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KWN Blog: Ben Davies – Silver Criticality, Why Silver Might Crash?

May 3

As our subscribers know, we always link to and recommend reading/listening to Eric King. The quality of the people he interview is truly great and one of the people contributing is Ben Davies. Today on the KWN Blog, Davies gave his thoughts on where we are right now in the silver market, as well as where we are headed longer-term:

“We believe that the market has been exhibiting the precursory signatures of power law behaviour, and that the internet power law of participation phenomena has produced a point of criticality whereby we have seen the top in silver for this half of the year. We believe a real shake out is imminent, in the order of $15 dollars over 3 to 5 days.” Read more…

NUTS to All of You ‘Top Pickers!’

By Peter Degraaf, May 3

“What is the meaning of a gold standard and a redeemable currency? It represents integrity. It insures the people’s control over the government’s use of the public purse. It is the best guarantee against the socialization of a nation. It enables a people to keep the government and banks in check. It prevents currency expansion from getting ever farther out of bounds until it becomes worthless. It tends to force standards of honesty on government and bank officials. It is the symbol of a free society and an honorable government. It is a necessary prerequisite to economic health. It is the first economic bulwark of free men”. W. E. Spahr.

On a daily basis I receive Emails that consist of a lament, citing analysts who are predicting a major top in the metals, to occur almost imminently.  They quote a man who runs a financial website and who a few weeks ago, drew a line in the sand for silver at $37.00.  They also mention Robert Prechter as having told his clients that he was selling silver at 37.37.  I was surprised to learn that Prechter had any silver, since he told his subscribers in 2002 that he had just shorted gold at $400.00 and expected to cover at $50.00.  Since he is still waiting for gold to drop to $50.00, why would he own silver?  This is the same Robert Prechter who in the mid-1980’s predicted a peak for the DOW at 4000 to be followed by a crash.  Instead the DOW rose to 11000.  “Nuts” to these and other analysts who fail to realize that silver is in a bull market like no other.

General Anthony Clement “Nuts” McAuliffe (July 2, 1898 – August 11, 1975) was the United States Army general who commanded the 101st Airborne Division troops defending Bastogne, Belgium during the Battle of the Bulge in World War II. He is famous for his single-word reply to a German surrender ultimatum: “Nuts!”

After the Battle of the Bulge, McAuliffe was given command of his own division, the 103rd Infantry Division of the US 7th Army, which he led from January 15, 1945, to July 1945.

I’d like to take a page from General McAuliffe and say ‘nuts’ to all those who are warning their readers not to buy gold and silver because they think that the ‘top is in’.  Sure, silver may (or maybe not?) need a few weeks to climb above the magical $50.00 level, just as gold took its time to rise above $1,450.00; but $50.00 silver today does not mean the same thing as $50.00 silver in 1980. 

Inflation Calculator

 

Obviously the barrier these ‘silver-negative’ advisers need to be concerned about is not $50.00 but $451.45.

Then there are those who warn of a price decline between May and September.  While it is true that this is the time of year when jewelry demand worldwide is at its lowest as many jewelers take holidays, the adage ‘sell in May and go away’ did not work for silver during 2009 and 2010 (see next chart), and may not work this year due to positive fundamentals.

 

The charts in this essay are courtesy Stockcharts.com unless indicated.  This chart shows selling on May 1st followed by a purchase after Labor Day in 2009 and 2010 would have produced a loss.

