Avnel Gold Mining Limited (AVK: TSX) announces 2012 annual results

Period ended December 31, 2012.

ST. PETER PORT, Guernsey, March 27, 2013 /CNW/ - Avnel's strategic objective, through SOMIKA, is to commercially exploit underground reserves at the Kalana Gold Mine, whilst exploring for commercially viable opportunities for the exploitation of a bulk mineable deposit.

Avnel entered into an agreement (the "Option Agreement") with IAMGOLD Corporation ("IAMGOLD") on August 10, 2009 pursuant to which IAMGOLD had the right to earn a 51% interest in Avnel's interest in the Kalana Permit by spending $11 million over a three year period and making two payments to Avnel of $1 million each on August 10, 2009 and August 10, 2010.  The IAMGOLD work programme focussed primarily on the evaluation of the Kalana Mine and its environs to examine the potential for a large scale, bulk mineable resource. The Option Agreement automatically lapsed on March 1, 2013 as IAMGOLD was unable to produce a Resource Study as defined in the Option Agreement under the timescale allowed.

IAMGOLD has spent approximately $32.0m on the Kalana Main Project between the period of mid August 2009 to February 28, 2013. IAMGOLD interrupted their work following the military coup d'etat in Mali in March 2012 and  were unable to complete its 2012 work program, although it was able to complete a small proportion of that work program as reported below.

Avnel has not received a reserve model from IAMGOLD but did receive a presentation in December 2012 summarising its findings.

As noted under resource study below, Avnel mandated Roscoe Postle Associates, Toronto, in March and August 2012 to analyse the large extensive data base arising from the IAMGOLD exploration programs and prepare a resource model for Avnel. The model is well advanced and it is expected that National Instrument 43-101 compliant resource study will be issued shortly and filed.

Resource Study

Historically, diamond drilling at the Kalana Mine has underestimated the grades of the mineralised packages actually mined.  This under evaluation is common to high grade quartz vein mines where the nugget effect is significant. Recent underground development by Avnel of Vein 20 has again shown that drill hole results underestimate gold grades mined.  As part of the resource study it is planned to study the nugget effect at the Kalana Mine using historic data and assess what additional methodology can be applied to the sample and assaying protocols.

Metallurgical test work has commenced with 7 samples from two RC holes and underground samples (weighing 50-70kgs per sample) sent to Lakefield Laboratories in Canada. Results show that gold recovery of 95% plus can be achieved with normal industry cyanide consumption and leach time. IAMGOLD have reported that the seven 2011 Kalana 50 kg met test samples mostly showed a significantly higher grade than the 50 gram fire assay.

Avnel continues to operate the underground mine exploiting quartz veins by narrow stope mining and gravity gold recovery. This continues to produce data that is helpful to evaluate the nugget effect.  In addition Avnel excavated exploration raises (including twinning diamond drill holes) and drifts (a total of 615 metres completed in 2011 and 345 metres in 2012) for and at IAMGOLD's expense. Samples from these raises were collected and sent to SGS laboratory for fire assay. Results are now being received and analysed.

IAMGOLD has not issued a NI 43-101 compliant Mineral Resource Study to Avnel. Avnel has been closely working with its consultants, Roscoe Postle Associates, in analysing the database arising from the extensive exploration program conducted by IAMGOLD and intends to make a detailed technical announcement of that work in the near future.

At December 31, 2012 some 23% of assays of the IAMGOLD drilling had not been received, although most of this backlog was received during March 2013. The process of the transfer of the database accumulated by IAMGOLD during its exploration is anticipated to be completed by the end of April 2013 and will include raw data, interpreted data, reports and alike.




2012 Exploration

The report below is an update for the work programme on its 80% owned 387.4 km2 Kalana exploitation permit in Mali conducted by IAMGOLD Corporation ("IAMGOLD") as operator of the exploration joint venture under the Option Agreement.

