Orsu Metals Corporation ("Orsu" or the "Company" or the "Group"), the dual
listed (TSX:OSU)(AIM:OSU) London-based precious and base metals exploration and
development company today reports its unaudited results for the period ended
March 31, 2012.
A full Management's Discussion and Analysis of the results for the period ended
March 31, 2012 ("MD&A") and Consolidated Financial Statements ("Financials")
will soon be available on the Company's profile on SEDAR (www.sedar.com) or on
the Company's website (www.orsumetals.com). Copies of the MD&A and Financials
can be also be obtained upon request to the Company Secretary.
The Financials for the period ended March 31, 2012 have been prepared in
accordance with International Financial Reporting Standards ("IFRS").
All amounts are reported in United States Dollars unless otherwise indicated.
Canadian Dollars are referred to herein as CAD$ and British Pounds Sterling are
referred to as GBP.
The following information has been extracted from the MD&A and the Financials.
Reference should be made to the complete text of the MD&A and the Financials.
BUSINESS REVIEW OF THE THREE MONTHS ENDED MARCH 31, 2012
During the first quarter of 2012 the Company focussed on the Karchiga Project
and in particular on two significant aspects of the project:
-- In February 2012, the Company announced the successful completion of the
Karchiga definitive feasibility study ("DFS"), a key milestone in the
development of Orsu as a Company. The Karchiga DFS supports a total
probable mineral reserve estimate of 10 million tonnes of sulphide and
oxide ore containing a total 166.6Kt copper at an overall average grade
of 1.67% copper, of which 145.2Kt is amenable to flotation and 21.4Kt
amenable to heap leaching. The key economic indicators of the Karchiga
Project show that with an initial capital expenditure requirement of
$115 million based on a 100% equity financing and on a copper price of
$3.25/lb, a post tax net present value (or "NPV") of $150 million, an
internal rate of return (or "IRR") of 30% and payback of less than three
years.
-- The Company continues to progress the process of obtaining a mining
licence, the necessary local Kazakh feasibility study and construction
approvals from the Kazkah authorities. In parallel, the Company is
seeking to secure separate financing for mine construction for the
Karchiga Project which it expects to finalise in the third quarter of
2012, in time for the start of construction estimated to commence in the
fourth quarter of 2012.
For the three months ended March 31, 2012 the Company reported a net loss of
$2.6 million.
2012 FIRST QUARTER HIGHLIGHTS
-- February 2012 - the Company announced the positive results of the DFS
for the Karchiga Project completed by SRK Consulting (UK) Limited
("SRK") which reported that the Karchiga Project could produce total
production of 149kt (328 Mlb) of copper over a mine life of 11.5 years,
and a post tax NPV of $150 million and IRR of 30% based on a 100% equity
financing and a copper price of $3.25/lb Cu.
-- March 2012 - in relation to the Karchiga DFS the Company announced the
filing of a National Instrument 43-101 (or "NI 43-101") compliant
technical report on www.sedar.com (the "Karchiga DFS Report").
POST YEAR QUARTER HIGHLIGHTS
-- May 2012 - the Company announced the appointment of Mr Kevin Denham as
Chief Financial Officer effective May 1, 2012 replacing Mr Petro
Mychalkiw who stepped down to pursue other business interests.
-- May 2012 - the Company announced the expiry of 62.7 million share
purchase warrants (originally issued in April 2010).
OPERATIONAL REVIEW
The Company's principal and most advanced exploration project is the property
comprising a 47.3km2 licence area in eastern Kazakhstan containing the Karchiga
volcanogenic massive sulphide ("VMS") deposit (the "Karchiga Project"), which is
part of the Rudny Altai polymetallic belt. The Company's other principal
exploration asset is its property in northwest Kyrgyzstan, which is comprised of
four licence areas within the Tien Shan gold belt: the Taldybulak, Barkol,
Korgontash and Kentash licences (collectively, the "Talas Project").
The Company's other exploration project is located approximately 100km to the
south west of the Talas Project and is the Akdjol-Tokhtazan licence area
comprising the Akdjol and Tokhtazan licences (the "Akdjol-Tokhtazan Project").
The Company considers its principal mineral properties to be the Karchiga
Project and the Talas Project and expects to continue to focus its resources and
activities during 2012 on the development of these properties. As such, the
Company considers the Akdjol-Tokhtazan Project a non-core asset which is
available for sale.
The Company has been using, and will continue to use, its current working
capital resources, to satisfy the its expenditure obligations in respect of its
corporate costs and mineral exploration properties as described below, with the
exception of expenditures relating to mine construction for the Karchiga
Project.
The Company continues to progress the process of obtaining a mining licence, the
necessary local Kazakh feasibility study and construction approvals from the
Kazkah authorities. In parallel, the Company is seeking to securie separate
financing for mine construction for the Karchiga Project which it expects to
finalise in the third quarter of 2012, in time for the start of construction
estimated to commence in the fourth quarter of 2012 (see "Financial review -
Liquidity and capital resources" and "Risk and uncertainties" sections of the
Company's MD&A).
