Avion acquires 100% interest in Hounde concessions

2010-10-07 02:39 ET - News Release

Mr. Michael McAllister reports

AVION CLOSES ACQUISITION OF THE HOUNDE GROUP CONCESSIONS IN BURKINA FASO

Avion Gold Corp. and Avocet Mining PLC have closed Avion's previously announced acquisition of a 100-per-cent interest in the Hounde Group concessions in Burkina Faso (see Stockwatch news releases dated Jan. 29, 2010, and July 5, 2010).

In consideration for 100 per cent of the Hounde assets, Avion has issued Avocet 10.3 million shares of Avion.

This very large property lies within a new emerging gold camp, along more than 60 kilometres of the same geological package that hosts SEMAFO's Mana mine to the northeast, which has reserves of 1.77 million ounces, measured and indicated resources of 520,000 ounces of gold and an anticipated 2010 production of over 235,000 ounces. ACC Resources Ltd.'s Dossi zone is adjacent to the east of the Hounde group and is estimated to contain approximately one million ounces of non-NI 43-101-compliant gold resources (as per ACC's corporate website).

Avion has conducted an airborne magnetic and radiometric survey over the entire property. As well, Avion has completed 21 holes totalling approximately 3,900 metres of drilling that tested the Vindaloo zone and targets at the southern end of the property. A resource estimation of the Vindaloo zone is in progress. Drilling will resume in mid-October, with an additional 3,000 to 4,000 metres of drilling planned. Metallurgical testing will commence, once all assay results have been received. This property has never been subjected to a regional-type exploration survey. Avion believes that the chance for the extension of known zones and the discovery of additional zones is high, when considering the abundance and strike extent of the known zones and untested artisanal mining areas.

Don Dudek, Avion senior vice-president, exploration, stated: "The Hounde acquisition not only provides Avion with an excellent strategic position south of Semafo's Mana project, it also provides a new platform for growth. Avion has gotten off to a great start on the Hounde property, first through the expansion of the Vindaloo zone and secondly by the identification of an extensive, largely untested trend of artisanal workings and gold-in-soil anomalies that extends for more than 25 kilometres along strike. We strongly believe that we will both define extensions to the Vindaloo zones and discover new zones on the property."

The mining industry in Burkina Faso is growing at a fast rate due to a combination of a stable elected democratic government, good prospective geology and a competitive fiscal regime. Currently six gold mines are in production or development in Burkina Faso (Essakane: IAMGOLD Corp., Mana: SEMAFO, Inata: Avocet Mining PLC, Youga: Etruscan Resources Inc., Taparko: High River Gold Mines Ltd. and Kalsaka: Cluff Gold PLC). In 2011, it is expected that Burkina Faso will become the fourth-largest gold-producing country in Africa. The country enjoys an income tax rate of 20 per cent or a corporate profits tax of 20 per cent for mining companies. There is a three-year tax holiday during construction that includes relief from value-added tax and custom duties during construction and reduced customs duties of 7.5 per cent during mining operations. The government is entitled to a 10-per-cent free-carried interest and a reasonable 3-per-cent royalty on gold production. In addition, two of the eight Hounde concessions, which include the Vindaloo zone, are subject to a 2-per-cent net smelter royalty on gold production and certain back-in rights to Barrick Exploration Africa Ltd.

Don Dudek, PGeo, the senior vice-president, exploration, of the company and a qualified person under National Instrument 43-101, has reviewed the scientific and technical information in this press release.