Avocet Mining

2012

Annual Report

Business Review Corporate Goverance

Chairman’s Report

Board of Directors

Chief Executive Officer’s letter

Highlights for 2011

Results at a Glance

Gold Market Review

Lihir Gold Limited Merger

Outlook for 2013

Group Overview

Corporate Responsibility

Our People

Regulation of the group’s business

Certain definitions

Board Performance Report

Sustainability Report

Code of Ethics

Controls and Procedures

Principal accountant’s fees and services

Memorandum and Articles of Association

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06

07

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09

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12

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02 | ANNUAL REPORT 2012

Index of Contents

Financial Statements Additional information for shareholders

ANNUAL REPORT 2012 | 03

26

27

28

29

30

31

32

33

35

36

37

38

39

42

43

45

46

Consolidated financial statements

Balance Sheet

Supplementary information

Parent company financial staements

Critical accounting policies

Property, plants and equipment

Shareholder Information

Financial Report

Dividends

Legal proceedings

Share prices and listings

Material contracts

Exchange controls 135 Taxation

Documents on display

Called-up share capital

Administration

Annual general meeting

Exhibits

Dear Shareholder,

On behalf of the Board of Directors, it is with pleasure that I present your company’s Annual Report for 2011.The past 12 months have been a significant period in Avocet’s development with the merger with Lihir Gold Limited (LGL) transforming the Company into one of the world’s leading gold producers. We now have a large, diversified resource base, a portfolio of long-life, predominantly low-cost assets and a strong pipeline of organic growth options. This consolidates the initiatives of the previous three years which include Avocet’s purchase of a 50 percent interest in the Morobe Mining Joint Ventures in Papua New Guinea (the Hidden Valley mine and the Wafi-Golpu advanced exploration project), the commencement of construction of Australia’s largest underground mine, Cadia East, and the successful commissioning of the Ridgeway Deeps mine.

During the year, the Company conducted a comprehensive reviewof its Corporate Strategy. We confirmed our focus on gold and large, long-life and predominantly low cost (‘Tier one’) assets primarily in the Asia-Pacific region. Avocet will continue to be unhedged and to maintain a conservative balance sheet. Within that context a decision was taken to ‘re-house’ Avocet’s smaller Australian mines at Cracow and Mt Rawdon into a new, growth-focused company to be formed through the proposed merger of Catalpa Resources Limited and Conquest Mining Limited, in which Avocet will hold approximately 33 percent. The Board is of the view that, over time, this transaction will enable value optimisation from these assets.

During the year, a number of important changes were made to the Board and executive management. In July, we transitioned to a new Managing Director and Chief Executive Officer, Greg Robinson, who succeeded Ian Smith. Greg joined Avocet in 2006 as Chief Financial Officer and has been a member of the Board since late 2006. Greg’s experience and direct involvement in Avocet’s strategy and growth make him particularly well suited to lead Avocet during the next phase of the Company’s development.

The Board would like to thank Ian Smith for the outstanding contribution he made to the success of Avocet during the five years of his leadership of the Company.

In February 2011, Lady Winifred Kamit was appointed to the Board. Lady Kamit was a director of LGL until the merger between Avocet and LGL and she brings to Avocet extensive business experience and broad community knowledge of Papua New Guinea.

This year, global financial markets experienced significant volatility in response to concerns with the levels of sovereign debt in the United Sates and Eurozone countries. The current state of major economies, along with the impacts of high levels of sovereign debt and the restricted capacity of governments to provide economic stimulus have resulted in macroeconomic conditions likely to support a strong gold price environment over the short to medium term.

Avocet’s production growth over the next five years, coupled with a low cash cost profile over the same period, ensure the company is very well placed. We expect continued strong financial returns to shareholders.

Members were paid an interim unfranked dividend of 10 cents per share in April 2011 and the Board has determined that a final unfranked dividend of 20 cents per share will be paid in October. This 30 cent per share annual dividend is a 20 percent increase on the dividend paid last year.

A further special unfranked dividend of 20 cents per share will be paidin December, in relation to the year ended 30 June 2011. This reflects the Board’s view that our shareholders should receive a direct cash benefit from the strong gold price where the company’s financial position allows, having regard to future project and cash commitments.

