Burkina Faso – Inata

In late June 2009, Avocet completed the recommended, share for share, acquisition of Wega Mining ASA (‘Wega’). The main asset of Wega is the 90% owned Inata gold mine (‘Inata’) in northern Burkina Faso.

As announced on 17 April 2010, gold production in Q1 2010 was 19,838 ounces, reflecting 228,830 ore tonnes milled at a grade of 2.8 g/t and recovery of 95%. As previously announced, gold production reached its target rate of over 10,000 ounces per month in May 2010. Plant throughputs are now approaching design capacity, with monthly equivalent throughput rates over the final 5 days of May above 95% of design capacity.  Inata remains on track to produce over 100,000 ounces in 2010, and has now enabled the Group’s total gold production rate to rise to over 200,000 ounces per year.  Mining is scheduled to accelerate from Q3 2010 with the ongoing expansion of the mining fleet.  All gold will be sold at spot prices until Q3 2010.

Commercial production was brought forward from Q3 2010 to Q2 due to the successful commissioning and ramp up achieved to date. Accordingly, all revenue and costs for the March quarter have been capitalised and no unit cash cost was reported. From 1 April, all revenue and costs will be recognised in the income statement and unit cash costs will be reported from that date.

The current life of mine (‘LOM’) plan has determined an operation that will produce at least 120,000 ounces of gold annually over an initial 7 year mine life. Current NI 43-101-compliant Mineral Resources at Inata are 1,693,000 ounces of gold and the Ore Reserves at Inata stand at 932,000 ounces. It is anticipated that additional gold resources from the exploration licences surrounding the 26 km² Inata mining permit will be defined in due course for incorporation into the Life of Mine plan. Now that the project is in production, Avocet has recommenced exploration activities on the prospective tenements that surround the Inata mill.

The gold mineralisation at Inata can be traced over a continuous 4 km strike length and occurs within silicified volcaniclastic rocks, porphyries and vein quartz that occur within a large shear zone. The 932,000 ounces of proven and probable reserves will be mined from three principal pit areas: Inata North, Central and South. Three smaller pits will be developed during the life of the project.

Inata - Mineral Resources as of 31 December 2009

Mineral Reserves - Proven - Probable - Reserves subtotal		Gross Tonnes__   4,179,000__ 9,801,000__ 13,980,,000__ Grade (g/t)––   2.48__ 1.90__ 2.07__ Contained–– Ounces––   333,000__ 599,400__ 932,400__		Net attributable (90%) Tonnes__   3,761,100__ 8,820,900__ 12,582,000__ Grade (g/t)––   2.48__ 1.90__ 2.07__ Contained–– Ounces––   299,700__ 539,500__ 839,200__
Mineral Resources Measured Indicated Measured + Indicated Inferred Resources subtotal		5,211,100__ 19,842,000__ 25,053,000__ 7,072,000__ 32,125,000__   2.26__ 1.60__ 1.73__ 1.30__ 1.64__   378,400__ 1,018,400__ 1,396,800__ 296,400__ 1,693,200__		4,689,000__ 17,857,800__ 22,557,700__ 6,364,800__ 28,912,500__   2.26__ 1.60__ 1.73__ 1.30__ 1.64__   340,600__ 916,600__ 1,257,100__ 266,800__ 1,523,880__

Reserves were calculated at a 0.8 g/t Au cut-off and a stock pile is developed for all low grade ore (0.5 – 0.8 g/t Au)
that will be processed towards the end of the mine’s life. The above Ore Reserves and Mineral Resources are reported in compliance with Canadian Instrument 43-101.

Conventional drilling, blasting, loading and hauling will be deployed during the mining of each pit through a sequential life-of-mine plan that has been determined from physical properties of the orebodies, the equipment in use and the economics that govern the profitability of the mining. The majority of the ore is soft oxide that will not require blasting. Less than 5% of the existing reserves are contained in fresh rock.

A 12.6 MW power station from Connell Mining Products Ltd and the Komatsu owner-operator mining fleet comprising 6 Komatsu 785s (100-tonne haulage trucks), 1 Komatsu PC2000 excavator (200-tonne shovel), 1 Komatsu PC1250 (120 tonne excavator) and 1 Tamrock D25 blast-hole drill are on site. The mining fleet and processing plant are both operational 24 hours a day, 7 days a week.  As per the mine plan, a second mining fleet was purchased in H1 2010.  The additional equipment will enable mining operations to supply the plant with sufficient material to sustain production at capacity levels.  The second fleet includes six dump trucks, an additional excavator, a blast hole drill rig and other ancillary equipment.

The Inata project will employ around 300 staff when in full production, most of which will be recruited from within Burkina Faso.

The plant has a milling capacity of 2.25 Mt p.a. and has a SAG mill and two ball mills in the circuit. The results from metallurgical testwork of the ore indicated that conventional CIL with a gravity recovery circuit will achieve recoveries of around 90% Au over the life of the mine.  In the initial 3 months of production to date, gold recovery rates have been approximately 95%.

Water for the project is supplied by a 100 million cubic metre water reservoir - the Gomde Barrage. The current capacity held in the dam equates to substantially more water than required for annual consumption for the project and will also represent a stable supply of water for the local communities, a major benefit which has built strong social support for the project. Additional subterranean water sources have been discovered close to Inata that will be used for potable consumption and excess plant water.

Macquarie Bank is the lead financial institution for the senior debt facility of US$65 million. As part of the project finance facility, the Company has forward sold a total of 400,000 ounces at an average price of US$970/oz up until June 2014.  Prior to Avocet’s involvement at Inata, 350,000 ounces of forward sales had already been agreed as part of the facility. As per the announcement on 28 October, as part of the restructuring of the Inata facility, the Company was required to hedge a further of 50,000 ounces of gold at a price of US$1,056/oz. Sales of gold into the hedge position are not due to commence until September 2010.

Avocet works closely with the Burkina Faso Government in many areas of the project to make sure that the project is sustainable not just as a viable gold project, but as a sustainable business for the people and communities within the local area. Sustainable social initiatives such as medical assistance and schooling will be a clear mandate to improve the lives of people in the areas in which the Company operates.