Dear Shareholder,
We are pleased to present a review of Avino’s achievements in 2011 and outlookfor 2012. Last year was a mile stone year for Avino despite the turmoilwitnessed in the global financial markets. Considerable progress was madetowards our goal of becoming a multi-million ounce annual silver producer.
Management remains focused on the following key objectives:
1. Commence full commercial production at San Gonzalo
2. Continue developing the San Gonzalo resource
3. Asses plans for reopening the original Avino Mine and processing tailingsresource
4. Expanding resources, reserves
5. Identify and explore new targets on Avino’s large property
San Gonzalo Bulk Sample Program Complete
On April 2 2011, Avino completed the bulk sample program at the SanGonzalo deposit after more than two years of development work. The highlyanticipated program produced very encouraging conclusions. Avino’s productioncosts for the bulk sample were just $7.62 per ounce of silver equivalent,demonstrating the robust nature of the project. The overall bulk sample feedgrade was 261g/t Ag and 0.9g/t Au. Silver and gold recoveries improved over thecourse of the bulk sample and averaged 76% and 59% respectively. During theprogram, 232 dry tonnes of flotation concentrate were produced of which 188tonnes were sold for net revenues of US$1.83 million. If the entire productionwere sold under the same contract terms, the net revenue would have beenUS$2.26 million. The remaining concentrate was not sold at this time due to theEarthquake situation in Japan which forced the closure of numerous smelters,thus significantly driving up smelting costs. Instead, Avino stockpiled theremaining concentrate inventory until the end of 2011 when the concentratemarkets had improved and better terms could be reached for the sale of theproduct. Net proceeds of the bulk sample program yielded a significant profitof $1.3 million based on concentrate sold to date. As a result of the positiveoutcome, Avino is proceeding with its mine plan to develop the 3rd, 4th and 5thlevels in order to provide mill feed a the rate of 250 tpd on a sustainedbasis. The Remaining inventory of San Gonzalo concentrate was recently shippedand sold to a trading firm. Final figures for both revenue and cost associatedwith the San Gonzalo concentrate will be reported once the sale is final.
San Gonzalo – Mining and Underground Development Continues
Since the completion of the bulk sample, mining and development of the SanGonzalo zone has continued. Stope, 2-200 which was not included in the 2008 NI43-101 resource calculation by Orequest consultants, and stope 2-080 weremined. Work on stope 2-200 was completed in late November. The calculatedtonnage of this stope was 3723 tonnes with an estimated grade of 300 g/tand 1.2 g/t silver and gold respectively. Work on stope 2-080 towards theold mine workings slowed in September due to a different mining method beingrequired. The average grade of this stope is 216g/t silver and 0.9 g/tgold; plans to continue mining this stope have been put on hold due to itsproximity to the old workings.
Development mineralized material from both areas is currently being stockpiledon the surface near the coarse ore bin of the crushing plant. The estimatedtonnage of this surface stockpile at the end of the year was 8507 tonnes. Thismaterial will be processed once a quantity sufficient to feed and ongoing 250tonne per day operation is stockpiled.
To obtain sufficient feed for a sustained 250 TPD operation, Avino’s miningcontractor DMG has been completing the necessary underground work to developthe 3rd, 4th and 5th levels of the mine. This work has been accelerated throughthe purchase several new pieces of underground mining equipment by Avino. Bythe end of 2011, the ramp to level 3 and the cross cut to the vein had beencompleted, drifting on the vein at the level 3 elevation was in progress andwork on the ramp to level 4 continues.
Milling Operations
In the periods leading up to and following processing of the San Gonzalo bulksample, we have used our mill to process stock piled material left from ourpast mining operation on the main Avino Vein. The mill has been processing thestock piles at approximately 180 tpd with feed grades highly variable dependingon the location of the stockpiles. Typical silver feed grade ranges from 60 to120 g/t and gold from 0.6 to 1.5 g/t. Copper values are low andranges from 0.1 to 0.2%. The concentrate produced grades about 2 kg/tsilver and 30 g/t gold. Over the course of 2011, approximately 550 tonnesof this concentrate was sold to a trading firm in Mexico. Final sales and costfigures will be reported in our audited financial statements. The remaininginventory of approximately 300 tonnes was sold and trucked to Manzanillo inJanuary; final terms of the sale are still pending.