  • According to the Silver Institute in a report “The future of Silver Industrial Demand”, industrial usage by 2015 is expected to total 667 million ounces.  Industrial use for silver in 2010 was 487 million ounces.   This represents an expected annual increase of 7.4%.  In 1990 industrial demand was 273 million ounces.  In the past 20 years demand is up 78%.  
  • There are a number of new applications for silver including food packaging, RFID tags (this could be BIG), auto catalysts, electrical contacts in automobiles, solar energy (this too could be BIG).
  • According to Goldcorp.com the demand for silver from Solar Panels is expected to reach 2,000 tonnes by 2011.  This represents 7% of the world output!  (One tonne of silver = 32,273.96 ounces).
  • The big driver at the moment is investor demand, as coin shops and bullion dealers are hard pressed to keep up with demand and the price for physical silver carries a sizeable premium over the ‘paper-digital’ silver price that is reported by the COMEX. 
  • The bullion banks that stupidly shorted millions of ounces of silver are facing margin calls that collectively total billions of dollars.  We are seeing signs that these banks are trying their utmost to cover these short positions without causing price to run too far ahead of them.  (For evidence of the most recent attempt by the bullion banks to suppress the silver price visit today’s silver chart at www.kitco.com).
  • Demand for silver from China keeps on increasing.  In January the major bullion bank in China sold as much as it had sold in the first three months of 2010. 
  • According to an article at Infomine.com by Shivom Seth quoting bullion dealers in Mumbai, investors in India are hoarding the white metal.  Demand is expected to jump by 10% – 15% from the current level of about 3,000 tonnes a year.
  • Eric Sprott in Canada was quoted recently while commenting upon his purchase of silver bars for the silver trust PSLV, “all we saw coming in was brand new bars – it looked like they came fresh from the mines.”   
We have not yet seen silver users scramble for supply in an effort to stock up before price rises even higher.  This is likely to occur once the $50.00 level is conquered.

This chart shows the price of silver at week’s end to be at or near the top of the weekly range, for the past six weeks.  Although the supporting indicators are presently at resistance levels, a return to the support line at the green arrow will cause me to add to existing long positions.  A strong close above the blue arrow (ideally after some oscillation between $45.00 and $50.00), will set up a price target at $451.45.  (This target will advance as time goes by, due to price inflation).

“When national debts have once accumulated to a certain degree, there is scarce, I believe a single instance of their having been fairly and completely paid.  The liberation of the public revenue if it has ever been brought about at all, has always been brought about by a bankruptcy, sometimes by an avowed one but always by a real one, though frequently by a pretended payment.”
Adam Smith.
This chart courtesy Cotpricecharts.com shows a drop in the ‘net short’ position of commercial silver traders (purple bar).  This drop is the largest drop in years, from 53,000 to 43,000!   This is very bullish as it shows us that the commercial traders do not believe silver is topping out, or they would be selling into it.  The next largest drop (from 57,000 to 48,000), occurred in February 2010 and silver then rose from $15.51 in February to $19.34 in the next three months – an increase of 25%!   The next COT report is due out on Friday May 6th and is expected to be even more bullish, due to the raid on silver taking place May 2nd.

“The greatest profits will be made by the long-term investor without margin, who is there when gold goes to four figures.  Trading is a game won by a few, but lied about by many.” 
James Sinclair.

And What About Gold?

You have a choice between the natural stability of gold and the honesty and intelligence of the members of government. And with all due respect for those gentlemen, I advise you, as long as the capitalist system lasts, vote for gold.” George Bernard Shaw.

 

 

This chart courtesy KPCB.com shows current US federal government spending compared to GDP is at the highest level in over 200 years except for WW2. One of the drivers behind a rising gold price is the collapse of public confidence in leadership.

 

 

Featured is the daily bar chart for gold.  Price is in a solid uptrend after the recent breakout above $1500.  Because the supporting indicators are nearing resistance levels, the expectation is for price to oscillate between the two arrows for a few days while the indicators release some pressure, but because of bullish fundamentals (paper printing at Bernanke and Co., outpacing gold production by 10 to 1), the bull market is expected to continue, for many years.

“That which has been is what will be.  That which is done is what will be done, and there is nothing new under the sun.” King Solomon 940 BC. Ecclesiastes 1:9.

 

 

This chart courtesy Cotpricecharts.com shows the ‘net short’ position among commercial traders (purple bar) has dropped from 267,000 the previous week to 249,000 this past week.  This tells us that commercial traders do not expect a top during the next few weeks; otherwise they’d be piling on the short positions.

 

 

Featured is the gold price in Canadian dollars.  Price rose to a new high Friday and closed near the top of the daily range.  In the event of a test of the breakout at 14.40, the arrow points to support.  The 50D is in positive alignment to the 200D (green oval), and both are rising.

 

 

Featured is the gold price in Euros.  Price is carving out a small ARAT formation.  A breakout at the blue arrow turns the short-term quite bullish.

“Banking was conceived in iniquity and born in sin. Bankers own the earth; take it away from them but leave them with the power to create credit; and, with a flick of a pen, they will create enough money to buy it back again. Take this power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this world would be a happier and better world to live in. But if you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit.”  1940, Sir Josiah Stamp, Director of the Bank of England.

