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). Kalana Mine The Kalana Exploitation Permit covers an area of 387 sq. kilometres on which the Kalana Mine is located. The Kalana Mine 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. To mid 2009 100,000 ounces have been recovered from the underground mine.

The Kalana Mine has a Mineral Resource base of 886,000  ounces ( Measured and Indicated Category) and 257,000 ounces (Inferred Category), estimated in accordance with Canadian IMM Standards and National Instrument 43-101 as at 31 December 2008. The main components are:

• Underground veins (Measured and Indicated) : 1,761,000 tonnes at 10.9g/t containing 617,000 ounces
• Underground stockwork (Indicated):310,000 tonnes at 4.25g/t containing 42,000ounces
• Underground veins/stockwork (Inferred):429,000 tonnes at 6.2g/t containing 85,000 ounces 
• Open Pit (Indicated): 872,000 tonnes at 7.12g/t containing 200,000 ounces
• Open Pit (Inferred): 1,842,600 tonnes at 2.9g/t containing 172,000 ounces
• Surface tailings (Indicated): 399,000 tonnes at 2.05g/t containing 26,000 ounces

 The Measured and Indicated Resources have been converted in to Underground Proven and Probable Mineral Reserves of 42,000 ounces contained in 123,000 tonnes at a grade of 13.1 g/t, between 100m and 200 metres below surface. The existing mine infrastructure enables the reserves to be mined from 180m level via the No 2 Shaft.

 Kalana Gold Mine Production for 2004, 2005, 2006, 2007 and 2008

Kalana Main Project
The focus of the Kalana Main Project is to study the potential for non-quartz vein hosted gold mineralization and explore the potential for the mining of the Kalana Gold Mine or parts of it either as an open pit or by underground bulk mining methods.  Underground development and drilling has shown that gold mineralisation exists outside the major quartz vein structures that host substantially all of the Kalana Gold Mine’s mineral resources, reported in the NI 43-101 compliant “Kalana Gold Mine Technical Report 17 January, 2005” prepared by Snowden Mining Industry Consultants (the “2005 Snowden Technical Report”) and filed on SEDAR. These resources are based on high grade, narrow quartz veins that occur within a broader mineralised system. The understanding of this strong gold mineralised system needs to be developed by:
 (i) capture the very large geological database generated in paper form by SONAREM and into a digital database, and (ii) re-interpret that data to assess the potential for gold mineralization outside of the flat dipping quartz vein structures mapped and assayed by SONAREM and SOGEMORK and (iii) optimise a future drill program to enhance the existing mineral resource base. Avnel has continued underground exploration by development and diamond drilling and this data will be included in the database. Underground mining has exposed numerous quartz vein, stockworks and mineralization in the metasediments that had not been incorporated by SONAREM and SOGEMORK into their geological model of the deposit.

Kalana Permit 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 completed a 2,542m RC drill program at Djirila in quarter 2, 2006 and confirmed the updip extent of the mineralized zone.

Fougadian Permit In February 2006, Avnel was awarded a three month exploration authorisation on the Niessoumala exploration area directly south of Kalana Permit. The area was included in the Or-Bagoe geochemical soil sampling program conducted in the 1980s (see Figure 12). That survey identified a number of multi-kilometre length gold anomalies.  The soil survey lines were at 1 km spacing. Avnel collected 1,512 soil samples, using a 200m line spacing, from 3 anomalies identified in the Or-Bagoe survey and assayed 300 samples for gold. The results confirmed that gold occurs at these locations. A number of orpaillage pits were identified during the field work. Based on the results and the potential for gold discoveries, Avnel Mali applied for an Exploration Permit over 150 square kilometres. Avnel Mali was awarded the Fougadian Exploration Permit (the “Fougadian Exploration Permit”) which lies south of the existing Kalana Permit.  The Fougadian Exploration Permit covers an area of 150 square kilometers. The Fougadian Exploration Permit has been awarded in accordance with the 1999 Mining Code and a Foundation Agreement has been signed between Avnel Mali, a 100% owned subsidiary of Avnel, and the Government of the Republic of Mali.  Avnel Mali has a 90% interest and the Malian State 10% in the permit, if a decision is made to construct a mine. The Foundation Agreement provides for the exploration and exploitation of Group 2 minerals as defined in the 1999 Mineral Code. Group 2 minerals includes gold and silver, base metals but excludes precious stones, semi- precious stones and fossils.

