Period ended September 30, 2013.
ST. PETER PORT, Guernsey, Nov. 14, 2013 /CNW/ -
Overview of the Company
Avnel's principal assets are an 80% indirect interest in Société
d'Exploitation des Mines d'Or De Kalana, S.A. ("SOMIKA") and a 100%
indirect interest in the Fougadian Exploration Permit, through its
subsidiary, Avnel Mali SARL. The State of Mali holds the remaining 20%
interest in SOMIKA which owns a long tenure (30 years plus two 10 year
extensions) Exploitation Permit over 387.4 square kilometres located in
South West Mali ("the Kalana Permit").
Avnel operates the small underground Kalana gold mine (the "Kalana Gold
Mine") located in the far northwest of the Kalana Permit extracting
narrow quartz veins and with a gravity only recovery process.
The Kalana Permit was acquired by Avnel in late 2002 following which the
existing plant and infrastructure were upgraded. Mining operations
were resumed by SOMIKA in January 2004 with commercial production
commencing in March 2004.
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
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 did not produce a Resource Study as
defined in the Option Agreement within the timescale allowed.
IAMGOLD spent approximately $32.0 million on the Kalana Main Project
between the periods, mid-August 2009 to February 28, 2013. The costs
incurred by IAMGOLD are represented by loans to the Company's
subsidiary Avnel Gold, Limited which were on lent to SOMIKA. IAMGOLD's
loans to Avnel Gold, Limited are forfeited to Avnel.
Avnel has engaged Dundee Securities Limited as its exclusive financial
advisor in assisting Avnel in exploring all options available to
maximise the value of the Kalana Project and shareholder value.
Kalana Permit Exploration
Avnel has received an extensive geological database after the completion
of 130,000 metres of drill holes at the Kalana Mine that has added
value to the future development of a bulk mineable deposit. At the
Kalanako prospect, IAMGOLD completed 29,500 metres of drilling. At the
Djirila prospect, IAMGOLD completed 2,535 metres of RC drilling.
IAMGOLD reported that 11 gold anomaly targets were identified on the
Kalana Permit (including Kalana itself) that are worthy of additional
Avnel has been working with its consultants Roscoe Postle Associates
("RPA") and Snowden in analysing the database arising from the
exploration program conducted by IAMGOLD. The final drill assay results
(15,340 assays or 12% of the total assays) and the geological logging
were received from IAMGOLD during the first quarter. RPA updated the
data base with the new data and reviewed their geological model. RPA
have recommended that higher grade assays from the 2010-2012 drill
program might benefit from re-assaying by a more exhaustive assay
method. RPA recommend that a screens metallic assay on a 1kg sample be
Avnel has received two geological models, one from RPA and one from
IAMGOLD. The methodology of the two geology model differs and Avnel
will review the models with Snowden Mining Industry Consultants.
IAMGOLD and RPA identified the technical challenge to evaluate grade
associated with the high content of free milling gold (nuggets) in the
Kalana Mine. Historically gold grades from drill holes have under
estimated mined grades at Kalana.
IAMGOLD conducted a limited number of metallurgical tests to address the
under estimation of gold in drill hole samples. The main variable was a
larger sample weight than the standard 50 gram fire assay used for all
assays reported to date.
In 2011 metallurgical test work was carried out with seven composite
samples from two RC holes and underground samples (weighing 50-70 kg
per sample) sent to Lakefield Laboratories in Canada. IAMGOLD have
reported that the seven Kalana 50 kg metallurgical test samples mostly
showed a significantly higher grade than the 50 gram fire assay
In 2012 a total of fifty bulk metallurgical samples (weighing 10-12 kg
per sample) were submitted for heavy concentrate analysis by using the
Knelson concentrator at the SGS laboratory in Johannesburg. IAMGOLD
reported that 50g fire assay results underestimate grade when the Fire
Assay ("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.
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.
Avnel has appointed Snowden to review the sampling procedures utilised
at Kalana deposit which demonstrates a high coarse gold nugget effect.