 

 

Featured is the GLD gold ETF.  Price has risen 11 out of the last 12 days and Friday it produced the best jump of all.  Volume is supporting the rise (green arrow).  The supporting indicators are positive but at resistance.  Technically a pullback is due, but strong fundamental pressure could very well delay or cushion a pullback.

 

 

Featured is the index that compares gold to bonds.  Price rose to a new all-time high Friday, after having been in a bull market since 3.00 in 2002 (see next chart).  Ever since then gold has outperformed bonds (‘stuff beating fluff’).  Every breakout causes more people to give up on bonds and turn to gold.

 

 

Featured is the long term look at the same index.  Gold has outperformed bonds by 400% in 11 years.

 

 

Featured is the PHYS gold trust.  Price has broken out from the year old resistance area and volume is supportive (green box).  The green arrow points to support in the event of a test.  The target for this breakout is 16.00.  Owning part of an audited trust guarantees the gold is there to back up the shares – many ETFs do not offer such a guarantee.

Something smells!  On Sunday afternoon, May 1 at 4.43 PM Marketwatch sent out an alert with this notice:  

LOS ANGELES (MarketWatch) – “Silver prices fell sharply in early Monday trading in Asia, with the spot price plunging more than 10% in a matter of minutes, according to Kitco data”.  This alert quotes Kitco data, but Kitco on Sunday does not report data until 6 PM, NY time!  Could it be that someone provided Marketwatch with a ‘heads up’ that a raid would take place in the thinly traded market in Sydney, Australia on Sunday evening?

Disclaimer Please do your own due diligence. Investing involves taking risks. I am NOT responsible for your investment decisions. Peter Degraaf is an online stock trader with over 50 years of investing experience. He produces a weekend report as well as a daily update for his many subscribers. 

This article is written by Peter Degraaf and with his kind permission, O B Research has been privileged to publish his work on our website. To find out more about his work, please visit: http://www.pdegraaf.com/

The Dollar: It’s Payback Time!

By Axel G Merk, May 3

It’s payback time for Ben Bernanke, the chairman of the Federal Reserve (Fed). In some ways, this should neither surprise, nor scare anyone. Unfortunately, however, it might do both.

In any open market, information is absorbed rather quickly into asset prices, including exchange rates. Indeed, exchange rates may be the best pricing source to assess the impact of the relentless involvement of policy makers’ “print and spend” mentality in the markets. When trillions are spent, markets are likely to move. However, an unintended consequence has been that a broad range of assets are now moving more and more in tandem, giving investors fewer options to diversify. Investors should be mindful of this development, as markets do not always go up: where do you hide when the mood turns sour? In fact, why bother buying stocks, thereby taking on corporate risk, when ultimately the reason stocks are moving may have little to do with managerial skill. The U.S. dollar, one might argue, says it all. Be aware, though: there is no such thing anymore as a safe asset, and a diversified approach may be needed for something as mundane as cash. Investors these days may want to consider managing the U.S. dollar risk of their U.S. investments.

Generally speaking, payback time should be embraced rather than feared. Your compensation should reflect your good work. When, instead of gold, you receive devalued dollars as compensation, things might be different, though. When consumers are struggling to make ends meet because of soaring food and energy prices, when unrest is erupting around the world, then Bernanke might be haunted by the French philosopher Sartre’s view that the weight of the world is resting on his shoulders.

Bernanke has chosen to shoulder his responsibility through increased transparency. In a world saturated with information, he is trying to explain his policies to the public. It’s unlikely that those outside the world of financial markets will listen to the press conferences live, but headlines might sink in. Bernanke’s inaugural press conference lead the Wall Street Journal to publish a cover page article entitled “Fed Takes Foot Off the Gas”. As non-business publications cover the event, they may adopt a similar tone. The goal of the exercise is to manage public opinion, to ensure the public that inflation is “transitory.” Unfortunately the term is increasingly ridiculed as for some, a period as long as a lifetime may be transitory. Bernanke needs to regain confidence of an ever more skeptical public before the term “anchored inflation expectations” suffers the same fate as “transitory.” You see, the world of central banking is a mind game: as long as there is unconditional confidence that the Fed will do whatever it takes to keep inflation in check, the bond markets are likely to behave. Indeed, the Fed may even get away with printing trillions of dollars if there is confidence that the Fed could mop up all this liquidity in 15 minutes, as Bernanke has argued.

