Avnel Gold Mining Limited - Kalana project update

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

ST. PETER PORT, GUERNSEY, June 21 /CNW/ - Avnel Gold Mining Limited (TSX: AVK) -

Avnel Gold Mining Ltd. ("Avnel") is pleased to provide a project update for the work programme on its 80% owned 387.4 km(2) Kalana exploitation permit in Mali conducted by its joint venture partner IAMGOLD Corporation ("IAMGOLD"). The Option Agreement dated August 11, 2009 provides IAMGOLD with the option to earn an initial 51% interest in Avnel's share of the Kalana project by spending US$11,000,000 on exploration activities over a three year period and by delivering a NI-43-101 resource calculation of at least 2 million ounces of gold as well as proceeding with a feasibility study.

PROJECT MILESTONES ACHIEVED

    
    -  Establishment of an IAMGOLD exploration team at the Kalana Mine,
       enhancing Avnel's existing exploration infrastructure including the
       expansion of the SGS assay laboratory on site and a new sample
       preparation facility.

    -  Geophysical data collection over the whole Kalana Permit, as well as
       the 150 km(2) Fougadian Permit contiguous with the southern boundary
       of the Kalana Permit.

    -  Completion of the digital capture of the very large historical
       geological and exploration database resulting from the previous
       Russian exploration program.

    -  Collection of over 3,700 grab samples from the underground workings in
       the Kalana Mine and first pass assaying of these samples.

    -  Completion of 9,800 metres of diamond drilling in 40 drill holes in a
       program designed to test potential mineralised structures outside the
       known mineral resource.

    -  Logging and interpreting of 5,000 of diamond drill core.

    -  First pass assaying of 2,851 metres of diamond drill core.

    -  Commencement of a 12,000 metres RC drill programme designed to:

       -  extend the Kalana Mine zone
       -  evaluate the Kalanako Prospect (previously drilled by the
          Russians), located 3 km to the north east of the Kalana Mine
       -  test the Dadjan zone, a coincident geophysical and geochemical
          target located southeast of the Kalana Mine

    -  Termite mound geochemical sampling over the northern 60 km(2) priority
       zone in proximity to the mine is completed and is well advanced over
       the remainder of the Kalana Permit.

    -  On-going assessment of sampling techniques and assay protocols to
       better quantify the coarse gold mineralisation in the Kalana deposit.
    

Avnel's Chairman and CEO, Howard Miller is reported as saying "IAMGOLD have taken an aggressive approach to the project. Although the accelerated pace of work may result in the assay results lagging, it will accelerate the understanding of the potential for large tonnage bulk mining extending the known mineralisation at the Kalana Mine and its environs."

Mr. Roy Meade, Avnel's Executive Director Mining said "the IAMGOLD team are enthusiastic and have worked closely with the Kalana Gold Mine professional team. They have integrated well into a working mine site and camp adding to the convivial atmosphere in our mine community and in a collegiate framework promoting constructive cooperation."

THE KALANA MINE AND PERMIT BACKGROUND AND EXISTING RESOURCES

The Kalana Mine and Permit was historically owned by a Malian State company (Sogemork) with exploration and mine construction supported by Russian financial and technical aid. The mine operated for a few years until it was put on care and maintenance on the break up of the Soviet Union in 1991. The Kalana Mine and Permit was privatised by international tender and awarded to Avnel in December 2002, and in 2005 a NI 43-101 compliant technical report by Snowdens ("The Snowden Technical Report") classified 1,020,000 oz gold as a measured and indicated resource and 249,000 oz gold as an inferred resource. Gold hosted within shallow dipping veins comprised 80% of the mineral resource estimates. The tender conditions required the small Russian built gravity recovery mine be put into immediate production, precluding a re-evaluation of the deposit for bulk mineable potential at that time. The Mine, which continues to operate, is located in the northwest corner of the Permit and is accessible to a depth of 180 metres below surface. The underground access is extremely valuable in the exploration programme to test the bulk mineable potential which is now undertaken by IAMGOLD.