Snowden completed the study in July 2013 after reviewing all historical
reports and data on the Kalana deposit, and has reported that
alternative assay protocols may be more suitable to optimise the coarse
gold mineralisation present in the Kalana deposit. Dr Simon Dominy,
from Snowden, an expert in this field, has reviewed the nature of the
coarse gold mineralisation at Kalana and concluded the veins bear
dominant coarse gold mineralization, potentially >35% plus 100 micron
based on a liberated gold study and up to 75% based on Screen Fire
Assay ("SFA") results. The IAMGOLD protocols are likely to
underestimate gold grade. Three options were considered for improved
protocols for sample preparation and assay. These included the use of
metallic screen fire assays, Leachwell cyanide extraction method and
laboratory-scale gravity processing of bulk samples. The use of these
protocols will reduce the sampling error inherent in the IAMGOLD sample
The selection of samples for re-assaying commenced in June 2013 and
approximately 20,000 samples (1m sample length) were identified. All
selected samples from the RC drill campaigns have been collected and
selected diamond drill samples will be available in November.
1,500 samples for re-assay were prepared and submitted to SGS laboratory
in Bamako for SFA. The protocol required 1 kilograms of the 2-4
kilogram sample to be screened (106 µm) after pulverisation. The QAQC
assessment showed that there were significant errors in the work and it
was decided to stop SFA at SGS Bamako. SGS and Snowden agreed that,
data on these 1,500 samples are not usable.
In October 1,000 samples were submitted to the Bigs Global laboratory in
Burkina Faso for assaying using the Leachwell cyanide extraction
method. The weight of each sample is approximately 2-4 kilograms. The
protocol requires 2 kilograms of the 2-4 kilogram sample to be split
after crushing; it includes sample preparation for 24 hour leaching
with fire assay of the leach tail. Partial results (fire assaying of
tails is not yet available) indicate that the grade compares favourably
to the assay results reported by IAMGOLD who used the standard 50g Fire
In October 298 samples for re-assay and metallurgical test work were
submitted to the SGS Metals and Mineralogy laboratory in Johannesburg,
South Africa to carry out gravity and cyanidation test work. This is
the same laboratory that conducted test work for IAMGOLD in 2012. The
weight of each sample is 2-4 kilograms. The protocol requires sample
preparation (crushing and milling), batch gravity concentration, and
cyanide leaching of the gravity tails and fire assay on the final
It is expected that the re-assaying of 20,000 selected samples will
continue using the Leachwell method, assuming results from the test
work is satisfactory. If the work proceeds, it is expected that a new
assay database will be complete by March 2014.
Avnel and Snowden have reviewed the two geological models prepared by
IAMGOLD and RPA consultants. The geological model is being updated
using drill hole data that was not available to IAMGOLD in November
2012. Avnel's Group Geology Manager, Dr. Olivier Femenias, is leading
the re-interpretation of the mineralized intercepts having agreed an
appropriate methodology with Snowden. The geological model is scheduled
to be completed in November. Preliminary indications are that the
volume of mineralization will increase compared to the IAMGOLD model,
due to the additional data from 25,000m of drill hole and detailed
interpretation of all aspects of the geological database.
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, with the commencement date December 2009.
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 (Maramele). 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 applied for a two year
extension of the Permit and which was granted in August 2013. The
Permit is for two years and is non-renewable.
Joint Venture Arrangements Agreement Fougadian Permits
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. This Permit is called the Fougadian South and was
granted for 3 years, renewable twice. The combined permits are referred
to as the "Fougadian Exploration Permit".
Following the military coup in Mali in March 2012, IAMGOLD halted the
planned drilling program. A ground geophysics program was completed
over the Avnel 1 (Maramele) target by SAGAX. 192 line kilometers were
completed and results received. The results confirm the previous
IAMGOLD completed 8,836 meters of air core drilling during the quarter
and the samples have been submitted to SGS Mineral Laboratories in
Bamako. Drilling was focused on the Maramale and Zambala targets on the
Fougadian North permit. These two prospects were chosen by IAMGOLD
being the only ones accessible at the beginning of the annual rainy
season. Results have recently been received and are being reviewed.
