Avnel Gold Mining Limited (AVK: TSX) announces second quarter 2011 results
ST. PETER PORT, GUERNSEY, Aug. 12, 2011 /CNW/ --
Period ended June 30, 2011.
ST. PETER PORT, GUERNSEY, Aug. 12, 2011 /CNW/ -
Exploration
SOMIKA
PROJECT MILESTONES ACHIEVED
-- Between January and June 2011, 18,472 metres of diamond
drilling was completed at the Kalana Mine using two diamond
drill rigs. 1,535 metres of diamond drilling was also completed
at the Kalanako prospect during the second quarter 2011. One
diamond drill rig was used for this program. The 2011 work
program aims to complete 46,000 metres of diamond and RC
drilling with a total budget of $8 million.
-- In 2010, 13,164 metres of diamond drilling and 28,347 metres of
reverse circulation drilling were completed at Kalana, Kalanako
and Dabaran. All assay results, including re-assays from the
first campaign between February and July 2010, have been
received.
-- Expenditure in 2009 and 2010 totalled $6.4 million. By end 2011
IAMGOLD plans to have expended approximately $14.4 million,
higher than the minimum $11 million required to be spent by
August 2012 in terms of the Option Agreement. Expenditure to
June 2011 totalled $4.7 million.
-- Termite mound sampling on the 387 sq. km Kalana permit has been
completed. During 2010 approximately 21,000 samples were
collected and assay results have been received. During 2011
approximately 4,000 additional samples were collected at
priority targets and assay results were received during the
second quarter. Interpretation of the results confirms that
significant gold anomalies exist including Djirila that has
been drill tested.
-- The main objective is to complete lines of drill holes spaced
50m apart across the Kalana 1 North domain and Kalana 1 South
Domain to enable geological cross sections to be generated and
a resource study to be completed during 2012. Three diamond
drill rigs are working, and a reverse circulation drill rig has
been mobilised to site in July. Preliminary geological cross
sections have been generated for Kalana 1 North (one cross
section) and Kalana 1 South (five cross sections).
Highlights
During 2010 and 2011 diamond drilling and RC drilling has shown the
potential for bulk mining at Kalana. IAMGOLD has made significant
progress in constructing a detailed and predictive geologic model on
the Kalana project. The Kalana Project is described below in three
domains, namely Kalana 1 North, Kalana 1 South and Kalana II. These
three domains are located within the total Kalana project and can be
considered as one potential mine.
Mineralised packages up to 18 metres width have been confirmed by
drilling and underground development in the northern area of the Kalana
Mine designated as Kalana I North. Assay results from the diamond
drill program shows extensive mineralised packages extending 250 metres
north from No 2 shaft to a depth of 250m below surface across
approximately 150m strike.
A new mineralised package of steep, thin, closely spaced veins has been
exposed by diamond drilling and underground development between 100m
and 250m elevations in this area. Assay results show that this
mineralised package has several zones of elevated gold grades,
generally associated with flat dipping quartz vein structures that
crosscut the package.
North of the existing underground workings, vertical and flat dipping
quartz veins have been intersected between surface and 100m elevation
that may provide early access to bulk mineable ore within the saprolite
zone. The results of diamond drilling and RC drilling confirm the
possibility of these vein packages being a source of gold
mineralisation for an open pit in Kalana 1 North domain.
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 300m and with a strike of at least 200m to a depth of
120m. During the second half of 2011 infill reverse circulation
drilling will increase the density of data to enable a mineral resource
to be estimated in 2012. There is potential to extend the
mineralisation to the north by 150m towards the existing mine
infrastructure at No 1 Shaft. It is planned to commence RC drilling in
between the existing infrastructure during the fourth quarter.
Initial results from diamond and RC drill holes at Kalana II, east of
the existing mine, are providing a better understanding of the
potential mineralisation than previously interpreted. Assay results
from the 2010 diamond and RC drilling at Kalana II have been received
and show the excellent potential for mineralised packages that may lead
to a major increase in the existing Mineral Resources at Kalana II. .
Diamond drilling and RC drilling during the second half of 2011 will
increase the density of data and enable a geological cross section to
be interpreted.
Assay results from the 2010 RC drill holes at Kalanako, a satellite
prospect located 3 kilometres north east of Kalana, are very
encouraging. The results indicate that at least two mineralised zones
exist, striking north-west as indicated by the geochemical anomaly,
artisanal workings and geophysical structures. A diamond drill program
has commenced in quarter 2, 2011 to provide geological information to
enable a preliminary model to be developed.
