Avnel Gold Mining Limited announces third quarter 2011 results

Period ended September 30, 2011.

ST. PETER PORT, Nov. 11, 2011 -
Exploration
SOMIKA
PROJECT MILESTONES ACHIEVED

- Over 60,000 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 which has been exceeded as shown in the table below. This has been achieved by end September and IAMGOLD plans to aggressively advance the project in the 4th quarter

     ____________________________________________________________________
    |Location/Drill hole |      |2010     |Jan-September|Project Total To|
    |type                |      |         |2011         |Date            |
    |____________________|______|_________|_____________|________________|
    |Kalana Diamond      |Metres|   12,361|       20,253|          32,614|
    |drilling            |      |         |             |                |
    |____________________|______|_________|_____________|________________|
    |Kalana RC drilling  |Metres|   10,040|        9,312|          19,352|
    |____________________|______|_________|_____________|________________|
    |Kalanako Diamond    |Metres|         |             |                |
    |drilling            |      |        0|        5,383|           5,383|
    |____________________|______|_________|_____________|________________|
    |Kalanako RC drilling|Metres|   12,076|            0|          12,076|
    |____________________|______|_________|_____________|________________|
    |Expenditure         |   US$|6,400,000|    8,900,000|      15,300,000|
    |____________________|______|_________|_____________|________________|

- All drill hole assay results for 2010 drill campaign (35,000 metres drilled) have been received.

- Of the 35,000 metres drilled to-date of the 2011 drill campaign, 19.000 assays have been received with a backlog of 16,000 metres.

- The main objective is to complete lines of drill holes spaced between 50m and 100m apart 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 during third quarter 2012. One diamond drill rig and one reverse circulation drill rig are on site and commenced drilling in mid September after the rains. Preliminary geological cross sections have been generated for Kalana 1 North (one cross section) and Kalana 1 South (five cross sections).


Results to September 30, 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.

The results in the press release dated October 11, 2001 should be read in conjunction with Figures 1 - 9 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.


KALANA I NORTH

Assay results from thirty five diamond drill 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 suitable for bulk mining.

Kalana 1 North has been drilled systematically over six north-south sections and two east-west sections. Fifty five diamond drill holes have intersected mineralised zones of varying width and grade. Forty six 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 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).

Assay results have been received for thirty five holes with results for 20 diamond drill holes outstanding. Recent assay results are shown in Table 1. Figure 2 and Figure 2A is a plan showing all assay results to date.

First interpretations (Kalana I North) are reported on the cross-section Figure 7 from Section W412. This is a North-South section looking to the East (see Figure 2 to localize the section). This section is provisional as it is based on data received from ten of the eleven diamond drill holes on this section line.

On the eastern boundary of Kalana 1 North, the potential for steep, vertical vein packages is being tested during the second half of 2011. This area is shown on Figure 3 where RC drilling is in progress.


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. It is planned to commence RC drilling in between the existing infrastructure during the fourth quarter 2011.

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 forty diamond drill holes with results for one diamond drill hole outstanding. Recent assay results are shown in Table 1 and Figure 4 is a plan showing all assay results to date.

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. Assay results are shown in Figure 4 and reported in previous press releases (see www.avnelgold.com).

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. First interpretations (Kalana I South) are reported on the cross-section Figure 8 from Section S 100. This is an East-West section looking to the North (see Figure 4 to localize the section). This section is provisional as it is based on data received from twelve of the thirteen diamond drill holes on this section line.

Two RC drill holes (RC133 and RC134) were drilled to a hole depth of sixty metres at sixty degrees from west to east to provide metallurgical samples from the oxide zone (see Figure 2A). RC133 was drilled sub vertical to the vein 3 mineralised packages that dips from west to east. The hole showed two mineralised composites as shown below:

        --  From 11m to 28m, 17m at a grade of 1.88g/t and from 34m to 53m,
            19m a grade of 3.12g/t

This drill hole demonstrates the continuity of the vein 3 package in the oxide zone.