KARCHIGA COPPER PROJECT, KAZKHSTAN
Karchiga Definitive Feasibility Study
In February 2012, SRK completed the Karchiga DFS and, in connection therewith,
completed the Karchiga DFS Report dated March 28, 2012. The complete Karchiga
DFS Report entitled "Karchiga Feasibility Study, NI 43-101 Technical Report",
dated March 28, 2012 was prepared by Michael Beare, Dr Michael Armitage and Ms
Tracey Laight of SRK (each of whom is a "qualified person" within the meaning of
NI 43-101 and independent of Orsu) can be viewed under the Company's profile on
SEDAR at www.sedar.com.
The Company commenced the Karchiga DFS in September 2010, completed in February
2012, with a view to potentially starting construction in the third quarter of
2012. During the process of completing and fulfilling the requirements of the
Karchiga DFS the Company undertook associated exploration and test work
programmes which include:
-- In-fill resource drilling program 2010 (full details can be viewed in
the Company's MD&A);
-- Metallurgical test work April 2011 (full details can be viewed in the
Company's MD&A);
-- SRK May 2011 Pit-Constrained Mineral Resource Estimates (full details
can be viewed in the Company's MD&A);
-- SRK December 2011 Pit-Constrained Mineral Resource Estimates (full
details can be viewed in the Company's MD&A); and
-- Karchiga DFS and the 2012 Mineral Reserve Estimates (as described
below).
Table 1 below shows the results of the 2012 Mineral Reserve Estinmates:
Table 1. Probable Mineral Reserves Estimates as of February 18, 2012
----------------------------------------------------------------------------
Tonnes Cu Metal Cu Metal Au Metal
Orebody Ore Type (Mt) Cu % Au g/t (kt) (Mlb) (Koz)
----------------------------------------------------------------------------
Central HL 1.5 1.43 0.06 21.4 47.2 3.0
----------------------------------------------------------------------------
Central FL 3.8 1.78 0.12 68.2 150.2 15.2
----------------------------------------------------------------------------
North East FL 4.7 1.64 0.18 77.0 169.8 27.4
----------------------------------------------------------------------------
Total 10.0 1.67 0.14 166.6 367.2 45.6
----------------------------------------------------------------------------
All figures are on a 100% ownership basis
Pit designs and the final NI 43-101 mineral reserve estimates dated February 18,
2012 were completed using two types of software; Whittle 4X optimisation
software was used to generate optimal pit shells which were designed in detail
using Vulcan software.
Key optimisation parameters are presented in Table 2 below.
Table 2. Whittle Input Parameters
----------------------------------------------------------------------------
OVERALL SLOPE ANGLES PARAMETER
CENTRAL PIT
HANGING WALL 49 degrees
FOOTWALL 47 degrees
NORTH-EASTERN PIT
HANGING WALL 51 degrees
FOOTWALL 45 degrees
NORTHERN WALL 47 degrees
MINING & PROCESSING
MINING RECOVERY 95%
MINING DILUTION 5%
FRESH CU PROCESSING RECOVERY 94.0%
OXIDE CU PROCESSING RECOVERY 55.0%
COSTS
MINING COST
ORE 1.80 $/t
OXIDE 1.30 $/t
WASTE 1.60 $/t
FRESH PROCESSING COST 9.00 $/t ore
OXIDE PROCESSING COST 22.57 $/t ore
GENERAL & ADMINISTRATIVE COST 5.00 $/t ore
ROYALTY 5.7% of RoM Metal Value (above 0.7% Cu head
grade)
PRICE
CU SELLING PRICE 6,600 $/t Cu
NSR 83% (For Fresh Rock only)
----------------------------------------------------------------------------
Capital Expenditure
The estimated total project capital expenditure ("CAPEX") over the mine life of
$147 million, including the solvent extraction with electro winning ("SXEW")
plant to treat the oxide ores, is made up as follows:
-- $21.5 million for mining equipment
-- $40.1 million for copper in concentrate processing plant and equipment
-- $26.3 million for SXEW plant
-- $21.7 million for mine site facilities and infrastructure
-- $26.3 million for sustaining capital & closure costs
-- $11.3 million for contingency
The estimated initial CAPEX is $115 million, which excludes the SXEW plant,
sustaining capital & closure costs but includes pre-production development
costs.
The initial CAPEX estimate is comparable to the initial capital cost estimate of
$100 million contained in the Karchiga Scoping Study. The Company estimates that
a 12 to 15 month period is sufficient for the construction of the processing
facilities and pre-production development at the Karchiga Project.