Results to June 30, 2011
Avnel issued press releases on January 31, 2011, February 22, 2011 and
May 26, 2011and this update should be referenced to those documents.
KALANA I NORTH
Assay results from twenty six diamond drill holes reported show that a
mineralised zone running 400m north of No 2 Shaft has significant
mineralised packages suitable for bulk mining.
Kalana 1 North has been drilled systematically over six north-south
sections and two east-west sections. Forty seven diamond drill holes
have intersected mineralised zones of varying width and grade. Thirty
nine 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. Eight drill holes were drilled at
a sixty degree angle from east to west at approximately 100m between
drill hole collars.
Assay results have been received for twenty six holes with results for
21 diamond drill holes outstanding.
KALANA I SOUTH
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 300m and with a strike of at least 200m to a depth of
120m.
During the second half of 2011 infill RC drilling will increase the
density of data to enable a mineral resource to be estimated in 2012.
There is potential to extend the mineralisation to the north by 150m
towards the existing mine infrastructure at No 1 Shaft. It is planned
to commence RC drilling in between the existing infrastructure during
the fourth quarter
Kalana 1 South has been drilled systematically over five east-west
sections and four north-south sections. Forty one diamond drill holes
have intersected mineralised zones of varying width and grade. Thirty
three holes were drilled at a sixty degree angle from east to west at
fifty metres between drill hole collars to intersect the predominantly
west-east plunging vein structures. Eight diamond drill holes were
drilled at sixty degree angle from south to north at approximately 100m
between drill hole collars.
Assay results have been received for thirty eight diamond drill holes
with results for 3 diamond drill holes outstanding.
Eighteen RC drill holes have been drilled over two east-west sections
and assay results have been received for eighteen holes. The RC drill
holes are drilled at between fifty five and sixty degrees angle from
east to west to a depth of 100m along the drill hole. Drill collars are
approximately 50m between holes.
The surface area covered by the drill sections is 540m (east-west) by
250m (north-south).
Geological modelling has progressed well with 5 cross sections partially
complete.
KALANA II
The results confirm the existence of an extensive mineralised zone down
to 100m below surface over a surface area of 300m by 400m. Additional
drilling planned in 2011 will enable the mineralisation to be modelled.
Kalana II has been drilled systematically over five east-west sections
and five north-south sections. Nine diamond drill holes have
intersected mineralised zones of varying width and grade. Five holes
were drilled at a sixty degree angle from east to west at 100 metres
between drill hole collars to intersect the predominantly west-east
plunging vein structures. Four diamond drill holes were drilled at a
sixty degree angle from south to north at approximately 100m between
drill hole collars.
Assay results have been received for all nine diamond drill holes.
Thirty one RC drill holes have been drilled over five east-west sections
and assay results have been received for all thirty one drill holes.
The RC drill holes are drilled at between fifty five and sixty degrees
angle from east to west to a depth of 100m along the drill hole. Drill
collars are approximately 100m between holes. Twenty eight RC drill
holes have been drilled over four north-south sections and assay
results have been received for all twenty eight drill holes. The RC
drill holes are drilled at between fifty five and sixty degrees angle
from south to north to a depth of 100m along the drill hole. Drill
collars are approximately 100m between holes.
The surface area covered by the drill sections is 300m (east-west) by
400m (north-south).
Geological interpretation and modelling is in progress. Preliminary
interpretation indicates two mineralised domains (named Savanna and
Superette) dipping from surface to the east. During the second half of
2011 several diamond drill holes and RC drill holes are planned to
provide additional geological and assay information. Based on an
increased density of data geological modelling will proceed.
All assay results have been reported in quarter 1 2011.
KALANAKO
During 2010 138 RC drill holes were completed at Kalanako. A total of
14,460m were drilled. 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 for 138 holes.
Two mineralised trends, one over 500m and the other over 250m, have been
detected from the drill assay results. The potential to explore below
the 100m depth may identify the source of these strong mineralised
structures.
During the second quarter four diamond drill holes were completed at
Kalanako and one diamond drill hole was in progress. A total of 1,535
metres were completed in DD001, DD002, DD003 and DD004.
The diamond drill holes will provide geological information to assist
the interpretation of the mineralised zones identified by the 2010 RC
drill hole program. No diamond drill assay results have been received.
