Avnel issued a news release on March 30, 2016 announcing the results of a definitive feasibility study Study for the Kalana Main Project (the “DFS”), which are summarized below. The key performance indicators reported below are based upon 100% ownership of the Kalana Main Project. All amounts are in United States dollars (“$”) unless specified otherwise.

Feasibility Study Highlights (base case gold price of $1,200 per ounce)

Project Economics

• After tax 8% NPV: $196 million
• After tax IRR: 38%
• Payback period: 1.2 years from start of commercial production

Mine Production

During first 5 years:
• Average annual production of 148,000 ounces at a total cash cost of $507/oz and an average on-site all-in-sustaining cost (“AISC”) of $595/oz
• Average mill head grade of 3.6g/t Au with gold recovery of 94.6%
• Average annual throughput of 1.35 million tonnes milled

Over 18-year life of mine:
• Total production of 1.82 million ounces with gold recovery of 92.7%
• Average annual production of 101,000 ounces at a total cash cost of $695/oz and an on-site AISC of $784/oz

Maiden Mineral Reserve declared of 1.96 million ounces:
• 21.0 million tonnes of ore at a grade of 2.80 g/t Au containing 1.92 million ounces declared
• 0.7 million tonnes of existing tailings at a grade of 1.80 g/t Au containing 0.04 million ounces to be hydraulically mined and processed prior to commissioning the new mill

Capital Expenditure

• Initial net capital expenditure of $163 million; gross initial capital expenditure of $196 million (including contingency) and working capital of $8 million offset by $41 million from gold production prior to commercial production
• Sustaining capital expenditure of $123 million

Mineral Resources

• Updated March 2016 Mineral Resource for the Kalana Main deposit utilizing a $1,400/oz gold price:
• In situ Measured plus Indicated Resource of 23.0 million tonnes grading 4.14 g/t Au containing 3.06 million ounces at a 0.90 g/t Au cut-off
• In situ Inferred Resource of 1.7 million tonnes grading 4.51 g/t Au containing 0.24 million ounces at a 0.90 g/t Au cut-off
• The diluted (internal and external) Measured plus Indicated Resource of 35.7 million tonnes grading 2.78 g/t Au containing 3.20 million ounces
• Tailings of 0.7 million tonnes at a grade of 1.80 g/t Au containing 0.04 million ounces

Kalana Project
The Kalana Project is owned by Société d’Exploitation des Mines d’Or de Kalana, S.A. (“SOMIKA”). Avnel has an 80% equity interest in SOMIKA and the Malian Government holds a beneficial interest in the remaining 20%, which has anti-dilution and free-carry rights. SOMIKA owns and operates the Kalana Gold Mine, a small, Soviet-era, underground gold mine, and holds the rights to the Kalana Exploitation Permit, a combined exploitation and exploration permit that is subject to the 1999 Mining Code and is unique in Mali. The permit covers a surface area of 387.4 km2 and was last renewed in 2003 for a term of 30 years. This permit is host to 29 exploration targets, including the Kalana Main Project, the Company’s flagship development-stage project, which is the subject of the DFS.

Kalana Main Definitive Feasibility Study
The DFS was led by Snowden Mining Consultants Pty Ltd. (“Snowden”) with the support of several leading consulting firms, all of whom have extensive experience in Mali, including Mr. Ivor Jones of Denny Jones Pty. Ltd. (“Denny Jones”), DRA Projects (Pty) Ltd. (“DRA”), and Epoch Resources. The key performance indicators reported in this MD&A are based upon 100% ownership of the Kalana Main Project. The assumptions used in the economic evaluation and a summary of the results of the economic evaluation are presented in the tables below:

Table 1: Assumptions used in the Economic Evaluation

Economic Assumptions Unit Value
Plant Throughput (saprolite) Mtpa 1.5
Plant Throughput (fresh rock) Mtpa 1.2
Gold Price $/oz 1,200
Discount Rate % 8%
Diesel Fuel Price $/litre 1.0
Corporate Tax Rate % 30%
ZAR/USD Exchange Rate x 15
Selling Costs $/oz 4
Stamp Duty on Gold Sale % 0.6%
Net Smelter Royalty % 3.0%


Table 2: Summary of Economic Analysis

Financial Summary



LOM Tonnage Material Mined



LOM Tonnage Ore Mined



LOM Tonnage Ore Processed



LOM Feed Grade Processed

g/t Au


LOM Gold Recovery



LOM Gold Production

Oz Au


Production Period



Pre-production Capital Costs



LOM Sustaining Capital Costs

(including mine closure and community investment)



*Pre-Tax 8% NPV



*Post-Tax 8% NPV



Pre-Tax IRR



Post-Tax IRR



Undiscounted Payback Period



*West African peers commonly use a 5% NPV which would compute to a Pre-tax NPV of $345 million and a Post-tax NPV of $257 million

Also included in these after-tax estimates are management fees paid to Avnel for the operation of the Kalana Main Mine (the “Mine Management Fee”). As per the Company’s Operator Agreement with SOMIKA, the Mine Management Fee is calculated as 0.75% of turnover (gross revenue) and 2.5% of brut exploitation excess (or “EBE”, which is equivalent to Earnings Before Interest, Taxes, and Depreciation or “EBITDA”) as calculated in accordance with Le Système Comptable Ouest Africain (“SYSCOA”).

