Avnel Gold Mining Limited (AVK: TSX) announces first quarter 2010 results

Period ended March 31, 2010.

ST. PETER PORT, Guernsey, May 14 /CNW/ -

Results of Operations

Mining Operations

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

                                                            Three months
                                                           ended March 31
                                                          2010        2009
                                                      ----------  ----------
    Tonnes milled....................................     13,753      12,783
    Gold grade      - grams per tonne (g/t)..........        8.4       13.06
    Recovery rate   - %..............................       86.0        86.8
    Gold production - ounces.........................      3,160       4,663

    Cost per tonne milled............................       $228        $285
    Operating cost per ounce of gold
     sold............................................       $782        $722
    Operating cost per ounce of gold
     produced........................................       $980        $782

Gold production of 3,160 ounces in the first three months of 2010 was 15% above plan and 32% lower than the production in the first quarter of 2009. The higher gold production than plan was due to higher mill throughput (22%) and lower head grade (8%).

Tonnes milled in the first quarter of 2010 were 8% higher than production achieved in the corresponding period of 2009.

The gold grade of ore milled in the first quarter of 2010 was 38% lower than that obtained in the first quarter of 2009. The grade was 8% lower than the planned grade (9.2g/t) as a higher than planned percentage of ore came from development. Gold recovery of 86.0% in the first quarter of 2010 was higher than plan (83%).

Development advanced 317 metres in the first quarter of 2010 compared to the planned 201 metres and 196 metres in the first quarter of 2009. Development east on Vein 17 confirmed the potential extension east of the main fault.

Based on development results and three surface diamond drill holes, it appears Vein 17 may extend below the anticipated mining elevation. To access Vein 17 on 180m level, haulage was advanced 42m east from the north haulage. This haulage will intersect Vein 17 and ore development will open up this potential mining block. The total development is 220m (ore and waste) and is scheduled to be completed in September. The potential block will probably enable mining to continue to March 2011.

Mine operating expenses for the three months ended March 31, 2010 amounted to $3,818,000, compared with $5,180,000 in the first quarter of 2009, a reduction of 26%.

Cash operating costs of $228 per tonne milled in the first quarter of 2010 were 20% lower than the cost per tonne in the corresponding period of 2009. This is due to lower operating costs as employee numbers reduced and higher ore tonnes milled, resulting in higher productivity. Cash operating costs per ounce sold of $782 per ounce of gold sold in the first quarter of 2010 increased from $722 per ounce in the same period for 2009. The main factor increasing the costs per ounce of gold sold is the decrease in grade.

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

                                                            Three months
                                                           ended March 31
                                                          2010        2009
                                                      ----------  ----------
    Total Revenue....................................      3,582       6,484
    Total Expenses...................................      4,885       8,092
    Net Loss.........................................     (2,401)     (3,091)
    Loss per share...................................     ($0.03)     ($0.04)
    Weighted average shares outstanding.............. 81,792,909  75,844,572

    Balance Sheet                                       March 31,   March 31,
                                                        ---------   ---------
                                                            2010        2009
                                                           ------      ------
    Working Capital..................................    (14,446)     (1,929)
    Total Assets.....................................     23,187      29,598
    Long Term Debt...................................          -      10,941
    Shareholders' Equity.............................      2,906       9,723

Revenue has decreased to $3,582,000 in the first quarter of 2010 from $6,484,000 in the same quarter of 2009. Gold sales of 3,203 ounces decreased in the first quarter of 2010 compared to 6,895 ounces sold in the first quarter of 2009. Average sales price increased from $939 per ounce in the first quarter of 2009 to $1,116 per ounce in the first quarter of 2010. Spot prices increased 23% from the first quarter of 2009, but that quarter also included 4,000ozs at a hedged price at $960 per ounce.

Avnel recorded net loss of $2,401,000 ($0.03 per share) for the three months ended March 31, 2010 compared to a net loss of $3,091,000 ($0.04 per share) in the first quarter of 2009. Revenue has decreased by 45% and costs have decreased by 40% in the first quarter 2010 compared to the first quarter of 2009.

