Mr. Howard Miller reports

AVNEL ANNOUNCES FILING OF AIF AND YEAR-END CONSOLIDATED FINANCIAL STATEMENTS AND MD&A FOR THE YEAR ENDED DECEMBER 31, 2016

Avnel Gold Mining Ltd. has filed its 2016 annual information form (AIF) and its audited consolidated financial statements and the related management discussion and analysis (MD&A) for the three- and 12-month periods ended Dec. 31, 2016, on SEDAR.

Fourth quarter 2016 highlights:

• Completed an optimization feasibility study (OFS) to enhance the results of the definitive feasibility study for the Kalana Main project. The OFS shows the potential for improved economics and a project construction schedule of 19 months, three months shorter than the feasibility study (the OFS does not incorporate any changes to the project's underlying Canadian National Instrument 43-101-compliant mineral reserves and resources, and the production profile and the mining plan of the project outlined in the feasibility study remain unchanged, but as a result of the optimization process, the project's cost structure has been reduced);
• Completed an 8,635-metre exploration drill program at the Kalanako deposit;
• Issued tender document for the construction of the tailings storage facility;
• Received a receipt from the Ontario Securities Commission, as principal regulator, for a base shelf prospectus that was filed in each province of Canada except Quebec. The base shelf prospectus, as amended, qualifies an aggregate offering amount of $325-million of debt securities, ordinary shares, warrants, subscription receipts and units in the 25-month period following the date of the receipt (Oct. 7, 2016).

Full year 2016 highlights:

• Completed the feasibility study for the Kalana Main project and filed an NI 43-101-compliant technical report in support of the feasibility study on SEDAR;
• Announced an updated mineral resource statement for the Kalana Main project;
• Received approval of the environmental and social impact assessment (ESIA) for the development of the Kalana Main project;
• Appointed Charles Graham as project manager and Raymond Deen as project controls manager for the Kalana Main project;
• Appointed ABS Africa to assist Avnel to develop strategies, policies and action plans to meet the requirements of the environmental and social management plan;
• Appointed Epoch Resources, which completed the tailings storage facility design for the feasibility study, and commenced detailed engineering design to enable tender for construction to be issued;
• Appointed ESDCO, a Malian consultant which completed the socio-economic and resettlement action plan (the RAP) for the feasibility study, to design and manage the implementation of the RAP for Kalana town and other impacted areas;
• Announced infill and extension drilling program on the Kalanako deposit and regional exploration activity in Q4 2016 and Q1 2017;
• Appointed Anne-Severine Le Doare to the board of directors;
• Appointed DRA Mineral Services and Group 5 joint venture to execute the engineering, procurement and construction (EPC) for the Kalana project, subject to final contractual documentation.

Significant events subsequent to Dec. 31, 2016:

• Announced Kalana Main project optimization;
• Discussions advanced with banks and financial institutions on financing the Kalana Main project;
• In January and February, 2017, 67,063,700 warrants at 20 cents each were exercised for aggregate proceeds of $10.2-million.

2017 outlook

In March, 2016, a positive feasibility study for the Kalana main project was completed, and the related ESIA and associated ESMP have been approved by the Malian authorities. The approval of the ESIA was the key government approval required to advance the Kalana Main project toward construction as the Kalana exploitation permit was awarded to Avnel in 2003 with an initial term of 30 years plus two 10-year extensions. The company continues to advance the Kalana Main project toward a construction decision through its 80-per-cent ownership in Societe d'Exploitation des Mines d'Or de Kalana SA (SOMIKA).

In January, 2017, the company announced the results of an optimization of the feasibility study. The results enhanced the financial parameters for the project and reduced the execution risk for construction and operations. An EPC contract for the construction of the gold plant and associated infrastructure has been awarded to a joint venture of two international engineering companies, namely DRA Mineral Services and Group 5. The EPC contract has improved the construction period by three months, and the fixed cost is within the feasibility study capex. A power supply contract has been negotiated with an international power provider, subject to final documentation. The hybrid power plant will utilize solar and fossil fuels, reducing annual fuel consumption with financial and environmental benefits. The company will issue a request for tender to international contract mining companies for the mining of the Kalana Main project. Assuming positive results, the project financials will be enhanced and the execution risk reduced.

The company will advance the planned resettlement of impacted persons resulting from the future operation. Final urban planning approval for the extension of Kalana town is expected by Q3 2017, and this will allow construction of new housing and public infrastructure to commence when financing is available. The RAP commission to oversee the process was established by the Malian authorities and will implement the plan in consultation with all stakeholders according to Malian legislation and IFC performance standards.

