Avnel Gold Mining Limited - Kalana Project Update

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Avnel Gold Mining Limited - Kalana Project Update
yahoo.com - Mar 12, 2012

ST. PETER PORT, Guernsey, March 12, 2012 /CNW/ - Avnel Gold Mining Limited (TSX: AVK.TO - News) -
/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES /
Avnel Gold Mining Ltd. ("Avnel") is pleased to provide a project update for the work programme on its 80% owned 387.4 km2 Kalana exploitation permit in Mali conducted by its joint venture partner IAMGOLD Corporation ("IAMGOLD") as operator of the exploration venture. The Option Agreement dated August 11, 2009 between Avnel and IAMGOLD provides IAMGOLD with the option to earn an initial 51% interest in Avnel's share of the Kalana project by spending a minimum US$11,000,000 on exploration activities over a three year period and by delivering a NI-43-101 resource estimate of at least 2 million ounces of gold as well as proceeding with a feasibility study.

THIS UPDATE REPORTS ON THE RESULTS OBTAINED FROM THE EXPLORATION CAMPAIGN CONDUCTED DURING THE FOURTH QUARTER 2011.

PROJECT MILESTONES ACHIEVED

Over 93,000 metres of diamond and RC drilling has been completed to date. The 2011 work program aimed to complete 35,000 metres of diamond and RC drilling with a total budget of $8.0million . This was exceeded with nearly 58,000 metres drilled and expenditure of $13 million .

Location/Drill hole type 2010 2011 Project Total To Date

Kalana Diamond drilling Metres 12,361 22,908 35,269

Kalana RC drilling Metres 10,040 23,942 33,982

Kalanako Diamond drilling Metres 0 7,402 7,402

Kalanako RC drilling Metres 12,076 3,474 15,550

TOTAL Metres 34,477 57,726 92,203

Expenditure US$ 6,400,000 12,954,000 19,354,000

46,000 assays have been received from the 58,000 metres drilled in 2011.
The main objective in 2012 is to complete fences of drill holes on a nominal 50m by 25m grid across the Kalana 1 North, Kalana 1 South and Kalana II domains to enable geological cross sections to be generated and a resource study to be completed during the third quarter 2012.
IAMGOLD has proposed a budget of 60,000 metres at a cost of US$12.5 million for 2012. The majority of the drill metres will be at Kalana, but drilling is also planned at the Djirila discovery that was drilled in 2007/08 by Avnel (see Avnel's press release dated 8/08/2005 and 19/04/2006 reporting excellent drill results, posted on Avnel's website).

The results in this release should be read in conjunction with Figures 1 - 5 as well as Table 1 (Assay Results) and Table 2 (Drill Collar coordinates) posted on Avnel's website www.avnelgold.com. All results are expressed in g/t Au.

Results to December 31, 2011
Avnel issued press releases on January 31, 2011 , February 22, 2011 , May 26, 2011 and October 11, 2011 and this update should be referenced to those documents which are 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 (See Figure 1). Within these domains, the predominant strike and direction of quartz vein packages varies as shown in Figure 1. 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 (see Figure 1).

KALANA I NORTH
Assay results from fifty six diamond drill holes and twenty three RC holes reported show that a mineralised zone, running 400m north of No 2 Shaft and extending over an east west strike of 278 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 six diamond drill holes have intersected mineralised zones of varying width and grade. Forty seven 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) (see Figure 1).

An RC drilling campaign commenced in the fourth quarter of 2011 to infill between the diamond drill holes to a programmed hole depth of 150m to 200m (see Figure 1). This campaign is expected to be complete by the end of March 2012 . This will provide information from drill holes spaced 25 metres apart along the north-south drill lines that are approximately spaced at 50 metres apart.

Thirteen RC drill holes have been drilled at sixty degree angle from south to north to an average depth of 120 metres. Twelve holes were drilled in the fourth quarter of 2011 on three drill lines. In 2010 ten RC drill holes were drilled at sixty degree angle from east to west.

Assay results have been received for all fifty six diamond drill holes and twenty three RC holes. Recent assay results are shown in Table 1. Figure 2 and Figure 3 show significant assay results received since October 2011 .

Geological modeling is in progress and should be complete in the second quarter of 2012. Extensive RC drilling in the first quarter of 2012 will provide additional data to a depth of at least 150m. The model will be used for mineral resource estimate in the second half of 2012.

Results to date indicate that both gold grades and mineralised thicknesses tend to decrease from the main intrusive diorite going north. Mineralisation is generally associated with quartz veins and stockworks.

