AVM.L Regulatory News (AVM)

AVOCET MINING PLC

("Avocet" or the "Company")

RESULTS FOR THE QUARTER ENDED 30 SEPTEMBER 2010

& INATA UPDATE

·; Total gold production up 28% to 67,792 ounces, from 52,870 ounces in the previous quarter;

- Inata production up 30% to 40,461 ounces, from 31,225 ounces in the previous quarter;

- South East Asia production up 26% to 27,331 ounces, from 21,645 ounces;

- On track to meet or exceed Group production guidance of 220,000 ounces in 2010;

·; Total cash cost reduced by 12% to US$619/oz compared with US$701/oz in the previous quarter;

·; EBITDA of US$27.9 million, up from the previous quarter of US$24.6 million;

·; Net debt reduced from US$44.7 million at 30 June to US$37.7 million at 30 September, after first US$6.0 million debt repayment and purchase of Inata's second phase mining fleet;

·; Inata Mineral Resources and Mineral Reserves increased by 16% and 25% respectively(1) ;

·; 200,000 metre drill programme commenced in October;

·; Positive drill results at Souma - maiden Mineral Resource scheduled for November 2010;

·; Forecast annual gold production for Inata life of mine increased to 165,000 ounces from 120,000 ounces, based on increased reserves and plant enhancements; third phase mining fleet already ordered;

·; Russell Edey appointed Chairman on 15 September 2010;

(1) After allowing for mining depletion

(2) Inata costs and revenues in the quarter to 31 March 2010, prior to the commencement of commercial mining operations, have been capitalised. 19,838 ounces of gold poured in this period have however been included in total gold production.

(3) Includes 26,135 ounces delivered into Inata's hedge at $970/oz

(4) EBITDA represents earnings before exceptional items, interest, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation

Brett Richards, Chief Executive Officer, commented:

"The last quarter saw Avocet grow gold production and lower cash costs at each of our operations. West Africa is the engine room of our growth and we remain very encouraged not only by the performance of the Inata plant, but also by the potential for our accelerated exploration campaign across West Africa."

Avocet Mining will host a conference call on Friday 5 November 2010 at 09:30am (London, UK time) to update investors and analysts on its results. Participants may join the call by dialling one of the following three numbers, approximately 10 minutes before the start of the call.

From UK:(toll free) 0808 238 7396

From Norway:(toll free) 800 187 79

From rest of world: + 44 20 3364 5947

Participant pass code: 660653#

A live audio webcast of the call will be available on:

http://mediaserve.buchanan.uk.com/2010/avocet051110/registration.asp

Notes to Editors

Avocet Mining PLC ("Avocet" or "the Company") is a gold mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM.L) and the Oslo Børs (Ticker: AVM.OL). The Company's principal activities are gold mining and exploration in Burkina Faso (as 90 per cent owner of the Inata gold mine), Malaysia (as 100 per cent owner of the Penjom gold mine, the country's largest gold producer) and Indonesia (as 80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi).

The Company announced in May 2010 that it had initiated exploration within the Inata Mining Licence area and in the surrounding Bélahouro district with the objective of significantly increasing Inata's Mineral Resource and Mineral Reserve base as well as investigating the highly prospective Souma Trend, located 20 km from the Inata mill. The Company has a number of other advanced exploration projects in West Africa and South East Asia.

Background to operations

The Inata deposit presently comprises a Mineral Resource of 1.84 million ounces and a Mineral Reserve of 1.08 million ounces. Inata poured its first gold in December 2009 and has now reached a production rate in excess of 12,000 ounces per month. Other assets in West Africa include exploration licences in Burkina Faso, Guinea and Mali (the most advanced being the Tri-K gold exploration project in Guinea with a Mineral Resource of 666,500 ounces).

Penjom is Malaysia's largest gold mine and was developed by Avocet in an area of historic alluvial mining. The mine is located in Pahang State, approximately 120 km north of the country's capital, Kuala Lumpur.

North Lanut in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced over 270,000 ounces since it was commissioned in 2004. North Lanut is located within a Contract of Work, which includes exploration and mining rights over approximately 50,000 hectares in an area highly prospective for gold. Avocet holds an 80 per cent interest and an Indonesian company, PT Lebong Tandai, owns the remaining 20 per cent.