Field work has been suspended during the annual rainy season. During
the fourth quarter and first quarter 2014 it is planned to complete
15,000m to 20,000m of air core drilling on the Fougadian North and
South permits. The 2013/14 budget is $1 million.
Selected Annual Information
(In thousands of U.S. dollars except per share amounts)
Three months ended Sept 30
Nine months ended Sept 30
Total Revenue .................................................
Total Operating expenses ................................
Other income/(expenses) .................................
Net (loss)/profit .................................................
Net (loss)/profit from continuing operations
attributable to parent
Net (loss)/profit per share attributable to parent
Weighted average shares outstanding
Sept 30, 2013
Sept 30, 2012
Dec 31, 2012
Working capital surplus
Total assets .....................................................
Shareholders' equity ........................................
Results of Operations
Metal revenues reduced to $11,811,000 in the nine months to Sept 30,
2013 from $12,854,000 in the nine months to Sept 30, 2012. This was as
a result of a reduction in the realised average sales price of gold
from $1,655 per ounce in the nine months to Sept 30, 2012 to $1,446 per
ounce in nine months to Sept 30, 2013 being partly offset by increased
gold ounces sold from 7,742 ounces in the nine months to Sept 30, 2012
to 8,147 ounces in the nine months to Sept 30, 2013.
Total expenses increased from $11,611,000 in the nine months to Sept 30,
2012 to $12,556,000 in the nine months to Sept 30, 2013. Operating
costs per ounce of gold produced for the nine months to Sept 30, 2013
increased from $1,257/oz. to $1,286/oz.
Avnel recorded a net loss of $1,445,000 ($0.000 attributable loss per
share) for the nine months to Sept 30, 2013, compared to a net profit
of $5,591,000 ($0.040 attributable profit per share) in the comparative
period in 2012. Included in the nine months to Sept 2013, is an
accounting finance gain on the fair value of derivative financial
instruments of $1,600,000, arising from a reduction in the Company's
share price from December 31, 2012. This compared to a profit on
financial derivatives of $6,733,000 in the nine months to Sept 30,
2012. These fair value accounting gains reported have no cash effect
on the Company.
As compared to the balance sheet as at December 31, 2012, Avnel's cash
and cash equivalents as at Sept 2013, decreased by $1,145,000 from
$7,979,000 to $6,834,000. This decrease was mainly due to losses in
the year to Sept 2013.
There was a working capital surplus of $10,854,000 as at Sept 30, 2013
compared to working capital surplus of $12,226,000 as at December 31,
2012. The working capital figure reported at December 31, 2012 excludes
the other derivative financial liability reported on the Company's
balance sheet which had no cash liability to the Company.
Total assets reduced from $31,051,000 as at December 31, 2012 to
$28,491,000 at Sept 30, 2013.
Total stockholders' equity also increased to $32,829,000 as at Sept 30,
2013 from $32,750,000 at December 31, 2012. The retained deficit
increased by $206,000 as a result of the net loss made in the nine
months to Sept 30, 2013.
Third Quarter Results
Metal revenues reduced to $2,930,000 in the quarter to Sept 30, 2013
from $3,427,000 in the quarter to Sept 30, 2012. This was as a result
of increased gold ounces sold from 2,021 ounces in the quarter to Sept
30, 2012 to 2,224 ounces in the quarter to Sept 30, 2013 more than
offset by a reduction in the realised average sales price of gold from
$1,690 per ounce in quarter to Sept 30, 2012 to $1,314 per ounce in
quarter to Sept 30, 2013.
Total expenses increased from $3,467,000 in the quarter to Sept 30, 2012
to $4,321,000 in the quarter to Sept 30, 2013, arising from finished
goods movement. Operating costs per ounce of gold produced for the
quarter to Sept 30, 2013 increased from $1,392/oz. to $1,598/oz.