Recent diamond (see DD103 and DD104) and RC (see RC240 to RC250) infill drilling has shown that the mineralisation identified by diamond drilling in 2010 does continue west of the main diorite intrusive for approximately 100 metres. Encouraging grades and mineralised widths are reported between surface and 150 metres. These recent assay results enhance the grade and mineralised widths reported from the 100m spaced diamond drill holes completed in 2010. This improvement is a function of, inter-alia, closer drill hole spacing.

The mineralised packages continue 180 metres east to a depth of 150 metres below surface (see DD084 and DD086). The thickness and grade of the north-south dipping mineralisation packages start to decrease going further east (see DD088C and DD090).

To a depth of 150 metres, drilling has now extended mineralization 250 metres north of two shaft (see DD089B and DD043). As the mineralisation is associated with veins dipping from north to south, these packages extend up dip to the north towards surface for another 150 metres, 400m north of two shaft (see DD036, DD037 and DD038 drilled in 2010).

Below 150m from surface, mineralised packages have been identified by the 2010/2011 diamond drill program. One of these, 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.

Underground mining and diamond drill holes have exposed a mineralised domain of vertical veins associated with flat vein structures in the northwest area. This domain has potential to be included in a mineral resource but requires more drilling and underground development during 2012.

RC drill holes east of the diorite intrusive have intersected mineralised zones dipping from west to east and are extentions of the veins in Kalana 1 South. These RC holes were drilled from east to west at an inclination of sixty degrees (see Kalana 1 South below and Figure 3).

During the first quarter 2012 forty two RC drill holes are planned to infill the existing drill lines. This will provide intersections at 25 metres between drill collars within the 180m by 250m area discussed above. Holes are planned to be drilled to a minimum of 150 metres and possibly as much as 200 metres. Three RC holes will test the extent of mineralisation to the west of the current boundary drill line. The planned drill holes are shown in Figure 1.

On the north eastern boundary of Kalana 1 North, the potential for steep, vertical vein packages was tested by two RC drill lines spaced 50m apart (see Figure 3). Drill holes were drilled from east to west at sixty degree inclination. Assay results indicate mineralisation that will be further tested by drilling planned in 2012 (see Figure 1).

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 600m and with a north-south strike of 250m to 350m to a depth of at least 120m.

Kalana 1 South has been drilled systematically over eleven east-west sections and five north-south sections. These drill sections are spaced at 50 metres. Forty seven diamond drill holes have intersected mineralised zones of varying thickness and grade. Thirty five 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. Twelve diamond drill holes were drilled at sixty degree angle from south to north at approximately 100m between drill hole collars. These holes passed through the east-west dipping mineralised zones and continued north into the Kalana 1 North domain (see Figure 1).

Assay results have been received for forty seven diamond drill holes. Recent assay results for DD087 and DD088C are shown in Table 1 and Figure 2.

Seventy seven RC drill holes have been drilled over eleven east-west sections and assay results have been received for all these holes. The RC drill holes were oriented between fifty five and sixty degrees angle from east to west, mainly to a depth of 100m along the drill hole. Some holes were extended to 150m. Drill collars are approximately 50m between holes. Recent assay results are shown in Table 1 and Figure 4 for holes drilled in the second half 2011.

The surface area covered by the drill sections is 540m (east-west) by 500m (north-south). During the fourth quarter the drill area was extended north where the current mine infrastructure is located. The drill assay results showed the main mineralised vein structures extending 150m north. The mineralised domain does not extend south as shown by the most southern drill line in Figure 4.

Diamond and RC drill hole results from the 2010 and 2011 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 is being modeled. 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.

During the first quarter of 2012, fifty nine RC holes are planned to infill existing lines to a drill spacing of 25m. The drill holes are planned to a minimum depth of 150m but if possible to 200m.

During the first two quarters of 2012, sixteen diamond drill holes are planned to infill existing drill lines targeting Vein 20C and other mineralised packages below 200m depth. These drill holes will provide additional information on the mineralised packages between surface and 200m depth. The planned drill holes are shown in Figure 1.

KALANA II
The results confirm the existence of an extensive mineralised zone down to at least 100m below surface over a surface area of 350m by 250m.

Kalana II has been diamond drilled over two east-west sections and two north-south sections. Sixteen diamond drill holes have intersected mineralised zones of varying width and grade. Eight 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. 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 eleven of the sixteen diamond drill holes. Results for two holes, DD105 and DD106, are shown in Table 1.

