Orsu Metals Corporation ("Orsu" or the "Company" or the "Group"), the dual
listed (TSX:OSU)(AIM:OSU) London-based base and precious metals exploration and
development company today reports its unaudited results for the quarter ended
March 31, 2013. A full Management's Discussion and Analysis of the results
("MD&A") and Consolidated Financial Statements for the quarter ended March 31,
2013 ("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 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 FROM JANUARY 1, 2013
Extension of East Balkhash 2 Agreement, April 2013 - as part of the objective to
acquire new exploration licenses in Kazakhstan, in April 2013 the Company
announced that it had entered into a new exclusivity agreement (the "New
Balkhash Agreement"), superseding the initial agreement announced in November
2012, to jointly explore with Asem Tas-N LLC ("Asem Tas"), a privately owned
Kazakh registered company and the owner of the relevant subsoil use contract, a
license area of approximately 6,000km2 (referred to herein as the "East Balkhash
2" license area) in Eastern Kazakhstan, which is host to a 30km long
Dzharyk-Taisogan cluster of copper-polymetallic occurrences (referred to as the
"Balkhash Project"). Under the terms of the New Balkhash Agreement, the Company
has been granted the exclusive right for a period of 175 days, ending in
September 2013, subject to extension by mutual agreement of the parties (the
"Exclusivity Period"), to explore and participate in the Balkhash Project (see
"Operational Review - Balkhash Project, Kazakhstan").
Appointment of Technical Director, April 2013 - the Company announced that Mr.
Christopher Power, previously the Project Manager for the Company's Karchiga
Project, had been appointed as Technical Director, replacing Mr. Raymond Oates.
OPERATIONAL REVIEW
The Company's principal and most advanced project is the property, within the
Republic of Kazakhstan (or "Kazakhstan"), comprising a license area in eastern
Kazakhstan containing the Karchiga volcanogenic massive sulphide ("VMS") deposit
which is part of the Rudny Altai polymetallic belt (the "Karchiga Project"). In
addition the Company continues to seek to acquire new exploration license areas
within Kazakhstan. The Company also holds exploration licenses within the Kyrgyz
Republic (or "Kyrgyzstan").
Karchiga Copper Project, Kazakhstan
During the three months ended March 31, 2013 the Company continued to work
primarily on planning as well as obtaining the necessary approvals for the
construction of mine and processing facilities for the Karchiga Project.
As part of the process of planning for the construction of mine and processing
facilities for the Karchiga Project, in the first quarter of 2013, the Company
obtained the remaining local and regulatory approvals required for the
commencement of mining and construction at the Karchiga Project.
In March 2012 the Company filed the results of a definitive feasibility study
for the Karchiga Project (the Karchiga DFS Report") with an estimated initial
capital expenditure requirement of $115 million for the Karchiga Project. To
assist the Company in arranging finance for such expenditures, in 2012, the
Company appointed Barclays Bank plc and UniCredit Bank AG (together the
"Mandated Lead Arrangers") to secure debt financing of up to $90 million as well
as extending the appointment of Endeavour Financial Limited ("Endeavour") to
provide financial advisory services to assist the Company in securing further
debt and other forms of finance required.
As at the date of this press release the Company continues with its efforts to
secure finance for the Karchiga Project together with Endeavour and the Mandated
Lead Arrangers. Until such time as it is able to secure the required financing,
the Company will not enter into any contracts to place advance orders for mining
equipment or construction materials and will be unable to determine the expected
timing for the commencement of construction (see the "Financial review -
Liquidity and capital resources" and "Risks and uncertainties" sections below).
Other Projects
The Company's exploration interests in Kyrgyzstan consist of the Akdjol and
Tokhtazan exploration licenses (or the "Akdjol-Tokhtazan Project") located in
the Jebel-Abad Oblast, western Kyrgyzstan. In 2011, the Company determined the
Akdjol-Tokhtazan Project to be a non core asset which would be available for
sale and subsequently, in November 2012, the Company announced that it had
entered into an exclusivity agreement with David-Invest LLP ("David-Invest"), a
Kyrgyz registered company, with a view to the potential sale of the Company's
interest in the Akdjol-Tokhtazan Project (the "Akdjol-Tokhtazan Exclusivity
Agreement"). Pursuant to the Akdjol-Tokhtazan Exclusivity Agreement,
David-Invest was granted the exclusive right until September 1, 2013 (the
"Akdjol-Tokhtazan Exclusivity Period") to acquire, subject to the renewal of the
relevant exploration licenses expiring on December 31, 2012 (which have been
renewed to December 31, 2015), for consideration of $4.5 million through the
acquisition of Orsu's wholly-owned subsidiary, Tournon Finance Limited. The key
terms of the Akdjol-Tokhtazan Exclusivity Agreement are that in return for being
granted exclusivity, David-Invest will fund the exploration programme for the
Akdjol-Tokhtazan Project on a non-refundable basis during the Akdjol-Tokhtazan
Exclusivity Period. In the event of the sale of the Akdjol-Tokhtazan Project the
Company will no longer have any exploration interests in Kyrgyzstan.