  • 158,000 metres of diamond and RC drilling has been completed in 2010, 2011 and 2012. During the fourth quarter 2012 work program, 16,353 metres of RC drilling and 4,644 metres of diamond drilling were completed.
Location/Drill hole type   2010 2011 2012 Project Total
Kalana Diamond drilling Metres 12,361 22,908 14,841 50,110
Kalana RC drilling Metres 10,040 23,942 43,238 77,220
Kalanako Diamond drilling Metres 0 7,402 0 7,402
Kalanako RC drilling Metres 12,076 3,474 4,244 19,794
Djirila RC drilling Metres 0 0 2,535 2,535
Kalana/Kalanako auger drilling Metres     3,945 3,945
TOTAL Metres 34,477 57,726 68,803 161,006
Expenditure US$ 6,600,000 12,900,000 11,100,000 30,600,000
  • All drill hole assay results for 2010 and 2011 drill campaigns have been received. 77% of assays have been received from the 68,000 metres drilled in 2012.
  • The main objective in 2012 was to complete fences of drill holes on a nominal 50m by 25m across the Kalana 1 North domain, Kalana 1 South domain and Kalana II domain to enable geological cross sections to be generated and a resource study to be completed. This drilling was completed during the fourth quarter of 2012.
  • IAMGOLD notified Avnel Gold that it was unable to meet the requirements of the joint venture and the Option Agreement automatically lapsed on March 1, 2013.
  • IAMGOLD have not delivered a technical report and resource study.

Results to December 31, 2012

Avnel issued press releases on its Kalana exploration project on January 31, 2011, February 22, 2011, May 26, 2011 October 11, 2011, March 12, 2012, May 15, 2012 and August 14, 2012.  Assay results and drill collar co-ordinates are reported in these press releases posted on Avnel's website www.avnelgold.com.  Assay results and drill collar coordinates for results received since August 2012 are now posted on Avnel's website.

The Kalana mine area is geologically defined by three structural domains based on the dip and strike of the quartz veins. These domains are known as Kalana I North, Kalana I South and Kalana II all located in the immediate vicinity of the current mine operations. Within these domains, the predominant strike and direction of quartz vein packages varies.  In Kalana 1 North veins are dipping predominately south. In the Kalana I South domain the predominant dip direction is east and can be projected south east into Kalana II.


Assay results from fifty seven diamond drill holes and sixty nine RC holes reported show that a mineralised zone, running 400m north of No 2 Shaft and extending over an east west strike of 230 metres, has significant mineralised packages with potential for bulk mining to at least 150 metres below surface.

Kalana 1 North has been drilled systematically over six north-south sections and three east-west sections.  Fifty seven diamond drill holes have intersected mineralised zones of varying width and grade.  Forty eight holes were drilled at a sixty degree angle from south to north at fifty metres between drill hole collars to intersect the predominantly north-south plunging vein structures.  Nine diamond drill holes were drilled at sixty degree angle from east to west at approximately 100m between drill hole collars.  The surface area covered by the drill sections is 278m (east-west) by 400m (north-south).

A RC drilling campaign commenced in the March 2012 to infill between the diamond drill holes to a programmed hole depth of 150m to 200m. Due to the suspension of drilling in late March the program was delayed. Drilling of approximately 8,000 metres commenced in late June and is now completed. This has provided information from drill holes spaced 25 metres apart along the north-south drill lines that are approximately spaced at 50 metres apart.
Assay results have been received for fifty seven diamond drill holes and sixty nine RC holes. Assay results are available at www.avnelgold.com.

Geological modeling was completed by IAMGOLD by end 2012. In the major mineralised zones, new results confirm the continuity of the mineralised packages identified by previous drilling and underground mining. The main mineralised packages are associated with main veins such as Vein 17, Vein 20, Vein 14, Vein15, Vein 18 and Vein 18C. The Vein 17 mineralised package is generally the thickest with good grades.

Underground development and previous drilling have shown that there is potential for long intersections of lower grade mineralisation in the far north of the Kalana 1 North Domain. This zone lies between 300m and 400m north of No 2 shaft. This zone will possibly be part of the northern extremity of an open pit and could provide lower grade ore to the plant as part of the stripping of the pit. The mineralisation is associated with the major quartz veins that plunge from near surface to the south and have been mined underground down to 230m below surface. Between the major veins, vertical veinlets exist that contain gold usually associated with quartz veins. The geological interpretation of the formation of this mineralised zone is being reviewed and requires additional drill holes from east to west to finalise interpretation.

The zone lies between drill lines W475 and W310 (165m) and has an average north-south length of 50m. The zone extends down to at least 150m below surface. This interpretation is based on a drill hole density of 50m by 25m.

