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Saturday, 03/31/2007 11:33:32 PM

Saturday, March 31, 2007 11:33:32 PM

Post# of 2138
Unknown small gold producer Avnel gold listed on the toronto exchange (AVK.TO) is producing around 25,000 oz per year from their gold mine in Mali. But the total resources are 1.25 million oz and continuing to grow as they drill more, so there is a lot of upside potential in their gold production. And their drilling is finding more high grade gold, so I think the resources can go up to 2 million oz in the next year or so. Two insiders (a fund and the chairman) control 40% of the shares outstanding. If you look at their presentation on their website, they talk of expanding to 150,000-200,000 oz per year in the future:
http://www.avnelgold.com/investor_relations/presentations/presentations.html

All this for a US$25 million Market cap. This seems cheap not only on the basis of the current 25,000 oz per year gold production, but especially more so if you take into account their plans to grow into being an intermediate producer over the next few years. A 150,000 oz per year producer in Mali (which is pretty stable and investor friendly) should be worth US$500 million market cap. Assuming they have to double the shares outstanding to finance their expansion, that still leaves open a 10 fold share price appreciation potential.


http://www.avnelgold.com/about_us/about.html
Avnel Gold Mining Limited owns and operates the Kalana Exploitation Permit in Mali through its 80% owned Malian subsidiary, SOMIKA. Avnel completed an IPO in June 2005 and is listed on the Toronto Stock Exchange (Ticker: AVK). Avnel completed a Private Placement in November 2005 raising gross C$7.9 million.

In October 2006 Avnel has acquired the Exploration Permit for the Fougadian Permit located directly south of the Kalana Permit. The permit covers an area of 150 square kilometers.

Kalana Mine

The Kalana Exploitation Permit covers an area of 387 sq. kilometerson which the Kalana
Kalana Gold Mine - location in Mali

Mine is located. The Kalana Mine was produced approximately 80,000 ounces in the period 1985-1991. SOMIKA re-commissioned the mine and plant facilities in 2003 and gold production commenced in 2004.

The Kalana Mine has a Mineral Resource base of 1,000,000 ounces ( Measured and Indicated Category) and 252,000 ounces (Inferred Category), estimated in accordance with Canadian IMM Standards and National Instrument 43-101 . 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): 1,840,000 tonnes at 2.82g/t containing 167,000 ounces

The Measured and Indicated Resources have been converted in to Underground Proven and Probable Mineral Reserves of 428,000 ounces contained in 936,000 tonnes at a grade of 14.2 g/t, between 100m and 300 metres below surface. Snowden concluded there is reasonable potential to define additional reserves from indicated and inferred resources through continued mine development and exploratory drilling

The Kalana Mine produced 7,396 ounces and 14,923 ounces respectively in 2004 and 2005. Production increased in 2005 as head grade increased to 15.5g/t and gold recovery increased to 86%. Avnel is currently deepening No 2 shaft to access ore reserves located between 100m and 300m below surface. Ore production will reach mill capacity of 60,000 tonnes per annum in 2008. During 2006 and 2007 gold production is planned to increase as new ore reserves are opened up by development. The gravity plant is recovering approximately 86% of the gold showing the free gold nature of the Kalana quartz veins. Avnel currently plans to increase gold production an average of 26,000 ounces per annum at a cash cost of approximately $275 per ounce for the first 8 years of the mine life.

Kalana Exploration

SOMIKA has the right for 30 years to explore and develop mines on the Kalana Exploitation Permit. The objective of the exploration is to discover additional large gold deposits, including disseminated replacement type hosted by sedimentary rocks, Morilla or Sadiola analogues, or multiple Au-quartz vein systems as mined at the Kalana Mine.

The area is highly prospective and the Phase 1 and 2 geochemical soil sampling program completed in 2004/5 identified at least 9 significant gold-in-soil anomalies on the 10 grids areas sampled.

The Phase 3 program consisted of a RC and RAB drilling program located on the anomaly identified on grid 8, where the Djirila Hill is located. Some of the drill holes have intersected high grade mineralization in a new gold discovery. Best results include 45.9 g/t over 4m and 73.6 g/t over 2m.

The Phase 4 program consisted of 2,100 metres of diamond drill completed in quarter 1 2006. The results confirmed the high grade intersections from the RC drilling. Best results include 11.14g/t over 24m, 12.55g/t over 19m, 4.8g/t over 10m, 3.04g/t over 7m, 19.3g/t over 2m, 14.57g/t over 3m. This mineralised zone has now been traced by diamond core drilling along a NNE strike for more than 225m where it has been found to have a vertical to steep easterly dip. The width of the mineralised zone varies from 3 to 50 metres and appears to be associated with a NNE-trending corridor of faulting and silica-sulphide emplacement. The zone of artisanal workings stretches another 150m beyond the present drill program.

Avnel has completed a 2,543m RC program in quarter 2, 2006 to follow up the diamond drill program completed in quarter 1, 2006. The results show that the mineralization at Djirila Main continues up dip towards surface.
Drill Targets
The mineralized zone is open below 100m. Best results include: 15.8g/t over 2m from 53-55m, and 10.1g/t over 1m from 59-60m in RC-28; 2.1g/t over 2m from 24-26m and 4.7g/t over 2m from 96-98m in RC-29; 2.2g/t over 1m from 17-18m and 4.6g/t over 1m from 100-101m in RC-31; 4.4g/t over 1m from 88-89m and 4.4g/t over 1m from 96-97m in RC-32; 9.7g/t over 3m from 84-87m and 2.0g/t over 1m from 94-95m in RC-33.

Growth Strategy

Avnel intends to identify other gold resources on the property and to add these to the 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 5 years. Excess cash flow from the Kalana Mine will be used to expedite the exploration and development activity, and to fund corporate cost.

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