avino_ex992.htm

The following discussion and analysis of the operations, results and financial position of Avino Silver & Gold Ltd. (the “Company” or “Avino”) should be read in conjunction with the Company’s unaudited interim consolidated financial statements for the three month period ended March 31, 2010 and the audited financial statements for the year ended December 31, 2009 and the notes thereto.

This Management’ Discussion and Analysis (“MD&A”) is dated May 21, 2010 and discloses specified information up to that date. Avino is classified as a “venture issuer” for the purposes of National Instrument 51-102. The Financial Statements are prepared in accordance with Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) and unless otherwise cited, references to dollar amounts are Canadian dollars.

Throughout this report we refer to “Avino”, the “Company”, “we”, “us”, “our” or “its”. All these terms are used in respect of Avino Silver & Gold Mines Ltd. We recommend that readers consult the “Cautionary Statement” on the last page of this report. Additional information relating to the Company is available on SEDAR at www.sedar.com.

Founded in 1968, Avino’s principal business activities are the exploration and development of mineral properties. The Company holds an 99.28% equity interest in Compañía Minera Mexicana de Avino, S.A. de C.V. (“Cia Minera”), a Mexican corporation which owns the Avino Silver Mine, located in the state of Durango, Mexico (“Avino Mine”). The Company also holds mineral claims in the Yukon and British Columbia, Canada.

Avino is a reporting issuer in British Columbia and Alberta, a foreign issuer with the Securities & Exchange Commission and trades on the TSX Venture Exchange under the symbol ASM, on the OTCBB under the symbol ASGMF and on the Berlin & Frankfurt Stock Exchanges under the symbol GV6. In November 2006, the Company’s listing on the TSX Ventures Exchange was elevated to Tier 1 status. In January 2008, Avino announced the change of its financial year end from January 31 to December 31. The change was completed in order to align the Company’s financial statements reporting requirement with its Mexico subsidiaries which operate on a calendar fiscal year.

During the quarter, the Company provided progress reports and updates on the bulk sampling program and by April 2010 reported significant progress towards its goal of beginning a 10,000 tonne bulk sample to facilitate a production decision regarding San Gonzalo. Plant refurbishing is nearly complete and management expects to begin processing stockpiled ore for commissioning and testing purposes during the second quarter of 2010. Construction of the surface infrastructure and underground development are ongoing, and the Company expects to treat the 10,000 tonne San Gonzalo bulk sample after the stockpiled ore test has been completed.

In January, Desarrollo Minero Guadalupe S.A. de C.V. (“DMG”), began driving the decline for development work and extraction of the bulk sample and intersected the San Gonzalo vein in May. Several narrow alterations rich in pyrite have been noted and logged during the advancement of the ramp. Channel and chip samples from these vein lets have been collected and delivered to SGS analytical labs in Durango. The 10m cut out for equipment turnaround in the ramp has been completed.

In addition to the larger haulage ramp, the mining contract includes driving an extraction drift, 2 crosscuts, 2 raises and a smaller ramp for ventilation and the escape way. The Company expects to extend this contract with continued mining operations in the event the bulk sampling program results in positive cash flow.

The mine office, workshop and diesel fuel storage are approximately 80% complete. Any spills from the workshop and fuel storage will be contained and filtered as per the design reported in the land use permits. For the development work, DMG has provided the power generator and air compressor until replacements have been purchased.

The tailing reclaim water system is in place and operational. The system consists of a well pump, steel pipeline and two water storage tanks for the supply of process water to the plant. Plans are also in place to reactivate the La Caricol water system to ensure continuation of the milling operations during the dry season.

An agreement with Mexico’s state power utility commission CFE (Commission Federal de Electricidad) has resulted in an increase to the supply of power together with an electrical system upgrade which allows the Company to operate the 250 tpd circuit on a sustained basis. The majority of this work has been completed. Additional work will be required as more equipment is added to the operation including pumping requirements for the La Caricol water system.