Mine Plan
The open pit mining schedule produced by SRK calculated a producing mine life of
11.5 years. The mining schedule envisages the mining of 10 Mt of sulphide and
oxide ore and 124 Mt of waste with a stripping ratio of 1:12.4 over the mine
life producing11.8 ktpa of 27.9% Cu concentrate and 2.8 ktpa of Cu cathode. The
average mining rate of the operation is 750kt per annum.
For the first 2.25 years of the mine life, the mining schedule includes open pit
mining of the Central sulphide ore body alone in order to maximise the sulphide
copper grade and hence sulphide copper recovery. The optimised mine schedule has
been developed to minimise the stripping ratio in the initial three years of the
mine life. In addition, the use of stockpiling has enabled the Company to
increase the processed ore grade. From Year 4 until Year 7, sulphide ore will be
mined from both the Central and North East open pits. From Year 8 until the end
of mine life in Year 12, all mining will continue in the North East pit.
The average mining cost over the mine life is $1.7 per tonne of material moved.
Processing Plan and Economic Model
The plant is designed to process approximately 750,000 tonnes per annum of
sulphide ore. A conventional processing route was chosen using relatively fine
grinding and selective sulphide flotation to produce x ktpa of 27.9% Cu bulk
concentrate. The first production has been scheduled for the fourth quarter of
2013 through to final production in 2025.
Copper from the oxide ore will be extracted using SXEW process. The oxides will
be treated over a period of 4.5 years starting in 2018 at an annual production
rate of 360,000 tonnes and is expected to produce an average of 2.8kt (6.22Mlb)
of copper cathode per annum over that period. Production of cathode copper will
continue until 2022.
In order to reduce the initial Capital Expenditure, the SXEW plant construction
has been delayed until after the initial Capital Expenditure payback period
(which is anticipated to be 2.75 years). The plant has been designed to treat an
average of 30,000 tonnes of leachable oxide ore per month.
The results of the Karchiga DFS demonstrate that economically the best option is
to delay the SXEW construction until 2017, allowing the cost of construction to
be financed from the revenue generated by the sulphide ore treatment.
The project key performance indicators are shown in Table 3 below.
Table 3. Key Performance Indicators
----------------------------------------------------------------------------
Key Performance
Parameter Units Indicator
----------------------------------------------------------------------------
Average annual mining rate Tonnes 750,000
----------------------------------------------------------------------------
Average mining cost $/t of ore 22.99
----------------------------------------------------------------------------
Annual processing rate (FL) Tonnes 750,000
----------------------------------------------------------------------------
Mine life (FL) Years 11.5
----------------------------------------------------------------------------
Processing cost (FL) $/t of ore 8.91
----------------------------------------------------------------------------
Metallurgical recovery (FL) % 93.4
----------------------------------------------------------------------------
Average annual copper production,
over 11.5 years (FL) '000 tonnes 11.82
----------------------------------------------------------------------------
Average annual copper production
(FL) Mlb 26.1
----------------------------------------------------------------------------
Annual processing rate (HL) Tonnes 360,000
----------------------------------------------------------------------------
Mine life (HL) Years 4.5
----------------------------------------------------------------------------
Processing cost (HL) $/t of ore 18.7
----------------------------------------------------------------------------
Metallurgical recovery (HL) % 61.1
----------------------------------------------------------------------------
Average annual copper production,
over 4.5 years (HL) '000 tonnes 2.8
----------------------------------------------------------------------------
Average annual copper production
(HL) Mlb 6.2
----------------------------------------------------------------------------
Cash operating cost over the mine
life (pre tax) $/lb Cu 1.47
----------------------------------------------------------------------------
The mine is expected to produce a total of 149kt (328 Mlb) of payable copper,
with an average of 12,957t (28.57 Mlb) of copper production per annum.
The Karchiga Project site is located 10 km from the main road and a 110 kV
national power grid and is expected to be connected to the same as part of
construction. An adequate supply of water can be sourced from the River Kalzhir
as well as from aquifers in the immediate vicinity of the designed project
facilities.
The project key economic indicators are shown in Table 4 below.
Table 4. Key Economic Indicators
----------------------------------------------------------------------------
Parameter Units Key Economic Indicator
----------------------------------------------------------------------------
Total project CAPEX $m 147
----------------------------------------------------------------------------
Initial CAPEX $m 115
----------------------------------------------------------------------------
Total Net Smelter Revenue $m 971
----------------------------------------------------------------------------
Sulphide and Oxide Case @ $3.25/lb Cu:
- Post-Tax NPV7.5 $m 150
- Post-Tax IRR % 30
- Payback period Years 2.75
----------------------------------------------------------------------------
Sulphide and Oxide Case @ $3.00/lb Cu:
- Post-Tax NPV7.5 $m 113
- Post-Tax IRR % 25
- Payback period Years 3.0
----------------------------------------------------------------------------
All figures are on a 100% ownership basis
The ESIA for the Karchiga Project was successfully completed by WAI on January
31, 2012. The Company expects to receive the necessary construction permitting
approvals from the Kazakh authorities by the end of the second quarter of 2012.
