Avion Gold Corporation

Avion Gold Corporation

October 09, 2008 09:52 ET

Avion Resources Attracts Financial Investor Into Segala Gold Project, Mali

- Production Targeted to Begin February 2009

TORONTO, ONTARIO--(Marketwire - Oct. 9, 2008) - Avion Resources Corp. (TSX VENTURE:AVR) ("Avion Resources" or the "Corporation") today announced that it has entered into an agreement to sell 50% of its interest in the Segala gold project located in Mali, West Africa to Dynamite Resources Inc. (the "Transaction"). Avion Resources will retain a 40% interest in the Segala Gold Project, with the remaining 20% interest held by the Government of Mali. Avion Resources also holds an 80% interest in the neighbouring Tabakoto gold project and its related mining infrastructure and processing facilities.

In consideration for acquiring a 40% interest in Segala, Dynamite Resources Inc. ("Dynamite"), a Canadian junior mining company, has agreed to pay US$5 million. This amount is to be provided to Avion Resources as a short-term loan. Upon satisfaction of certain conditions precedent, the principal amount of the loan shall be applied as the purchase price for the Transaction. Conditions precedent to the closing of the Transaction include the receipt of all necessary third party approvals, including approval of the TSX Venture Exchange and the Government of Mali, as required.

John Begeman, Avion Resources' President and CEO, commented, "During these difficult times in the market, we feel that Segala represents an exciting opportunity for near-term gold production. By selling an interest in Segala we are able to obtain a significant portion of the funding that will be required to commence mining operations in Mali. With funding now available to develop the property, we can focus on development and putting this property into production by the targeted date of February 2009."

Details of the Purchase and Sale

Avion Resources shall be entitled to re-purchase from Dynamite a 20% interest in the Segala property (the "Back-in Right"), so that it holds an aggregate 60% interest in the property, in consideration for a cash payment equal to: (i) US$10 million, and (ii) an amount equal to the revenue realized by the Corporation in respect of the sale of the first 22,000 ounces of gold produced from Segala, less any and all amounts paid by Avion Resources to Dynamite in respect of such sales, and less all direct expenditures and costs incurred in respect of the Gold produced at Segala. The Back-in Right shall be exercisable at any time during the 90-day period that commences on the production of 22,000 ounces on account of Dynamite, provided that it shall expire on March 31, 2010.

The Corporation and Dynamite have agreed to enter into a Joint Venture in respect of the Segala project that shall commence on the exercise or expiry of the Back-in Right. Avion Resources shall have the right to drag-along Dynamite in the event of any change of control affecting the property and Dynamite shall hold a right of first refusal in respect of any sale of an interest held by the Corporation in the Segala and/or Tabakoto properties.

Dynamite has agreed to provide the Corporation with a US$5 million loan. The loan is to be secured against the assets of Avion Resources and the shares of its subsidiaries. Amounts outstanding under the loan shall accrue interest at a rate of 10% per year. The loan shall mature upon the occurrence of certain conditions and no later than June 30, 2009.

The proposed transaction is not a related party transaction under applicable securities law, but it is a non-arm's length transaction under the rules of the TSX Venture Exchange because Avion Resources and Dynamite have a director and officer in common.

Segala Gold Project, Mali

On September 15, 2008, the Company announced plans that it intends to focus on the Segala project during the first phase of a new mining strategy. Avion Resources plans to commence mining operations at Segala with open-pit production (at a projected low-strip ratio), followed by underground mining. The Company anticipates production to begin at Segala in mid-February 2009. The strategy is to mine near-surface mineral resources to minimize waste stripping and then proceed to underground mining. The Company is discussing terms with contractors for surface mine development and mining at Segala. The Company expects that near surface Segala ore will average approximately 3 grams of gold per ton. The Company's new mine plan for Segala anticipates that 600,000 tons of ore will be mined and processed in 2009, delivering approximately 56,000 ounces of Dore'. A feasibility study has not been completed to support these projections. There is no certainty that the proposed operations will be economically feasible.

Avion Resources purchased the Segala and Tabakoto gold projects from Nevsun Resources Ltd. ("Nevsun") in May 2008, for US$20 million and a 1% net smelter royalty (NSR). The acquisition price included all infrastructure, including a plant that can process from 2,100 to 2,700 tonnes per day, diesel generators, camp accommodation, tailings dam and office buildings.

Recent drill assays released from Segala continue to return positive results. The Company drilled a total of 26 holes in the Segala area this year. Avion Resources believes that the results of this work confirmed the grade and the continuity of the Segala zone, resulted in the discovery of a new zone of gold mineralization (along an area called Segala Far NW trend) that is located approximately 600 metres northwest of the Segala deposit, and developed numerous additional exploration targets. Hole S-08-19, which tested a 145 metre, on-section gap in the Segala Zone, returned 2.72 g/t Au over 73.5 metres core length (approximately 41.4 metres true width). This new intercept is consistent with historic drill intercepts for the Segala zone, along a 300-metre strike from 50 metres to 450 metres depth that returned from 1.96 g/t Au to 8.72 g/t Au over true widths of 9.0 metres to 43.5 metres. See the news release issued by Avion Resources on October 6, 2008 for a description of the results from the drill program.

The scientific and technical information in this news release has been reviewed by John Begeman, P.Eng., the President and CEO of the Company and a qualified person under National Instrument 43-101. A description of the verification procedures of the Company relating to the 2008 drill program can be found in the October 6, 2008 press release of the Company.

About Avion Resources Corp.

Avion Resources is a Canadian-based exploration and development company focused on strategic acquisitions in Africa. Avion has a team of highly qualified geologists, as well as a strong operational team that is exploring various properties in the previously mentioned region. Avion currently holds 80% of the Tabakoto gold mine and, following completion of the sale outlined above, 40% of the Segala gold deposit in Mali.

Cautionary Notes

This press release contains "forward looking information" within the meaning of applicable Canadian securities legislation. Forward looking information includes, but is not limited to, statements with respect to the future financial or operating performance of the Company, the prospective mineralization of the properties, planned exploration programs, anticipated production schedule and terms, availability and likelihood of future acquisitions, and the impact of the acquisition of the Tabakoto and Segala projects on Avion. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; the actual results of current exploration activities; ability to successfully integrate the purchased properties; foreign operations risks; and other risks of the mining industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.


Contact Information

  • Avion Resources Corp.
    Rene Bharti
    Vice President, Corporate Development
    (416) 861-5913
    Email: rene@avionresources.com