The Company secured all permits to operate the San Gonzalo deposit and the processing plant at the rate of 250 tonnes per day (“tpd”). These permits are valid for processing the 10,000 tonne bulk sample as well as for full production. These permits are in good standing with regular submissions to the regulatory authorities to maintain compliance such as the explosives and the land use permits.

Repairs to the assay lab have been completed. Purchases of glassware, balances and reagents have been placed. Training on the new Varian AAS unit has been provided by the Supplier as per the purchase agreement. Replacement pulverizer plates have been ordered for the sample preparation facility.

The Company’s focus continues to be the development of the mine and plant to conduct a 10,000 tonne bulk sample from the high-grade San Gonzalo zone. This sample will allow the Company to assess economics of the zone and confirm mineral grades obtained through earlier diamond drilling. The Company is also investigating potential buyers for the San Gonzalo concentrate. Samples have been shipped to various smelters for testing. The goal is to complete the bulk sample program and move into full production if results are positive.

In addition, Avino is also planning to explore new areas of the property, expand upon discoveries made in 2008 and follow up on the 2008 mapping and sampling. At present, trenching and 9,000 metres (29,520 feet) of new drilling have been proposed for up to 15 areas of the property. These proposals will be reviewed once the bulk sampling program has been completed.

Avino has operated continuously in Mexico since 1968, a period in which the Avino Mine produced for 27 years. During the long history, the Company has weathered a number of difficult economies. While the current market clearly presents challenges, the Company’s cash position of approximately C$2 million puts it in a strong position for continued growth and to bring the mine back into production. The Company will continue to invest aggressively in exploration and development.

Avino is uniquely positioned among the many emerging producers in Mexico. Through its majority ownership in the Avino Mine, recovery plant and surrounding property holdings all may provide its shareholders to profit from the strong metal markets that the Company believes lay ahead. Avino remains committed to returning to profitable mining operations and are very excited about the opportunity to build this company into a significant producer of precious and base metals. Avino adheres to the highest standards of environmental responsibility, to supporting the local community with the highest standards of business practices and to the long-term success of its shareholders.

The Eagle property, held 100% by Avino is located on the south slopes the prolific Galena Hill in the Keno City silver mining camp in north-central Yukon, 350 km north of Whitehorse. On November 13, 2008, the Eagle property was consolidated under option (now terminated) into the Eagle Project by Mega Precious Metals (“Mega”; formerly Mega Silver Inc.) of Thunder Bay, Ontario. From May 15 to September 17, 2009, Mega completed six NTW diamond drill holes on the Eagle property totaling 1,897.1m.

The 2009 Eagle Project work program was successful in indentifying strong silver-gold-indium enriched zinc and lead mineralization hosted in the Eagle vein fault, a known and proven host of significant intercepts of Pb-Zn-Ag mineralization, including a reported 7,624.9 g/t Ag, 1.2% Pb and 1.5% Zn over 0.15metres (hole E64-23). The 2009 work has also established that indium, used in plasma screens, is present in significant concentrations of up to 285.4 g/t indium (In) over 1.8m (Hole D09EE-11) in the sphalerite enriched Eagle vein.

With prices for silver and gold remaining at historically high levels, the Company is working aggressively to capitalize on this trend by bringing the Avino Mine back into operation as quickly as possible. The Company expects to begin test operation of the plant in the second quarter of 2010. Processing of ore from the San Gonzalo zone will follow once this testing phase is complete.

Operating and administrative expenses were $140,388 for the three months ended March 31, 2010 as compared with of $132,897 for the three months ended March 31, 2009, an increase of $7,491. Operating and administrative expenses were relatively constant during the period with reductions of $30,101 in office and $10,211 in professional fees. These were offset by increase of $36,750 in stock-based compensation, $2,400 in salaries, $2,403 in travel and $6,084 in sales tax recoverable. Stock-based compensation increased as a result stock options granted during the period.

The loss for the three months ended March 31, 2010 was $151,136 compared with a loss of $110,538 for the three months ended March 31, 2009, a difference of $40,598. The differences include an increase in general and administrative expenses of $7,491 as discussed above, a reduction in interest income of $16,865 and foreign exchange of $16,242. Interest income was $3,407 in the current period compared to $20,272 in the prior year. Foreign exchange was a loss of $14,155 as compared to a gain of $2,087 in the prior year.