Excluded from this analysis is SOMIKA’s repayment of existing inter-company loans, accrued interest, and accrued Mine Management and Engineering Fees associated with the underground Kalana Gold Mine to Avnel. Avnel estimates that these amounts to approximately $115 million.


The DFS’ mine plan provides for 18 years of production from the Kalana Main deposit from a single open-pit with 12 stages as shown in Figure 1. A total of 228 million tonnes will be mined with LOM waste-to-ore ratio of 9.9:1 including the pre-strip. Production schedules are included in the appendix.

The deposit contains high grade mineralized zones that will be extracted by selective mining using 5m benches. Bulk mining of the waste zones will be conducted on 10m benches.

The mine area consists of a weathered zone to an average depth of 60m below surface which is amenable to free digging. The mining schedule targets the areas of saprolite that will generate higher cash flow early in the mine life. The pre-strip of six months will provide ore stockpiles to enable higher grade ore to be processed in the early years of the mine life.

Mining will be conducted by the owner whilst maintenance of the open pit mining machinery will initially be carried out by the original equipment manufacturer to ensure fleet availability. The maintenance plan provides for a five-year handover period to the owner after completion of the initial capital purchase of the full fleet component.


ROM ore will be delivered from the mine to the processing plant, which consists of a conventional two-stage crushing circuit and a single-stage milling circuit to achieve a target grind size of 80% passing 75 microns. The processing plant design is based on annual throughput rates of 1.5 million-tonnes-per-annum (“Mtpa”) for saprolite and 1.2 Mtpa for saprock and fresh rock material.

Gold is to be extracted by gravity concentration and a CIL plant to produce a gold dore via elution, electrowinning, and smelting. Gold is recovered from the loaded carbon in an elution and electrowinning circuit and will be poured into doré bars on site. Life of mine average recovery is projected to be 92.7% (including tailings) resulting in LOM production of 1.82 million ounces.

The plant design philosophy incorporates a requirement that the processing plant be constructed in a manner that would expedite the construction of the leaching and absorption circuit with the intention of processing historic tailings from the underground Kalana Gold Mine prior to the hot commissioning of the mill. These tailings are intended to be recovered by hydraulic mining and processed through the CIL circuit over a 5-month period and then for 3 months during the hot commissioning of the mill. This represents an opportunity to generate pre-commercial production cash flow that will partially offset development capital requirements.

Capital Expenditure

The initial cost to achieve commercial production is estimated to be $196.3 million as shown in Table 4(a).
Major capital items are the processing plant and plant infrastructure, purchase of the mining fleet, construction of the tailings storage facility, initial phases of the resettlement action plan and owners cost.
Revenue, net of costs and taxes, generated by gold production of 53,000 ounces from processing existing gravity tailings and ore during the commissioning of the mill total $41.2 million and will offset the capital expenditure. Working capital is estimated at $8.1 million.

Table 4(a): Capital Costs to Commercial Production

Units Value
Processing Plant Cost $M 93.6
Contingency – Processing Plant $M 9.5
Open-pit Pre-Strip & Tailings Mining $M 11.4
Mine Infrastructure $M 20.7
Mine Site Facilities $M 4.5
Mobile Fleet & Vehicles $M 30.3
Owner’s Costs $M 13.2
Other Capital Costs $M 13.1
Total Capital Costs to Commercial Production $M 196.3
Revenue, net of costs and taxes, prior to Commercial Production $M (41.2)
Initial Working Capital Costs $M 8.1
Net Costs to Commercial Production $M 163.2


Table 4(b): LOM Sustaining Capital Costs

Units Value
Processing Plant – Sustaining $M 7.9
Mine Infrastructure $M 10.4
Mobile Fleet & Vehicles $M 72.4
Other Sustaining Costs $M 18.4
Mine Closure $M 13.9
Total Sustaining Capital Costs $M 123.0


Operating Cost

The average production over the first 5 full years of steady-state production is approximately 148,000 recovered ounces per year at a Cash Operating Cost of $460 per ounce. Including refining, transportation and royalties, the Total Cash Cost is $507 per ounce. Including sustaining capital and mine operator fees to be earned by Avnel, on-site AISC are $595 per ounce. A summary of unit operating costs over the first 5 years of steady-state production is presented below:

Table 5(a): Cash Operating Cost for First 5 years of Steady State Production 

  $/tonne-ore $/oz
Mining 29.19 268
Processing 14.73 135
General and Administrative 6.18 57
Cash Operating Cost 50.10 460
Selling Costs 0.44 4
Royalty and Stamp Duty 4.71 43
Total Cash Cost 55.25 507
Mine Management Fees Payable to Avnel 02.80 26
Sustaining Capital 6.74 62
On-Site AISC 64.78



Over the LOM, average annual production is approximately 101,000 ounces at an average Cash Operating Cost, Total Cash Cost, and on-site AISC of $648 per ounce, $695 per ounce, and $784 per ounce, respectively. A summary of unit operating costs over the LOM is presented in below:

Table 5(b): Cash Operating Cost for Life of Mine Production

  $ /tonne-ore $/oz
Mining 31.83 380
Processing 16.25 194
General and Administrative 6.17 74
Cash Operating Cost 54.26 648
Selling Costs 0.33 4
Royalty and Stamp Duty 3.62 43
Total Cash Cost 58.21 695
Mine Management Fees Payable to Avnel 1.75 21
Sustaining Capital 5.64 67
On-Site AISC 65.60 784

The Company will file a NI 43-101 Technical Report in support of the DFS by no later than May 14, 2016.