Avnel Announces Proposed Private Placement of up to C$13.5 Million

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

ST. PETER PORT, Guernsey, June 26, 2014 /CNW/ - Avnel Gold Mining Ltd. ("Avnel Gold" or the "Company") (TSX: AVK) is pleased to announce today a best efforts private placement (the "Offering") of up to C$13.5 million of units of Avnel Gold (the "Units") at a price of C$0.15 per Unit (the "Issue Price") representing up to 90,000,000 Units.

Each Unit will consist of one ordinary share in the capital of the Company (a "Unit Share") and one transferable ordinary share purchase warrant (a "Warrant"). Each Warrant will entitle the holder to purchase one ordinary share of Avnel Gold at a price of C$0.20, at any time for a period of 30 months from the date of issue of the Warrants, provided that in the event that the ordinary shares of Avnel trade on the Toronto Stock Exchange (the "TSX"), or other recognized stock exchange or market, as applicable, at a volume weighted average price of C$0.30 or more for a period of at least 20 consecutive trading days, the Company shall be entitled to accelerate the exercise period to a period ending at least thirty days from the date that notice of such acceleration is provided to the holders of Warrants. The Warrants will also contain standard anti-dilution provisions. Haywood Securities Inc. ("Haywood" or the "Lead Agent") and Northland Capital Partners Limited are managing the Offering (the "Agents"). The terms and conditions of the Offering are the results of arm's length negotiations between Company and the Lead Agent. The Company has granted the Agents an option (the "Over-Allotment Option"), exercisable, in whole or in part by the Lead Agent on behalf of the Agents, at any time up to the Closing Date to offer for sale, up to an additional number of Units (the "Additional Units" and together with the Units, the "Offered Units") equal to 15.0% of the Units sold pursuant to the Offering at a price per Additional Unit equal to the Issue Price. The gross proceeds of the Offering will be up to approximately C$13.5 million (up to approximately C$15.5 million if the Over-Allotment Option is exercised in full). Based on a Black-Scholes valuation, the C$0.15 price per Unit reflects a value of C$0.135 per Unit Share and C$0.015 per Warrant. The price per Unit Share represents a premium of approximately 12.5% over the five day volume weighted average price for the ordinary shares (as at June 24, 2014) listed on the TSX of approximately C$0.12 per ordinary share.

Avnel Gold intends to use these proceeds for: (i) working capital expenditures at the Kalana Gold Project (the "Kalana Project"); (ii) the completion of a pre-feasibility study for the Kalana Project in order to bring the project closer to the feasibility study phase; and (iii) general corporate purposes. The expected timing for the completion of the pre-feasibility study is January 2015, at which time it is anticipated that the Company will focus on completing a feasibility study for the Kalana Project if the results of the pre-feasibility study are positive. Upon completion of a feasibility study, the Company will make a determination whether the development of the Kalana Project shall proceed and whether project financing for the Kalana Project is required. All references herein to "Offering" shall be deemed to include the Over-Allotment Option.

Closing of the Offering will be subject to certain closing conditions, including the approval of the TSX and the execution of definitive agreements by all parties, and is expected to occur on or about July 7, 2014.

Certain affiliates of Elliott Management Corporation (the "Elliott Group") and the Fern Trust have stated an intention to participate in the Offering such that they will purchase, in aggregate, such number of Offered Units equal to 80% of the Offered Units sold pursuant to the Offering, in order to maintain their respective pro rata ownership interest in the Company and as such, will subscribe for Units under the Offering. Each of the Elliott Group and the Fern Trust are currently insiders of the Company by virtue of holding greater than 10% of the Company's currently issued and outstanding ordinary shares and each will continue to be an insider of the Company after completion of the Offering.

Although the closing of the Offering will not result in a change of control of Avnel Gold, the transaction does require security holder approval under the Company Manual of the TSX, subject to the availability of an exemption therefrom. The Offering requires security holder approval because: (i) the aggregate number of ordinary shares of Avnel Gold issuable pursuant to the Offering (including the exercise of Warrants issued thereunder) would be greater than 25% of the number of ordinary Shares of Avnel Gold which are issued and outstanding, on a non-diluted basis, prior to the date of closing of the Offering and the Issue Price is considered to be less than the market price of the ordinary shares of Avnel Gold by virtue of the fact that the Warrants form part of the Units being offered pursuant to the Offering, (ii) insiders or affiliates of insiders of Avnel Gold will receive Units pursuant to the Offering, representing more than 10% of the market capitalization of Avnel Gold, and the interests of those insiders may differ from those of other holders of the ordinary shares of Avnel Gold and (iii) the percentage compensation payable to the Agents pursuant to the Offering exceeds the maximum amount that the TSX will allow without shareholder approval.