The depth of saprolite and saprock is between 150m and 200m, much deeper
than that observed at Kalana. In fresh rock there is evidence of
shearing and tight folding that is also not observed at Kalana.
Resource Study
The program to date has made significant progress in constructing a
detailed and predictive geological model. The drilling to be completed
in 2011 is designed to provide information for IAMGOLD to generate a
resource estimate. 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 very 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.
Avnel continues to operate the underground mine exploiting exposed
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 is mining exploration raises (including
twinning diamond drill holes) and drifts (a total of 600 metres for
2011) for and at IAMGOLD's cost.
Avnel expects to release assay results from the drilling completed
between January and April 2011 as data are received and interpretation
of results allows. The results were used to generate preliminary
geological cross sections. Results of drilling between May and July
2011 will be released in September 2011.
QAQC
Sample protocol entailed the splitting of the core by diamond core saw
by IAMGOLD staff at the Kalana mine site. Half of the sample preserved
at the Kalana mine site and the other half separated by the metre and
dispatched to the SGS analytical facilities in Bamako, a well
recognized 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 stored by IAMGOLD staff.
As part of the QAQC program, control samples are added. These control
samples include standards, blanks and duplicates.
Fougadian Exploration Permit
On December 6, 2010 the Company announced that it had entered into a
joint venture arrangements agreement (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. The Fougadian 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 has applied for and received
an exploration permit in respect of the southern 75 sq. km. The
combined permits are referred to as the 'Fougadian Exploration Permit'.
Under the terms of the Joint Venture Arrangements Agreement, IAMGOLD
will fully fund and satisfy the expenditure requirements of the
Fougadian Exploration Permit and, upon establishing a qualifying
mineral resource of not less than 250,000 oz of gold, may earn a 51%
interest (of Avnel's 90% interest) in the permit. Upon delivery of a
pre-feasibility study, IAMGOLD will be entitled to increase its
interest to 65%. After delivery of a feasibility study, IAMGOLD will
undertake to procure or provide project financing to develop a mining
operation.
During the first half 2011 approximately 12,300 termite mound samples
were collected and submitted for sample preparation at the Kalana SGS
sample preparation laboratory. The prepared samples were submitted to
SGS fire assay laboratory in Kayes. 7,000 assay results have been
received and validated. The gold values obtained on the 'Avnel 1'
anomaly are the highest seen on both Fougadian and SOMIKA permits.
IAMGOLD believes the anomaly is linked with a rooted geological
structure. Avnel completed limited drilling over the Avnel 1 anomaly in
2008 as reported above.
The establishment of an exploration camp commenced during the quarter
and will be operational in the fourth quarter after the rainy season.
Expenditure totaled $483,000 during 2011.
Results of Operations
Revenue decreased slightly to $3,918,000 in the second quarter of 2011
from $4,001,000 in the second quarter of 2010. This was as a result of
a decrease in gold ounces sold from 3,338 ounces in the second quarter
of 2010 to 2,605 ounces in the second quarter of 2011 offset by the
increase in the realised average sales price of gold from $1,196 per
ounce in 2010 to $1,499 per ounce in 2011.
Avnel recorded a net loss of $193,000 ($0.000 loss per share) for the
quarter ended June 30, 2011 compared to a net loss of $1,718,000
($0.007 loss per share) in the comparative period in 2010. The main
contributing factor to the reduced loss in the period was a reduced
exchange loss of $285,000 compared to an exchange loss of $2,106,000 in
the comparative period in 2010.
As compared to the balance sheet as at December 31, 2010, Avnel's cash
and cash equivalents as at June 30, 2011 increased by $7,731,000 from
$2,106,000 to $9,837,000. On March 31, 2011 a private placement closed,
the net proceeds of which $9,621,000 were received in April 2011.
There was a working capital surplus of $12,516,000 as at June 30, 2011
compared to working capital deficit of $14,262,000 as at June 30, 2010.
The increase mainly resulted from the debt equitisation and private
placement in August 2010 and the March 31, 2011 private placement.
Total assets increased from $23,438,000 as at December 31, 2010 to
$31,990,000 at June 30, 2011 due to the private placement on March 31,
2011.
Stockholders' equity also increased to $32,996,000 as at June 30, 2011
from $24,580,000 at December 31, 2010. This was due to the private
placement in March 31, 2011. The retained deficit increased by
$1,191,000 as a result of the net loss made in the first half of 2011.