Forty seven RC drill holes have been drilled over seven east-west sections and assay results have been received for forty seven 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 to 130m along the drill hole. Drill collars are approximately 100m between holes. Eighty five RC drill holes have been drilled over eight north-south sections and assay results have been received for sixty 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 to 130m along the drill hole. Drill collars are approximately 50m between holes on the thirteen drill lines.

The surface area covered by the drill sections is 350m (east-west) by 400m (north-south).

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 modelled.

Recent assay results are reported in Table 1. Figure 5 is a plan showing recent drill holes and assay results to date.

During 2012 five RC drill holes and five diamond drill holes are planned at Kalana II (see Figure 1). These holes will assist the geological modeling and resource estimation.

KALANAKO
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. Mineralisation remains open at depth.

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 2011, 3,741 metres of RC drill holes were completed and assay results are pending. Twenty five 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 14 holes. Results are reported in Table 1.

The diamond drill holes will provide geological information to assist the interpretation of the mineralised zones identified by the 2010 RC drill hole program

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 veins with sulfides and locally, highly altered and mineralized dioritic intrusives. Mineralisation is associated with these felsic intrusive rocks. Diamond drill results to date show generally low grades over narrow widths.

Assaying

The assay turnaround is slower than planned due to work backlog and a sampling protocol that requires a full half core to be sample prepped. Approximately 9,000 samples from the 2011 drill program (58,000 metres) that have been sent to the SGS laboratory in Bamako are outstanding and expected shortly.

The planned increase in drill metres and samples during 2012 has been discussed with SGS who are increasing the sample preparation capacity at Kalana and constructing a new fire assay facility at Bamako .

Resource Study

The program to date has made significant progress in constructing a detailed and predictive geological model. The drilling completed in 2011 and the drill program in the first quarter of 2012 is designed to provide information for IAMGOLD to generate a resource estimate planned for the third quarter of 2012.

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. Approximately 1,000 samples from drill hole were sent to the Essakane Mine laboratory, Burkina Faso , for assaying using the Leachwell assay methodology. These one kilogram samples are from mineralised drill hole sample rejects that have been already fire assayed using a 50 gram aliquot sample. Results have been received and are being reviewed.

Metallurgical test work has commenced with 7 samples from two RC holes and underground samples (weighing 50-70kgs per sample) to Lakefield Laboratories in Canada. Results show that gold recovery of 95% plus can be achieved with normal industry cyanide consumption and leach time.

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 is excavating exploration raises (including twinning diamond drill holes) and drifts (a total of 615 metres completed in 2011) for and at IAMGOLD's cost. Samples from these raises were collected and sent to SGS laboratory for fire assay. Results are now being received and analysed.

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 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 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 are 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.

Gold assaying is completed at the SGS laboratory in Kayes on a 50-gram aliquot using the fire assay procedure, initially with an atomic absorption spectroscopy finish. For samples with a gold grade > 5 g/t, the assay is repeated with a gravimetric finish. All rejects (the 20 to 22 kg left from riffling of the original sample and the 2.3 kg of pulp) are retained and warehoused at the Kalana site.

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

Looking Forward

IAMGOLD expects to substantially complete the drill programs at Kalana and Kalanako in the first quarter of 2012 to generate the data necessary to prepare a NI 43-101 compliant Resource Study planned for the third quarter of 2012.

During 2012 IAMGOLD is also planning to commence drill testing the gold anomaly targets identified by the termite mound geochemical sampling and ground geophysics program completed in 2011. Targets include Djirila (previously drilled in 2006/07), Tenintoumanina, Sanekourou, Dabaran (previously drilled in 2007), Sananfarani, Solomanina and Tonda.

Avnel is pleased to report these results which are tending to establish both the extension of mineralisation in both aerial and vertical extent. Furthermore the increased density of drilling is tending to establish a higher gold grade tenor which is to be expected from closer drill spacing for the type of coarse nuggety gold encountered at Kalana.

These results elevate the potential for bulk mining at Kalana. The closer spaced drill holes in 2012 may enable the Resource modeling to be completed and confirm the potential for an open pit mine at Kalana. The preliminary metallurgical test results indicate that an industry standard gold plant could extract 95% gold from the ore. Mining costs will benefit from the deep (70 metres) saprolite weathering at Kalana which will not require drilling and blasting.

Technical information regarding the Kalana Gold Mine and the Kalana Permit is provided by Avnel management under the supervision of Roy Meade , a Company director, who is a non-independent "Qualified Person" as such term is defined in National Instrument 43-101.

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 as well as on Avnel's abutting Fougadian Exploration Permit.

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% in Avnel's interest in the Kalana Exploitation Permit as well as 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.