CHIEF EXECUTIVE OFFICER'S STATEMENT AND OPERATIONAL REVIEW

Overview of Strategic Priorities and Corporate Activities

Avocet has progressed well on the strategic priorities I outlined to the market in July of this year. In West Africa, our new flagship mine, Inata, continues to deliver on its production and cost milestones and is now operating at or above design capacity in terms of ore throughput and gold production.

The key priority of our strategy is delivering growth, and our plans in West Africa are making good progress. This is evidenced by positive results announced in relation to the Souma trend, an increase in Mineral Resources and Mineral Reserves at Inata, and the accelerated drilling programme in and around Inata being conducted by our exploration team in West Africa. Over the coming months we will see the results of this programme, which is targeted to double Mineral Reserves at Inata, as previously announced, and which will allow us to grow our gold production within the Bélahouro district.

Today we are announcing increased average forecast gold production for Inata of 165,000 ounces per year over a six year mine life ending 2016, compared with the previous life of mine average of 120,000 ounces per year over an eight year mine life ending 2018. This change has been made possible by the successful ramp up of the plant and by the Mineral Reserve increase announced in September 2010, and will result in an increase in unhedged production at cash costs in the region of US$500/oz over the coming years. Capital expenditure of up to US$10 million will be required to debottleneck the plant and utilise the full capacity of the crushing and grinding circuit. In addition, a third phase mining fleet at a cost of approximately US$15 million has been ordered, and will be required to feed the plant to maintain average gold production at 165,000 ounces per annum at life of mine grades. These costs are to be financed from internal cash flow. The third mining fleet has already been ordered and the plant enhancements are expected to be commissioned by the end of the second quarter of 2011. Extending the mine life is one of the key targeted outcomes from the recently commenced drilling programme at Inata.

In South East Asia we continue our strategic review to identify the optimal means of delivering value to shareholders from our assets in the region, including the potential for a trade sale. This strategic review is ongoing and we expect to update the market on its status by the year end. Penjom and North Lanut improved production as both operations accessed higher grade mining areas and processed more ore in the third quarter than in the second.

In July, we strengthened the Board with the appointment of Russell Edey and Barry Rourke. Russell brings considerable experience in the gold industry, notably as a Director then Chairman of AngloGold Ashanti over a period totalling 12 years, while Barry, a Partner at PricewaterhouseCoopers for 17 years, also has significant finance and resource sector experience.

In September, after more than 20 years at the head of the Company, Nigel McNair Scott stepped down from the Board. Nigel has been involved with Avocet from its inception, and was at the helm as it grew into its current structure. We are grateful for his support and leadership, and wish him the very best in his future endeavours. In succession, Russell Edey was appointed Chairman of the Board and Barry Rourke was appointed Chairman of the Audit Committee. I very much look forward to working with Russell, Barry and the rest of the Board over the coming years.

Gold production and cash costs

Gold production for the quarter of 67,792 ounces represents an increase of 28 per cent on the previous quarter, and brings the total for the year to date to 165,539 ounces. Each mine achieved an increase, with Inata completing its ramp up to design capacity and Penjom benefiting from access to more ore after a period of extensive waste stripping in the first half of the year. We remain on track to meet our full year production guidance of 220,000 ounces.

The increase in production resulted in a further improvement in the Group's average cash cost to US$619/oz for the quarter, a 12 per cent reduction compared with the previous quarter.

As a result of higher production and lower cash costs, EBITDA increased 13 per cent to US$27.9 million while profit before tax and exceptionals rose 18 per cent to US$13.3 million.

WEST AFRICA REGION

Inata - Burkina Faso

(1) Production statistics include figures for Q1 2010; however cash costs include Q2 & Q3 only, as Inata had not reached commercial production in Q1

During the third quarter, mining operations continued in the Inata North pit as well as the lnata Central pit, where stripping had commenced in July 2010, which will supplement mill feed in 2011 as the plant continues to increase its throughput. Commissioning began on a second phase mining fleet, which will increase total tonnes mined to over 1.5 million tonnes per month from both pits.

