Achieves Record Production for the First Quarter of 2012 With Over 26,000 Ounces of Gold Produced an

TORONTO, ONTARIO--(Marketwire - May 16, 2012) - Avion Gold Corporation (News - Market indicators)(OTCQX:AVGCF) ("Avion" or the "Company") today announces its financial results for the first quarter ended March 31, 2012. All amounts are in United States dollars unless otherwise indicated.

Avion plans to host a conference call at 10:30 AM (ET) on May 16, 2012. To participate in the call please dial:

A play-back recording will be available shortly after the completion of the call on Avion's website at www.aviongoldcorp.com.

Complete unaudited financial statements and the related Management's Discussion and Analysis are available under the Company's profile on www.sedar.com.

First Quarter Highlights:

• The Company had a net loss of $6.2 million or $0.01 per share, for the quarter as compared to net income of $12.6 million or $0.03 per share for the comparable quarter last year. The loss in earnings is primarily related to: The change in fair value of the call options of $6.4 million, higher operating costs as Avion transitions to underground mining; depletion and depreciation charges of $5.1 million and foreign exchange losses of $3.0 million. 
• The Company achieved revenue of $33.0 million for the quarter compared to revenues of $31.8 million for the comparable quarter last year, representing a 4% increase. 
• Avion produced 26,256 ounce of gold during the quarter after final refinery adjustments at a cash cost of per ounce produced of $898. Please see "Non-GAAP Measures" below. Mining and processing costs were $19.0 million compared to $13.0 million for the comparable quarter last year.
• Production mining at the Tabakoto underground deposit commenced in February, 2012. During the first quarter of 2012 approximately 86,000 tonnes of ore was mined from stopes and development headings at an average estimated grade of 5.40 g/t Au.
• During the quarter the Company sold 19,460 ounces of gold at an average realized price of $1,694 per ounce. The build-up of gold inventories at March 31 included gold readily available for shipment and refining of 6,188 ounces. These ounces were sold in April and will benefit the operating profit in the 2^nd quarter of 2012.
• The Company generated operating cash flow before working capital adjustments of $4.2 million compared to $15.4 million for the same quarter last year. Net working capital adjustments of $17.3 million contributed to decreased operating cash flows during this quarter versus the same quarter last year.
• The Company completed the quarter having $41.2 million in cash and cash equivalents including working capital of $19.2 million.
• The Company sold call options raising $25 million in February 2012.

Capital Expansion Programs

Expansion plans continued at Tabakoto during the quarter, consisting of the following activities:

• Construction of the haul road from the Dioulafoundou deposit to the Djambaye II deposit was essentially completed.
• The underground portal at the Segala deposit encountered a 2m wide fault zone which halted advance. A shotcrete machine has been purchased and has been set up and to spray concrete onto the tunnel walls to reinforce the workings. It is anticipated that is will take until the end of May before normal advance resumes.
• Construction work to double the Tabakoto plant capacity from 2,000 to 4,000 tonnes per day was progressing well until a military coup occurred on March 21, 2012. The plant expansion was on budget and schedule and approximately 80% completed on a cost spend basis. The Company reported in early May that it had suspended the mill expansion program due to the effects of the military coup.

Financial Discussion: three months ended March 31, 2012

Avion produced 26,256 ounces of gold during Q1-2012, which is a 30% increase compared to the 20,272 ounces produced in Q1-2011. The Tabakoto plant processed 225,729 tonnes of ore at an average grade of 4.02 g/t Au and the average mill recovery for Q1-2012 was 90.2%. This compares to Q1-2011 production of 180,800 tonnes of ore at an average grade of 3.64 g/t Au and an average mill recovery of 96.2%.

The Company reported a net loss of $6,189,551 ($0.01 per share, basic and diluted) for the three months ended March 31, 2012 compared to net income of $12,564,705 ($0.03 per share, basic and diluted) for the three months ended March 31, 2011.

During Q1-2012, the Company sold 19,460 ounces of gold and generated $32,965,385 in gold sales revenue. In Q1-2011, 22,583 ounces of gold was sold generating $31,489,868 in gold sales revenue. Mining and processing costs were $19,048,663 (Q1-2011: $13,017,240), and the Company recorded depletion and depreciation of $5,055,950 (Q1-2011: $1,560,056). The Company is amortizing deferred property, plant and equipment related to the Mali projects on a unit of production basis from the current mine plan. The Company was subject to a 6% royalty on metal sales during Q1-2012. Royalties expense totaled $1,977,310 (Q1-2011: $1,473,593) for the ounces of gold sold during Q1-2012. Gold inventories on hand included 6,188 of ounces readily available for shipment and refining at March 31^st. These ounces were sold in the first few weeks of April and the sale of these ounces will be reflected in the 2^nd quarter results.