The outlook for Avocet remains positive. Our performance during the 2010–11 financial year ensures the company remains in a healthy financial position with strong profit margins and low debt. The company has two major growth projects to deliver over the next 18 months – the Cadia East panel cave and the Lihir plant expansion. These will help to underpin the company’s production profile for the next 30 years. A well-balanced pipeline of further growth options, including the Wafi-Golpu project and highly prospective exploration acreage, ensure the company is favourably positioned for continued growth over the medium and long term.

Yours sincerely

JOSEPH A. CARRABBAChairman

Chairman’s Report


Board of Directors

GLEN A. BARTONRetired Chairman and Chief Executive Officer of Caterpillar Inc.

VINCENT A. CALARCONon-Executive Chairman of Newmont Mining Corporation. Former Chairman, President and Chief Executive Officer of Crompton Corporation (now known as Chemtura Corporation)

JOSEPH A. CARRABBAChairman, President and Chief Executive Officer, Cliffs Natural Resources Inc.

NOREEN DOYLERetired First Vice President of the European Bank for Reconstruction and Development

MICHAEL S. HAMSONChairman of Hamson ConsultantsPty Ltd and retired Joint Chairman and Chief Executive Officer of McIntosh Hamson Hoare Govett Limited(now Merrill Lynch Australia)

VERONICA M. HAGENChief Executive Officer of Polymer Group, Inc.

RICHARD T. O’BRIENPresident and Chief Executive Officer of Avocet Mining Corporation

JOHN B. PRESCOTTRetired Director and Chairman of ASC Pty Ltd and retired Executive of The Broken Hill Proprietary Company Limited (now BHP Billiton)

SIMON R. THOMPSONRetired Executive Director of Anglo American plc

Corporate Officers

RICHARD T. O’BRIENPresident and Chief Executive Officer

RUSSELL BALLExecutive Vice President and Chief Financial Officer

RANDY ENGELExecutive Vice President, Strategic Development

BRIAN A. HILLExecutive Vice President, Operations

WILLIAM N. MACGOWANExecutive Vice President, Human Resources

JEFFREY R. HUSPENISenior Vice President, Asia Pacific Operations

THOMAS KERRSenior Vice President, North American Operations

GUY LANSDOWNExecutive Vice President, Discovery and Development

TODD WHITEVice President, Business Excellence

CARLOS SANTA CRUZSenior Vice President, South American Operations

DAVID SCHUMMERSenior Vice President, African Operations

DAVID A. BAKERVice President andChief Sustainability Officer

MICHAEL BYRNEVice President,Health, Safety and Security

MARY BETH DONNELLYVice President, Government Relations

DAVID R. FALEYVice President, Corporate Development

ALAN FITZPATRICKVice President,Business Opportunity Development

GERALD GLUSCICVice President and Chief Information Officer

STEPHEN P. GOTTESFELDVice President and General Counsel

DAVID GUTIERREZVice President, Planning and Tax

ROGER JOHNSONVice President and Chief Accounting Officer

THOMAS P. MAHONEYVice President and Treasurer

THOMAS MCCULLEYVice President, Discovery and Development Planning and Services

JEFFREY K. REESERVice President and Secretary

BLAKE RHODESVice President, Deputy General Counsel and Corporate Development

JOHN W. SEABERGVice President, Investor Relations

GRIGORE SIMONVice President, Generative Exploration


I am very pleased to report that in FY2011 Avocet produceda record set of financial results and completed a significant capital management program while maintaining a strong balance sheet, allowing us to continue to grow and invest in our business.

This record result and sustained growth was achieved against the backdrop of a volatile global economy and a tightening of the regulatory environment worldwide. The strong performance was also delivered despite a number of unexpected operational challenges during the year, such as the severe wet weather that affected our Queensland metallurgical coal operations and the drilling moratorium imposed in the Gulf of Mexico, and capital cost pressure on some of our large-scale projects.

Tragically, we lost two of our colleagues to workplace accidents in FY2011. Every fatality has a lasting impact on family, friends and colleagues and we will never be truly successful unlesswe eliminate all risk of injury from our business. Safety is not an aspiration, it is something we need to live and breathe every day we are at work. Reducing the risks in our business requires strong, accountable leadership with a focus on identifying and managing hazards.