Exploration
Following a complete overhaul of Avino’s Longyear 44 drill and a new drillcontract for personnel and materials, Avino started its regional explorationdrill program on January 27, 2011. The drill spent the early part of the yearat San Gonzalo further outlining the resource before being moved to variouszones around the property. In total 69 holes totaling 9943 metres were drilledprincipally in the following locations: San Gonzalo (18 holes), La Potosina (9holes), Guadalupe (23 holes), San Juventino (3 holes), San Lucero (5 holes),Mercedes (1 hole), San Jorge (3 holes), Yolanda (2 holes). The drill crew endedthe year back at San Gonzalo exploring for the feeder system of the San GonzaloDeposit. Encouraging results continue to come from San Gonzalo as well as fromthe Guadalupe zone where mineable grades and widths were encountered.
NYSE/AMEX Listing
In August, Avino’s common shares began trading on the NYSE/AMEX under thetrading symbol ASM. We are excited about the increased exposure from thislisting and hope that it will bring additional value to Avino’s broadeningshareholder base as well as to introduce Avino to a wider audience of investorsas our company profile expands. On January 23rd 2012, Avino rang the openingbell at the New York stock exchange to commemorate the listing.
Outlook
In 2012, Avino expects to enter full commercial production at 250 tonnes perday once enough mill feed from the San Gonzalo zone is stockpiled at thesurface. We are also excited about a pending royalty agreement that will onceagain permit us to mine the main Avino Vein. Furthermore, in the coming weekswe expect an updated report from Wardrop Engineering pertaining tore-processing the considerable tailings resource left from past mining. Allthree of these items will play an important role in Avino’s goal of becoming amulti-million ounce annual silver producer.
Aggressive exploration is also scheduled to continue in 2012 with 10 holesplanned for the Elena Tolosa area which are intended to confirm internalestimates of the remaining tonnage of the Avino vein and help prepare for a newNI 43-101 resource estimate later in the year. Drilling at San Gonzalo willalso continue but will shift from surface to underground drilling with 10 holesplanned using the company’s recently purchased underground drill. Extensivedrilling will also be undertaken on the tailings resource to provide materialfor metallurgical test work as well as to upgrade oz’s from the inferred to themeasured and indicated categories; 1985 meters of drilling through 95 holesusing a sonic drill are planned. A further 44 holes are also set to be drilledas part of Avino’s ongoing regional drill program in areas including: LaPotosina, Aranguez, Gran Luccero, Guadalupe and La Estela.
About Avino
Avino has operated continuously in Mexico since 1968, including a period inwhich the Avino Mine produced for 27 years. During our long history, we haveweathered a number of difficult economies and are now poised to capitalize onrecord precious metal prices.
We would like to thank our loyal shareholders for remaining patient throughdifficult years and our development years and to thank our management and stafffor their excellent work in the office and in the field
ON BEHALF OF THE BOARD
“David Wolfin”
______________________________
David Wolfin
President & Chief Executive Officer
Neither TSX Venture Exchange nor its Regulation Services Provider (as that termis defined in the policies of the TSX Venture Exchange) accepts responsibilityfor the adequacy or accuracy of this release. This release contains statementsthat are forward-looking statements and are subject to various risks anduncertainties concerning the specific factors disclosed under the heading “RiskFactors” and elsewhere in the Company’s periodic filings with Canadiansecurities regulators. Such information contained herein representsmanagement’s best judgment as of the date hereof based on information currentlyavailable. The Company does not assume the obligation to update any forward-lookingstatement.