At the time of the privatisation tender the database consisted of information from the Sogemork exploration that included the original handwritten drill logs and data presented in sections and plans from the approximately 97,000 metres of historical drilling Sogemork selected intervals for sampling according to lithology with only selected parts of the core outside the quartz veins being sampled for assay. No information regarding the sample preparation, analysis and security was available. No drill core from Sogemork is available. The data is considered an important contribution to the understanding of the geology and exploration potential, but is insufficient to access the bulk mineable potential at Kalana

See The Snowden Technical Report for more information which can be viewed on Avnel's website and at www.SEDAR.com.

GEOPHYSICAL DATA COLLECTION

A detailed airborne magnetic, radiometric and DTM survey was flown between October and November 2009 encompassing both the Kalana Permit and the Company's Fougadian Permit. Interpretation and enhancement of the 1,264 line km survey is ongoing. The key features are:

    
    -  Two accurate main shear zones are clearly shown trending from the
       Fougadian Permit over the Kalana Permit as well as evidence of diorite
       bodies. See attached Plan No 3 and visit Avnel's website.

    -  The Kalanako Prospect (located 3-4 km north east of the Kalana Mine)
       has a strong 3 km long magnetic anomaly. (See attached Plan No. 1 and
       visit Avnel's website).

    -  The Dadjan Prospect (located 2 km to the south east of the Kalana
       Mine) also appears as a magnetic anomaly.

    -  The Yanfolila sedimentary basin appears clearly on the magnetic maps.

    -  By combining the radiometric survey with field mapping the regolith
       mapping is enhanced, thus allowing better interpretation of the
       geochemical data.
    

See attached Plans and visit www.avnelgold.com.

UNDERGROUND GRAB SAMPLING

Between July 2009 and January 2010, 3,753 underground samples were collected from the workings in the mine. Samples were collected from 4 km of main haulages and crosscuts that access the major quartz veins that have been mined. The majority of the samples were collected from zones that lie between the major shallow dipping, high grade quartz veins. Where a major vein was exposed in a tunnel, samples were not taken from this vein but from the adjacent hanging wall or footwall. This allowed the geologists to observe potential gold mineralisation between the main quartz veins. The rock lithology and mineralogy was mapped and recorded. The density of quartz veins or veinlets within tunnels was also measured and recorded.

The tunnels were marked every metre with a vertical line of spray paint. Samples were collected from one side wall between 50cms and 150cms above the adit floor. Each sample contained between 2.5kgs and 5.0kgs. A total of 7 tonnes were collected using this sampling method.

The Au assay results were received in the first quarter of 2010. The average grade of all samples was 2.17g/t. Over 25% of the assays are above 0.7g/t with an average value of 8.5g/t for the top quartile of samples. It was decided to re-assay samples where assays are greater than 0.7g/t utilizing screen fire assays using a 106 micron screen. Preliminary results suggest that the screen fire assays are approximately 20% higher than the standard fire assays without significant relation to the grade of the sample. Further re-assaying is planned to evaluate the impact of screen fire assaying and different sample preparation protocols.

The lithological and mineralogical descriptions were integrated into a Geosoft program which produced a lithological and mineralogical map of the underground tunnels. The maps show extensive zones of pyrite and arsenopyrite.

DIAMOND DRILLING

Diamond drilling commenced in February 2010 and 9,800 metres drilling in 40 holes were completed at the Kalana Mine by the end of May. The first phase drill program was designed to test:

    
    -  potential extentions of known veins and intervening material between
       high grade veins
    -  potential mineralisation outside of the known Mineral Resources
    -  the results of recent underground drilling in the aureole around the
       central intrusion
    

IAMGOLD's recent diamond drill holes are mainly located outside the existing Kalana Mine and target potential additions to the known Mineral Resources (see attached Plan No. 4). The holes were drilled on the eastern, northern, western and southern boundaries of the mine. Holes are drilled at sixty degrees to an average depth of 250 metres. One hole (DDH-39) was drilled to a depth of 480 metres and was located within the existing mining area. Details of the drill hole locations, azimuth and depth are shown in Table No. 2.