RC134 was drilled sub vertical to the vein 10 mineralised package that dips from west to east. The hole showed two mineralised composites as shown below:

        --  From 20m to 26m, 6m at a grade of 1.84g/t and from 33m to 52m,
            19m at a grade of 6.25g/t

These drill holes demonstrate the continuity of the vein 3 and vein 10 mineralised packages in the oxide zone. These intersections are not a true width of the mineralised package.


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 seven east-west sections and five north-south sections. Eleven 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. Six 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 nine of the eleven diamond drill holes.

Forty seven RC drill holes have been drilled over seven east-west sections and assay results have been received for forty 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 to 130m along the drill hole. Drill collars are approximately 100m between holes. Forty three RC drill holes have been drilled over four north-south sections and assay results have been received for thirty five 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 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 Savana 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.

Recent assay results are reported in Table 1. Figure 5 and Figure 5A are plans showing all drill holes and assay results to date.


KALANAKO

Kalanako is located five kilometres north east of Kalana. Two mineralised trends, one over a distance of 500m and the other over 250m, have been detected from the RC drill assay results. Mineralisation remains open at depth 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 and previously reported for 138 holes.

As at end July 2011 fourteen diamond drill holes were completed at Kalanako. A total of 3,384 metres were completed in DD001to DD014. Holes are drilled from east to west at an inclination of sixty degrees. Diamond drilling continued in September 2011.

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 approximately 150 metres, much deeper than that observed at Kalana. 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 dioritic intrusives.

Figure 6 is a plan showing all drill holes and assay results to date.


Assaying

The assay turnaround is slower than planned due to work backlog and due to the sampling protocol that requires the full half core to be sample prepped. Approximately 16,000 samples from the 2011 drill program (35,000 metres) that have been sent to SGS laboratory in Bamako are outstanding. IAMGOLD is investigating how to improve the speed of the assay turnaround.


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. Assay data from this program should be available by end Quarter 1, 2012 and the resource study complete by Quarter 3, 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 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. Approximately 1,000 samples are being prepared to be sent to SGS Laboratory in Ouagadougou, 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.

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. Test results are expected during Quarter 4, 2011 <

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.


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 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 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.


Looking Forward

IAMGOLD expects to complete the drill programs at Kalana and Kalanako in the quarter 1, 2012 to generate the data for the NI 43-101 Resource Study to be completed in Quarter 3, 2012. The objective is 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. During 2012 IAMGOLD is also planning to possibly commence testing the gold anomaly targets identified by the termite samples and ground geophysics program completed in 2011. Targets include Djirila (previously drilled in 2006 see press release dated May 15, 2006, filed on SEDAR or on the Company's website), Tenintoumanina, Sanekourou, Dabaran (previously drilled in 2007), Sananfarani, Solomanina and Tonda (see Figure 8).

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.


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 is for 3 years and Avnel has committed to expenditures of $1.9 million over this period.

The 2008 drill program was focused on the Avnel-1 gold-in-soil geochemical anomaly that the Company believes is the largest and the most important in terms of gold and arsenic values on the Fougadian Exploration Permit. The anomaly is defined by an area where values generally exceed 32ppb Au and attain a maximum of 1731ppb Au. It extends for almost 4km in an N-S direction and for 1.5km in an E-W direction.

Two diamond drill holes were completed to a depth of 190 metres in order to provide information on the bedrock structure that can be used to optimise the orientation of the RC drilling programme. 48 inclined RC drill holes totalling 5422 metres were completed on a grid pattern during the second quarter, covering only a small portion of the Avnel 1 anomaly. The holes were drilled in a heel-to-toe fashion to ensure complete coverage across the width of the anomaly. As the budget was inadequate to fully test this large anomaly, the holes were drilled along pairs of lines spaced 200m apart, one pair in the north and a second pair 800m further to the south. Because of encouraging geological indications, an additional three holes were drilled to the south of the latter set of lines. In summary, out of the 50 holes drilled 15 (30%) intersected values above 1 g/t Au. An airborne geophysics study was completed in the fourth quarter 2009. The study covered the total Fougadian Exploration Permit. The study generated new information on magnetic, radiometric and topographic data. The Company believes that the study will improve the quality of previous surveys as the line spacing 50m and height flown 25m is superior to previous work. The interpretation of the results is ongoing.