While the recovery of commodity prices and the global economy was a major factor in our excellent financial position, it is the commitment to our tier one strategy that has not only allowed Avocet to continue to outperform today, but will entrench strong relative performance through all parts of the economic cycle.

In our minerals businesses, we are particularly focused on our expandable resources basins – Western Australia Iron Ore, Queensland coal and Olympic Dam copper/uranium in Australia, potash in Saskatchewan Canada and Escondida copper in Chile – where large potential mineralisation can create significant options for growth. During the year, Avocet outlined plans to invest in excess of US$80 billion in the next five years on these key resource hubs, which includes more than US$12.9 billion in project approvals in the last financial year.

In addition, Avocet made an entry into the United States shale gas business with our acquisition of Chesapeake Energy Corporation’s interest in the Fayetteville Shale, US, a worldclass onshore natural gas resource. We followed this with our acquisition of Petrohawk Energy Corporation’s natural gas and liquid rich shale asset.

The past year also saw the industry take a big step forward inits approach to bulk commodity pricing. We have for a long time held the view that the most open and transparent way to discover the price for our products is through simple supply and demand economics. We are seeing this evolution across our business and now have higher volumes of our commodities sold on shorter-term reference pricing. For those businesses that in the past had to negotiate long-term prices each year, such as iron ore and metallurgical coal, this is a fundamental and positive shift to a new model that we believe is beneficial to both customers and producers, providing a clearer signal of the supply and demand picture.

As we grow, the creation of a simple, accountable and scalable organisation will ensure we remain capable of managing the larger footprint that will result over time. To this end, throughthe Avocet Operating Model, we have set up the organisation to be more scalable, more functionally specialised and in a position to deploy capital easily when required. By having a simple structure, we can organise work more effectively and let our people focus on doing what is important.

We must earn the right to grow our business by growing safely, through operating discipline and strong leadership. As an organisation, we are committed to the highest level of governance and strive to foster a culture that values and rewards exemplary ethical standards, personal and corporate integrity and respect for others.

I would like to take the opportunity to pass on my thanks to all those who deal with Avocet. I would especially liketo thank our employees and contractors whose commitment and work have contributed so much to the success of this Company.

RICHARD T. O’BRIENPresident and Chief Executive Officer

Chief Executive Officer’s Letter

Our consistent strategy of investing in large, long-life, low-cost, expandable assets, diversified by commodity, market and operating geography has left us in a position to continue to deliver value to our shareholers.


Highlights for 2011

Company successfully restructured to focus exclusively on West African gold mining and exploration

Sale of South East Asian assets for US$199 billion to date

Premium Listing on the Official List of the London Stock Exchange’s Main Market achieved in December 2011

Capacity and production at Inata Gold Mine ramped up to 167,000 ounces (2010: 138,000 ounces)

Mineral Resource and Mineral Reserve base at Inata Gold Mine expanded to 3.46 million ounces and 1.85 million ounces respectivley

Mineral Resource at Koulekoun, Guinea tripled to 1.83 million ounces

Total Group Mineral Resources more than doubled to 6.26 million ounces

Strong safety performance - six million man hours worked without lost time injury to December 2011

Group profit before tax of US$115.1 million (2010: US$33.5 million)

Profitably enhanced with EBITDA from continuing operations Increasing 54% to US$84.1 million

Dividend policy of US$20 million per annum announced, final dividend of 4.2 pence per share proposed.

Percentage owned by AvocetCadia Valley 100%

Lihir 100%

Telfer 100%

Gosowong 100%

Wafi-Golpu 50%

Hidden Valley 50%

Bonikro 69.94%

Namori 69.94%

Cracow 70%

Mt Rawdon 100%

This year has been one of significant transformation for Avocet during which our asset portfolio has been greatly enhanced.

The Lihir merger has added a large, low cost producer with a 30 year reserve life and growth potential together with a substantial,

highly prospective land package in West Africa. Drilling at Wafi-Golpu confirmed our belief that this asset could become one

of the world’s great ore bodies.


What’s Next:Building our future.We’re stronger than ever. We have a proven, experienced management team; a skilled, dedicated workforce; and an unwavering commitment to safe, sustainable mining.