Karchiga DFS Expenditure
The Company originally estimated expenditure on the Karchiga DFS of $6.6
million, but due to increased resource drilling work covering the additional
oxide and sulphide drilling programme mentioned above, the Company now expects
to incur expenditure of $9.2 million, which it expects to fund from its
available cash. As at March 31, 2012, the Company had incurred cumulative
expenditure of $8.6 million relating to the Karchiga DFS since August 2010 with
the remaining work expected to be completed in the second quarter of 2012.
Other matters
Following the completion of the Karchiga DFS the Company began the process of
identifying companies and contractors to complete the detailed design work going
forward into the start of construction expected by August 2012. In addition the
Company continues to identify potential off-takers for the copper concentrate in
both the People's Republic of China ("China") and Kazakhstan. The Karchiga
Project is favourably located approximately 220 km south east of the regional
centre, Ust-Kamenogorsk, and approximately 40 km from the Chinese border to the
east. The nearest copper mining operation in China at the Ashele VMS deposit,
containing 1Mt of copper, is located approximately 85 km east-southeast from the
Karchiga deposit.
TALAS COPPER-GOLD-MOLYBDENUM PROJECT, KYRGYZSTAN
2012 Exploration Programme
The Company has agreed with Gold Fields a 6,000 metre infill drilling programme
for the Taldybulak deposit, aimed at providing additional resource data testing
priority targets in the immediate vicinity of the Taldybulak deposit. In
preparation for the infill drilling programme, a partnership Agreement was
signed with the community of Aral village (the "Partnership Agreement") to
obtain local support for the drilling programme. The exploration programme is
expected to be completed by July 2012 in advance of any decision regarding a
potential pre-feasibility study. Orsu and Gold Fields have agreed exploration
expenditure for the infill drilling programme of $2.3 million in total. As per
the terms of the JV Agreement the Company is required to fund its 40% pro rata
share of approximately $0.9 million.
As at March 31, 2012 the Company contributed $152,000 of its 40% share of
expenditure in 2012 ($200,000 for the three months ended March 31, 2011)
relating to the completion of the 2011 work programme and expenditure budget in
connection with environmental, social, metallurgical and resource studies, as
well as a ground magnetic survey at the Taldybulak licence.
FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2012
For the three months ended March 31, 2012 the Company reported a net loss of
$2.6 million compared to net income of $1.4 million for the three months ended
March 31, 2011.
As at March 31, 2012 the Company had net assets of $29.6 million ($32.1 million
as at December 31, 2011) of which $8.3 million was cash and cash equivalents
($10.3 million as at December 31, 2011).
The net loss of $2.6 million for the three months ended March 31, 2012 consisted
of: administrative costs of $1.0 million, legal and professional costs of $0.3
million, exploration costs of $1.0 million, a stock-based compensation charge of
$0.1 million and the Company's share of the Talas Joint Venture losses of $0.2
million.
The Company's cash flows, cash and cash equivalents as at March 31, 2012 were
$8.3 million compared to $10.3 million as at December 31, 2011, representing a
decrease of $2.0 million. The decrease was due primarily to corporate and
exploration expenditure of $1.8 million and Orsu's 40% funding of the Talas
Joint Venture of $0.2 million.
FINANCIAL POSITION AS AT MARCH 31, 2012
As at March 31, 2012 the Company's net assets were $29.6 million, compared with
$32.1 million as at December 31, 2011, of which $8.3 million consisted of cash
and cash equivalents ($10.3 million as at December 31, 2011).
The decrease of $2.5 million was due to corporate and exploration expenditure of
$1.8 million, a reduction in the Company's 40% share of losses in the Talas
Joint Venture of $0.2 million and lower receivables of $0.3 million.
ASSET HELD FOR SALE
The exploration license area for the Akdjol-Tokhtazan Project is located in the
Jalal-Abad Oblast, western Kyrgyzstan and comprises the Akdjol license and
Tokhtazan license. During 2010, the Company identified the Akdjol license area
as a gold-silver epithermal prospect and the Tokhtazan license area as a gold
prospect. The Akdjol and Tokhtazan licenses expire on December 31, 2012.
The Company considers its principal mineral properties to be the Karchiga
exploration property and the Talas exploration license will continue to focus
its resources and activities during 2012 on the development of these properties.
As such the Company considers the Akdjol-Tokhtazan Project a non core asset
which is available for sale.
Under IFRS 5, "Non-current assets held for sale and discontinued operations",
the Company classified the assets and liabilities related to the
Akdjol-Tokhtazan Project (the disposal group) as held for sale on the balance
sheet as at March 31, 2012 and as at December 31, 2011 and anticipates that
after negotiations with potential buyers, a disposal of the Akdjol-Tokhtazan
Project will be completed before the expiry of the licences.