The Company realized a cash cost per ounce produced of $898 per ounce for Q1-2012 compared to $462 for Q1-2011. Please see "Non-IFRS Measures" below.

Corporate and administrative expenses totaled $2,309,666 for the quarter ended March 31, 2012 compared to $1,067,176 for Q1-2011. The Company incurred higher professional costs during the quarter primarily higher audit costs and costs associated with financing efforts. Consulting and management costs were also higher in Q1-2012 compared to Q1-2011.

Non-cash share-based compensation expense for Q1-2012 was $1,255,264 (Q1-2011: $3,479,773) related to the estimated fair value of stock options that were granted and vested during Q1-2012. A total of 1,700,000 stock options were granted during Q1-2012 compared to 4,455,000 during Q1-2011. Share-based compensation was estimated using the Black-Scholes option pricing model as at the date of grant.

Other gains and losses included a foreign exchange loss of $2,984,000 during Q1-2012 compared to a gain of $1,477,495 during Q1-2011. The Company carried large liabilities denominated in FCFA during Q1-2012 as a result of the loan with Banque Atlantique as well as large accounts payables balances. The FCFA strengthen during the quarter, resulting in a foreign exchange loss.

The Company recorded an unrealized loss on the change in fair value of derivative liabilities of $6,430,979 during Q1-2012 (Q1-2011: $nil). This was in relation to the gold call options sold during the quarter.

Andrew Bradfield, P.Eng., the Chief Operating Officer of the Company, and a qualified person under National Instrument 43-101, has reviewed and approved the scientific and technical information in this press release.

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. 2011 production was 91,200 ounces of gold. The current mineral reserve estimate (as of January 1, 2012) of 6.91 million tonnes grading 3.73 g/t Au totaling 827,100 ounces of gold (proven and probable), for the Tabakoto project property, demonstrates several sources of excellent grade open pit and good grade underground mineral resources thus providing significant flexibility for Avion's future mining plans. The Company has developed an underground mine at the Tabakoto deposit, and is developing another underground mine at the Ségala deposit. The Tabakoto project property also contains several producing open pit mines. Production sustainability will continue to be supported by exploration programs over an approximately 600 km2 exploration package that both surrounds and is near to the Company's existing mine infrastructure, and contains mineral resources on the Kofi property. Additionally, mineral resources have grown considerably at Avion's 1,600 km2 Houndé exploration property in Burkina Faso. Avion has a highly skilled management team, with a focus on growth and consolidation within West Africa.

Cautionary Notes

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, without limitation, statements regarding the impact of the financial results on the Company, development potential and timetable of the Mali projects; the future price of gold; the estimation of mineral resources; the realization of mineral resource estimates; the timing and amount of estimated future production, development and exploration; costs of future activities; capital and operating expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; the actual results of current exploration activities; foreign operations risks; other risks inherent in the mining industry and other risks described in the annual information form of the Company, which is available under the profile of the Company on SEDAR at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

Cautionary Non-GAAP Statements

Avion believes that investors use certain indicators to assess gold mining companies. The indicators are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP. "Cash flow from operating activities before changes in non-cash working capital" is a non-GAAP performance measure which could provide an indication of the Company's ability to generate cash flows from operations, and is calculated by adding back the change in non-cash working capital to "Cash provided by (used for) operating activities" as presented on the Company's consolidated statements of cash flows. "Cash flow per share" is calculated by dividing "Cash provided by (used for) operating activities" and adding back the change in non-cash working capital by the fully diluted number of shares outstanding for the period. "Cash cost per ounce produced" is a non-GAAP performance measure which could provide an indication of the mining and processing efficiency and effectiveness at the mine. It is determined by dividing the relevant mining and processing costs excluding royalties by the ounces produced in the period. There may be some variation in the method of computation of "cash cost per ounce produced" as determined by the Company compared with other mining companies. In this context, "ounces produced" includes in-process and dore inventory along with ounces of gold sold in the period. "Cash costs per ounce produced" may vary from one period to another due to operating efficiencies, waste to ore ratios, grade of ore processed and gold recovery rates in the period.

The following table provides a reconciliation of mining and processing costs per the financial statements and cash operating for the purposes of calculating cash costs per ounce produced and total cash costs produced.