	2010	2009	2009	2009	2009	2008	2008	2008
Period ended	Mar 31 Q1	Dec 31 Q4	Sept 30 Q3	Jun 30 Q2	Mar 31 Q1	Dec 31 Q4	Sept 30 Q3	Jun 30 Q2
Gain (Loss) for the period	$ (151,136)	$ (716,898)	$ (41,545)	$ (118,778)	$ (110,538)	$ (869,144)	$ 164,833	$ (300,847)
Loss per share	(0.01)	(0.00)	(0.00)	(0.01)	(0.01)	(0.04)	0.01	(0.01)
Total assets	19,100,568	19,206,278	20,106,051	19,934,900	20,010,900	20,126,230	20,820,081	20,726,621

Quarterly results often fluctuate with changes in non-cash items such as stock-based compensation, future income tax and foreign exchange variances. The higher cost in the current quarter related to stock-based compensation associated with the granting of stock options. The lower loss in the third quarter of fiscal 2009 was a result of the recovery of the Mexican Value-Added-Tax. While in the fourth quarter of 2009, the Company incurred a write down on British Columbia mineral properties of $608,118.

During the period ended March 31, 2010, the Company incurred expenditures that increased its mineral property carrying value on its Mexican properties by $332,802 and capital assets by $15,441. At this time the Company has no operating revenues but earned interest income of $3,407 during the three months ended March 31, 2010. As the Company’s cash and cash equivalents will continue to be drawn down by operations therefore interest income is expected to decrease in future periods.

At March 31, 2010, the Company had working capital of $1,958,337 and cash equivalents of $2,255,002. The Company is continuing its exploration program and refurbishing of its mine facility for a bulk sampling program in Mexico. The annual cost for the bulk sampling program estimated by Orequest was $2,651,000 U.S. and the Company has stayed well below budget. The Company has no immediate plans for the British Columbia properties at this time.

The Company continues in the exploration stage until such time that the Avino Mine is re-opened. The investment in and expenditures for the mineral properties comprise most of the Company’s assets along with a lesser asset amount in regards to the Avino Mine facilities and equipment. The recoverability of amounts shown for its mineral property interest and related deferred costs and the Company’s ability to continue as a going concern is dependent upon the continued support from its directors, the discovery of economically recoverable reserves and the ability of the Company to obtain the financing necessary to complete development and achieve profitable operations in the future. The outcome of these matters cannot be predicted at this time.

Mineral exploration and development is capital extensive, and in order to re-commence operations at the Avino Mine, the Company may be obliged to raise new equity capital in the future. There is no assurance that the Company will be successful in raising additional new equity capital.

i)	$38,681 (2009 - $38,372) for administrative expenses (rent, salaries, office supplies and other miscellaneous disbursements) to Oniva International Services Corp (“Oniva”), a private company beneficially owned by the Company and a number of other public companies related through common directors;

The amounts due to related parties consist of $147,399 (December 31, 2009 - $145,120) due to Oniva; $3,750 (December 31, 2009 - $18,000) due to Directors for Directors fees; $531 (December 31, 2009 - $1,054) due to a Director for geological services; and $Nil (December 31, 2009 - $516) due to a private company controlled by a Director for an expense reimbursement.

During the three months ended March 31, 2010, $24,000 was paid to the President for services as director and officer of the Company; $4,875 was paid to the Corporate Secretary for services as an officer of the Company; and $5,408 was paid to the Chief Financial Officer for services as an officer of the Company.

Recent Canadian accounting pronouncements that have been issued but are not yet effective, and which may affect the Company’s financial reporting are summarized below. For details of the specific accounting changes, refer to Note 3 (xvi) of the Company’s Consolidated Financial Statements for the three months ended March 31, 2010:

In addition to these changes, in February 2008 the CICA announced that Canadian GAAP for publicly accountable enterprises will be replaced by International Financial Reporting Standards (“IFRS”) for the interim and annual financial statements for fiscal years beginning on or after January 1, 2011. The standard also requires that comparative figures for 2010 be based on IFRS.

