Gold miner Avocet tumbles after fresh trouble at Inata

* Avocet sees 2013 production 115,000-120,000 ounces

* Sees funding shortfall in 2014

* Starts asset review; analysts say project sales possible

* Shares down 27 percent in morning trade

By Clara Ferreira-Marques

LONDON, Dec 20 (Reuters) - Avocet Mining (LSE: AVM.L - news) warned that 2013 gold production would fall more steeply than expected and announced a new plan that will halve the life of its sole operating mine, sending its stock tumbling more than 30 percent.

Avocet shares have slumped almost 90 percent since the start of the year, hit by a sharp drop in gold prices that has hit miners of all sizes, but also by a hefty reserve downgrade at its key Inata mine in Burkina Faso and funding worries.

Avocet said in a statement that production at Inata would be 115,000 to 120,000 ounces for 2013, down from a revised full-year forecast of 125,000-130,000 ounces, already trimmed in October. It blamed trouble with mobile and plant equipment - stretched as Avocet mines tougher ore and has little cash for maintenance - and two minor pit slope failures, or landslides.

In 2012, Avocet produced 135,189 ounces of gold.

"Avocet continues to struggle with operating its Inata mine to plan, and has faced rising mining costs, technical problems and a falling gold price," analysts at Investec (LSE: INVP.L - news) said in a note.

"Management will need to work hard to establish credibility in the new plan as the mine has been consistently missing targets for some time now."

Avocet, which announced a new eight-year mine plan for Inata in August with positive cash flow every year, said it had again reviewed the operation in the light of weaker prices and higher costs. It now sees a 2015-2018 plan that could generate $180 million in cash, based on an assumed gold price of $1,200 per ounce, close to the current spot price.

This plan, though, shows the mine would burn cash in 2014 and require a further $20-30 million.

Avocet said more work was needed on the new plan, but said it had already begun a business review to consider options for Inata and projects in Burkina Faso and in Guinea. Analysts say this could lead to efforts to sell some of the projects or a stake in Inata.

Complicating the review is a funding deal with Elliott Management, its largest single shareholder, which used the Tri-K mine project in Guinea as security. This means Avocet could lose the operation if it cannot repay or renegotiate a $16 million loan from Elliott owed by the end of this year, out of an expected cash balance of $15 million.

The company also announced it had reduced the size of its board after the departure of two directors, while the remaining non-executive board members had agreed to a pay cut, back-dated to March 2013.

At 1115 GMT, Avocet shares were down 25.5 percent at 9.4 pence, off their earlier low (SES: E2:OJ4.SI - news) .