Potential Extention of known mineralisation within the mine

Eight holes (DDH-1, 6, 7, 8, 27, 28, 29 and 30) were drilled to test possible extentions of known veins currently being exploited. Diamond drill hole DDH-28 showed that Vein 17 extends east of the main fault as has been shown by mine development. The intersection shows that the vein may continue approximately 50m beyond the current mine development on 150m elevation. The holes also indicate that Vein 17 is part of a mineralised, stockwork zone that may generate significant ore tonnes at lower grades. This has been further supported in recent mine development where a twenty degree inclined winze of 75m assayed 4.5g/t over 75m of development. The inclined area is estimated to be equivalent to 15m vertical thickness. DDH-06 returned 17m at 1.64g/t in this Vein 17 mineralized stockwork close to the bulk sample from the underground development. DDH-27 returned 8m at 2.5g/t and DDH-28 returned 8m at 1.98g/t. Visible gold was observed in all three holes. Interpretation of drill results suggests that borehole assay results may underestimate high grade, "nuggetty", quartz mineralised zones. This has been historically recognised within the existing Kalana Mine and in similar mineralised deposits.

DDH-1 was collared west of the Kalana Mine and drilled north-east to a depth of 329 metres. The hole was targeting an area north of existing mine development to test the up dip extension of the Vein 19 and 19A and Vein 20 Mineral Resources. This area had been partially tested by underground diamond drilling by SOMIKA in 2008. The hole intersected a zone of vertical, thin quartz veins containing some grains of free gold. The vertical mineralized structures had not previously been recognized. No assay results are available for this hole at this time.

DDH-27 intersected Vein 17 close to the 180m elevation and a new haulage is being developed to access Vein 17 between 180 metre and 165 metre elevations.

Two diamond drill holes (DDH-29 and DDH-30) intersected possible extensions of Vein 18 and Vein 18C approximately 50 metres west of the current mining blocks. Assay results are pending.

DDH-39 was collared south of the Kalana diorite intrusion and drilled north at sixty degrees through the diorite to a final hole depth of 480 metres. The hole intersected 224 metres of diorite. Beyond the diorite the hole intersected twelve metres of strongly altered and silicified hornfelsed metasediments containing sulphides. The remainder of the hole showed quartz veins and stockworking, with intervals of strong alteration and breccias zones. Significant assay results for the hole from a depth of 253 metres to the end of hole are shown in Table No. 1 below.

Potential Mineralisation beyond the Known Mineral Resources

An east-west fence of six holes (DDH-33 to 38) was completed north of the known Mineral Resources. Holes were drilled from east to west dipping at sixty degrees. The holes were testing vertical structures reported in previous exploration and interpretation of geophysical data. The holes intersected vertical quartz vein structures as well as shallow dipping quartz vein zones.

Gold assay grades have been received for three of these holes. An east-west fence of six holes (DDH-20 to 25) was completed south of the known Mineral Resources. Holes were drilled from east to west and inclined at sixty degrees. Both vertical and shallow dipping quartz veins and stockworks were intersected. Assay results are pending.

This fence above was extended to the east with seven holes (DDH-13 to 19). Holes were drilled from east to west and inclined at sixty degrees. These holes were testing the inferred Mineral Resources at Kalana II which are associated with an extention of the diorite from the centre of the Kalana Mine to the east. DDH-18, 19 and 20 intersected quartz veins that may be extentions of the Vein 1, 2 and 4 with visible gold observed. DDH-13, 15 and 16 intersected brecciated quartz vein, stockworking and diorite. Assay results are pending.

A north-south fence of four holes (DDH-9 to 12) was completed over the Kalana II area. Holes were drilled from south to north at sixty degrees. The holes tested the extention of mineralisation north and south of the east-west striking diorite intrusion. Assay results are pending.

Potential gold mineralization south of the Kalana Diorite Intrusion

A north-south fence of four holes (DDH-2 to 5) was completed. The holes were drilled from south to north and inclined at sixty degrees. These holes were testing a zone south of the Kalana diorite intrusion where Avnel completed three underground diamond drill holes in 2008 with significant intersections of lower grade mineralisation. DDH-4 intersected quartz vein and quartz stockworking associated with Veins 1 and 3 in the Kalana Mine. Assay results produced 10m at 4.9g/t and 8m at 3.3g/t (see Table No. 1 below).