Avnel recorded a net loss of $1,766,000 ($0.004 attributable loss per
share) for the quarter to Sept 30, 2013, compared to a net loss of
$1,280,000 ($0.000 attributable loss per share) in the comparative
period in 2012. Included in the Sept quarter of 2012, is an accounting
finance loss on the fair value of derivative financial instruments of
$711,000. There was zero comparative derivative financial instrument
profit in the June 2013 quarter. These fair value accounting gains
reported have no cash effect on the Company.
Avnel's cash and cash equivalents decreased by $407,000 in the quarter
to Sept 30, 2013 from $7,241,000 to $6,834,000.
Snowden Mining Industry Consultants have reviewed the gold sampling
procedures for the Kalana deposit. Following their report Avnel has
commenced a program to re-assay the selected 2010-2012 drill hole
samples using a new sampling protocol, namely Leachwell. This
methodology will better capture the coarse mineralisation in the
deposit and reduce the sampling error in the standard 50g fire assay
protocol used by IAMGOLD. The sample preparation and cyanide leaching
is being carried out in a laboratory in Burkina Faso.
Approximately 20,000 samples will be re-assayed and the results are
expected by March 2014.
Avnel has appointed Snowden Mineral Industry Consultants to complete a
Mineral Resource Study utilising the new assay data. Snowden
consultants have visited Kalana to review the exploration data and the
geological model. Snowden reported at the end of the site visit that
the exploration data base meets international standards. Snowden will
work closely with Avnel to update the geological model and assess the
impact on the potential mineral resource by January 2014. This
assessment will utilise the existing data base using IAMGOLD assay
results. After receipt of the final re-assay results in March 2014,
Snowden will complete the Mineral Resource Study in April 2014.
On completion of the Mineral Resource Study Avnel will consider the
commencement of a Pre-Feasibility Study.
For the remainder of 2013, Avnel is planning gold production of 2,200
ounces from 12,600 tonnes of ore milled, at an average grade of
6.7g/t. This plan is very sensitive to grade and gold price. The plan
assumes that the major ore sources will be Vein 20 and Vein 17.
Assuming a gold price of $1,300 per ounce, cash costs will exceed
revenues. The company has initiated a productivity drive that aims to
reduce this cash loss.
It is forecast that the potential mineable reserves available from the
current mine infrastructure are approximately 26,000 tonnes at 6.75g/t
containing 6,000 ounces. This assumes that ongoing development of Vein
20 and Vein 17 will be successful and the average gold price will be
$1,300 per ounce. This will allow mining to average 4,200 tonnes per
month to March 2014
The mine plans to advance development 160m during the remainder of 2013.
Development will focus on opening up Vein 17 above the 180m level, vein
20 below 180m level and Vein 21 below 180m level. Development will
continue during 2014 to access additional ore to extend mining beyond
the first quarter 2014.
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 estimated cost
of care and maintenance is $190,000 per month including administration
costs in Mali.
Current Events in Mali
Following the turmoil in the north of Mali and the military coup d'état
on March 21, 2012, stability has been restored with the intervention of
French and ECOWAS troops. The First round Presidential elections were
held peaceably in July and August, 2013 with a high voter turnout. The
conduct of the election has been internationally acclaimed. The new
President was inaugurated in September 2013 and the new government
The Annual Financial Statements and Annual Information Form are
available on Sedar (www.sedar.com and the Avnel Gold website www.avnelgold.com).
ABOUT THE COMPANY
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.
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.
SOURCE: AVNEL GOLD MINING LTD.
For further information:
Chief Executive Officer
Phone +44 207 589 9082; Fax +44 207 589 8507
UK Mobile : +44 07768 696129
Canadian Mobile : +1 416 726 8174
Public Relations Consultant:
Chief Executive Officer
FronTier Merchant Capital Group
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Direct +1 416 800 9156
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