UPDATE 2-Avocet shares plunge on goldmine downgrade

Thu Feb 14, 2013 6:29am EST
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* Considering share issue to buy back hedge book gold

* Closing hedge to cost up to $130 mln

* Says 35 pct downgrade to gold reserves likely

* Company could become takeover target - analyst

* Shares dive over 40 pct (Adds comments by CEO, finance director, analysts; updates share price)

By Sarah Young

LONDON, Feb 14 (Reuters) - Africa-focused gold company Avocet Mining could need a share issue to raise as much as $130 million after it said on Thursday its sole operating mine, in Burkina Faso, is not as big as it thought, nearly halving its London-listed share price.

The miner, already struggling after it slashed last year's output target, said its reserves would be downgraded by at least 35 percent, putting it under pressure financially to reduce a forward sales hedging deal and ease near-term cash needs, raising the possibility of a takeover bid for the firm.

Shares in the company hit their lowest level since 2003, down 44 percent at 28.7 pence at 1103 GMT, having hit a low of 25.98 pence earlier in the session, 88 percent down on the 12-month high and valuing the miner at around 58 million pounds ($90 million).   Continued...