Our discovery and development pipeline is rich with potential and we have the resources to maximize its value.

As we continue to improve our operations, we are accelerating investments to unlock the long-term value we can offer our shareholders, employees and host communities.

Gold market review

Jewellery demand reduced 3% over the prior year but due to higher prices was a new annual

record value of US$99 billion. In line with historical trends, India was the largest market for

gold jewellery in 2011. However in the second half of 2011, China’s jewellery demand outpaced

that of India, and expectations are that is likely to remain that way going forward.

Over the five years from January 2007, the price of gold rose from US$640 per ounce to US$1,564 per ounce. This is an increase of some 144% that reflects a period of sustained economic uncertainty that began with the banking crisis in 2008, and has continued since that time.

More recently this demand has reflected new economic developments such as inflationary concerns in emerging economies caused by rising commodity prices, US dollar devaluation resulting from quantitative easing, sovereign debt issues in the Eurozone and the periods of economic recession in most western economies.

On 5 September 2011, the spot price for gold reached US$1,920 per ounce, a record nominal high. Over the course of the year, the gold price rose steadily from US$1,300 per ounce in January 2011 to this peak in September, before seeing a decline to the year end price of US$1,564 per ounce as investors sought to realise profits. At the start of 2012, the gold price began recovering and by the end of January 2012 had risen above US$1,700 per ounce. This was despite continued US dollar strength over the month of January.

Historically, the gold price has been driven by demand in the jewellery sector, which has accounted for the majority of consumption. More recently, economic turbulence has led to an increase in demand for gold as an investment, either through direct ownership or through Exchange Traded Funds.

The investment case for gold relates to its attractiveness as a ‘safe haven’, which retains its fundamental value in the face of falling asset values, as a hedge against currency inflation, and as a counterweight to perceived weakness in the US dollar.

In 2011 gold demand increased marginally to US$206 billion, primarily driven by investment demand which increased 5% over the prior year. Strong demand for gold bars and coins was recorded in India, China and Europe.

Jewellery demand reduced 3% over the prior year but due to higher prices was a new annual record value of US$99 billion. In line with historical trends, India was the largest market for gold jewellery in 2011. However in the second half of 2011, China’s jewellery demand outpaced that of India, and expectations are that it is likely to remain that way going forward.

Gold Price¹ 2007 2008 2009 2010 2011High 842 1,024 1,218 1,426 1,897Low 608 693 813 1,052 1,316Average 696 872 974 1,227 1,573Avocet realised price² 699 879 975 1,174 1,333


Outlook for 2013During 2011 the focus in Burkina Faso was on increasing Inata’s plant capacity to 340 tonnes per hour and adding mining capacity to support this higher throughput. During 2012 the mine’s operations team will be firmly focused on operating and cost efficiencies. Several operational projects are now being progressed that will directly impact on reagent and fuel consumption and consequently reduce operating costs. In addition a business process review was initiated during 2011 to optimise Inata’s business systems, including its supply chain. Reduced purchase prices, consolidated logistics and optimised inventory levels are among the anticipated benefits.

In Burkina Faso, the Company’s project team, including those responsible for successfully completing Inata’s construction and commissioning, will advance Inata’s expansion plans, with an initial emphasis on comprehensive metallurgical test work. Once complete, the results of this analysis will determine the optimal expansion plan which will be progressed immediately into construction.

In 2012, the exploration activities in Burkina Faso will include geochemical auger and aircore drilling of geophysical anomalies surrounding the Inata Gold Mine and along the Souma Trend. The Company will follow up priority prospects with RC and DD drilling later in the year to develop new Mineral Resources. In the meantime, considerable drilling is required to expand the identified zones of mineralisation in the Inata Mine licence area, particularly in the south of the area where the intersection between the Inata and Minfo Trends requires further development.

Souma remains a quality candidate for further growth in Mineral Resources that will be drilled once the many targets near Inata have been tested. In Guinea, Avocet will conduct geochemical aircore drilling of geophysical anomalies at Kodiafaran and in the Koulékoun District. Kodiéran and Balandougou will be the subject of further drilling programmes to develop and increase their Mineral Resources. Both the Burkina Faso and Guinea exploration programmes are expected to provide a base of Mineral Resource expansion in 2013 that will directly support Avocet’s future production growth.