The amount of comprehensive loss attributable to non controlling interests in
relation to the losses incurred by the disposal group in the period ended March
31, 2012 and December 31, 2011 is nil.
EQUITY INVESTMENT IN THE TALAS JOINT VENTURE
The Talas exploration licence area comprises the Taldybulak, Kentash, Barkol and
Korgontash licences in Kyrgyzstan. The primary exploration property within the
Talas exploration licence area is the Taldybulak copper-gold-molybdenum porphyry
deposit. The Taldybulak licence expires on December 31, 2015 and the Barkol
licence expires on December 31, 2013. The Kentash and Korgontash licenses expire
on December 31, 2012.
In December 2008, the Company entered into a joint venture agreement to further
develop the Talas licence area with Gold Fields Orogen Holdings BVI Limited (or
"Gold Fields") (the "JV Agreement") and, under the terms of the JV Agreement,
Gold Fields became the project operator.
In January 2010, Gold Fields earned a 60% interest in the JV Company and, in
doing so, earned the ability to unilaterally control the operational, financial
and investment decisions of the JV Company. For this reason the Company's 40%
minority interest in the Talas Project has been accounted for as an associate
under the equity method.
A summary of the carrying value of the Company's equity investment in the Talas
Joint Venture as at March 31, 2012 is set out below:
$000s
Fair value of equity investment as at January 1, 2012 10,111
Funding provided by the Company during the period 152
Less: Company's 40% share of operating losses for the period (158)
------------
Fair value of equity investment as at March 31, 2012 10,105
------------
------------
LIQUIDITY AND CAPITAL RESOURCES
As at March 31, 2012 the Company's main source of liquidity was unrestricted
cash of $8.3 million, compared with $10.3 million as at December 31, 2011.
The Company measures its consolidated working capital as comprising free cash,
accounts receivable, prepayments and other receivables, less accounts payable
and accrued liabilities. As at March 31, 2012, the Company's consolidated
working capital was $9 million (compared with a consolidated working capital of
$11.5 million as at December 31, 2011).
The Company's working capital needs as at March 31, 2012 included the
maintenance of the Company's interests in, and the further exploration and the
development, of the Company's mineral properties in Kyrgyzstan, the completion
of the Karchiga DFS and the funding of general corporate, legal and professional
expenses. The Company expects to fund its working capital requirements for 2012,
other than as set out below, and be able to contribute towards the pursuit of
future growth opportunities (which may include acquiring one or more additional
assets), if and when such opportunities arise, from its unrestricted cash of
$8.3 million as at March 31, 2012. In the Company's view, the consolidated
working capital as at March 31, 2012 is sufficient to satisfy its working
capital needs, other than as described below, for at least the next 12 months.
The construction of mining facilities and commencement of mining operations at
the Karchiga Project, if any, will require an estimated initial capital
expenditure of $115 million (see "Operational review - Karchiga copper project,
Kazakhstan" of the Company's MD&A) for which the Company will be required to
raise additional financing in the future. The Company is currently in
discussions with potential lenders to raise debt financing but will also need to
raise financing from other sources, which may include equity financing and/ or
the sale of the Akdjol-Tokhtazan Project. Whilst the Company has been successful
in raising debt and equity financing in the past, the Company's ability to raise
additional debt and equity financing may be affected by numerous factors beyond
the Company's control, including, but not limited to, adverse market conditions
and/or commodity price changes and economic downturn and those other factors
that are listed under "Risks and Uncertainties" of the Company's MD&A.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's derivative instruments as at March 31, 2012 consist of derivative
warrant liabilities in relation to its share purchase warrants.
Derivative warrant liabilities
In prior years the Company has issued listed share purchase warrants in
conjunction with public offerings for the purchase of common shares of the
Company. These share purchase warrants were issued with an exercise price in
Canadian dollars, rather than U.S. dollars (the Presentation and Functional
Currency (as defined in "Critical accounting policies and estimates" in the
Company's MD&A) of the Company), were only issued to participants in these
public share offerings, are not able to be tracked by the Company and are
transferable by the warrant holder. Such share purchase warrants are considered
to be derivative instruments and the Company is required to re-measure the fair
value of these at the reporting date. The fair value of these listed share
purchase warrants are re-measured at each balance sheet date using the Black
Scholes model using the exchange rates at the balance sheet date and measured
over their remaining life. Adjustments to the fair value of the share purchase
warrants as at the balance sheet date are recorded to the income statement.
Share purchase warrants that have expired or have been forfeited are adjusted to
the net income statement. As at March 31, 2012 the Company calculated a fair
value for its warrant derivative liabilities of nil ($nil as at December 31,
2011).