The company is committed to construct and operate the project in compliance with Malian legislation, the Equator principles and IFC performance standards. Resources are being applied to the health, safety and environmental policies and systems to meet this commitment.

Discussions are progressing with banks and other financial institutions to provide financing for the development of the Kalana Main project. The company anticipates that the Kalana Main project will be sufficiently advanced to consider a construction decision in 2017, subject to the availability of adequate financing on a timely basis.

With respect to operations at the small Soviet-era underground mine (the Kalana mine), gold production in the year to Dec. 31, 2016, was 9,633 ounces. The company continues to sustain operations to partially offset the cost of providing underground access to facilitate due diligence activities necessary to secure mine development financing. The continued operation of the underground mine also helps to maintain socio-economic stability in the local community as the work force prepares to transition to activities related to the construction and operation of the proposed Kalana Main project. The company intends to sustain operations for as long as it is economically feasible and safe to do so, without incurring any significant capital expenditures, until such a time as the company is able to commence construction of the Kalana Main project.

The directors recognize the continuing requirement for short-term financing, working capital purposes and in the longer term to build the proposed open-pit mine operations of the company, which are dependent upon its ability to raise adequate financing. The directors believe that the required financing will be raised, and in conjunction with management, are actively pursuing various financing options with the major shareholders and are engaged in continuing discussions with banks, financial institutions and other mining companies regarding proposals for financing. While these discussions are continuing, it cannot be guaranteed that such financing will be available on a timely basis or on acceptable terms.

                                 SELECTED ANNUAL INFORMATION                                 
               (in thousands of U.S. dollars, except per-share amounts) 
  
                                                                 2016        2015        2014

Total revenue                                              $   12,031   $  11,360   $  12,024
Total expenses                                                 16,067      16,048      19,114
Other income/(expense)                                          3,755       1,840      (3,211)
Net (loss)                                                       (284)     (2,848)    (10,296)
Net profit/(loss) from continuing operations 
attributable to owners of the parent                            1,234      (1,214)     (8,482)
Earnings/(loss) per share attributable to 
owners of the parent                                            0.004      (0.004)     (0.038)

Full year 2016 results of operations (in U.S. dollars)

Total revenue increased to $12,031,000 in the 12 months to Dec. 31, 2016, from $11.36-million in the 12 months to Dec. 31, 2015. The increase in revenue is primarily a result of a 7-per-cent increase in the realized average sales price of gold from $1,164 per ounce in the 12 months to Dec. 31, 2015, to $1,246 per ounce in the 12 months to Dec. 31, 2016, and a 1-per-cent decrease in the number of ounces of gold sold relative to the prior year.

Total expenses remained constant in the current and prior year at just over $16-million. Exploration costs expensed were $508,000 in the 12 months to Dec. 31, 2016, compared with $260,000 in the 12 months to Dec. 31, 2015. Operating costs per ounce of gold sold for the 12 months to Dec. 31, 2016, decreased 4 per cent to $1,027 per ounce from $1,073 per ounce in the prior year.

Avnel recorded a net loss of $284,000 (0.4-cent earnings per share attributable to owners of the parents) for the 12 months ended Dec. 31, 2016, compared with a net loss of $2,848,000 (0.4-cent earnings per share attributable to owners of the parents) in the prior year. Included in the 12 months to Dec. 31, 2016, is a net gain on the fair value of derivative financial instruments of $3,955,000, compared with a net gain of $2,166,000 in the 12 months of 2015, arising from a change in the fair value of warrants outstanding. Fair value accounting gains and losses reported have no cash effect on the company.

As compared with the consolidated statement of financial position as at Dec. 31, 2015, Avnel's cash and cash equivalents as at Dec. 31, 2016, decreased by $3,491,000 to $3.72-million. The reduction mainly arose from exploration and evaluation expenditures of $1,521,000 and cash used in operations of $2,854,000 that was partly offset by cash provided by financing of $874,000. As at Dec. 31, 2016, the company had a working capital surplus of $4,492,000, compared with a working capital surplus of $8,803,000 as at Dec. 31, 2015, excluding derivative financial liabilities. Total assets reduced from $27,958,000 as at Dec. 31, 2015, to $24,815,000 at Dec. 31, 2016.

Total non-current liabilities increased from $3,349,000 as at Dec. 31, 2015, to $3,653,000 at Dec. 31, 2016, excluding derivative financial liabilities.

Total stockholders' equity increased to $34,494,000 as at Dec. 31, 2016, from $32,738,000 as at Dec. 31, 2015.

We seek Safe Harbor.