Long composites on Drill Section W310 West include 52m at 1.23g/t (RC405), 56m at 1.29g/t (RC441), and 36m at 0.8g/t (RC440).
Long composites on Drill Section W360 West include 20m at 0.99g/t and 20m at 0.65 (RC411), 17m at 2.24g/t and 25m at 0.57g/t
Long composites on Drill Section W475 west include 20m at 3.65, 11m at 1.68g/t, 15m at 1.93g/t, and 12m at 2.21g/t (all RC425); 26m at 1.24g/t, 10m at 4.33g/t, 9m at 1.14g/t, 10m at 1.49g/t and 12m at 1.35g/t (all RC251).

The recent drill holes completed in Kalana 1 North included holes drilled from east to west at an inclination of sixty degrees. The results show the extension of Vein 10 from the Kalana South domain to 215m north of No 1 shaft.

Below 150m from surface, mineralised packages have been identified by the 2010/2011 diamond drill program. One of these packages, Vein 20, is currently being mined with grades in excess of 10g/t over a 1m width. The diamond drill holes continue to intersect a number of veins within the package. This mined area was intersected by DD043, DD057, DD060 and DD044. The grades reported from these holes are significantly lower than those now being mined.


The diamond drill and RC assay results continue to demonstrate the potential for an open pit in the Kalana 1 South domain, running east-west over 600m and with a north-south strike varying between 250m to 400m, to a depth of 120m.

The main mineralized zones strike approximately north-south and dip from west to east at approximately twenty five degrees.  Some of these zones extend north into the Kalana 1 North domain.

Kalana 1 South has been drilled systematically over eleven east-west sections and six north-south sections. The surface area covered by the drill sections is 540m (east-west) by 530m (north-south).  These drill sections are spaced at 50 metres. Sixty six diamond drill holes and one hundred and twenty eight RC drill holes have intersected mineralised zones of varying thicknesses and grade. The drill density is 50m by 25m down to a depth of 100m where most RC drill holes ended. The diamond drill holes continue to a greater depth and provide data at a wider spaced drill hole collar position.

Assay results have been received for sixty six diamond drill holes and one hundred and twenty eight RC drill holes. Recent assay results are shown on the Avnel Gold website www.avanelgold.com.

Diamond and RC drill hole results from the 2010, 2011 and 2012 drill campaigns have shown a number of mineralised zones associated with major quartz veins (1, 3, 10, 20C and Savane).  Between these major mineralised zones the model shows other mineralised zones.  The recent RC drill assay results have provided additional data that was modeled by IAMGOLD.  Assay results include high grades that would be expected as Veins 1 and 3 have been mined underground between 2004 and 2007. The average mined grade of Vein 1 was in excess of 20g/t over 1.8m mining width.  Seven diamond drill holes were drilled to test the extension of the Vein 1 mineralised package to surface from 85m elevation in the saprolite.  The recent assay results confirm the extension of Vein 1 in the saprolite above 80m level to surface. Results include 8m at 5.17g/t (DD132), 10m at 3.95g/t (DD126), 9m at 2.6g/t (DD128), 4m at 31.8g/t (DD134), 14m at 2.58g/t (DD143) and 14m at 4.61g/t (RC455).

Recent RC drilling shows that Vein 10 and Vein 3 extend approximately 215m north of the No 1 shaft.


The results confirm the existence of an extensive mineralised zone down to at least 100m below surface over a surface area of 350m by 150m. 

Kalana II has been drilled over four east-west sections and eight north-south sections. The surface area covered by the drill sections is 350m (east-west) by 400m (north-south). Seventeen diamond drill holes and one hundred and sixty RC drill holes have intersected mineralised zones of varying width and grade

Assay results have been received for all drill holes except those drilled in December 2012.  Assay results have been previously reported and are shown on the Avnel Gold website at www.avnelgold.com.