As compared to the balance sheet as at December 31, 2009, Avnel's cash and cash equivalents as at March 31, 2010 decreased by $976,000. The decrease comprised of the net of cash used by operating activities of $811,000, cash utilised on capital equipment of $51,000 and repayment of overdrafts $114,000.

The working capital deficit has increased from a deficit of $12,779,000 at December 31, 2009 to a deficit of $14,446,000 at March 31, 2010. This was largely due to reduced inventories and the losses in the first quarter of 2010.

Total assets decreased from $25,530,000 as at December 31, 2009 to $23,187,000 at the end of March 2010. The largest contributing factor to the decrease in total assets was the depreciation charge and reduced inventories.

Shareholders' equity decreased to $2,906,000 at March 31, 2010 from $5,139,000 at the end of 2009. This decrease is mainly due to the loss of $2,041,000 in the first quarter.



IAMGOLD continued with the exploration program to meet the requirements of the Joint Venture Agreement. During the quarter total expenditure was $745,000.

Diamond drilling

Diamond drilling commenced in February and 6,300 metres was completed at the Kalana Mine by the end of the quarter. The surface drilling was carried out by Boart Longyear using one drill rig. The planned program is 9,000 metres and should be complete in May, thereafter, a 12,000 metre RC drilling program will commence immediately.

The diamond drill holes are located around the existing Kalana Mine. The holes were drilled on the eastern, northern and western boundaries of the mine. Holes are drilled at fifty degrees to an average depth of 250 metres. One hole was drilled to a depth of 480 metres and was located within the existing mining area. The remaining holes will be drilled to the south of the existing mine and will include the Kalana II area.

All core from the diamond drill holes are being logged by geologists prior to being cut in half for sample preparation. Intersections of quartz vein and quartz stockworks have been observed, with visible gold observed in some holes.

Samples are being prepared at the mine in a sample laboratory established by SGS. All samples are then fire assayed at the mine laboratory that is operated by SGS. 1,600 samples have been prepared during February and March. The majority of the samples are from the geochemical sampling of termite mounds (see below). These were given priority as the results will be used to locate the RC holes to be drilled from end May.

Three diamond drill holes 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 fault, Two diamond drill holes intersected possible extensions of Vein 18 and Vein 18C west of the current mining blocks.

Assay results and interpretation should be available by the end of the second quarter. The assay methodology is being reviewed to assess the most effective method to evaluate the "nugget" impact on results. It is planned to conduct screen fire assays where good mineralisation is seen in the drill cores. To date all samples have been fire assayed. The screen fire assays may show higher grades in the coarser fraction as has been the mine experience.

Geochemical Sampling of Termite Mounds

It is planned to collect samples of termite mounds over the total Permit. During the first quarter 5,907 samples were collected in the northern area near the Kalana Mine. The sample density is one per hectare. The sampling will continue in the second quarter in the southern area of the Permit. The density of samples will be one per 2 hectares.

Reogolith mapping and recording of orphilage workings are conducted at the same time as sampling of termite mounds. This is utilised to assist in prioritisation of future drill targets

All samples will be prepared and assayed by SGS at the Kalana Mine Site as reported above.

Underground Sampling

During 2009 3,753 underground samples were collected from the workings in the mine. Samples were collected from the main haulages and crosscuts to access the major quartz veins that have been mined. The assay results were received in the first quarter. The average grade was 2.17g/t. 25% of the assays are above 0.7g/t with an average value of 8.5g/t. The results are being interpreted using assay results and underground mapping of the tunnels.


Interpretation of the airborne geophysics program in 2009 is complete. The results confirm the known major structures on the Permit.

At the Kalanako prospect, where drilling occurred in the 1980's, the magnetic anomaly indicates that the north-west trending zone between two structures may be wider than currently understood. This will be tested by RC drilling during 2010.

The survey also identified an anomaly associated with artisanal workings at Dadjan, a few kilometres south of Kalana. This may be tested by RC drilling during 2010.

Additional information is available in the MD&A for the quarter ended March 31, 2010 which is available on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and the Company's 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

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Avnel Gold Mining Ltd.

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