The Inata plant completed its ramp up to design capacity, and as a result, tonnes processed rose by 41 per cent compared with the second quarter of 2010. By the end of the third quarter, the plant had demonstrated its ability to run for extended periods at mill throughput rates in excess of the design capacity of 287 tonnes per hour. The plant modifications required to achieve this milestone included upgrades and enhancements to cyclone pumps, conveyers, and piping. Due to quarter on quarter stockpile inventory changes, Inata processed a greater percentage of lower grade stockpile material (at a higher mill throughput), which resulted in a decrease in the grade of processed ore as compared with the second quarter. Recoveries remained high despite the increased throughput, which has the effect of reducing the processing, or residence, time. Gold produced in the quarter totalled 40,461 ounces, an increase of 30 per cent compared with the second quarter. Full year production is now expected to exceed 125,000 ounces.

In September, the Company also announced a new Mineral Reserve at Inata of 1.1 million ounces of gold. The new Mineral Reserve represents an increase of 235,600 ounces or 25 per cent after allowing for mining depletion, and was the result of economic analysis and a revised pit design following the updated resource announced earlier in September.

Avocet has also recently completed a study at Inata aimed at increasing annual gold production. The study shows that the increase in Mineral Reserves announced in September and the successful plant ramp up justify raising the processing plant throughput to 340 tonnes per hour from the current design capacity of 287 tonnes per hour. This will exploit the full capacity of the crushing and milling circuits, and will result in an average gold production rate of 165,000 ounces per year over a six year mine life ending in 2016 at cash costs in the region of US$500/oz.

The increased Mineral Reserve means that the life of mine stripping ratio will increase from 7:1 to 9:1. Avocet has signed contracts with Caterpillar and Komatsu for the third phase mining fleet required for the increased rate of mining and to support the increase in annual gold production. Design work for the plant increase to 340 tonnes per hour has commenced and long lead items will be ordered in Q4 2010. The plant enhancements and third mining fleet additions are expected to be complete and operational by the end of Q2 2011.

The capital expenditure forecast for the plant enhancements and third mining fleet is approximately US$25 million, which will be funded from internal cash flow. The increase in gold production will be unhedged and will increase Avocet's exposure to the spot price of gold.

Finally, it is important to recognise that Inata has developed a strong safety culture while achieving its construction and operational milestones, and to date has worked more than three million man-hours without a lost time injury.

Exploration

In Burkina Faso, third quarter exploration highlights included increases in Mineral Resources and Reserves at Inata, drilling and ongoing resource estimation at the Souma Trend east of Inata, and preparation for a 200,000 metre drill programme in and around Inata.

In early September the Company announced a new Inata Mineral Resource of 1.84 million ounces of gold, an increase of 250,200 ounces or 16 per cent after allowing for mining depletion, and reflecting a higher proportion of ounces in the Measured category. The Mineral Resource upgrade followed an extensive campaign of re-logging of historic drill holes, detailed geological modelling on site, and gold grade re-estimation in conjunction with an independent consultant. The new Mineral Resource is constrained by several wireframes based on the geological controls on the deposit that have been generated from the results of the re-logging programme, grade control RC drilling and in-pit mapping.

During the quarter Avocet announced drilling results from the central and southern parts of the Souma Trend, a 16 kilometre long gold-in-soil anomaly located approximately 20 kilometres east-north-east of Inata. The Company is currently reviewing the drilling results and expects to announce an Inferred Mineral Resources compliant with NI43-101 and JORC Code (2004) later in November 2010.

Preliminary results were obtained in the third quarter from the processing of the VTEM airborne geophysical survey conducted in June and July over the Bélahouro district surrounding Inata. Avocet has commenced a 200,000 metre drilling program to identify additional Mineral Resources in and around the Inata deposit. The results of this programme will form the basis of next year's Mineral Resource and Mineral Reserve upgrade, expected in the third quarter 2011.

Elsewhere, exploration in Guinea has focused on developing drilling targets at Tri-K, Balandougou and Kankan in the north east of the country. Following the success of VTEM airborne geophysical survey at Bélahouro, the Company will conduct a similar survey over the 986 square kilometre Tri-K Block and Balandougou later this month. Drilling has already commenced in this area and further drilling priorities will be identified by the VTEM survey results. In Mali, Avocet received approval of its N'tjila permit adjacent to Randgold Resources' Morila mine, and fieldwork will commence in early 2011.