During the fourth quarter RC drilling was mainly focused at Kalana II. Assay results have been received from some of these holes with encouraging composites. The better results include:

RC475: 10m at 1.74g/t from 133m and 7m at 2.36g/t from 152m
RC476: 26m at 8.58g/t from 135m (including 1m at 70g/t and 1m at 55.5g/t) and 21m at 1.64g/t from 196m
DD146: 5m at 1.97 from 109m
RC458: 16m at 0.86g/t from 117m
RC459: 3m at 3.11g/t from 19m
RC459A: 2m at 16.98g/t from 19m, 1m at 7.71g/t from 47m, 3m at 7.28g/t from 54m, 1m at 23.2g/t from 66m, 2m at 7.56g/t from 110m
RC460: 4m at 1.44g/t from 9m, 3m at 1.89m from 19m and  6m at 1.54g/t from 83m
RC465: 6m at 5.03g/t from 36m, 14m at 1.54g/t from 54m and 15m at 1.09g/t from 187m
RC466: 4m at 1.74g/t from 1m, 5m at 2.11g/t from 108m and 4m at 3.65g/t from 165m
RC467: 3m at 2.18g/t from 25m, 4m at 1.76g/t from 35m and 3m at 2.28g/t from 78m
RC479: 12m at 0.54g/t from 25m and 16m at 1.5g/t from 80m
RC480: 5m at 1.14g/t from 186m and 2m at 60g/t from 221 (includes 1m at 120g/t)
RC481: 16m at1.01g/t from 55m
RC482A: 14m at 4.64g/t from 54m
RC483A: 9m at 3.38g/t from 14m

Geological interpretation and modelling is in progress.  Preliminary interpretation indicates the presence of two mineralised packages (named Savana and Superette) dipping from surface to the east. Gold mineralisation exists outside these two packages but has still to be fully modelled but is located along the boundary of the east -west diorite. This mineralized zone around the diorite contact covers an area of 150m by 350m.

The recent RC drilling in 2012 continued to a depth of approximately 200m, deeper than previous drill holes.  There is an indication of mineralisation continuing below 100m and may enable mining to extend down to 150m below surface.

RC 475 and RC 476 were drilled from south to north at an inclination of 55 degrees.  The long composites have intersected the Vein Savane mineralisation that dips from west to east.  It appears there may be some sub vertical gold bearing structures associated with Vein Savane.


Kalanako is located three kilometres north east of Kalana.  Two mineralised trends, with strike lengths of 500m and 250m, have been established from the RC drill assay results. These mineralised zones appear to be steep dipping over a width of less than 10 metres. Closer spaced drill holes will be required to define a mineral resource.

During 2010, 138 RC drill holes, totalling 14,460m were completed at Kalanako. Holes were drilled to an average of 105m hole length at an inclination of 55 degrees. Hole collars were spaced 50m apart.  Assay results have been received and previously reported for 138 holes.  In the fourth quarter of 2011, 3,741 metres of RC drill holes were completed and assay results are reported in the May, 2012 press release. During 2012 thirty seven RC drill holes were completed and all assay results received.  Twenty six diamond drill holes were completed at Kalanako. Holes are drilled from east to west at an inclination of sixty degrees. Diamond drill assay results have been received for all twenty six holes.  Recent results are reported at www.avnelgold.com.

The depth of saprolite and saprock is approximately 150 metres, much deeper than that observed at Kalana.  Diamond drilling at Kalanako displays numerous high strain zones (shearing and folding), packets of dense laminated quartz vein with sulfides and locally, highly altered and mineralized felsic intrusives.  Mineralisation is associated with these felsic intrusive rocks that intrude NW-SE striking shear zones.  Diamond drill results to date show generally low grades over narrow widths at the depth.


The Djirila prospect was discovered by Avnel Gold in 2004 and drilling in 2005/2006 identified high grade mineralisation down to a depth of 150 metres. Djirila is located in the south east portion of the SOMIKA permit (see Avnel Gold Press Release dated April 19, 2006).

A RC drill program commenced on April 23 and was suspended on May 2, 2012. A total of 19 drill holes for 2, 535 metres were drilled. Drill samples were transported to the Kalana mine where sample preparation was performed at the SGS sample preparation laboratory.  Assay results have been received and are reported on the Avnel Gold website at www.avnelgold.com.

The RC drill results show the continuation of gold mineralisation in the package delineated by Avnel Gold.  Seven holes were drilled at the southern limit of the mineralisation and generally show lower grades than that reported in the core of the mineralisation reported by Avnel Gold in 2006.
Better results include:

DJ-RC019: 7m at 0.91g/t from 25m, 6m at 1.8g/t from 85m and 9m at 2.25g/t from 80m
DJ-RC014: 5m at 2.49g/t from 65m
DJ-RC013: 6m at 0.85g/t from 0.85m
DJ-RC012: 5m at 1.03g/t from 27m and 3m at 1.35g/t from 53m
DJ-RC010: 8m at 0.97 from 12m, 7m at 0.91g/t from 29m and 3m at 1.47g/t from 47m

These results are from step out drilling on the southern margin of the footprint drilled by Avnel, the results of which were reported on April 19, 2006.