The cheapest Fed policy is one where a central banker utters a few words. More expensive are interest rate cuts; emergency rate cuts are even more expensive; printing trillions comes next. It is not surprising that Bernanke wants to regain the initiative and set the tone. However, the tone set during Bernanke’s press conference was one of gold moving steadily higher and the U.S. dollar steadily lower. For the month of April, the U.S. dollar was down versus all currencies we track.

It was little news that food and energy inflation has been creeping up; it was also little news that inflationary pressures are now creeping into the rest of the economy. However, what became rather clear throughout Bernanke’s press conference was that the Fed still wants higher inflation and may do little to contain it, other than to tell the public to trust the Fed. And that’s where the problem is: trust in the Fed has been eroding. It started when the Fed moved away from managing monetary policy (influencing interest rates and money supply) and veered into fiscal policy by targeting specific sectors of the economy (buying mortgage backed securities, for example). It’s never a good idea to try to take power away from politicians; it may be true that the Fed Chairman is more powerful than the President, but it’s not polite to rub it in the face of Congress. In Fed talk it’s “the resources of the Federal Reserve”; in plain English, it’s the printing press. In our opinion, Bernanke has consistently underestimated the political component of his policies. As scrutiny of his policies increases, Fed policy will become ever more expensive. What that means is that should the Fed one day want to tame inflationary pressures once again, tightening may need to be employed on a scale that will cause severe hardship. Bernanke addresses those concerns with press conferences.

Actions, however, would speak louder than words. The words may appease some, but it may not be enough. That’s because the Fed is not taking the foot off the gas; instead, the Fed has engaged cruise control at 160mph because the banking system will remain awash in money, while proceeds from maturing securities the Fed holds will be re-invested. Speeding at 160mph may be legal on the German Autobahn, but is only recommended when there are no obstacles on the road.

At this stage in the economic cycle, any recovery should be more robust. However, we don’t have a strong recovery because we did not allow consumers to fully de-leverage. As policy makers don’t want to see foreclosures and bankruptcies, they have been throwing a lot of money at the problem. As housing is entering a ‘double dip’, Bernanke acknowledges that a “QE3” may do more harm than good, meaning inflationary expectations could rise even beyond Bernanke’s comfort level suggesting that Congress should employ fiscal policy to get the economy moving. However, even in the absence of QE3, there is plenty of monetary stimulus as banks are sitting on massive excess reserves.

And we would not be surprised if banks have started to deploy those funds – not necessarily to lend to consumers, but to buy Treasuries – the very securities the Fed has been buying. That’s because recent regulatory changes make it unattractive to borrow from Fannie and Freddie, now branches of the government, and park that money on the Fed’s balance sheet as excess reserves, pocketing the interest rate differential (spread); in plain English, until recently, one could borrow from one political establishment to give credit to another. As that risk free trade is winding down, banks may be borrowing cheap short-term money to buy longer-term Treasuries. That trade may be perceived as rather low risk as long as the Fed ensures the market that “rates will remain low for a considerable period.”

However, the thought of an ivory tower academic driving at 160mph may not engender confidence. Debasing the U.S. dollar may only be the start. As we have cautioned in the past, this may well be a desired consequence, given that our analysis has shown that Bernanke embraces the dollar as a monetary tool in both word and action. But debasing the dollar may also be highly inflationary; the CEO of WalMart recently cautioned that the cost of imports from Asia is rising. Bernanke doesn’t think so, pointing to research at the Fed that, historically, a weaker dollar, did not lead to inflation. But historically, neither tech stocks, nor housing prices could fall, either.

This article is written by Axel G Merk of Merk Investments LLC and with his kind permission, O B Research has been privileged to publish his work on our website. To find out more about Merk Investments, please visit:

NEWS: Dacha Reports Assets of C$0.71 Per Share

Dacha Strategic Metals Inc. is pleased to announce the continued appreciation of its Rare Earth metals inventory. As of April 29, 2011, the estimated value of its metals inventory was US$48.8 million, or C$46.1 million, an increase of C$5.5 million, or 13%, from the estimated value of C$40.6 million at March 31, 2011, as reported in the Company’s April 5, 2011 press release.

Assets include metal inventory, cash and marketable securities. At April 29, 2011, in addition to its metal inventory, which had an estimated fair market value of C$46.1 million, the Company’s equity investments had an estimated fair market value of approximately C$3.9million and cash of approximately C$1.7 million for a total of C$51.7 million, or $0.71 per share, based on 73.1 million shares outstanding.