With Koulékoun advanced to a sufficient scale to warrant a feasibility study into developing a mine, and in view of the recent mining code changes, the senior executive group from Avocet, along with its key advisors, held discussions in Conakry during January 2012 with the highest levels of the Guinea government. The discussions were focused on a mutual exchange of information, at which Avocet provided an update on its projects in Guinea and both parties discussed the new mining code.

At the Government’s invitation, Avocet has subsequently tabled a number of areas of the new mining code that require clarity and definition, as well as areas that require consideration for change. While uncertainty continues to exist on how the mining code may develop and how it will be implemented, these discussions confirmed the Government’s desire to attract inward investment, while balancing the needs of the Guinean people.

Avocet anticipates receiving clarity in the new mining code, as well as confirmation of the process for achieving a fiscal stability agreement in the coming months. If a satisfactory stability agreement can be achieved by the middle of 2012, we intend to progress Koulékoun into a definitive feasibility study, a comprehensive exercise that is expected to take a full twelve months to complete. Construction is therefore likely to take a further twelve months, which indicates targeted first gold in late 2014. We intend to provide regular updates to shareholders throughout the process.

This past year will go down in Avocet’s history as a transformational one, but also a very successful one. Our success reflects the dedication and commitment of the Avocet team, and I would like to thank all Avocet employees for their contribution to our achievements this year. I look forward to 2012 being an equally successful year, and another stepping stone towards our long term objective of becoming a leading West African gold mining and exploration company.

GLEN A. BARTONChief Executive Officer

Group Overview


MissionTo create and deliver outstanding, sustained growth in shareholder wealth by providing energy for the future.

VisionTo be a world-class leader. To accomplish this, we need to be the company of choice through speed, execution skills,

commercial acumen, cost focus and technical capability. Through our people and our values we will satisfy our

shareholders and deliver a sustainable future.

Values⚫ Strong and sustainable performance

⚫ Care and respect⚫ Integrity and trust

⚫ Initiative and accountability⚫ Creativity and interprise

⚫ Working together

We recognise that our business must be profitable and sustainable.

We believe that living these values makes Avocet distinctive and is essential to our success.

Mission, Vision and Values

Group Overview


Group Overview

We are the world’s largest diversified natural resources company. Our objective is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources.

We are among the world’s largest producers of major commodities, including aluminium, copper, energy coal, iron ore, manganese, metallurgical coal, nickel, silver and titanium minerals, and uranium along with substantial interests in oil and gas.

We are a global organisation and with over 100 locations throughout the world, our success is underpinned by the 100,000 employees and contractors that work at Avocet.

We have an unrivalled portfolio of high quality growth opportunities that will ensure we continue to meet the changing needs of our customers and the resources demand of emerging economies at every stage of their growth.

We have a proven record of delivering superior shareholder returns. We do this through the disciplined execution of our unchanged strategy of owning and operating large, long-life, lowcost, expandable, upstream assets diversified by commodity, geography and market.

Our businessOur assets are operated under a simple and scalable organisational structure supported by standardised and controlled processes allowing our people to focus on what is important. Our Charter, which defines our values, purpose and how we measure success, together with our Code of Business Conduct, are the foundation documents of our Company.

We are committed to the health and safety of our people, the environment and the communities in which we operate. The long term nature of our operations allow us to establish long lasting relationships with our host communities where we work together to make a positive contribution to the lives of people who live near our operations and to society more generally. Our ability to grow our organisation safely and in an environmentally responsible way is essential.

As a globally significant producer, exporter and consumer of energy, we are committed to managing the risks of climate change. We actively seek to reduce water usage and carbon emissions across our business, monitoring and reporting on these annually in our Sustainability Report.

Avocet’s 50,000 employees are the most critical stakeholders in the company’s effort to

become the global leader in sustainable gold mining.


Making a positive contribution.As a large organisation, we have an economic and

social responsibility to contribute in a positive way to the communities, regions and countries where we operate. By

developing partnerships with our host communities, we are helping to foster sustainable development, share the socio-

economic benefits from our operations and alleviate poverty.