A gradient array IP survey has been carried out over several drill targets identified by geochemistry results.

The 2011 IP survey over Ténintoumanina, Djirila and Kalanako grids is being processed and some initial results have been produced.

During 2012 a ground geophysics survey has been completed on several target areas defined by geochemistry. A total of 337.4 line-km has been completed at Kalanako, Kalana, Djirila and Solomanina. The survey was done by Sagax, a specialist company with extensive experience in West Africa. Preliminary results and interpretations have been received. This will be used for the optimum locating of future drill holes.


The backlog of assays has been reduced due to the reduced drilling rate in the second quarter. All 2010 and 2011 results have been received. Approximately 77% of the assays for 2012 have been received.

IAMGOLD and SGS were planning for the construction of a sample preparation and fire assay laboratory at the Kalana Mine site. The laboratory would be operated and managed under contract by SGS. The laboratory capacity would meet the future requirements for ongoing exploration on both the SOMIKA and Fougadian Permits, and any future mining operation. IAMGOLD planned to install metallurgical laboratory equipment, including Knelson concentrators, to enable on site testing for ongoing evaluation of nugget effect of the Kalana ore. This decision is based on metallurgical test results on Kalana ore in 2012 (see below) and discussions with international expertise in coarse gold deposits. Fire assay laboratory equipment was ordered and deliveries to site started at the end of the third quarter. Orders for laboratory the Knelson concentrators have not been placed until a decision is made on the construction of a laboratory.  The laboratory layout is complete and order for the pre-fabricated building was delayed until a decision is made by IAMGOLD to continue with the exploration.  IAMGOLD has ceased to participate in the IAMGOLD Joint Venture option agreement at Kalana as from February 28, 2013, and it is uncertain if and when the laboratory will be constructed.

Metallurgical Test Work

A total of 50 bulk metallurgical samples were submitted for heavy concentrate analysis by using the Knelson concentrator at the SGS laboratory in Johannesburg. The samples consist of 1m length of 5m composites.

The test program required processing each individual sample through the gravity concentrator and then direct cyanidation of the gravity concentrator tailings.  The main objective of the study was to determine the head grade of the bulk samples by gravity and leaching. It is expected that large samples will be results in a better gold estimation, at a significantly higher process cost. The bulk samples test work cost was $1,000 per 5 m composite sample compared to a cost of less than $30 per 1m for 50g FA.

The RC drill hole samples had previously been assayed using conventional 50g fire assay in Mali. The chip rejects were submitted to SGS in South Africa to compare the results of a bulk sample to a standard 50g fire assay.

IAMGOLD reported initial indications are that the bulk samples analysed in Johannesburg and metallurgical samples previously analysed in Canada display the same behaviour as illustrated by the "Poisson effect" during sub-sampling with the global under-estimation of grade using a classical FA 50g approach.

IAMGOLD reported that 50g fire assay results underestimate grade when the FA grade is 4g/t or higher. In the range 1g/t to 4g/t the FA and the bulk sample assays report similar results.  In the range below 1g/t there appears to be some limited upgrade in bulk sample assays compared to 50g FA results.

SOMIKA observed that the gravity recovery in a 5m composite varied considerably for each 1 metre sample. The higher grade sample generally showed recovery to gravity of 60% plus, whereas the lower grades generally reported 80% plus gold being recovered from the tails.  Gravity recovery over the 50 samples ranged from 8% to 90% plus. This demonstrates that the gold size distribution varies through a 5m mineralised package, with the larger gold particles associated with major quartz veins. This aligns with historic mining experience of 2m stopes and development crosscutting mineralized packages.

Historically grade estimates using drill hole assay results has always significantly underestimated mined grades at Kalana. The mass of sample from a bore hole is normally reduced to a 50g sample for fire assaying.  Using a larger bulk sample will address some of the underestimation of drill hole grades, but at a considerable cost.  An alternative protocol is to use screen metallics assaying methodology of 1 kilogram samples.


