass the second major milestone when only a short-6 months after declaring commercial production, the mine is now producing generous free cash flows, and therefore we close the year with a healthy cash balance of US$22.9 million and with no debt. We look forward to building on this success in 2017 as we continue to ramp-up, delivering more production at a time that the outlook for copper is improving, in addition to advancing the many growth opportunities available to us."

A conference call to discuss the results will be held today at 13:00 AEST / 10:00 AWST. The conference call number is 1800 268 560 / [phone], passcode 416782#.

A replay will be available at 1800 731 519 / [phone], conference ID 188127, PIN code 498469# for approximately 14 days.

1

1. ANTAS MINE

During the quarter, the increase in the copper price combined with higher production and a decrease in operating costs, resulted in a significant increase in free cashflow and cash position.

The year to date cash receipts from customer, net of treatment and refining costs, has surpassed the construction costs incurred in building the Antas Mine, within an industry leading six months since declaring commercial production.

Key Quarterly Production Data SAFETY

The Antas Mined continued an excellent safety performance with no LTIs reported in the quarter. Over 1,605,492 man-hours without LTI have been achieved to date.

MINING AND PROCESSING

Production through the fourth quarter exceeded guidance, with 4,010t of copper metal in concentrate produced for the quarter and 11,188t of copper metal in concentrate produced for the year. The installation of the tertiary crusher was completed on time and within budget, and has increased crushing productivity from ~120tph to ~200tph.

Highlights for the quarter included:

• Copper production exceeded guidance by over 1,000 tonnes

• Higher head grade results in copper recoveries increasing to 97.2% compared to 96.4% in the previous quarter

 15% increase in milling throughput

 Excellent safety performance, with no lost time injuries reported

Units	Q42016	Q3 2016	Variance	FY 2016
Mining
Total Material Mined	t	1,680,311	1,645,365	+2%	6,497,037
Ore Mined	t	210,137	158,006	+33%	629,026
Copper Grade	%	2.52	2.38	+6%	2.24
Gold Grade	g/t	0.73	0.59	+24%	0.67
Processing
Tonnes Processed	t	172,320	161,247	+7%	510,830
Copper Grade	%	2.40	2.15	+12%	2.29
Gold Grade	g/t	0.60	0.51	+18%	0.55
Copper Recovery	%	97.20	96.36	+1%	95.76
Gold Recovery	%	85.82	85.81	-	85.81
Production
Concentrate	DMT	14,243	11,563	+23%	39,794
Contained Copper	t	4,010	3,330	+20%	11,188
Contained Gold	oz	2,839	2,246	+26%	7,779
Concentrate Copper Grade	%	28.16	28.80	-3%	28.11
Concentrate Gold Grade	g/t	6.20	6.04	+3%	6.08

Mining

Open pit mining continued with a focus on completing the Stage 1 development, to reduce production risks. Significant works outside of the pit included completion of the waste dump diversion works and progressive rehabilitation.

Antas Stage 1 Pit in the foreground

Antas Stage 2 Pit progress

Year to date reconciliation of copper production versus ore reserves continues to track well, with a very strong positive reconciliation for gold.

Mine Reconciliation - YTD 2016	Actual Mined	Ore Reserve	Variance (%)
Copper Metal Tonnes	12,230	12,353	-1%
Gold Metal Ounces	11,291	9,162	+23%

Production came mostly from the Stage 1 Pit. Adjustments were made to the ore boundary definitions to accommodate some lower/medium grades zones as a consequence of grade control drilling results. This resulted in the loss of some tonnes, but was compensated by a corresponding increase in grade.

High grade massive sulphide ore in Antas Stage 1 Pit

Close-spaced infill drilling provided better definition to the original sporadic high-grade gold zones.