The Company is developing an IFRS conversion plan which will include an in-depth analysis of the IFRS standards, with priority being placed on those that have been identified as possibly having a significant impact. Analysis will include identifying the differences between IFRS and the Company’s accounting policies and assessing the impact of the difference. Changes in accounting policies are likely to impact the Company’s consolidated financial statements.

Expiry Date	Exercise Price Per Share			Number of Shares Remaining Subject to Options (Mar 31/10)		Number of Shares Remaining Subject to Options (May 21/10)
April 5, 2010	$	1.35			42,500		-
April 5, 2010	$	0.75	*		219,500		-
September 26, 2010	$	0.75	*		52,500		52,500
April 26, 2011	$	3.99			60,000		60,000
April 26, 2011	$	0.75	*		865,000		865,000
February 27, 2013	$	1.65			10,000		10,000
February 27, 2013	$	0.75	*		410,000		410,000
September 22, 2014	$	0.75			160,000		160,000
January 14, 2015	$	0.81			75,000		75,000
					1,894,500		1,632,500

These options were re-priced to $0.75 on August 25, 2009. The original prices for these options were granted at various prices of $1.35, $1.65 and $3.99. Disinterested shareholders’ approval was obtained on June 26, 2009 for the re-pricing of the options to insiders and the TSX Venture Exchange approved all re-pricing on August 25, 2009.

The Company entered into a cost sharing agreement dated October 1, 1997, and amended November 1, 2003 to reimburse Oniva for a percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the Company, and to pay a percentage fee based on the total overhead and corporate expenses. Either party may terminate the agreement with one-month notice. Transactions and balances with Oniva, which is a related company, are disclosed in the transactions with related parties section.

The Chief Executive Officer and the Chief Financial Officer of the Company are responsible for evaluating the effectiveness of the Company’s disclosure controls and procedures and have concluded, based on our evaluation, that they are effective as at March 31, 2010 to ensure that information required to be disclosed in reports filed or submitted under Canadian securities legislation is recorded, processed, summarized and reported within the time period specified in those rules and regulations.

The Chief Executive Officer and the Chief Financial Officer of the Company are responsible for designing internal controls over financial reporting, or causing them to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. The Company assessed the design of the internal controls over financial reporting as at March 31, 2010 and concluded that there are material weaknesses in internal controls over financial reporting, which are as follows:

The weaknesses and their related risks are not uncommon in a company the size of the Company because of limitations in size and number of staff. The Company believes it has taken steps to mitigate these risks by increasing financial reporting personnel, consulting outside advisors and involving the Audit Committee and Board of Directors in reviews and consultations where necessary. However, these weaknesses in internal controls over financial reporting could result in a more than remote likelihood that a material misstatement would not be prevented or detected. The Company believes that it must take additional steps to further mitigate these risks by consulting outside advisors on a more regular and timely basis and continuing to do periodic on-site inspections of the accounting records in Mexico.

There have been no changes in the Company’s internal controls over financial reporting that occurred during the period ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Cautionary Statement

This MD&A is based on a review of the Company’s operations, financial position and plans for the future based on facts and circumstances as of May 21, 2010. Except for historical information or statements of fact relating to the Company, this document contains “forward-looking statements” within the meaning of applicable Canadian securities regulations. There can be no assurance that such statements will prove to be accurate, and future events and actual results could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from our expectations are disclosed in the Company’s documents filed from time to time via SEDAR with the Canadian regulatory agencies to whose policies we are bound. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made, and we do not undertake any obligation to update forward-looking statements should conditions or our estimates or opinions change. These statements involve known and unknown risks, uncertainties, and other factor that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievement expressed or implied by these forward-looking statements.

Tonnes	Ag g/t	Au g/t	Zinc %	Lead %
444,250	332	2.61	1.5	1.0