Sample protocol entailed the splitting of the core by diamond core saw was carried out by IAMGOLD staff at the Kalana mine site.  Half of the sample is preserved at the Kalana mine site and the other half separated by the metre and dispatched to the SGS analytical facilities in Bamako, a certified assay lab in West Africa.  Each meter sample was dried, crushed, pulverized to 85% passing 75 micron, and then split using a cone splitter. Approximately 200 grams of the pulverised sample was placed in sealed packets and sent to the SGS assay laboratory in Kayes, Mali.  Samples were analyzed for gold using a 50g fire assay. Rejects are returned to the Kalana Mine site and were stored by IAMGOLD staff.

RC samples are prepared at the Kalana mine site. The cuttings are sampled in one-metre intervals, at a rate of six samples per drill rod. Individual samples are collected at the rig and transported to the mine site for air drying in pans as required (mostly for samples from the lower parts of the RC holes). The samples are weighed at the drill rig.

The dried samples are split in a large riffle to produce a sub-sample of nominal 2.5 kg for subsequent assaying. Chip boards, washed samples for logging, and pan concentrates for the observation of any free gold are also prepared. These activities were carried out by IAMGOLD personnel to industry standards.

The 2.5-kg sub-sample is taken to the SGS preparation laboratory. The sub-sample is weighed by SGS personnel and recorded. The entire sub-sample of nominally 2.5 kg is crushed to 2 mm and pulverized to a nominal 85% passing 75μ. A sub-sample of nominally 200 g is taken from the pulverized material and placed in a Kraft paper bag for transport to the analytical laboratory. Since October 2010 the 200g sub sample has been collected by riffle splitting to avoid possible segregation of heavy gold particles after pulverisation.

As part of the QAQC program, control samples are added. These control samples include standards, blanks and duplicates.

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.   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 was for 3 years and Avnel has committed to expenditures of $1.9 million over this period.  As at December 31, 2012 expenditure totalled US$1.8 million.

The Permit expired in December 2012. Avnel has applied for an extension of one year due to the delay in exploration caused by the military coup in 2012. Avnel is confident this application will be granted and the expenditure will increase to exceed the $1.9 million.

Joint Venture Arrangements Agreement

In 2010, Avnel Gold and IAMGOLD entered into the Joint Venture Arrangements Agreement whereby IAMGOLD has the option to acquire up to an initial 51% interest in Avnel's 90% interest in the Fougadian Exploration Permit as described below.

The Fougadian Exploration Permit held by Avnel previously comprised 150 sq. km. to the south of and abutting the Kalana Exploitation Permit.  Avnel relinquished the southern half of its ground in accordance with the Malian Mining Code and was granted a new exploration licence on the northern half on March 23, 2010.  IAMGOLD applied for an exploration permit in respect of the southern 75 sq. km and this was granted on June 20, 2012.  The combined permits are referred to as the "Fougadian Exploration Permit".

During 2012, IAMGOLD had proposed a $6.5 million budget to follow up the exploration results achieved in 2010/2011. The work program planned RC drilling at the Avnel 1 gold anomaly (now called Maramale) to follow up the targets identified by geochemical sampling of termite mounds and geophysical structures identified by airborne geophysics.

The exploration camp was 95% complete in 2012.

Due to the military coup in Mali, no drilling was possible prior to the rainy season which prevents drilling activity from August to December. A ground geophysics program was completed over the Maramele target by SAGAX. 192 line kilometers were completed and result received. The results confirm the previous interpretation as reported above.

2013 Planned Exploration

Avnel is waiting for a 2013 detailed work program and budget from IAMGOLD.

It is planned to complete an air core drill program to further define the optimum targets within the Maramale anomaly prior to an RC drill program. Work is dependent on the political and security situation in Mali.

Results of Operations
Selected Interim Information
(In thousands of U.S. dollars except per share amounts)

    2012   2011   2010
Total Revenue ...................................................................   16,804   14,654   14,709
Total Expenses ..................................................................   18,420   17,246   16,723
Other Income/ (expense) ....................................................   6,406   (2,285)   (4,789)
Net Profit/(loss) ..................................................................   4,786   (4,879)   (6,803)
Net Profit/ (loss) from continuing operations attributable to
owners of the parent ..........................................................
  7,762   (4,705)   (4,429)
Net Profit/(loss) per share attributable to owners of the
  $0.040   $(0.025)   $(0.038)
Basic weighted average shares outstanding   191,743,724   185,554,007   116,150,355
Balance Sheet             
Working Capital surplus .....................................................   12,226   12,058   3,835
Total Assets .......................................................................   31,051   31,726   25,593
Shareholders' Equity ..........................................................   32,750   24,515   21,677

Results of Operations

Metal revenues increased to $16,804,000 in the year to December 31, 2012 from $14,654,000 in 2011. This was as a result of an increase in gold ounces sold from 9,283 ounces in the year to December 2011 to 10,059 ounces in 2012 and an increase in the realised average sales price of gold from $1,573 per ounce in 2011 to $1,666 per ounce in 2012.