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 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. 13,826 assay results, including 1,388 QAQC samples 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 believe 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 second quarter and will be operational in the fourth quarter after the rainy season. Expenditure totaled $753,000 during 2011.


Results of Operations

Selected Interim Information

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

                   Three months ended Sept30      Nine months ended Sept 30
                        2011          2010           2011           2010
    Total Revenue        4,855         3,988         11,271          11,571
    Total                4,742         3,798         12,658          12,245
    Expenses 
    Net                  (280)         2,166        (1,998)         (2,038)
    (loss)/profit 
    (Loss)/profit      (0.002)         0.015        (0.009)         (0.012)
    per share
    Weighted       191,739,477   133,338,755    175,039,799      99,197,164
    average shares
    outstanding
    Balance Sheet                              Sept 30,2011   Sept 30, 2010
    Working                                          12,722           3,835
    Capital 
    Total Assets                                     31,762          24,043
    Stockholders'                                    32,659          24,580
    Equity 

Results of Operations

Metal revenues increased to $11,271,000 in the nine months to September 2011 from $10,571,000 in the comparative period in 2010. This was as a result of a decrease in gold ounces sold from 8,970 ounces in the nine months to September 2010 to 7,258 ounces in 2011 more than offset by the increase in the realised average sales price of gold from $1,176 per ounce in 2010 to $1,548 per ounce in 2011. Other revenues in 2010 also included $1,000,000 for the Kalana joint venture option fee.

Avnel recorded a net loss of $1,998,000 ($0.009 loss per share) for the nine months ended September 30, 2011 compared to a net loss of $2,038,000 ($0.012 loss per share) 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 September 30, 2011 increased by $8,149,000 from $2,106,000 to $10,255,000. This increase was due to a private placement, the net proceeds of which $9,621,000 were received in April 2011.

There was a working capital surplus of $12,722,000 as at September 30, 2011 compared to working capital surplus of $3,835,000 as at September 30, 2010. The increase working capital surplus resulted from the March 31, 2011 private placement.

Total assets increased from $24,043,000 as at December 31, 2010 to $31,762,000 at September 30, 2011 due to the private placement on March 31, 2011.

Stockholders' equity also increased to $32,659,000 as at September 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 $1,525,000 as a result of the net loss made in the nine months to 2011.


Mining Operations

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

                       Threemonths ended Sept30   Nine monthsended Sept30
                        2011            2010       2011           2010
    Tonnes milled:     11,821            12,602   35,869           38,455
    Underground ore

    Gold grade - grams                                    
    per tonne (g/t):
    Underground ore      7.60              7.60     7.39             8.03

    Recovery rate - %    84.6              85.1     84.6             86.0

    Gold production -   2,549             2,620    7,462            8,540
    ounces

    Cost per tonne       $268              $228     $261             $227
    milled

    Operating cost per $1,217            $1,109   $1,239             $990
    ounce of gold sold

    Operating cost per $1,242            $1,095   $1,254           $1,022
    ounce of gold
    produced

Tonnes milled in the third quarter of 2011 were 6% lower than achieved in the third quarter of 2010. Gold production at 2,549 ounces in the third quarter of 2011 was 3% lower than the third quarter of 2010 resulting from the lower tonnes milled together with the similar head grade of 7.6g/t. Gold totalling 104 ounces was recovered from a mill reline as part of the 2,549 ounces. Gold grade of 7.6g/t was higher than the planned grade of 6.8g/t, mainly due to higher grades from Vein 20 stope.

Gold recovery in the third quarter of 2011 decreased slightly to 84.6% from 86.0% in the second quarter due to lower head grades.

Mine development totalled 425 metres in third quarter 2011 compared to 308 metres in third quarter 2010 and 9 metres ahead of the mine plan. Ore development decreased to 170 metres in third quarter 2011 from 195 metres in second quarter 2011. Ore development focused on exposing Vein 20 mining area with positive results. The vein was exposed west of a fault where no vein was expected. To access Vein 20 down to the 210m elevation, an ore winze was advanced and a new access winze developed from 180m level. This new access winze will intersect Vein 20 in the fourth quarter and will be utilised for mining during 2012.