Phase 1 consisted of a  detailed soil geochemical surveys, initiated across its large Fougadian Exploration Permit in 2006 and 2007 and has outlined several km-scale, gold-in-soil anomalies and coincident arsenic anomalies.
The numerous significant gold and arsenic anomalous clusters that have been delineated were grouped into 14 anomalies (Avnel-1 to Avnel‑14). It was observed that these 14 gold anomalies fall along three major mineralised corridors. Two of these corridors are sub-parallel, strike approximately N‑S and can be traced nearly continuously through the length of the property. The third corridor strikes NNE-SSW and passes through the south-eastern and north-eastern quadrants of the licence.

The presence of definable ‘corridors’, +20km in length, characterised by linearly disposed anomalous concentrations of gold, arsenic, potassium and copper that cross the permit north to south indicate the probable presence of significant faults that have focused hydrothermal fluid flow through the crust at the western margin of the regional-scale volcaniclastic-sedimentary basin (Bougouni Basin).
The anomalies present in the western N-S mineralised corridor (Avnel-5 to 10) are located close to the lithological contact between a batholith-sized granitoid body to the west and the Birimian metasediments to the east. Their position within a possible thermal-structural aureole is reminiscent of the depositional site at the +6Moz Morila Deposit (i.e., Thermal Aureole Gold systems associated with contact metamorphic deposits).

The anomalies present in the central N-S mineralised corridor and the anomalies present in the eastern NNE-SSW mineralised corridor may be more related to quartz vein type deposits such as the Kalana Deposit (i.e., distinct linear bands of high gold values are observed within the main anomalies of the central and eastern N-S mineralised corridors).  Artisanal mining sites exposing quartz vein fragments are a significant feature of the more important gold anomalies in these mineralised corridors.
In March 2008, Avnel advanced its exploration of the Fougadian Exploration Permit by commencing a drilling program.   The drill program was focused on the Avnel-1 gold-in-soil geochemical anomaly that is the largest and the most important in terms of gold and arsenic values on the Fougadian Permit.

Two diamond drill holes were completed to a depth of 190 metres in order to provide information on the bedrock structure that was 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 of 2008, covering only a 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.

The results of this drilling programme are presently being assessed and thus far a quality control / quality assurance study has been completed on the assay data, individual borehole logs have been compiled and a petrographic study has been completed. An interpretation of the mineralized intersections was completed in May. That synthesis has indicated the presence of two sub-parallel zones of mineralization. The highest grade intersection was 7.45g/t Au over an intersection width of 2m and the widest intersection width was 14m  at 0.92g/t Au, using a cut-off of 0.5g/t.  Nine intersections contain 1g/t Au or more over intersection widths ranging from 2 to 12m.  Although no clearly economic mineralization has been delineated thus far the results are considered encouraging enough to justify further drilling of the Avnel 1 target. Avnel is currently preparing an application for an extention of the Permit for a 3 year period.

Growth Strategy
Avnel’s strategic objective is to grow its mineral resource base through ongoing exploration of the strong, gold mineralised system at the Kalana Mine and  to realise its potential to advance the project into a large scale bulk mining operation.  Avnel’s intention is to continue exploration of the Kalana Permit area to identify new ore resources to adjacent to the Kalana Gold Mine and follow up the gold anomalies identified on the Kalana Permit. These may add new mineral resources that can be exploited at the Kalana Mine or new mines.