Total expenses increased by 7% from $17,246,000 in 2011 to $18,420,000 arising from increases in labour and explosive costs.  Cash costs for 2012 reduced from $1,297/oz to $1,258/oz mainly as a result of increased production.

Avnel recorded a net profit of $4,786,000 ($0.040 attributable profit per share) for the year ended December 31, 2012 compared to a net loss of $4,879,000 ($0.025 attributable loss per share) in the comparative period in 2011. Included in 2012, is an accounting finance gain on the fair value of derivative financial instruments of $6,318,000, arising from the lapse of warrants without exercise together with a reduction in the Company's share price from last year compared to a loss of $1,647,000 in 2011. These fair value accounting gains/(losses) reported have no cash effect on the Company.

As compared to the balance sheet as at December 31, 2011, Avnel's cash and cash equivalents as at December 31, 2012 decreased by $1,392,000 from $9,371,000 to $7,979,000. This decrease was mainly due to $900,000 of capital expenditure on raising the mine's tailings dam and a new jaw crusher and cone crusher main frame.

There was a working capital surplus of $12,226,000 as at December 31, 2012 compared to working capital surplus of $12,058,000 as at December 31, 2011. The working capital figures reported exclude the other derivative financial liability reported on the Company's balance sheet which has no cash liability to the Company.

Total assets reduced from $31,726,000 as at December 31, 2011 to $31,051,000 at December 31, 2012.

Total stockholders' equity also increased to $32,750,000 as at December 31, 2012 from $24,515,000 at December 31, 2011. The retained deficit reduced by $7,742,000 as a result of the net profit made in the year to December 31, 2012.

Mining Operations

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

  2012   2011
Tonnes milled:      
Underground ore 49,485   47,546
Total 49,485   47,546
Gold grade - grams per tonne (g/t):      
Underground ore 7.3   7.2
Total 7.3   7.2
Recovery rate - % 86.3   84.6
Gold production - ounces 10,090   9,550
Cost per tonne milled - $ per tonne 257   261
Operating cost per ounce of gold sold - $ per ounce 1,284   1,280
Operating cost per ounce of gold produced - $ per ounce 1,259   1,297


Tonnes milled in 2012 were 4% higher than achieved in 2011. Gold production at 10,090 ounces in 2012 was 6% higher than 2011 resulting from the higher tonnes milled together with the higher head grade of 7.3g/t in 2012 compared to 7.2g/t in 2011.

Gold recovery in 2012 increased slightly to 86.3% from 84.6% in 2011 due to higher head grades.

Mine development totalled 1,276 metres in 2012 compared to 1,658 metres in 2011. Ore development increased to 1,134 metres in 2012 compared to 817 metres in 2011. Two new winzes were developed to access Vein 20 and Vein 18D, a new vein identified by exploration drilling.

During 2012, 345 metres were advanced as part of the exploration program for the mine. Diamond drill holes have passed through existing underground galleries. From these galleries the mine is developing raises following the drill hole to provide additional geological and sampling data.


IAMGOLD substantially completed the drill programs at Kalana and Kalanako by the end of 2012.  The objective was to define a minimum resource of 2 million ounces which would entitle IAMGOLD to obtain 51% of the project if it commits to the carrying out of a feasibility study under an agreed work program.  Avnel and IAMGOLD agreed to extend the exploration phase of its joint venture arrangements from August 9, 2012 to December 31, 2012.  This was further extended to February 28, 2013. The Option Agreement automatically lapsed on March 1, 2013 as IAMGOLD was unable to produce a Resource Study as defined in the Option Agreement under the timescale allowed.

Under the terms of the Option Agreement, IAMGOLD's cost receivables will be forfeited and all technical data, studies and other documents relating to the exploration activities not previously shared with Avnel (including financial models) will be so delivered to Avnel at no cost.  Avnel has been closely working with its consultants, Roscoe Postle Associates, in analysing the database arising from the extensive exploration program conducted by IAMGOLD and intends to make a detailed technical announcement of that work in the near future.