A committee of directors of Avnel Gold, independent of management, free from any interest in the Offering and unrelated to the parties involved in the Offering, has unanimously recommended to the board of directors of the Company that the Company apply to the TSX for an exemption from the shareholder approval requirements for the Offering on the basis that (i) the Company is in serious financial difficulty, (ii) the Offering is designed to improve Avnel Gold's financial situation, and (iii) the terms of the Offering are reasonable to the Company in the circumstances. The board of directors unanimously agreed with this recommendation.

The Company has applied to the TSX for, and received, an exemption from the requirement to seek shareholder approval in accordance with Section 604(e) of the TSX Company Manual on the basis the Company finds itself in a state of financial hardship. The TSX has advised Avnel Gold that reliance on this exemption will automatically result in a delisting review. Avnel Gold believes that, upon completion of the Offering, it will be in compliance with all of the continued listing requirements of the TSX.

In addition, due to the participation of insiders of the Company in the Offering, the Offering is a "related party transaction" for the purposes of Multilateral Instrument 61-101– Protection of Minority Security Holders in Special Transactions ("MI 61-101") and the Company is relying on exemptions from the formal valuation and minority approval requirements of such instrument on a determination of financial hardship available to it pursuant to Section 5.5(g) and Section 5.7(l)(e) of MI 61-101, respectively. A material change report in connection with the Offering will be filed less than 21 days before the closing date of such transaction. This shorter period is reasonable and necessary in the circumstances as the Company wishes to complete the transaction in a timely manner.

There are currently 191,743,724 ordinary shares of Avnel Gold issued and outstanding. Assuming the full exercise of the Over-Allotment Option, the Company will issue up to 103,500,000 ordinary shares (representing up to approximately 54% of the Company's current issued and outstanding ordinary shares) and up to 103,500,000 Warrants pursuant to the Offering (representing up to approximately 54% of the Company's current issued and outstanding ordinary shares). The maximum number of ordinary shares issuable by the Company pursuant to the Offering (assuming the full exercise of the Over-Allotment Option) is 211,347,000 ordinary shares (approximately 110% of the currently issued and outstanding ordinary shares).

Assuming the full exercise of the Over-Allotment Option, on the closing of the Offering the aggregate shareholdings of the Elliott Group will increase by up to 62,100,000 ordinary shares from approximately 112,981,945 ordinary shares (approximately 58.9% of the currently issued and outstanding ordinary shares) to up to approximately 175,081,945 ordinary shares (approximately 59.3% of the post-closing issued and outstanding ordinary shares) and the aggregate shareholdings of the Fern Trust will increase by up to 20,700,000 ordinary shares from approximately 33,602,022 ordinary shares (approximately 17.5% of the currently issued and outstanding ordinary shares) to up to approximately 54,302,022 ordinary shares (approximately 18.4% of the post-closing issued and outstanding ordinary shares).

Assuming the full exercise of the Over-Allotment Option and that all Warrants issued on the closing of the Offering are exercised in full and there are no other changes to the shareholdings of the entities referred to above, the aggregate shareholdings of the Elliott Group will further increase by up to 62,100,000 ordinary shares to up to approximately 237,181,945 ordinary shares (approximately 59.5% of the post-closing issued and outstanding ordinary shares or approximately 66.4% if only the Elliott Group exercises its Warrants) and the aggregate shareholdings of the Fern Trust will further increase by up to 20,700,000 ordinary shares to up to approximately 75,002,022 ordinary shares (approximately 18.8% of the post-closing issued and outstanding ordinary shares or approximately 23.7% if only the Fern Trust exercises its Warrants).

