Exploration

Indonesia

Drilling at North Lanut focused on resource extensions at Riska and Effendi; positive results received from both prospects may lead to such extensions in the next year. The Riska drilling also highlighted potential for deep high grade sulphide mineralisation beneath the Riska oxide deposit.

Infill drilling in the next year will evaluate the potential for this resource to sustain a longer mine life, albeit with different processes for the  recovery of gold. Exploration in the district continues to seek incremental resource additions to sustain the current operation. Infill drilling at Bakan, in support of ongoing feasibility work, confirmed and increased the confidence in the resources at Durian and Osela. Scout drilling of nearby prospects has identified several low grade satellites that may add to the project’s resource base.

The acquisition of the Banda properties in July 2007 transformed the Company’s exploration in Indonesia by significantly expanding its portfolio of advanced exploration projects. Of the Banda properties, Doup and Tanoyan are the most advanced. Both located close to North Lanut and initial scout drilling has produced positive results. Doup consists of two main prospects, Panang and Benteng, which were previously drilled by Placer Dome in the late 1980s.

Placer defined a resource of 17Mt @ 2.15 g/t Au containing 1.2 million ounces of gold based on this drilling. This resource is currently not JORC compliant because the original drill core is no longer available and the underlying data cannot be substantiated. Avocet has completed two holes to validate Placer’s drilling results and allow for initial metallurgical testwork; both holes intersected mineralisation over significant lengths and confirmed the previous drilling results.

The Tanoyan vein system has lower grade, lower temperature veining at higher levels, which is typically located above or adjacent to higher temperature, multiphase veins that may include boiling textures. These boiling textures are associated with gold deposition in the vein system and can host bonanza gold grades. Many of the scout holes drilled at Tanoyan have intersected the higher level veins, suggesting that the boiling zone(s) may exist at depth.

Equally promising is the Seruyung project in North Kalimantan, for the acquisition of which the Company signed a Memorandum of Understanding in February 2008 with an Indonesian company. Seruyung is a high-sulphidation epithermal system. Exploration by previous companies inferred a resource in the region of 225,000 to 330,000 ounces. Avocet believes that the high grade feeders that form these deposits have not been fully explored or modelled in this resource estimate, and also recognises potential for additional low grade, heap-leachable mineralisation within the tenement.

The Company believes that each of these three projects has the potential for a million ounce resource and are amenable to development as mines. Avocet completed a first round of scout drilling on the Mangkaluku project in South Sulawesi. This produced several significant intercepts that confirm the potential of the project. The results of this exploration programme are under review.

The Company spent US$8.1 million in Indonesia on resource development and greenfield exploration in the year and drilled 41,200 metres. The budget for the next year is US$6.7 million for resource development and US$11.5 million for exploration, with a programme to drill 44,700 metres and 60,000 metres, respectively. One third of the next year’s exploration budget is contingent on the success of early phase exploration.