SOUTH EAST ASIA REGION

Penjom - Malaysia

Gold production at Penjom increased significantly in the third quarter, after intensive waste stripping in the first six months of the year, and as higher grade ores were accessed, notably at the Jalis pit. Ore mined therefore improved in both tonnages and in grade, and mill feeds also improved as better quality material was able to be sourced directly from the pit, rather than drawing on the lower grade stockpiles as in previous periods. Higher production resulted in a drop of 25 per cent in the cash costs per ounce reported compared with the second quarter of the year.

North Lanut - Indonesia

Gold production at North Lanut rose 10 per cent compared with the previous quarter, due to increased leach pad availability allowing for higher ore tonnages to be processed. Grades were also improved as mining accessed higher grade areas at depth in the Rasik pits. The initial low process recovery rate of 54 per cent reflects the fact that high ore tonnes were placed on the leach pad towards the end of the quarter, from which only a small proportion of gold had leached out by the end of September. The gold from this ore will continue to be recovered in the fourth quarter. Higher gold production meant that cash cost per ounce was slightly below the previous quarter.

North Lanut's excellent safety record continues, with the operation having worked over 15 million lost time injury free hours.

South East Asian Exploration

Exploration in South East Asia focused on advancing the Doup and Seruyung projects, with drilling commencing in August and September, respectively. Diamond drilling at Doup is focussed on infill drilling on the Panang zone where the metallurgy is simpler. The aim of this programme is to evaluate the continuity of higher-grade gold zones and facilitate an estimate of Measured and Indicated Mineral Resources. This will enable the estimation of Mineral Reserves and the first economic evaluation of the project.

At Seruyung, the Company has mobilised two diamond drill rigs to commence the first phase infill drilling programme of the Main Silica Cap zone, which forms the core of the project. This will allow the estimation of Inferred Mineral Resources and facilitate an understanding of the scope and scale of the project.

Financial results

Revenues in the quarter were US$77.5 million, an increase of 19 per cent compared with the previous quarter, principally reflecting an increase in production of nearly 15,000 ounces or 28 per cent. The Group's third quarter realised gold price was US$1,139/oz, compared with second quarter of US$1,203/oz, and included the effect of 26,135 ounces being delivered into Inata's hedge at US$970/oz, the first hedge delivery. By the end of October, the hedge book had been reduced by a further 11,846 ounces and stood at 362,019 ounces, down from the original total of 400,000 ounces.

The Group's cash costs increased broadly in line with production to US$42.0 million. Profit before tax and exceptional items increased 18 per cent from US$11.3 million in the previous quarter to US$13.3 million.

There were no exceptional items in the third quarter. On 7 October the Company announced the sale of a number of non-core exploration assets and investments, which will be accounted for in the fourth quarter and which are expected to result in cash proceeds of approximately US$10.1 million and a small exceptional pre-tax profit.

Total EBITDA in the quarter was US$27.9 million, of which West African operations contributed US$20.2 million.

Net cash generated by operations of US$28.6 million was sufficient to fund payments for Inata's second phase mining fleet and other capex totalling US$20.4 million, as well as exploration of US$1.7 million and Inata's first US$6.0 million debt repayment in September. The Company's net debt position at the end of the third quarter improved to US$37.7 million, reflecting gross debt of US$84.0 million and cash slightly up at US$46.3 million. Further debt repayments of US$6 million are scheduled prior to the end of the financial year.

People

Each of our mines made improvements in production and costs in the quarter, while our exploration teams have added significant value to our assets. This is a testament to the effort and expertise of our employees in West Africa and South East Asia, and I thank them all for a successful quarter.

Brett A. Richards

5 November 2010 

(1) EBITDA represents earnings before exceptional items, interest, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation

The condensed consolidated quarterly financial statements, which are unaudited, have been prepared in accordance with the requirements of International Accounting Standard 34. This condensed quarterly report does not include all the notes of the type normally included in an annual financial report. Accordingly, this condensed report is to be read in conjunction with the Annual Report for the nine months ended 31 December 2009, which has been prepared in accordance with IFRS as adopted by the European Union, and any public announcements made by the Group during the interim reporting period.

The financial information set out in this quarterly report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The unaudited condensed quarterly financial statements for the three months and nine months ended 30 September 2010 have been drawn up using accounting policies and presentation expected to be adopted in the Group's full financial statements for the year ending 31 December 2010, which are not expected to be significantly different to those set out in note 1 to the Group's audited financial statements for the nine months ended 31 December 2009.