The Agents will receive a cash fee equal to 9.0% of the gross proceeds from the sale of Offered Units under the Offering excluding the proceeds from the sale of Offered Units to the Elliott Group and the Fern Trust. The Agents will also receive a cash financial advisory fee equal to 1.5% of the gross proceeds from the sale of Offered Units under the Offering to the Elliott Group and the Fern Trust. In addition, the Agents will be granted compensation options (i) entitling the Agents to purchase that number of ordinary shares of the Company equal to 9.0% of the aggregate number of Offered Units issued by the Company under the Offering excluding those Offered Units issued to the Elliott Group and the Fern Trust (the "Share Compensation Options"), representing up to 1,863,000 Share Compensation Options (assuming the full exercise of the Over-Allotment Option) with an exercise price per Share Compensation Option that is equal to the Issue Price and (ii) entitling the Agents to purchase that number of Units equal to 1.5% of the aggregate number of Offered Units issued by the Company to Elliott Group and the Fern Trust under the Offering (the "Unit Compensation Options"), representing up to 1,242,000 Unit Compensation Options (assuming the full exercise of the Over-Allotment Option) with an exercise price per Unit Compensation Option that is equal to the Issue Price. The Share Compensation Options and Unit Compensation Options shall have a term of 24 months following the closing of the Offering. The maximum number of ordinary shares issuable by the Company pursuant to the Share Compensation Options and the Unit Compensation Options (assuming the full exercise of the Over-Allotment Option) is 4,347,000 ordinary shares (approximately 2.3% of the currently issued and outstanding ordinary shares). The Lead Agent will also receive a corporate finance fee of C$50,000 in connection with the services provided to the Company in connection with the Offering.

About Avnel Gold

Avnel Gold is a TSX-listed gold mining, exploration and development company with operations in southwestern Mali, near the border with Guinea, in West Africa. The Company is focused on developing the Kalana Gold Project into a low cost, open-pit mining operation. The Company is also advancing several satellite deposits that have the potential to become part of a larger mining operation on the 387 km² 30-year Kalana Exploitation Permit.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained in this news release.

The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

CAUTIONARY STATEMENTS

Forward-Looking Statements

This news release includes certain "forward-looking statements". All statements, other than statements of historical fact, included in this release, including the future plans and objectives of Avnel Gold, are forward-looking statements that involve various risks and uncertainties. There can be no assurance that forward-looking statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Avnel Gold's expectations include, among others, risks related to international operations, the actual results of current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future prices of gold and silver, as well as those factors discussed in the section entitled "Risk Factors" in Avnel Gold's Annual Information Form, which is available on SEDAR (www.sedar.com). Although Avnel Gold has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Preliminary Economic Assessment

The Kalana Preliminary Economic Assessment ("PEA") is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves; thus, there is no certainty that the economic benefits indicated in the PEA will be realized. The PEA is subject to a number of assumptions, including, among others that an Environmental Impact Assessment will be completed within the required timeline, all required permits will be obtained in a timely manner, the company will continue to have the support of local community, a constant regulatory environment and no material increase occurs to the estimated costs. Investors are cautioned not to assume that all or any portion of these mineral resources will ever be converted into proven and probable reserves. The Kalana PEA is based upon an 8.54 million tonne Indicated Mineral Resource grading 4.53 grams of gold per tonne ("g/t Au") containing 1.25 million ounces and a 2.09 million tonne Inferred Mineral Resource grading 3.76 g/t Au containing 0.25 million ounces utilizing a cut-off grade of 0.9 g/t Au. The PEA also includes 0.66 million tonnes of tailings grading 1.80 g/t Au that are classified as an Indicated Mineral Resource. Investors are cautioned not to assume that all or any portion of these mineral resources will ever be converted into proven and probable reserves. The NI 43-101 technical report for the PEA and the Mineral Resource Estimate was prepared by Snowden Mining Industry Consultants and was filed on SEDAR (www.sedar.com) on 31 March 2014. The summary of the PEA above has been prepared under the supervision of Roy Meade, Director and Executive Director, Operations of Avnel Gold and a "Qualified Person" for the purposes of NI 43-101.A copy of the PEA was filed on SEDAR (www.sedar.com) on 31 March 2014.

Cautionary Note to United States Investors

This press release uses the terms "Measured", "Indicated", and "Inferred" resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. "Inferred Mineral Resources" have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of a Mineral Resource is economically or legally mineable.

SOURCE Avnel Gold Mining Ltd.