Mining Operations
The following table shows the production from the Kalana Gold Mine:
Three months ended June Six months ended June 30
30
2011 2010 2011 2010
Tonnes milled:
Underground ore 12,922 12,280 24,048 25,853
Gold grade -
grams per tonne
(g/t):
Underground ore 8.29 8.06 7.28 8.24
Recovery rate - 86.0 86.7 84.6 83.1
%
Gold production 2,960 2,760 4,913 5,920
- ounces
Cost per tonne $246 $225 $257 $227
milled
Operating cost $1,009 $742 $1,254 $947
per ounce of
gold sold
Operating cost $1,075 $1,000 $1,260 $989
per ounce of
gold produced
Tonnes milled in the second quarter of 2011 were 5% higher than achieved
in the second quarter of 2010. Gold production at 2,960 ounces in the
second quarter of 2011 was 7% higher than the second quarter of 2010
resulting from the higher tonnes milled together with the higher head
grade which increased 3% from 8.06g/t to 8.29g/t. Gold grade of 8.28g/t
was higher than the planned grade of 6.37g/t, mainly due to higher
grades from Vein 18 and Vein 20 stopes.
Gold recovery in the second quarter of 2011 decreased slightly to 86.0%
from 86.7%.
Mine development totalled 326 metres in quarter 2 2011 compared to 232
metres in 2010 and 227 metres ahead of the mine plan. Ore development
increased to 195 metres in 2011 from 99 metres in 2010 as new mining
areas were opened below 180m level. Exploration development advanced
112 metres as raises were mined to expose the mineralised package above
Vein 17. The raises are adjacent to diamond drill holes recently
completed by IAMGOLD.
Development results have been positive resulting in a forecast increase
in potential mining areas as discussed in the outlook section.
Operating cost of sales for the second quarter of 2011 increased 8% to
$3,843,000 compared with $3,571,000 in the second quarter of 2010 due
to higher maintenance and labour costs, and a 5% weakening of the US
dollar against the CFA. Cash operating cost of $246 per tonne milled in
the second quarter of 2011 increased by 9% from the cost in the second
quarter of 2010 of $225 per tonne. Cash operating cost per ounce
produced of $1,075 per ounce in the second quarter of 2011 increased
from $1,000 per ounce in the second quarter of 2010 due to lower gold
production.
Liquidity and going concern
On March 31, 2011 the Company completed a private placement (the '2011
Private Placement') of 25,000,000 units of Avnel (the 'Units') at a
price of Cdn. $0.40 per Unit (the 'Issue Price'). Each Unit consisted
of one ordinary share of Avnel and one-half of one ordinary share
purchase warrant (each whole warrant a 'Warrant'). Each Warrant
entitled the holder to purchase one ordinary share of Avnel at a price
of C$0.70, at any time for a period of 18 months from the date of issue
of the Warrants. Dundee Securities Ltd. was the lead agent and the
gross proceeds of the Private Placement were C$10,000,000. Avnel
intends to use these proceeds for general corporate purposes. The
Company is debt free and has sufficient funds to meet its liabilities
for the next 12 months.
The Company's cash flow is dependent on the volume of production, gold
prices, operating costs, interest rates on borrowings and investments
and discretionary expenditure levels including exploration, resource
development and general and administrative costs as well as obtaining
new sources of finance. With the world economy moving slowly out of
recession, sources of finance are still difficult to obtain and are
expensive.
The Company is currently in the middle of a significant exploration
programme being performed by IAMGOLD under the terms of the August 2009
Option Agreement. The Company intends to sustain the current
underground operation as long as economically feasible, without
spending significant capital expenditure, until such time as the
results of this exploration are completed and assessed to enable the
Company to better evaluate future development options for the mine.
Until this work is completed and a suitable development plan is
identified, output from the mine will continue to be constrained.
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. Avnel and
IAMGOLD Corporation have entered into a joint venture arrangements
agreement whereby IAMGOLD has the option to acquire up to an initial
51% interest in Avnel's interest in the Fougadian Exploration Permit
and in an additional 75 sq. kms to the south of Avnel's Fougadian
Exploration Permit area for which IAMGOLD has applied for an
exploration permit.
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.
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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
www.avnelgold.com
Public Relations Consultant:
Ari Todd
President 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
www.frontierconsultingltd.com