Consolidated Statements of Net (loss)/ income, and Comprehensive (loss)/
income (Unaudited)
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
Three months ended March 31,
2012 2011
$000 $000
(Expenses)/ income
Administration (1,091) (770)
Legal and professional (277) (291)
Exploration (968) (539)
Stock based compensation (90) (142)
Stock based compensation - non
employees (7) (20)
Derivative gains - 3,346
Foreign exchange gains/ (losses) 19 97
--------------- -----------------
Net (loss)/ income from continuing
operations (2,414) 1,681
Company's share of Talas Joint Venture
losses (158) (310)
Finance income 10 17
--------------- -----------------
Net (loss)/ income and comprehensive
(loss)/ income for the period (2,562) 1,388
--------------- -----------------
--------------- -----------------
Net (losses)/ income attributable to:
Shareholders of the Company (2,498) 1,581
Non-controlling interest (64) (193)
--------------- -----------------
(2,562) 1,388
--------------- -----------------
--------------- -----------------
(Loss)/ earnings per share
Basic $ (0.02) $ 0.01
Diluted $ (0.02) $ 0.01
Weighted average number of common
shares (in thousands) 157,696 157,696
Consolidated Balance Sheets (Unaudited)
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
March 31 December 31
2012 2011
Assets $000 $000
Current assets
Cash and cash equivalents 8,332 10,319
Prepaid and receivables 1,301 1,394
Assets classified as held for sale 5,873 6,116
----------------------------
15,506 17,829
Non-current assets
Exploration properties 4,404 4,404
Property, plant and equipment 328 353
Equity investment in Talas Joint Venture 10,105 10,111
----------------------------
14,837 14,868
----------------------------
Total assets 30,343 32,697
----------------------------
----------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 560 448
Liabilities classified as held for sale 65 66
----------------------------
625 514
Non-current liabilities
Other liabilities 120 120
----------------------------
745 634
Equity
Share capital 380,145 380,145
Share purchase warrants 1,131 1,131
Share purchase options 6,159 6,062
Contributed surplus 26,828 26,828
Non-controlling interest (318) (254)
Deficit (384,347) (381,849)
----------------------------
29,598 32,063
----------------------------
Total equity and liabilities 30,343 32,697
----------------------------
----------------------------
Consolidated Statements of Cash Flows (Unaudited)
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
Three months ended
March 31,
2012 2011
$000 $000
Cash flows (used by)/ from operating activities
Net (loss)/ income for the period (2,562) 1,388
Items not affecting cash:
Company share of Talas Joint Venture losses 158 310
Depreciation and amortization 35 33
Share-based payments 97 162
Foreign exchange losses 18 74
Derivative gains - (3,346)
------------------------
(2,254) (1,379)
Changes in non-cash working capital
Accounts receivable and other assets 313 (251)
Accounts payable and accrued liabilities 98 (52)
------------------------
Net cash used by the operating activities (1,843) (1,682)
Cash flows (used by)/ from investing activities
Expenditures on property, plant and equipment (9) (2)
Proceeds from net investment in residual oil
and gas interests - 251
Deferred consideration received - 1,500
Funding of investment in Talas Joint Venture (152) (200)
------------------------
Net cash generated (used by)/ from investing
activities (161) 1,549
------------------------
Effects of exchange rate changes on cash and
cash equivalents - (95)
------------------------
Net decrease in cash and cash equivalents (2,004) (228)
------------------------
Cash and cash equivalents - Beginning of the
period 10,341 19,596
------------------------
Cash and cash equivalents - End of the period 8,337 19,368
------------------------
------------------------
Cash and cash equivalents per the consolidated
balance sheet 8,332 19,368
Included in the assets held for sale 5 -
Consolidated Statements of changes in Equity (Unaudited)
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
Consolidated statements of changes to equity as at March 31, 2012 and
December 31, 2011:
Share capital
Share Share
Number of Share purchase purchase
shares capital warrants options
(000s') $000 $000 $000
---------------------------------------------
Balance as at January 1, 2011 157,696 380,145 4,897 5,904
Share-based payments - - - 737
Share purchase warrants lapsed - - (3,766) -
Share options forfeited or
lapsed - - - (579)
Eildon minority interest
acquisition - - - -
Distribution to non-
controlling interest - - - -
Net (loss)/ income for the
year - - - -
---------------------------------------------
Balance as at December 31,
2011 157,696 380,145 1,131 6,062
---------------------------------------------
---------------------------------------------
Share-based payments - - - 97
Net loss for the period - - - -
---------------------------------------------
Balance as at March 31, 2012 157,696 380,145 1,131 6,159
---------------------------------------------
---------------------------------------------
Non-
Contributed controlling Total
surplus interest Deficit equity
$000 $000 $000 $000
----------------------------------------------
Balance as at January 1, 2011 22,483 (773) (372,268) 40,388
Share-based payments - - - 737
Share purchase warrants lapsed 3,766 - - -
Share options forfeited or
lapsed 579 - - -
Eildon minority interest
acquisition - 935 (7,123) (6,188)
Distribution to non-
controlling interest - (1,086) - (1,086)
Net (loss)/ income for the
year - 670 (2,458) (1,788)
----------------------------------------------
Balance as at December 31,
2011 26,828 (254) (381,849) 32,063
----------------------------------------------
----------------------------------------------
Share-based payments - - - 97
Net loss for the period - (64) (2,498) (2,562)
----------------------------------------------