Exploration development advanced 201 metres as raises were mined to expose the mineralised package adjacent to Vein 17, Vein 18 and Vein 18C. The raises are adjacent to diamond drill holes recently completed by IAMGOLD.


Third Quarter Results

Third quarter revenue of $4,855,000 increased by 22% compared to revenue of $3,988,000 in the third quarter of 2010, due mainly to increased gold sales and higher realised gold prices. Other revenues in 2010 also included $1,000,000 for the Kalana joint venture option fee.

The net loss for the quarter of $280,000 compares to a profit of $2,166,000 in the third quarter of 2010 which arose from an exchange profit of $2,030,000.

Operating cost of sales for the third quarter of 2011 increased to $4,056,000 compared with $3,193,000 in the comparative period in 2010 due mainly to movement in finished goods stock and 10% unfavourable US$ exchange rate together with higher maintenance and labour costs. Cash operating cost of $268 per tonne milled in the third quarter of 2011 increased from $228 per tonne mainly due to reduced throughput. Cash operating cost per ounce produced of $1,242 per ounce in the third quarter of 2011 increased from $1,095 per ounce in 2010.

Cash and cash equivalents increased in the quarter by $418,000 to $10,255,000 from $9,837,000.


Liquidity, capital resources 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 C$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 continuing operations of the Company are dependent on its ability to generate future cash flows from its mining operations or obtain additional financing and there is a risk that additional financing will not be available on a timely basis or on acceptable terms. In the event that the Company is unable to secure additional financing, the Company will not be able to continue as a going concern, and material adjustments would be required to the carrying value of the assets and liabilities and the balance sheet classifications used.

The consolidated financial statements have been presented on the basis that the Company is a going concern. Accordingly, the financial statements do not include adjustments relating to the carrying value of assets, the amounts and classification of liabilities, or other adjustments that might result should the Company be unable to continue as a going concern.

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.


Outlook

Through the Joint Venture with IAMGOLD, Avnel is implementing an aggressive exploration program at the Kalana Mine to follow up the drilling program in 2010, reported above. IAMGOLD expects to incur expenditure in excess of $11 million during 2011 (with a total expense since the commencement of the Joint Venture of $15.3 million). The majority of the expenditure will be on diamond and RC drilling at the Kalana Mine. Diamond drilling has progressed ahead of plan during the first nine months and RC drilling commenced in the third quarter. For the fourth quarter one diamond drill rig and one RC drill rig will continue the drill program at Kalana. It is anticipated that a new Mineral Resource study will be completed in 2012. Underground exploration development is planned to increase to 600 metres as part of the resource study.

In addition diamond drilling will continue at the Kalanako Prospect close to Kalana to follow up initial drill program in 2010 and 2011.

In 2011 IAMGOLD, the joint venture partner with Avnel will commence exploration on the Fougadian Permit, which lies south and abuts the Kalana Permit. A termite mound sampling program was completed during the first half of 2011 and construction of an exploration camp should be completed during the fourth quarter. IAMGOLD plans to commence a further drill program in 2012.

In the fourth quarter of 2011, Avnel is planning gold production of 2,100 ounces from tonnes milled 11,000 tonnes, at an average grade of 6.8g/t. This plan is very sensitive to grade, gold price and costs. The plan assumes development will open up Vein 20 at an assumed mining grade of 7.5g/t. Initial ore development and mining of Vein 20 has provided data to estimate with confidence this grade. The company intends to sustain the operation as long as feasible whilst 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 allow access for future exploration activity.

The mine plans to advance development 302 metres during the remainder of 2011. Development will focus on opening up Vein 18 and Vein 20 below 180m level. Dependent on results, development will continue. Exploration development totalling 435 metres to provide information to support the exploration drilling program is planned on 150m and 180m levels.

It is forecast that the mineable reserves available from the current mine infrastructure are approximately 39,000 tonnes at 7.0g/t containing 9,000 ounces. This assumes that ongoing development of Vein 20 below 180m level will be successful. This will allow mining to average 3,800 tonnes per month to May 2012.

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.

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.



CONTACT:

AVNEL GOLD MINING LTD.
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