Avnel is examining its options to proceed with the work necessary to complete a pre-feasibility study leading to the development of a new bulk mine at Kalana and the ongoing exploration of its 387sq.km Kalana Permit where new gold prospects at Kalanako and Djirila have been identified.

For 2013, Avnel is planning gold production of 8,400 ounces from 46,000 tonnes of ore milled, at an average grade of 6.75g/t. This plan is very sensitive to grade, gold price and costs. The plan assumes that the major ore sources will be Vein 20 and Vein 18D which will be fully developed during the first quarter 2013. Lower grade ore is planned to be mined from Veins 17 and 1 based on the gold price of $1,700 per ounce.  The Company intends to sustain the operation as long as feasible while the exploration program progresses. This is important to reduce the social impact on the community and to cover the costs of underground pumping.  Once underground mining operations are temporarily stopped, the mine will be placed on care and maintenance. The underground water pumping system will remain in operation to prevent flooding of the mine and permit access for future exploration activity.

The mine plans to advance development 713 metres during 2013.  Development will focus on opening up Vein 18D below the 180m level and Vein 20 below the 180m level. Dependent on results, development will continue. Exploration development of 100metres to provide information to support the exploration drilling program is planned on 150m level.

It is forecast that the mineable reserves available from the current mine infrastructure are approximately 64,000 tonnes at 6.8g/t containing 14,000 ounces.  This assumes that ongoing development of Vein 20 and Vein 18D below 180m level will be successful. This will allow mining to average 3,800 tonnes per month to May 2014.

There remains approximately 1,740,000 tonnes containing over 600,000 ounces in underground mineral resources (measured and indicated). In addition the open pit mineral resources (measured, indicated and inferred) contain approximately 400,000 ounces in 3 million tonnes. Underground mining and underground diamond drilling have exposed additional mineralised zones that may contain gold to extract by open pit mining or underground bulk mining.  Avnel believes the optimum method to exploit these mineral resources will require the development of an open pit with a new gold plant. The development of the underground mine between 180m and 300m level will be postponed until this study is completed.  Avnel has revised the mineral reserves of the Kalana Gold Mine in line with the strategic decision to proceed with the Kalana Main Project study which is more fully explained on pages 2 to 3 above.

Current Events in Mali

Following the military coup d'etat on March 21, 2012 developments in Mali are closely monitored by Avnel. Mr. Roy Meade, Executive Director of Operations based at Kalana, reports that mining activities at the mine site are continuing as normal and conditions in the surrounding communities are completely calm.  The road between the Kalana Mine Site and the capital, Bamako, has remained open. The mine, which is operating normally, operates on grid power and there have been no interruptions to electric power supply to date. We are optimistic that the current ongoing operations by the Malian army backed by French and ECOWAS troops will enable elections to be held this year.

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


Avnel is a producing gold mining company operating the Kalana Mine in south-west Mali and is engaged in the exploration of the 30-year Kalana Exploitation Permit encompassing 387.4 sq km around and to the south of the Kalana Mine.

Avnel's principal asset is an 80% interest in Société d'Exploitation des Mines d'Or de Kalana ("SOMIKA") which is the holder of the Kalana Exploitation Permit.  The Kalana Project is situate in south west Mali.  The 387.4 sq km exploitation permit has a NI-43-101 compliant resource of 1,020,000 oz (at an average grade of 10.4 g/t) in the measured and indicated category, and 249,000 oz (at an average grade of 3.4 g/t) in the inferred category.  Avnel also holds the Fougadian Exploration Permit covering an area of 75 sq. km. to the south of the main Kalana Exploitation Permit area and abutting it.

Technical Information and Qualified Person/Quality Control Notes

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:

Howard Miller
Chief Executive Officer
Phone +44 207 589 9082; Fax +44 207 589 8507
UK Mobile : +44 07768 696129
Canadian Mobile : +1 416 726 8174
Email: howard@hbmiller.co.uk

Public Relations Consultant:
Ari Todd 
FronTier Consulting
1 King Street West - Suite 1411
Toronto, Canada
M5H 1A1
Direct   +1 416 800 9156
Mobile  +1 647 999 9734
E-Mail   atodd@consultwithfrontier.com

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