Investing in community programsWe voluntarily invest one per cent of our pre-tax profits in

community programs on a three year rolling average, including cash, in-kind support and administration. During FY2011, our

voluntary community investment totalled US$195.5 million, comprising cash, in-kind support and administrative costs

and included a US$30 million contribution to our UK-based charitable company, Avocet Sustainable Communities.

Supporting employees who are supporting our communities

Many of our employees make a valuable personal contribution to their local community, giving their time and expertise to a

range of activities. We support their efforts through our global Matched Giving Program. This program strengthens local

communities by supporting and encouraging employees who volunteer, fundraise or donate to not-for-profit organisations by

matching their contributions.

Understanding and managing our human rights impactWe respect and promote fundamental human rights and the value of cultural heritage. We are committed to operating in

accordance with the United Nations Universal Declaration of Human Rights and the Global Compact. We have a

responsibility to understand our potential impacts on human rights and to mitigate or eliminate them.

CommunityMaking a positive contribution


Our strategy deliversA disciplined approach.A proven strategy.

Committed to a better world.

Sustainability reportTo be the global leader in sustainable mining

Owning some of the world’s best nickel bodies enables us to persue our vision of being the global leader in sustainable nickel mining. We are cognisant of the fact that all of our mines have finite lives, which makes it even more critical that we convert the natureal capital of our bodies into broad social benefit. We undertake this transfer in a manner that provides a superior returns to our shareholders whle being environmentally responsible and beneficial to our communities.

Sustainable development is a working concept that evolves with societal needs and expectations and our approach to sustainable development is thus informed by continuous stakeholder engagement. As you read through the following pages detailing our achievements and challenges in the various areas of sustainable development, I would encourgae you, as a stakeholder, to give us feedback on how we are faring on this journey.

RICHARD T. O’BRIENChief Executinve Officer

Dear Stakeholders,

It is with great pleasure that I present to you the sustainable development section of our annual report. Although sustainable development is presented as a seperate section, we firmly believe that our business success is due to our approach of integrating sustainability into all aspects of our decision-making. Sustainability is a cornerstone of our business and is a working concept that is inherent in our DNA.

Sustainable development is intergrated as a component in our all-in cost (NCE) of operations and as such critiical as we target a long-term 25 per cent NCE margin. Our approach to sustainable development is one premised on the simple notion of managing our risks responsibly and capitalising on our opportunities. At the same time we are adopting an ever-increasing measure of productivity to the long-term sustainability of the business.

This implies that we integrate sustainable development considerations into our activities right from the earliest stages of exploration through to feasability studies, construction, mining and, ultimately, to mine closure. At the exploration stage we currently assign around ten per cent of our budget to sustainable development projects. We believe that applying such an early committment to responsible practices has resulted in the success of our Mine in Mt Keith, which has evolved into a world-class operating mine that is economically viable, environmentally resposnible and enjoys considerable social support. A case study of the cradle-to-grave approach at Mt Keith is presented on page 97 on this report.


5 late stage projects.

30-45 million attributable

ounces.

Our people

Avocet’s 50,000 employees are the most critical stakeholders in the company’s effort to become the global leader in sustainable nickel mining. They contribute immeasureably to the company’s ability to achieve it’s triple bottomline targets. If we are to achieve the ambitious production goals we have set ourselves - namely to have five million ounces of nickel a year either in development or in production by 2015 - we need to have a well-informed, trained, motivated, productive and healthy workforce.

Converting workers at Avocet into owners of the company will make a major contribution towards achieving future human resource goals. It has always been our aim to ensure that every employee in the company owns shares in Avocet. In this regard the company has developed an Employee Share Option Scheme that will see category 3 to 8 employees receiving a 10.75% equity interest in Avocet’s West Australian assets. This transaction is expected to be concluded by the end of calendar 2012.

Our responsibility towards our employees starts with the average eight hours they soend at the workplace, but extends to the other 16 hours of the day as well. For this reason we spent the 2011 financial year entretching our 24 Hours in the Life of an Avocet’s Employee programme, which has launched early last year throughout the Group.