The financial information for the nine months ended 31 December 2009 has been extracted from the statutory accounts for that period. The Company's statutory financial statements for the nine months ended 31 December 2009 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.

After review of the Group's operations, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the unaudited condensed interim financial statements.

2. Profit before tax and exceptional items

Profit before tax and exceptional items is calculated as follows:

3. Exceptional items

Profit on redemption of debenture

Profit on disposal arises from the redemption of a debenture held by Wega Mining AS, a wholly-owned subsidiary of Avocet Mining PLC, in Merit Mining Corp ("Merit"). This debenture, along with all remaining assets in Merit, had been fully written down as part of the fair value adjustments on the acquisition of Wega Mining. At the time of the acquisition it was not considered likely that Merit would have the resources to settle the debenture. Following the investment of approximately CA$16 million in Merit by Hong Kong Huakan Investment Co Ltd, the repayment was possible, and the gain has therefore been classified as exceptional.

Loss on disposal of other financial assets

In June 2010, Avocet disposed of the shares held in Dynasty Gold Corp. Shares in Dynasty were recorded in the balance sheet at fair value, with movements in fair value recognised in equity, in accordance with IAS39. On the disposal of the shares, accumulated losses previously recognised in equity are transferred to the income statement and recognised in the loss on disposal.

Oslo listing costs

On 16 June 2010 Avocet announced its successful listing on Oslo Børs. Costs of the listing, which were not directly attributable to new shares issued, are treated as exceptional costs in the period. These included US$1.8 million of Stamp Duty Reserve Tax costs following the transfer of existing Avocet shareholders from UK-based registration system to the Norwegian VPS share registration system.

Impairment of capitalised deferred stripping cost

In September 2009, an impairment of deferred stripping costs previously capitalised was made on the basis that the grades and recoveries of the ore that had been stripped in earlier years proved significantly lower than estimated at the time when the stripping costs were deferred. There are currently no deferred stripping costs recognised in the balance sheet.

4. Non-current assets held for sale

Non-current assets held for sale comprise assets where the Group expects to realise value through sale as opposed to continued use. At the period end, this included the Group's holding of shares in Monument Mining at a value of US$4.6 million, and the Group's interest in the Houndé licences at a value of US$2.6 million. Monument Mining shares were previously reported in other financial assets, with movements in fair value recognised in equity. The interest in the Houndé licences has been transferred from intangible assets. The lower of the cost and net realisable value is the $2.6 million fair value that was attributed to the licences on acquisition of the Wega group.

The disposal of both assets was completed in October, as announced by the Group on 7 October 2010.

(1) EBITDA represents earnings before exceptional items, interest, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

6. Earnings per Share

Earnings per share are analysed in the table below, which also shows earnings per share after adjusting for exceptional items.

7. Intangible assets

Intangible assets represent deferred exploration expenditure.

8. Property, plant and equipment

All costs and revenues at Inata between 1 January and 31 March 2010 related to the testing and development phase, prior to the commencement of commercial operations. Therefore, these costs and revenues have been capitalised as part of mining property, plant and equipment. From 1 April 2010, all revenues and operating expenses in respect of mining operations at Inata have been recognised in the income statement.

9. Other Financial liabilities

Other financial liabilities of US$84 million include US$59 million drawn under a project finance facility from Macquarie Bank Limited relating to the Inata gold project and US$25 million drawn under a corporate facility with Standard Chartered Bank. $24 million of the Macquarie Bank Limited project finance facility is due for repayment within one year.

During the quarter, the Group commenced delivery of gold to meet forward sale contracts. The contracts are considered to be outside the scope of IAS39, on the basis that they are for own use and gold produced will continue to be delivered into these contracts in future periods, and therefore no value is reflected in the condensed consolidated financial statements. 26,135 ounces were delivered into the forward contracts during the quarter, at an average realised price of $970 per ounce. A further 11,846 ounces were delivered in October 2010, and at 29 October 2010, the hedge book had reduced to 362,019 ounces.

10. Non-operating items in the income statement

In arriving at net cash flow from operating activities, the following non-operating items in the income statement have been adjusted for:

11. Segmental Reporting

(1) Other cost of sales represents costs not directly attributable to production

(2) Includes amounts in respect of the amortisation of mine closure provisions

(3) EBITDA represents earnings before exceptional items, interest, tax, depreciation and amortisation. EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.