Balance as at March 31, 2012 26,828 (318) (384,347) 29,598
----------------------------------------------
----------------------------------------------
FORWARD-LOOKING INFORMATION
This press release and the Company's MD&A contains or refers to forward-looking
information. All information, other than information regarding historical fact
that addresses activities, events or developments that the Company believes,
expects or anticipates will or may occur in the future is forward-looking
information. Such forward-looking information includes, without limitation,
statements relating to: the continued and future maintenance, exploration and
development of the Company's properties, including the proposed work programs,
and the timing related thereto; development and operational plans and
objectives, including the Company's expectations relating to the development of
the Karchiga Project; the Company's ability to realize the future potential of,
and satisfy certain future expenditure obligations with respect to, the mineral
properties in which it has an interest; mineral resource and mineral reserve
estimates and the timing thereof; estimated project economics, cash flow, costs,
expenditures, revenue, capital payback, performance and economic indicators and
sources of funding; the use and sufficiency of the Company's working capital for
the next twelve months; the estimated mine life, net present value and rate of
return for, and forecasts relating to tonnages and amounts to be mined from, and
processing and expected recoveries and grades at, the Karchiga Project and/or
Taldybulak as well as the other forecasts, estimates and expectations relating
to the Karchiga DFS Report, the Karchiga Scoping Study, the SRK May 2011
Pit-Constrained Mineral Resource Estimates, the SRK December 2011
Pit-Constrained Mineral Resource Estimates, the NI 43-101 Taldybulak Scoping
Study Report and the Taldybulak Scoping Study; future prices and trends relating
to copper, gold and molybdenum; the mine design and plan for the Karchiga
Project, including the potential start of construction at, and production from,
the Karchiga Project as well as the expected timing of same and the Company's
ability to receive the necessary permits and approvals in connection therewith;
the anticipated sale of the Akdjol-Tokhtazan Project and the timing with respect
thereto; the Company's belief that the results from the mineralogical study
relating to the Akdjol-Tokhtazan Project suggest that gold should be
metallurgically accessible; the future political and legal regimes and
regulatory environments relating to the mining industry in Kyrgyzstan and/or
Kazakhstan; the Company's expectations and beliefs with respect to the waiver of
the State's pre-emptive right with respect to the Karchiga Project and the past
placements of the common shares being covered thereby; the significance of any
individual claims by non-Ontario residents with respect to the Claim; and the
Company's future growth (including new opportunities and acquisitions) and its
ability to raise or secure new funding (including for construction at the
Karchiga Project).
The forward-looking information in this press release and the Company's MD&A
reflects the current expectations, assumptions or beliefs of the Company based
on information currently available to the Company. With respect to
forward-looking information contained in this press release and the Company's
MD&A, the Company has made assumptions regarding, among other things, the
Company's ability to generate sufficient funds from capital markets and/or debt
sources to meet its future expected obligations and planned activities, the
Company's business (including the continued exploration and development of its
properties and the timing and methods to be employed with respect to same), the
estimation of mineral resources and mineral reserves (as set in this press
release and under the "Operational Review" of the Company's MD&A), the
parameters and assumptions employed in the Karchiga DFS Report, the Karchiga
Scoping Study, the SRK May 2011 Pit-Constrained Mineral Resource Estimates, the
SRK December 2011 Pit-Constrained Mineral Resource Estimates, the NI 43-101
Taldybulak Scoping Study Report and the Taldybulak Scoping Study, the economy
and the mineral exploration and extraction industry in general, the political
environments and the regulatory frameworks in Kazakhstan and Kyrgyzstan with
respect to, among other things, the mining industry generally, royalties/MPTs,
taxes, environmental matters and the Company's ability to obtain, maintain,
renew and/or extend required permits, licences, authorisations and/or approvals
from the appropriate regulatory authorities, including the necessary
construction and development permits and approvals required to develop the
Karchiga Project as anticipated, that the waiver granted by the Competent
Authority covers any pre-emptive right that the Competent Authority or State has
in respect of any past placements, future capital, operating and production
costs and cash flow discounts, anticipated mining and processing rates, the
Company's ability to continue to obtain qualified staff and equipment in a
timely and cost-efficient manner and to engage international and Kazakh
companies to carry out additional studies for the Karchiga DFS and to obtain
Kazakh Feasibility Study approval, the treatment of the Varvarinskoye Project as
discontinued operations, assumptions relating to the Company's critical
accounting policies, that the Company has identified all of the key issues to be
investigated in connection with the Karchiga DFS, and has also assumed that no
unusual geological or technical problems occur, and that equipment works as
anticipated, no material adverse change in the price of copper, gold or
molybdenum occurs and no significant events occur outside of the Company's
normal course of business.
