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. Kalana Mine The Kalana Exploitation Permit covers an area of 387 sq. kilometerson which the Kalana 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 981,000  ounces ( Measured and Indicated Category) and 257,000 ounces (Inferred Category), estimated in accordance with Canadian IMM Standards and National Instrument 43-101 . The main components are:

• Underground veins (Measured and Indicated) : 1,548,000 tonnes at 14.4g/t containing 718,000 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 381,000 ounces contained in 705,000 tonnes at a grade of 16.79 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.

Table 1 Kalana Gold Mine Production for 2004, 2005 and 2006

Avnel has deepened No 2 shaft to access ore reserves located between 100m and 300m below surface. Development during 2007 will open up new ore reserves. Ore production will reach mill capacity of 60,000 tonnes per annum in 2009. During 2007 and 2008 gold production is planned to increase as new ore reserves are opened up by development. The gravity plant is recovering approximately 90% of the gold showing the free gold nature of the Kalana quartz veins.

The mined grades have exceeded the mineral reserve grades during 2005 and 2006. The block factor for mining of vein 1 has been approximately 238% of the mineral reserve grade calculated in 2003. The major reason for the positive block factor is the quantity of coarse gold mined. It is difficult to evaluate veins with high nugget effect by diamond drilling and generally mineral reserves will be under valued. The mineral reserves of other veins have not been adjusted as mine development is in progress to expose these veins.

Avnel expects to achieve sustainable annual gold production in excess of 30,000 ounces per annum from 2009 and a life of mine of 12 years.

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 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.

Avnel is obliged to incur expenditures of at least $310,000 in the first year after the award of the Fougadian Exploration Permit.

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.

A follow-up field exploration programme has been recommended in order to evaluate the potential of the numerous significant gold anomalies in the Fougadian Permit. This programme may include initial IP ground geophysical surveys and will include RC drill campaigns.

Growth Strategy

Avnel’s strategic objective, through SOMIKA, is to commercially exploit the reserves at the Kalana Gold Mine, and enhance the economics and life of the Kalana Gold Mine through underground exploration to convert mineral resources into mineral reserves and through surface exploration (including feasibility studies) to convert surface resources into reserves. Avnel intends to utilize free cash flow from the Kalana Gold Mine to partially fund exploration of the Kalana Permit and development of future projects. Avnel’s intention is to continue exploration of the Permit area to identify new ore resources to add to the known resources at the Kalana Gold Mine.  Avnel will focus on identifying these new resources prior to any commitment to expand production on the Kalana Gold Mine.  The scale of any proposed production expansion will be influenced by the size and location of any new discoveries.

Avnel plans to conduct an exploration program on the recently acquired Fougadian Permit, which lies directly south of the Kalana Permit. The objective is to identify gold mineralization that can be converted into mineral resources. The permit has an initial three year life and Avnel intends to explore the whole permit adequately by soil sampling and drill programs prior to October 2009.