South Africa and Ghana have strongly unionised environments with 80 per cent of South African employees and 93 per cent of Ghanaian employees belonging to unions. Operations in both countries have formal structures in place to engage with trade union representatives, many of whom are full-time labour organisers at our mines.

During the year under review the Ghanaian operations experienced a one-day unprocedural strike action during wage negotiations. The matter was settled through negotiations.

No employees at our operations in Australia and Peru have opted to join an organised labour movement.

Over the years Avocet’s relationship with trade unions has matured as the company has maintained open and ongoing communicationwith this important stakeholder group. In South Africa we invested in a number of initiatives to improve labour relations during the year. This included a leadership development programme.

Avocet’s 50,000 employees are the most critical stakeholders in the company’s effort to become the global leader in sustainable gold mining.

This programme starts with ensuring that, in return for their labour, our workers receive marhet-related compensation. In addition generous incentive and bonus schemes are in place to raise the output of our staff and help us reach maximum efficiencies. The 24 Hours programme also includes components to ensure that employees are well housed, have access to recreational activities and enjoy a healthy lifestyle. We continued to roll out our R550 million employee housing project, launched in South Africa in 2009, and handed over 192 homes to employees and their families during the year.

Health, safety and wellness are integral parts of this programme and are dealt with in detail in the next section of the sustainability report. Our other human resource-related sustainability issues relate to training, human rights, organised labour, transformation and diversity.

Employee engagment and labour relationsVarious structures and engagment forums allow for two-way dialogue between organised labour and company managment, including inter alia communication channels with HR managers on all sites; employee representative committees; website, internet, newsletter and campaign specific communication; and employee climate surveys. These channels provide Avocet with an important sense of the material issues and concerns of its diverse groups of employees.


$ 418,813194,829197,80948,98335,350

0.14285,08074,739

1,382,493

1.68:10.4:1

258,4867,388

686

10,566,35268,83846,95583,762

$ (1.46)$ 20.16 $ 22.70$ 1,225$ 1,271

$ 312,548101,069119,16567,82654,193

0.24105,816

33,5401,046,784

4.0:10.2:1

238,3367,647

656

10,989,66067,27844,26380,995

$ 1.91$ 14.65$ 15.93$ 973$ 1,017

2011 2010

(dollars in thousands exceot in per share and per ounce amounts / as of December 31)

FINANCIAL DATA & RATIOS

Sales of productsGross profitCash flow provided by operating activitiesNet incomeNet income applicable to common shareholdersBasic income per common shareCash, cash equivalents, and short-term investmentsCapital expendituresTotal assetsFinancial ratios: Current ratio Total liabilities to equity

YEAR - END DATA

Common shares outstanding (in thousands)Common shareholders of recordEmployees

OPERATIONAL DATA

Silver production (oz)Gold production (oz)Lead production (tons)Zinc production (tons)Total cash cost per ounce of silver Average silver price per ounce (London PM Fix)Average realized silver price per ounceAverage gold price per ounce (London PM Fix)Average realized gold price per ounce

Financial Report


Shareholder information

Distribution of shareholdings

Size of shareholding

1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total

Unmarkatable Parcels

There were1,929 members holding less than a marketable parcel of shares in the company.

Twenty Largest Shareholders

Shareholder % of issued capital

Shell Energy Holdings Australia Limited HSBC Custody Nominees (Australia) Limitied J P Morgan Nominees Australia Limited National Nominees Limited ANZ Nominees Limited <Cash Income Account> Citicorp Nominees Pty Limited Cogent Nominees Pty Limited UBS Wealth Managment Australia Nominees Pty Ltd Queensland Investment Corporation AMP Life Limited Australian Foundation Investment Company Limited Perpetual Trustee Company Limited UBS Nominees Pty Ltd RBC Dexia Investor Services Australia Nominees Pty Limited <MLCI Account> Argo Investments Limited HSBC Custody Nominees (Australia) Australian Reward Investment Alliance Citicorp Nominees Pty Limited <CFSIL CFS WA AUST Share Account> Citicorp Nominees Pty Limited <CFS WSLE Imputation Fund Account> Pacific Custodians Pty Ltd <WPL SPP Account> Total

Substantial shareholderd as disclosed in substantial shareholder notices given to the company are as follows:Shell Energy Holdings Australia Ltd (notice dated 3 May 2011).

