Avnel Gold Mining Limited (AVK: TSX) announces 2009 annual results

Period ended December 31, 2009.

ST. PETER PORT, Guernsey, March 30 /CNW/ -

Results of Operations

Revenue has increased to $20,420,000 in 2009 from $17,800,000 in 2008. This is as a result of an increase in average sales price of gold from $905 per ounce in 2008 to $976 per ounce in 2009, and a slight increase in gold ounces sold from 19,614 ounces in 2008 to 19,853 ounces in 2009.

Avnel recorded a net loss of $7,895,000 ($0.10 per share) for the year ended December 31, 2009 compared to a net loss of $3,457,000 ($0.05 per share) in 2008. Higher depreciation costs was the main contributing factor to the increase in the net loss in 2009 compared to 2008, resulting from the significant reduction of proved and probable reserves of 52,000ozs as at January 1, 2009 compared to reserves of 341,000ozs as at January 1, 2008.

As compared to the balance sheet as at December 31, 2008, Avnel's cash and cash equivalents as at December 31, 2009 increased by $1,750,000. Operating activities generated a positive cash flow of $2,489,000 with capital expenditure of $904,000.

There was a working capital deficiency of $12,779,000 as at December 31, 2009 compared to working capital deficiency of $639,000 as at December 31, 2008, with the main factor being that the convertible loan became a current liability being due 30 June, 2010.

Total assets decreased from $31,843,000 as at December 31, 2008 to $25,530,000 at the end of 2009 as the net value of property, plant and equipment decreased by $6,249,000.

At December 31, 2008 and December 31, 2009 shareholder loans (as defined below) were $10,941,000. Short term debt increased by $11,106,000 mainly resulting from shareholder loans of $10,941,000 moving from long term debt to short term debt. Shareholders' equity decreased to $5,139,000 as at December 31, 2009 from $12,665,000 at the end of 2008. The biggest contributing factor was the increase in losses in 2009. Additional Paid in Capital increased by $342,000 due to shares issued as payment of interest on the shareholder loans. The retained deficit increased by $7,895,000 as a result of the net loss made in 2009.

Mining Operations

The following table shows the production from the Kalana Gold Mine:

    
                                                              2009     2008
                                                            -------- --------
    Tonnes milled:
    Underground ore                                          49,348   48,232
    Coarse sand reclaimed                                         -        -
                                                            -----------------
    Total                                                    49,348   48,232
                                                            -----------------
                                                            -----------------

    Gold grade - grams per tonne (g/t):
    Underground ore                                            12.1     15.7
    Coarse sand reclaimed                                         -        -
                                                            -----------------
    Total                                                      12.1     15.7
                                                            -----------------
                                                            -----------------

    Recovery rate - %                                          86.6     88.0
    Gold production - ounces                                 16,677   21,047

    Cost per tonne milled                                      $279     $227
    Operating cost per ounce of gold sold                      $788     $653
    Operating cost per ounce of gold produced                  $826     $513
    

Tonnes milled in 2009 were 2% higher than the production achieved in 2008. Gold production at 16,677 ounces in 2009 was 21% lower than 2008 reflecting lower head grade not offsetting higher tonnes milled.

Underground mining production increased 2% in 2009 as additional mining faces were made available on 150m and 180m levels.

The gold grade of underground ore mined of 12.1 g/t in 2009 was 23% lower than 15.7g/t obtained in 2008. The gold grade decreased as mining moved into lower grade reserve blocks.

Gold recovery in 2009 decreased to 86.6% from 88% as the head grade decreased.

Tonnes milled and gold produced was lower due to the flooding of the 180m level on May 21, 2009 resulting in the underground ore production stopping. Underground production resumed on June 6, 2009. It is estimated that the production loss was 2,300 tonnes and 700 ounces during the shutdown.

Mine development totalled 651 metres in 2009 compared to 1,689 metres in 2008. Ore development increased to 472 metres in 2009 from 440 metres in 2008 as new ore reserve blocks were opened up on 150m and 180m level.

Ore development was focused on opening up mine reserves at Veins 1, 17, 18, and 18C. As reported previously, disappointing grades on Vein 1 and Vein 18C led to development stopping on these veins. In the fourth quarter, mine development east of a major fault exposed Vein 17 approximately nine metres below the Vein 17 elevation west of the fault. The current geological model based on limited boreholes did not show this vein extending east of the fault. On 180m level, the mine initiated exploration development of three veins (19C, 20C and 21C). The grade of these narrow quartz veins is 7.0g/t based on the development to date. The potential of veins 19C and 21C is limited but Vein 20C will be developed down dip below the 180m level.

Based on the diamond drill results in quarter 1, it was decided to stop underground diamond drill operations. The target areas lie below the existing infrastructure at No 2 Shaft and it was not considered appropriate to continue with this program. The drill holes were targeting Vein 19 and 19A between the 180m level and the 220m level. The results show that the veins contain good grades over several narrow channel widths. When the mineralised zone is combined as a number of narrow quartz veins within the metasediments, the mineralised package extends over several metres but at lower grades. This mineralisation is not suitable for narrow vein mining with only gravity recovery as currently practised at Kalana but will be suitable for a mass mining method with a larger gold plant which is designed to recover all gold, not just free milling gravity gold.

Operating cost of sales for the year ended December 31, 2009 amounted to $16,658,000 compared with $13,349,000 in 2008. The main reason for the 22% increase was due to the stock cost of gold bullion held at 31 December 2008 being sold in 2009. Cash operating cost of $279 per tonne milled in 2009 was 23% higher than the cost per tonne in 2008 of $227 per tonne. Cash operating cost per ounce sold of $788 per ounce in 2009 increased from $653 per ounce in 2008 due to higher operating costs.