    
    Table No. 1 - SIGNIFICANT ASSAY RESULTS

    --------------------------------------------------------------
    Hole No    From Metres   To Metres      Metres   Au Grade g/t
    --------------------------------------------------------------
    DDH-6               47          48           1           27.0
    --------------------------------------------------------------
                       184         201          17           1.64
    --------------------------------------------------------------
    including          184         185           1           2.06
    --------------------------------------------------------------
                       189         190           1            3.3
    --------------------------------------------------------------
                       193         194           1           2.96
    --------------------------------------------------------------
                       194         195           1           4.40
    --------------------------------------------------------------
                       197         198           1           2.70
    --------------------------------------------------------------
                       198         199           1           2.44
    --------------------------------------------------------------
                       199         200           1           3.80
    --------------------------------------------------------------
                       200         201           1           3.94
    --------------------------------------------------------------
    DDH-28             173         181           8           1.98
    --------------------------------------------------------------
    Including          178         179           1           3.59
    --------------------------------------------------------------
                       180         181           1           6.50
    --------------------------------------------------------------
                       208         211           3            4.0
    --------------------------------------------------------------
    Including          208         209           1           7.70
    --------------------------------------------------------------
                       210         211           1           4.20
    --------------------------------------------------------------
    DDH-27               9          10           1            9.6
    --------------------------------------------------------------
                       139         140           1            4.5
    --------------------------------------------------------------
                       210         216           6            2.5
    --------------------------------------------------------------
    Including          210         216           1            2.2
    --------------------------------------------------------------
                       211         212           1            3.8
    --------------------------------------------------------------
                       214         215           1            4.4
    --------------------------------------------------------------
                       215         216           1            4.2
    --------------------------------------------------------------
    DDH-4                6           7           1            7.8
    --------------------------------------------------------------
                        22          23           1            1.8
    --------------------------------------------------------------
                       118         128          10            4.9
    --------------------------------------------------------------
    including          118         119           1            2.6
    --------------------------------------------------------------
                       121         122           1            2.2
    --------------------------------------------------------------
                       126         127           1           16.0
    --------------------------------------------------------------
                       127         128           1           22.0
    --------------------------------------------------------------
                       198         206           8            3.3
    --------------------------------------------------------------
    Including          198         199           1           1.63
    --------------------------------------------------------------
                       200         201           1           2.10
    --------------------------------------------------------------
                       201         202           1           2.80
    --------------------------------------------------------------
                       202         203           1           5.90
    --------------------------------------------------------------
                       203         204           1           1.77
    --------------------------------------------------------------
                       204         205           1          10.60
    --------------------------------------------------------------
    DDH-35             183         184           1            1.9
    --------------------------------------------------------------
                       225         226           1            8.0
    --------------------------------------------------------------
                       249         252           3            1.5
    --------------------------------------------------------------
    DDH-36               1           3           2            7.3
    --------------------------------------------------------------
    including            2           3           1           14.0
    --------------------------------------------------------------
                        46          48           2            1.3
    --------------------------------------------------------------
                        63          69           5            1.1
    --------------------------------------------------------------
    Including           63          64           1           1.96
    --------------------------------------------------------------
                        68          69           1           1.86
    --------------------------------------------------------------
    DDH-39             262         265           3            1.8
    --------------------------------------------------------------
                       281         296          15            0.8
    --------------------------------------------------------------
                       302         303           1            2.1
    --------------------------------------------------------------
                       307         308           1            8.3
    --------------------------------------------------------------
                       317         322           5            2.0
    --------------------------------------------------------------
                       330         335          25            2.6
    --------------------------------------------------------------