As at April 29, 2011, Dacha’s physical inventory portfolio consisted as follows:

           
Metals
Inventory
Grades* Quantity
(Kg)
Spot
Price/kg
(US$)
Market
Value
(US$ millions)
Market
Value
(C$
millions)
         
Busan, South Korea          
Dysprosium Oxide 4N 15,000 $699 $10.5 $9.9
Dysprosium Fe Santoku 12,000 $653 $7.8 $7.4
Gadolinium Oxide 4N5+ 10,000 $185 $1.9 $1.8
Lutetium Oxide 4N+ 3,000 $800 $2.4 $2.3
Neodymium Oxide 4N+ 18,000 $224 $4.0 $3.8
Terbium Oxide 4N+ 14,000 $1,195 $16.7 $15.8
Yttrium Oxide 5N 10,000 $160 $1.6 $1.5
Shanghai, China          
Yttrium Oxide 4N5+ 120,000 $32 $3.8 $3.6
Total:   202,000   $48.8 $46.1
           
*Grades:          
4N = 99.99%          
4N+ = 99.99+%          
5N = 99.999%          
4N5+ = 99.99%/99.999+%          

Dacha’s inventory, including market value is updated weekly every Monday morning and posted to the “Inventory” tab of its website at www.dachametals.com. Dacha encourages its shareholders and all other interested parties to visit its website regularly and to monitor the ongoing appreciation of its physical inventory of Rare Earth Elements.

About Dacha

Dacha Strategic Metals Inc is an investment company focused on the acquisition, storage and trading of strategic metals with a primary focus on Rare Earth Elements. Dacha is in the unique position of holding a commercial stockpile of Physical Rare Earth Elements. Its shares are listed on the TSX Venture Exchange under the symbol “DSM” and on the OTCQX exchange under the symbol “DCHAF”.

The market value of the Company’s physical inventory is estimated using price quotes published by two of the largest independent news sources for the metals industry, namely, Asian Metal (www.asianmetal.com) and Metal-Pages (www.metal-pages.com). In cases where these websites do not provide a price quote on the type or quality of metal held in the Company’s physical inventory, the Company relies on a price quote provided by independent third-party industry participants.

Full release

NEWS: Avion Increases Measured & Indicated Resource by 20% to 1.17 Million Ounces of Gold

Avion Gold Corporation today announced its updated mineral resource estimation for the Tabakoto Project, including exploration drilling completed predominantly in Q1, 2011. Exploration drilling focused on the Tabakoto NW underground zones and the Djambaye II open pit zone. A summary of the current changes to the Tabakoto Project mineral resources are as follows:

  • Open Pit Measured and Indicated mineral resources increase 85% from 136,000 ounces of gold to 251,700 ounces of gold

  • Underground Measured and Indicated mineral resources increase 10% from 842,700 ounces of gold to 928,800 ounces of gold

The current mineral resources estimate update for the Tabakoto project presents updated resources for the Tabakoto NW zones and Djambaye II zone. The mineral resources, for all other zones on the Tabakoto Project, as presented on December 30th, 2010, remain the same. Material changes for this update include the addition of open pit Indicated mineral resources for the Djambaye II zone of 91,300 ounces of gold and additional underground Measured and Indicated mineral resources of 81,200 ounces of gold for the Tabakoto NW zones. The details of the resource breakdown are summarized in the table below.

John Begeman, President and CEO, commented: “The recent exploration drilling at the Tabakoto Project confirms our belief that a significant amount of the Inferred mineral resources can be upgraded to Measured and Indicated mineral resources. As well, the additional open pit mineral resources are especially significant as it provides even more flexibility to our mining operations as we transition to underground mining at Tabakoto and Segala.”