Forward-looking information is subject to a number of risks and uncertainties
that may cause the actual results of the Company to differ materially from those
discussed in the forward-looking information, and even if such actual results
are realised or substantially realised, there can be no assurance that they will
have the expected consequences to, or effects on, the Company. Factors that
could cause actual results or events to differ materially from current
expectations include, but are not limited to: risks normally incidental to
exploration and development of mineral properties and operating hazards;
uncertainties in the interpretation of results from drilling and metallurgical
test work; the possibility that future exploration, development or mining
results will not be consistent with expectations; uncertainty of mineral
resource and mineral reserve estimates; technical and design factors;
uncertainty of capital and operating costs, production and economic returns;
uncertainties relating to the estimates and assumptions used, and risks in the
methodologies employed, in the Karchiga DFS Report, the Karchiga Scoping Study,
the SRK May 2011 Pit-Constrained Mineral Resource Estimates, the SRK December
2011 Pit-Constrained Mineral Resource Estimates, the NI 43-101 Taldybulak
Scoping Study Report and/or the Taldybulak Scoping Study and that the completion
of additional work on the Karchiga Project and/or Taldybulak, as the case may
be, could result in changes to the estimates relating to the Karchiga DFS
Report, the Karchiga Scoping Study, the SRK May 2011 Pit-Constrained Mineral
Resource Estimates, the SRK December 2011 Pit-Constrained Mineral Resource
Estimates, the NI 43-101 Taldybulak Scoping Study Report and/or the Taldybulak
Scoping Study as applicable;
the Company's inability to obtain, maintain, renew and/or extend required
licences, permits, authorizations and/or approvals from the appropriate
regulatory authorities, including (without limitation) the Company's inability
to obtain (or a delay in obtaining) the necessary construction and development
permits and approvals for the Karchiga Project, and other risks relating to the
regulatory frameworks in Kazakhstan and Kyrgyzstan; adverse changes in the
political environments in Kazakhstan and Kyrgyzstan and the laws governing the
Company, its subsidiaries and their respective business activities; inflation;
changes in exchange and interest rates; adverse changes in commodity prices; the
inability of the Company to obtain required financing on favourable terms or at
all or to complete the disposition of the Akdjol-Tokhtazan Project; adverse
changes with respect to the Talas Joint Venture; adverse general market
conditions; lack of availability at a reasonable cost or at all, of equipment or
labour; inability to attract and retain key management and personnel; the
possibility of non-resident class members commencing individual claims in
connection with the Claim; the Company's inability to delineate additional
mineral resources and mineral reserves; and future unforeseen liabilities and
other factors including, but not limited to, those listed under "Risk and
Uncertainties" in the Company's MD&A.
Any mineral resource and mineral reserve figures referred to in this press
release or the Company's MD&A are estimates and no assurances can be given that
the indicated levels of minerals will be produced. Such estimates are
expressions of judgment based on knowledge, mining experience, analysis of
drilling results and industry practices. Valid estimates made at a given time
may significantly change when new information becomes available. While the
Company believes that the mineral resource and mineral reserve estimates in
respect of its properties are well established, by their nature mineral resource
and mineral reserve estimates are imprecise and depend, to a certain extent,
upon statistical inferences which may ultimately prove unreliable. If such
mineral resource and mineral reserve estimates are inaccurate or are reduced in
the future, this could have a material adverse impact on the Company. Due to the
uncertainty that may be attached to inferred mineral resources, it cannot be
assumed that all or any part of an inferred mineral resource will be upgraded to
an indicated or measured mineral resource as a result of continued exploration.
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. The Karchiga Scoping Study, the NI 43-101 Taldybulak Scoping
Study Report and the Taldybulak Scoping Study are preliminary in nature, and
include inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them that would
enable them to be categorized as mineral reserves. There is no certainty that
the conclusions of the Karchiga Scoping Study, the NI 43-101 Taldybulak Scoping
Study Report and/or the Taldybulak Scoping Study will be realized.
Any forward-looking information speaks only as of the date on which it is made
and, except as may be required by applicable securities laws, the Company
disclaims any intent or obligation to update any forward-looking information,
whether as a result of new information, future events or results or otherwise.
Although the Company believes that the assumptions inherent in the
forward-looking information are reasonable, forward-looking information is not a
guarantee of future performance and accordingly undue reliance should not be put
on such information due to the inherent uncertainty therein.
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