2009 Classified Mineral Reserve Estimates from the Company

The Company has classified the mineral reserves in two areas. The first is the reserves that can be mined from the existing infrastructure down to the 180m elevation. The second area is the reserves that can be mined from the mineral resources between the 180m and 300m elevations. In December 2008 the company excluded these reserves from the mineral reserve statement on the basis of a change in strategy to implement the Kalana Main Project. These mineral reserves may still be mined as previously planned in the 2005 feasibility study and the Company has decided to include the mineral reserves between 180m and 300m elevation in the December 2009 Reserve Estimates.

As described in this MD&A, the Company has decided to optimize the potential of the Kalana Gold Mine by further exploration drilling that may lead to a large, bulk mining operation. Underground development and diamond drilling has shown that gold mineralization occurs outside of the narrow, high grade quartz veins that make up the majority of the underground mineral resources as defined in 2004 by Snowden as described in the 2005 Snowden Technical Report. The Kalana Main Project seeks to evaluate this potential to increase mineral resources to enhance the economics of the Kalana Gold Mine. On completion of this program, the existing mineral reserves between 180m and 300m elevation may be exploited as originally planned by deepening No. 1 Shaft or by a bulk mining method. The classified mineral reserves for proved and probable reserves as of December 2009 for underground mineralization, as prepared by the Company, is summarized in the table below and are presented in accordance with the standards prescribed in National Instrument 43-101 and were prepared under the supervision of Roy Meade, an Executive Director of the Company, and a "Qualified Person" as defined in National Instrument 43-101.

    
         Kalana Gold Mine Classified Reserve Estimate - December 2009

                                              Contained       %     Recovered
    Category              Tonnes     Grade       Ozs      Recovery     Ozs

    Existing
     Infrastructure
    Proven-underground     7,000       12.8      3,000         86      2,000
    Probable-underground  17,000       10.4      6,000         86      5,000
    Sub Total             24,000       11.2      9,000         86      7,000

    180-300m elevation
    Probable             395,000       14.5    184,000         86    158,000

    Total                419,000       14.3    193,000         86    165,000
    

The differences from the 2005 Snowden Technical Report estimate of the Kalana Gold Mine Total Reserve compared to the above are mainly due to depletion of reserves by mining.

Exploration

SOMIKA

In August 2009 Avnel and IAMGOLD entered into the IAMGOLD Joint Venture. Based on the agreement, IAMGOLD commenced an exploration program in August, 2009. The work was carried out by IAMGOLD on behalf of SOMIKA.

An airborne geophysics study was completed in the fourth quarter. The study covered the total SOMIKA Permit.

The study generated new information on magnetic, radiometric and topographic data. The study will improve the quality of previous surveys as the line spacing (50 meters) and height flown (25 meters) is superior to previous work. The interpretation of the results is ongoing.

The termite mound sampling and regolith mapping is ongoing with a Malian contractor. A cumulative total of 3,354 samples have been taken between December 2009 and January 2010 and 32 sq.km have been mapped. Half of the northern part of the permit is finished, including the Kalana mine and Kalanako areas. Digitalization of maps is ongoing. Assay results are expected in 2010.

Underground grab sampling totaling 3,953 samples from accessible adits on 75m, 100m, 150m, 160m and 180m level were collected with initial assay results promising. The underground grab sampling was compiled on a geosoft project. Mapping is coherent between levels and displays a strong sulfide mineralization all through the mine. Nevertheless strong differences between the northern (epidote-chlorite poor) and the southern (epidote-chlorite bearing = deuteritization) part of the mine occur in relation with the diorite emplacement (central part of the mine). The most northern part of 100m level displays epidote-chlorite rich alteration which supposes a new magmatic intrusion north of the underground mine. The entire mine displays a strong sulfide mineralization between the main quartz lode.

Fougadian Exploration Permit

On October 17, 2006, Avnel was awarded the Fougadian Exploration Permit which lies south of the Kalana Permit. The Fougadian Exploration Permit covers an area of 150 square kilometres including a portion of the Niessoumala exploration area. The permit was awarded in accordance with the 1999 Mining Code and a foundation agreement (the "Foundation Agreement") was signed between Avnel Mali, a 100% wholly-owned subsidiary of Avnel, and the Government of the Republic of Mali. Avnel has a 90% indirect interest and the Malian State holds a 10% in the Fougadian Exploration Permit, provided a decision is made to construct a mine. The Foundation Agreement provides for the exploration and exploitation of Group 2 minerals as defined in the 1999 Mineral Code. Group 2 minerals include gold and silver, and base metals, but exclude precious stones, semi-precious stones and fossils.

Avnel applied for a renewal of the Fougadian Exploration Permit and this was granted in March 2010. Avnel has specified a new area of 75 sq. km as required by the Malian Code. This area lies in the northern half of the original permit and includes the largest anomaly Avnel 1. The renewal is for 3 years and Avnel has committed to expenditures of $1.9 million over this period.

The Annual Financial Statements and Annual Information Form are available on Sedar (www.sedar.com) and the Avnel Gold website (www.avnelgold.com).

Caution Regarding Forward Looking Statements:

Statements regarding the corporation's plans with respect to the Kalana Mine and exploration of the Kalana Permit are forward-looking statements. There can be no assurance that the planned ongoing development of the Kalana Gold Mine will be completed as forecast or that the exploration program on the Kalana Permit will identify minerals resources.

The TSX has neither approved nor disapproved the form or content of this information release.

SOURCE Avnel Gold Mining Ltd.

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, Website: www.avnelgold.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890