    Table No. 2 - DRILL HOLE LOCATIONS

    --------------------------------------------------------------
    Hole No         East         North  Azimuth    Dip   Length m
    --------------------------------------------------------------
    DDH-01      587054.9       1193286     34.4    -60        329
    --------------------------------------------------------------
    DDH-02    589706.291   1194998.588    343.6    -60        248
    --------------------------------------------------------------
    DDH-03    587208.024    1193174.49    343.6    -60        254
    --------------------------------------------------------------
    DDH-04     589538.55   1195049.578    343.6    -60        280
    --------------------------------------------------------------
    DDH-05    589539.614   1195051.401    343.6    -60        230
    --------------------------------------------------------------
    DDH-06    589535.594   1195054.587    343.6    -60        230
    --------------------------------------------------------------
    DDH-07    589536.185   1195055.561    343.6    -60        230
    --------------------------------------------------------------
    DDH-08    589540.702   1195053.208    343.6    -60        233
    --------------------------------------------------------------
    DDH-09    589536.945   1195056.712    343.6    -60        230
    --------------------------------------------------------------
    DDH-10    587977.772   1193037.469    343.6    -60        230
    --------------------------------------------------------------
    DDH-11     587148.77   1193268.371    343.6    -60        230
    --------------------------------------------------------------
    DDH-12    587599.509   1192797.379    343.6    -60        230
    --------------------------------------------------------------
    DDH-13    587158.364   1192964.384    253.6    -60        230
    --------------------------------------------------------------
    DDH-14    587296.055   1193552.637    253.6    -60        233
    --------------------------------------------------------------
    DDH-15     587080.19   1193356.671    253.6    -60        230
    --------------------------------------------------------------
    DDH-16    587097.511   1192918.047    253.6    -60        230
    --------------------------------------------------------------
    DDH-17    587265.633   1193102.867    253.6    -60        230
    --------------------------------------------------------------
    DDH-18     587646.41   1193719.779    253.6    -60        236
    --------------------------------------------------------------
    DDH-19    587770.567   1193600.748    253.6    -60         84
    --------------------------------------------------------------
    DDH-19A   589707.385   1195003.413    253.6    -60        233
    --------------------------------------------------------------
    DDH-20    589711.129   1194996.846    253.6    -60        263
    --------------------------------------------------------------
    DDH-21    589704.925   1194993.448    253.6    -60        275
    --------------------------------------------------------------
    DDH-22    589703.126   1194988.532    253.6    -60        239
    --------------------------------------------------------------
    DDH-23    589698.431   1194989.363    253.6    -60        230
    --------------------------------------------------------------
    DDH-24    589693.332   1194990.025    253.6    -60        239
    --------------------------------------------------------------
    DDH-25    589698.954   1194994.415    253.6    -60        233
    --------------------------------------------------------------
    DDH-26        587286       1193273    253.6    -60        239
    --------------------------------------------------------------
    DDH-27     589702.55   1195004.198    253.6    -60        252
    --------------------------------------------------------------
    DDH-28    589708.274   1195008.205    253.6    -60        230
    --------------------------------------------------------------
    DDH-29    587331.307   1192842.889    343.6    -60        260
    --------------------------------------------------------------
    DDH-30    589543.913   1195048.097    343.6    -60        239
    --------------------------------------------------------------
    DDH-31    589545.068   1195050.336    343.6    -60        230
    --------------------------------------------------------------
    DDH-32    589543.477   1195047.317    343.6    -60        230
    --------------------------------------------------------------
    DDH-33    589544.473    1195049.33    253.6    -60        245
    --------------------------------------------------------------
    DDH-34    589546.046   1195052.183    253.6    -60        248
    --------------------------------------------------------------
    DDH-35    589535.418   1195044.212    253.6    -60        269
    --------------------------------------------------------------
    DDH-36    589536.445   1195045.967    253.6    -60        227
    --------------------------------------------------------------
    DDH-37     589532.16   1195048.794    253.6    -60        290
    --------------------------------------------------------------
    DDH-38    589537.519   1195047.741    253.6    -60        236
    --------------------------------------------------------------
    DDH-39    589533.234   1195050.568    343.6    -60        487
    --------------------------------------------------------------
    

All diamond drill core are logged by IAMGOLD geologists prior to being cut in half for sample preparation. Samples are prepared at a sample laboratory established by SGS on the Kalana mine site. All samples are then fire assayed at the mine laboratory that is operated by SGS. To date 5,000 metres of diamond drill core has been logged and 3,600 metres prepared for assaying. Results have been received for 2,851 metres of core.