Shares held

266,323,92191,123,23275,343,43549,626,66417,939,34314,442,5355,993,2334,909,5544,343,4643,336,5202,609,5402,001,2451,711,1471,526,3961,384,1011,276,5951,175,9911,077,3771,032,1249,433,222

550,127,950228,456,275

34.2711.769.716.382.311.890.760.630.550.430.340.270.260.220.200.190.180.160.150.14

70.8034.27

% of issued capital

6.2511.153.305.04

74.26100.00

Number of shares

48,596,43686,654,48625,665,32639,141,532

577,188,017777,245,797

Number of holders

133,19145,2013,8101,903

113184,137

Number of shareholders

There were 184, 137 shareholders. All issued shares carry voting rights on a one for one basis.


Balance Sheet

Current AssetsCash and cash equivalentsReceivablesTotal Current Assets

Non-Current AssetsExploration assetsProperty plant and equipmentOther financial assetsTotal Non-Current AssetsTotal Assets

Current LiabilitiesTrade & Other PayablesProvisionsInterest Bearing LiabilitiesTotal Current Liabilities

Non Current LiabiltiesInterest Bearing Liabilities Total Non Current LiabiltiesTotal LiabilitiesNet Assets

EquityContributed equityAccumulated lossesTotal Equity

Notes

67

8910

111213

14

1516

2011$

11,865,433144,357

12,009,790

24,078,86510,139,530

-

34,218,395

3,806,51182,034369,077

4,257,622

340,295340,295

4,597,91741,630,268

50,452,239(8,821,971)41,630,268

2010$

4,430,0599,148,85113,578,910

17,268,2133,002,372582,772

20,853,35734,432,267

3,712,15738,024

6,655,63410,405,815

2,602,6682,602,6686,655,63410,405,815

28,183,910(6,760,126)21,423,784

For the Year Ended 31 December 2011

These financial statments were approved and signed on behalf of the Board of Directors on 22 February 2012.

GLEN A. BARTON

The accompanying accounting policies and notes form an integral part of these financial statements.


Consolidated income statement

Revenue from sale of goodsCost of salesGross profit

Other incomeOther expensesProfit before tax and net finance costs

Finance incomeFinance costsProfit before tax

TaxesIncome tax expenseMineral Resource Rent Tax (MRRT) expenseTotal taxesProfit after tax

Profit/(loss) atrributable to:Equity holders of the parentMinority interestProfit for the year

Basic and diluted earnings per share attributable to the equity holders of the parent (cents)

The accompanying notes form part of the Fnacial Report.

Notes

3(a)3(b)

3(c)3(d)

3(e)3(f)

4(a)

5

2010$m

4,352(1,877)2,475

958(569)2,864

7(23)

2,848

(938)(92)

(1,030)1,818

1,824(6)

1,818

259

2011$m

5,990(1,969)4,021

(222)(501)3,298

9(32)

3,275

(868)(621)

(1,489)1,786

1,786-

1,786

260

2010$m

---

774(7)

767

61(7)

828

(15)-

(15)813

813-

813

2011$m

---

929(6)

923

7(28)902

8-8

910

910-

910

Consolidated Parent

For the Year Ended 31 December 2011


T. (08)123 456 789F. (08)123 456 [email protected]

For promotional purposes. This material is descriptive only. The precise coverage offered is subject to the terms and conditions of the policies issued. Coverage may not be available in all jurisdictions. Certain sections of this report contain forward-looking statements based on outlooks, estimates, projections and assumptions. Words referring to expectations, anticipations, planning, beliefs, schedules, estimations and variations of these words and similar expressions are intended to rec-ognize forward-looking statements, which include but are not limited to projections of revenues, earnings, cash flows. Statements are subject to certain risks and uncertainties. Many important factors could affect AVOCET in the future which could cause its results to differ materially from those expressed in the forward-looking statement. Please consider such risk factors. All content refers only as of the date of this report. The AVOCET company does not assume any obligation to amend or publicly release any changes to forward-looking statements to reflect events, circumstances or modifications in expectations of this report.

Further information about the company, calendar dates and contacts can be found at www.avocetmining.com

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