More high-grade, shallow gold for Avion in Mali

VANCOUVER — The near-surface gold grades at the Tabakoto project in Mali keep getting better for Avion Gold (AVR-V) and now the company is being rewarded for its efforts with a $25-million bought-deal financing.

The junior producer is testing the area around the Dioulafoundou deposit, a northwest-trending zone 2 km south of the Tabakoto open pit. The area already hosts an open-pittable resource of 349,300 tonnes grading 3.76 grams gold per tonne as well as an underground resource measuring just over 100,000 tonnes at 4.41 grams gold.

Recent shallow drilling is, however, revealing better grades. Hole 33 cut 12 metres of 14.86 grams gold from 85 metres depth, hole 27 returned 9 metres of 17.1 grams gold from 39 metres downhole, and hole 34 intercepted 14 metres averaging 21.77 grams gold. Other strong hits included 13 metres of 6.4 grams gold, 8 metres of 10 grams gold, 4 metres of 17.92 grams gold, and 18 metres of 4.55 grams gold.

The intercepts all sit along 300 metres of strike and within 65 metres of surface. Avion also emphasized that the majority of recent drill intercepts sit outside of the current resource.

The company expects to complete its drill effort at Dioulafoundou within the next few weeks. Results from the program will inform a resource estimate due out by the end of the second quarter, which Avion says could be the basis of a production decision before year end.

Dioulafoundou is one of some eight targets lying on a southwest-striking mineralized trend that includes the Tabakoto pit. This latter pit is one of two deposits supplying ore to Avion’s mill, which it revived and commissioned in early 2009. Tabakoto hosts roughly 4 million measured and indicated tonnes of open-pittable material grading between 2.9 and 3.5 grams gold as well as 2.7 million measured and indicated tonnes of underground material averaging between 3.4 and 3.8 grams gold. Inferred resources add another million tonnes to the open pit and 2.7 million tonnes to the underground resource.

A second, parallel trend to the west hosts another eight to 10 targets; the western trend terminates at the Segala deposit in the north, which is the largest deposit in the area after Tabakoto. Segala hosts roughly 1 million measured and indicated tonnes of open-pittable resource plus almost 3.5 million measured and indicated tonnes of underground resource. Resource grades range from 2.1 grams gold to 5.6 grams gold.

Avion announced some promising drill results from one of the deposits on that western trend in mid- March. The Djambaye II zone is about 6.5 km southwest of the Tabakoto pit and is part of the 32- sq.-km Kenieba concessions that Avion acquired earlier this year from Great Quest Metals (GQ-V).

The latest Djambaye results came from 31 reverse circulation holes cut on a north-south line over 700 metres strike.

Hole 7 cut 1.8 metres grading 6.69 grams gold, starting at surface, as well as 1 metre grading 5.56 grams gold starting at 8 metres. Hole 9 hit 0.9 metre grading 8.08 grams gold starting 24 metres downhole and hole 11 returned 4.3 metres averaging 10.66 grams gold, starting at 20 metres depth.

Hole 13, drilled in what was likely once an artisanal pit, cut 2 metres grading 10.84 grams gold starting at 2 metres, as well as 2.4 metres grading 11.34 grams gold starting at 25 metres. Hole 18, also drilled in an artisanal area, returned 6.1 metres grading 3.64 grams gold starting at 9 metres.

Farther south, hole 30 intersected 11 metres grading 3.7 grams gold at 23 metres depth and hole 31 cut 5 metres grading 18.97 grams gold starting 44 metres downhole.

Great Quest established an inferred resource for the Djambaye zone of 2.57 million tonnes grading 3.92 grams gold from drill programs in 2006 and 2007. Avion drilled the latest holes as part of an infill exploration program in the area. The Djambaye II zone has now been traced for roughly 4,400 metres and is still open to the north, south and to depth.

Avion also recently identified a new mineralized zone north of and parallel to the Djambaye II zone called the Fougala area. Located 2 km north of Djambaye II, Avion hit 22.3 metres grading 8.02 grams gold in the area starting 80 metres downhole.

In 2010, Avion plans to spend $10 million on exploration, completing 60,000 metres of drilling.

Avion acquired an 80% interest in the Segala and Tabakoto properties in early 2008 from Nevsun Resources (NSU-T, NSU-X) for $20 million and a 1% net smelter return royalty. The government of Mali controls the remaining 20%.

The properties are located 200 km south of the city of Kayes, in the western portion of the country.

Since achieving production of Tabakoto and Segala more than a year ago, the company has managed to improve its production numbers every quarter. Mill throughput has remained fairly constant, averaging 162,000 tonnes per quarter, but head grade increased from 1.99 grams gold to 3.83 grams gold and recoveries increased from 93.7% to 96.7%. In its first three full quarters Avion’s mine produced 51,291 oz. gold.

Now Avion is working on an expansion study, with the goal of increasing its production capacity by nearly 100% to be able to produce 200,000 oz. gold annually. The study is also investigating how and when to initiate underground mining to tap into the area’s deeper resources.

Funds for the expansion would come from cash flow, the company’s cash balance of $20.5 million, and the newly-announced $25-million bought-deal financing. In the placement Avion is selling 41.8 million shares at 60¢ apiece; the underwriters have a 6.3-million share overallotment option.

And Avion also finalized a deal to purchase the Kofigroup of concessions, a 472-sq.-km property that at its nearest point is within 5 km of Tabakoto, from Axmin (AXM-V, AXMIF-O). The Kofiproperty wraps around the north side of Randgold Resources’ (GOLD-Q, RRS-L) Loulo mine, home to 63 million measured and indicated tonnes grading 4.55 grams gold and four of the nine known mineralized zones at Kofi sit along two trends extending from deposits on at Loulo. As Avion describes it, “These two trends, which intersect on the Kofiproperty, are associated with a magnetic feature that extends for another 5 km to the north. Avion believes this magnetic feature represents an interesting exploration target.”

Kofiis already home to 3.6 million indicated tonnes grading 2.5 grams gold plus 5.26 million inferred tonnes averaging 2.2 grams gold.

Avion’s share price gained 4¢ on news of the latest intercepts from Tabakoto to reach 78¢. The company has a 52-week trading range of 24.5¢-83¢ and 300 million shares outstanding.