Mineral Resource Estimates(1)(2)(3)(4)(5)
ZONE CATEGORY TONNES Au g/t Au OUNCES TYPE
Tabakoto NW
Zones

Measured 5,000 7.75 1,200 OP
Indicated 102,000 4.48 14,800 OP
inferred 86,000 3.31 9,100 OP
Measured 17,000 5.92 3,200 UG
Indicated 627,000 5.81 117,100 UG
inferred 660,000 5.67 120,200 UG
Djambaye II

Indicated 751,000 3.78 91,300 OP
inferred 1,595,000 3.30 169,200 OP
indicated 3,000 2.52 200 UG
inferred 950,000 3.43 104,700 UG
   
(1) Resource estimates based on a gold price of USD$1000 per ounce and a 96% recovery.
(2) Eugene Puritch, P.Eng. and Antoine Yassa, P.Geo. from P&E Mining Consultants Inc., Qualified Persons under NI 43-101 who are independent of the Company, are responsible for the mineral resource estimates presented herein.
(3) Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
(4) The quantity and grade of reported Inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred resources as an indicated or Measured mineral resource and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.
(5) The mineral resources in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.

The updated mineral resource statement was based on 46 shallow reverse circulation (“RC”) holes, totaling 3,554 metres of drilling, over the northern part of the Djambaye II zone and 10 core holes, totaling 2,068 metres, into the NW trending mineralized zones under the north end of the Tabakoto pit. All core and RC chip samples were analyzed at Avion’s Tabakoto mine lab to ensure quick turnaround. Avion’s procedures for handling reverse circulation drill chips were consistent with previous practice as presented in an April 5, 2010 news release.

The updated mineral resource calculations were prepared by Eugene Puritch, P. Eng. and Antoine Yassa, P. Geo. from P&E, Qualified Persons under NI 43-101 who are independent of the Company and have reviewed the scientific and technical information in this document relating to those estimates. Eugene Puritch, P. Eng. and Don Dudek, P.Geo., Senior Vice President Exploration of Avion both Qualified Persons under NI43-101 have reviewed and approved the updated mineral resources and the technical data presented in this press release. The updated mineral resource capped gold assays at 17.5 to 65 g/t Au, depending on the individual zone. A gold price of US$1000 per ounce, a 96% process recovery rate, mining costs of US$34/tonne, process costs of US$20/tonne and G&A costs of US$8 tonne were used to determine the 2.0 g/t underground cut-off grade. For potentially open pittable mineral resources a 1.0 g/t cut-off grade was used. Avion has not completed a feasibility study in regards to the mineral resources presented herein and there is no certainty the proposed operations will be economically viable.

These updated mineral resources and specifically the additional Measured and Indicated mineral resources will have an impact on Avion’s maiden reserve report. As such, the delivery of Avion’s first reserve report will be delayed until later Q2 2011 in order that this initial reserve statement can incorporate the updated resource data.

Don Dudek, Avion’s Senior Vice President Exploration, commented: “As we continue to refine the mineralization models at the Tabakoto Project numerous exploration targets and opportunities to systematically increase the mineral resources, become apparent. In management’s opinion, further drilling should continue to unlock the exploration potential of this project over time.”

Avion’s 2011, approximately 60,000 metre drill focused exploration program is well underway with 199 core and reverse circulation (‘RC’) holes totaling approximately 24,700 metres of drilling completed. Drilling completed to date is split evenly between Avion’s Tabakoto (Mali) and Houndé (Burkina Faso) properties with a core and an RC drill rig on each property. Drilling will commence on the Kofi property in early May. Additional drill rigs are being sought to accelerate and expand the 2011 drill programs.

About Avion Gold Corporation

Avion is a Canadian-based gold mining company focused in West Africa that holds 80% of the Tabakoto and Ségala gold projects in Mali. Gold production commenced at these projects in 2009 with approximately 51,290 ounces produced. 2010 production was 87,630 ounces of gold. Production sustainability will continue to be supported and enhanced by an aggressive 2011 drill program over an approximately 600 km2 exploration package that both surrounds and is near to the Company’s existing mine infrastructure. The current mineral resources estimate for the Tabakoto project demonstrates several sources of excellent grade open pit and good grade underground mineral resources thus providing significant flexibility for Avion’s future mining plans. Additionally, the 1,670 km2 Houndé exploration property in Burkina Faso continues to return promising results. These properties are subject to a preliminary US$ 10 million dollar, approximate 60,000 metre, drill-focused, exploration program in 2011. Avion continues to progress towards its medium term goal of 200,000 ounces of gold per year and a longer term goal of organic growth through development of its exploration properties. The Company is developing an underground mine at the Tabakoto deposit, and is preparing to mine underground at the Ségala deposit. Avion has a highly skilled management team, with a focus on growth and consolidation within West Africa.

Full release