Avnel’s principal asset is an 80% interest in Societe des Mines d’Or De Kalana (SOMIKA), with the State of Mali holding the remaining 20% interest. SOMIKA is the owner and operator of the Kalana Gold Mine located in the southwest of Mali, and is the holder of the exploration permit in respect of the 387.4 squ km site. The company’s strategic objective, through SOMIKA, is the commercial exploitation of Kalana’s existing reserves, and expansion of reserves through underground and surface exploration.
Gold production of 8 620 ounces in the first three months of 2007 was 46% above plan and almost double the production of 4 411 ounces in the first quarter of 2006. Increased gold production was due to 30% higher mill throughput, a 6% increase in grade and a 6% rise in gold recovery (6%).
Tonnes milled in the first quarter of 2007 were 17% above the production achieved in the corresponding period of 2006 and 30% above planned production for the first quarter.
The gold grade of ore milled in the first quarter of 2007 was 57% higher than that obtained in the same period of 2006. Gold recovery of 94.3% in the first quarter of 2007 also exceeded both the prior year (88.5%) and the planned rate (89.3%). Development advanced 535m in the first quarter of 2007, compared to the planned 445m.
Turning to finances, Avnel recorded a net income of US$0.8 million for the first quarter of 2007, compared to a net loss of US$1.3 million for the same period of 2006. Gold sales during the quarter totalled 7 466 ounces at an average price of $571 per ounce. (2 900 ounces were sold into a forward contract at an average price of $439 per ounce, and 4 566 ounces were sold at an average price of $656 per ounce). Cash costs per ounce reduced from $425 per ounce in the first quarter of 2006 to $325 per ounce in the first quarter of 2007.
Production at the Kalana Mine is increasing as new mining areas are developed. The underground mine is expected to reach the 60 000tpa design capacity of the plant once shaft deepening to new access veins is completed in 2008.
Once at full throughput, the mine is expected to produce and average of 26 000 to 30 000 ounces per annum over the next eight years of its 16-year life.
The Kalana Mine has a mineral resource base of more than 1 million ounces (measured and indicated) and 252 000 ounces (inferred). The main components are:
- Underground veins (measured and indicated): 936 000 tonnes at 14.2g/t containing 747 000 ounces
- Open pit (indicated): 872 000 tonnes at 7.12g/t containing 200 000 ounces
- Open pit (Inferred): 1.840 million tonnes at 2.82g/t containing 167 000 ounces.
Furthermore, Snowden has concluded that there is reasonable potential to define additional reserves from indicated and inferred resources through continued mine development and exploratory drilling.
Avnel intends to identify other gold resources on the property and to add these to the existing 1.25 million ounces at the Kalana Mine. A strategic development plan can then be implemented to allow the company to grow its production profile within five years. Excess cash flow from the Kalana Mine will be used to expedite the exploration and development activity, and to fund corporate costs.