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During the first three quarters of 2012, Avino processed material left over from past mining of the main Avino vein. The old ET stockpiles had been left on the surface in various locations across the property making delivery for processing easy and cost efficient. The stockpiles provided Avino an opportunity to generate cash flow while tuning the mill and continuing underground advancement and mining at San Gonzalo.

On October 1st, Avino began processing high-grade material from the San Gonzalo Mine with plans to accommodate a sustained 250 tonne per day ("tpd") operation. As expected, production numbers surged and in the fourth quarter more silver equivalent was produced than in the first three-quarters combined; results were also consistent with the data from the 2010 bulk sample program. During the fourth quarter, silver and gold feed grades from the San Gonzalo Mine averaged 258 g/t and 1.04 g/t respectively; recoveries averaged 79% for silver and 69% for gold.

Avino expects grades and recoveries will improve at lower levels because silver assay results from the 2007 drilling at levels 4 and 5 of the mine produced a number of core intercept samples (down hole) greater than 1,000 g/t Ag, some reaching as high as 5,265 g/t Ag, over 0.65 metres. In addition, independently verified metallurgical test work on the deeper level core samples yielded recoveries of 89%-90% for silver and 92%-93% for gold.

SG Underground Advancement

After the completion of the bulk sample taken in the spring of 2011, which was comprised of material from levels 1 and 2, mine advancement at San Gonzalo has been ongoing. In 2012, the remaining material from the stopes on level 2 was mined and brought to the surface. Level 3 was the main focus of mining activities with two stopes having been developed and partially extracted by the end of the year. By the end of July, a decline from level 3 to level 4 had been completed and work on the ramp to level 5 had commenced. Subsequent drifting on level 4 produced samples that assayed as high as 14,768 g/t Ag over 0.4 metres or 1,380 g/t over 2.22 metres. These assay results represented the highest grade Avino has sampled at San Gonzalo in 6 years of exploration. By year-end, level 5 had nearly been reached and stope development on level 4 was underway. Underground advancement for 2012 totalled 2,558 metres.

Main Avino Mine - Royalty Agreement

In February 2012, a new long-term royalty agreement was signed to grant Avino mining rights to the main Avino vein. Mining activities were suspended on the Avino vein in 2001 due to low metals prices and the closure of a key smelter. Avino plans to re-open the old Avino mine once de-watering and all necessary modifications to the processing plant have been completed. When operations resume, Avino will use its existing 1,000 tpd circuit to process the material. Between 1998 and 2000, leading up to the mines closure, annual output averaged 933,240 oz/Ag, 7,537 oz/Au and 9,305,347 lbs/Cu. When the mine re-opens in 2014, Avino expects to process similar material at a similar rate as it did prior to closure in 2001 and expects similar output levels.

Exploration - Avino Mine

Shortly after signing the new royalty agreement, the Company embarked on an exploration program to further define remaining resources. The 2012 drill program, which totalled 3,263 metres through 9 holes was intended to form the basis for a current mineral resource estimate below level 12 to be included in a forthcoming NI 43-101 compliant resource report. The results were consistent with results from drilling conducted between 2006 and 2008 and demonstrated the thickness and consistency of the vein. Full results from the drill program can be viewed in Avino's third quarter MD&A on Avino's website or on SEDAR.