QAQC procedures are in place with blank and standards inserted into the sampling process stream. Assay results are monitored closely for tolerance and re-assayed immediately if not within established limits. Sample pulps from D-6 were re-assayed at two other independent laboratories in addition to the SGS laboratory at Kalana to provide confidence in the assaying results.

Additional assay results and interpretation should be available by the end of the third quarter. The assay methodology is being reviewed to assess the most effective method to evaluate the "nuggetty" impact on results. To date all samples have been fire assayed. It is planned to conduct screen fire assays over select intervals of drill core when mineralization and alteration is observed. The screen fire assays may show higher grades in the coarser fraction as has been the mine experience. A total of 200 screen fire assays of diamond drill samples have been completed.

See attached Plan No. 4 showing the diamond drill and RC drill collars overlaying the Kalana Mine workings.

RC DRILLING

The RC drilling campaign totalling 12,000 metres commenced in May 2009 and is designed to test:

    
    -  Further extentions to the Kalana Mine zone

    -  The Kalanako Prospect located east of Kalana and within the priority
       northern area. Russian drilling delineated a historical non-compliant
       C1 + C2 resource of 600,000 tonnes grading 3.6 g/t within a 400 metres
       by 200 metres zone at Kalanako that has not been fully evaluated. Work
       by IAMGOLD has identified a strongly anomalous trend with a coincident
       geochemical signature and magnetic response over a strike of 3 km and
       a width of almost 1 km (See attached Plan No. 1.).

    -  The Dadjan Prospect supported by both a magnetic and geochemical
       signal. (See attached Plan No. 2.).
    

To View Plan No.'s 1 To 4 Click Here: http://files.newswire.ca/889/AVNEL.pdf

ABOUT THE COMPANY

Avnel is a gold mining producing company operating the Kalana gold mine and is engaged in the exploration of the Kalana Exploitation Permit and Fougadian exploration permit.

Avnel's principal asset is an 80% interest in Société d'Exploitation des Mines d'Or de Kalana ("SOMIKA"). SOMIKA is the holder of a 30 year exploitation permit encompassing 387.4 sq. km. around and to the south of the operating Kalana gold mine in south west Mali. Avnel also holds the Fougadian exploration permit covering an area of 150 sq. km. which lies to the south of the main Kalana exploitation permit.

    
       Technical Information and Qualified Person/Quality Control Notes
    

The mineral resource estimates contained in this news release have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101").

The mineral resource estimates contained in this news release have been based on the 2005 Snowden Technical Report prepared by G.M. Greenway, Principal Resource Geologist, and D.H. Kullmann, Principal Consultant Mining Engineer, of Snowden Mining Industry Consultants (Pty) Ltd. ("Snowden"), each of whom is a "Qualified Person" in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("National Instrument 43-101"). The authors of the 2005 Snowden Technical Report are independent of Avnel within the meaning of National Instrument 43-101.

Information in this release arising subsequent to the date of the 2005 Snowden Technical Report regarding the Kalana Gold Mine and exploration activity is provided by Avnel management under the supervision of Roy Meade (a director of the Company) who is a non-independent "Qualified Person" as such term is defined in National Instrument 43-101. Portions of the information are based on assumptions, qualifications and procedures which are not fully described herein.

    
                         Forward-Looking Information
    

This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts are forward-looking statements. Although Avnel believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Avnel does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

For further information: For further information: Howard Miller, Chief Executive Officer, Phone +44 207 589 9082, Fax +44 207 589 8507, Email: howard@hbmiller.co.uk, www.avnelgold.com; Ari Todd, President, FronTier Consulting, 1 King Street West - Suite 1411, Toronto, Canada, M5H 1A1, Direct 416.800.9156, Mobile 647.999.9734, E-Mail atodd@consultwithfrontier.com, www.frontierconsultingltd.com


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