Avnel Gold - Research Report from Edison Investment Research

By Edison Investment Research, PRNE
Monday, February 21, 2011

Golden Upside

LONDON, February 22, 2011 - Avnel Gold (AVK:CN)'s drilling results announced on 22 February 2011
highlight the potential for bulk tonnage, open pittable gold mineralisation
at the company's Kalana permit in south-western Mali. A relatively small
underground mine currently extracts ~20kozpa from high-grade quartz veins on
the property. However, Avnel is focused on the area's potential to host
significantly larger bulk deposits. Extensive exploration work is being
undertaken in partnership with TSX-listed IAMGOLD, which has the option to
earn an initial 51% of Avnel's 80% stake in the 30-year permit by spending
US$11m over three years and delivering a resource of 2Moz (although we
believe the permit has the potential to deliver a resource of at least double

According to the IAMGOLD option agreement, Avnel is likely to end up
owning 39.2% of at least a 2Moz resource at Kalana where the company's
established presence would assist in the development of a new mine. Using a
benchmark multiple of $125.5/oz derived for 'inferred ounces listed on the
TSX', we calculate a value for Avnel of US$98m, which rises to US$135m if
these resources were drilled out to 'indicated' status. However, our
valuation excludes the value of the significant greenfields exploration
potential at Kalana and Fougadian.

Please click here to view the full report:

TSX-listed Avnel Gold Mining has an 80% interest in Societe
d'Exploitation des Mines d'Or de Kalana, owner of the 387.4km2 Kalana mine
and exploitation permit. The Malian government holds the remaining 20%. The
mine has historically produced over 190koz of gold. Avnel also owns a 90%
interest in the 75km2 Fougadian exploitation permit located south of Kalana
where IAMGOLD has an option to acquire 51%.

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