BALKHASH PROJECT, KAZAKHSTAN
In April 2013, the Company announced that it had entered into the New Balkhash
Agreement to jointly explore the Balkhash Project with Asem Tas. The New
Balkhash Agreement replaces the initial agreement which the Company announced in
its press release on November 12, 2012.
The New Balkhash Agreement
The key terms of the New Balkhash Agreement with Asem Tas to jointly explore the
Balkhash Project include:
1) Orsu has been granted the exclusive right during the Exclusivity Period
to explore and participate in the Balkhash Project.
2) During the Exclusivity Period:
a. Orsu and Asem Tas will continue to jointly explore the Balkhash
Project, including geophysical works and verification drilling of
exploration targets;
b. Orsu will provide funding for exploration works at the Balkhash
Project in the amount of approximately $0.9 million (including $0.13
million already spent in 2013 pursuant to the predecessor agreement
announced on November 12, 2012) in accordance with a contractual
working programme agreed by both parties (the "Working Programme"),
and
c. Asem Tas will apply to transfer the exploration licence for the
Balkhash Project to a newly formed Kazakh legal entity jointly owned
by Orsu and Asem Tas (the "Joint Venture Company"), which will be a
subsidiary of Orsu, with Orsu holding an effective interest of 55%. A
transfer of the exploration license to the Joint Venture Company will
be conditional upon obtaining a formal waiver of the Kazakh
Government's pre-emptive right.
3) Upon the effective transfer of the exploration license to the Joint
Venture Company Orsu has agreed to pay Asem Tas:
a. up to $1.5 million to compensate Asem Tas for historical exploration
costs incurred prior to 2012 (excluding any costs funded by Orsu),
b. $20 per tonne of economically extractable copper equivalent, up to a
maximum of $10 million, less any amount paid under item 3) a. above,
on or before completion of a positive preliminary economic assessment
study, and
c. $20 per additional tonne of economically extractable copper
equivalent, up to a maximum of $15 million, less any amounts paid
under 3) a. and 3) b. above, on completion of a positive definitive
feasibility study.
4) Orsu may terminate its funding at any point before the earlier of the
effective transfer of the exploration licence or the end of the
Exclusivity Period. Where the approval of the relevant authorities for
the transfer of the licence is not received due to a breach by Asem Tas,
or the Kazakh Government exercises its pre-emptive right to acquire the
licence during the transfer process, Asem Tas is required to refund Orsu
for its expenditure in connection with the Working Programme.
5) Orsu will finance the works until completion of the definitive
feasibility study and Orsu will be responsible for securing debt and
financing for the project.
6) Under the terms of the New Balkhash Agreement, Orsu will have the right
to buy-out all or part of the interest of Asem Tas in the Joint Venture
Company, for cash or shares, at a price determined by an independent
expert.
FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2013
The Company is pleased to announce that losses reduced in the quarter with a net
loss on continuing operations of $1.2 million for the three months ended March
31, 2013, compared to a net loss of $2.6 million for the three months ended
March 31, 2012.
The net loss of $1.2 million for the three months ended March 31, 2013 consisted
of: administrative costs of $1.0 million, legal and professional costs of $0.2
million, exploration costs of $0.2 million, partially offset by a derivative
gain in relation to the derivative receivable of $0.2 million.
As at March 31, 2013 the Company had net assets of $28.6 million ($29.8 million
as at December 31, 2012) of which $7.1 million was cash and cash equivalents
($9.8 million as at December 31, 2012) and a $7.8 million receivable ($7.3
million as at December 31, 2012) representing the fair value of the Subscription
(as defined below) which is subject to the Company obtaining the Kazakh Formal
Waiver (as defined and described below).
The decrease in cash and cash equivalents was due to corporate and exploration
expenditure of $2.3 million and expenditure on property, plant and equipment of
$0.4 million due to capitalised development expenditure related to the Karchiga
Project.
Derivative receivable
In 2012, the Company sold its 40% interest in a property in northwest Kyrgyzstan
(the "Talas Project") to a wholly owned subsidiary of Gold Fields Limited ("Gold
Fields" or collectively with certain of its subsidiaries, the "Gold Fields
Group") for cash consideration of $10 million (the "Sale"). At the same time the
Gold Fields Group also agreed to subscribe for 25 million units of the Company
(each a "Unit") at a price of CAD$0.40 per Unit for gross proceeds of CAD$10
million (the "Subscription"), with each Unit consisting of one Common Share of
the Company and one half of one common share purchase warrant (each whole
warrant, a "Warrant"). Each Warrant will be exercisable for a period of three
years from the date of issue to acquire one Common Share at a price of CAD$0.50.
Completion of the Subscription is conditional on the Company obtaining a formal
waiver of the Kazakh Government's pre-emptive right and requirement for consent
for the issuance of Common Shares pursuant to the Subscription (the "Kazakh
Formal Waiver"), the application for which was submitted in September 2012. The
Units will not be issued to the Gold Fields Group until such condition has been
satisfied or waived by Gold Fields Group.
The gross proceeds of CAD$10 million cash are currently held in escrow pending
the Company obtaining the Kazakh Formal Waiver or Gold Fields waiver of such
condition and as a result the Subscription is considered to be a derivative
receivable. As at March 31, 2013 the Company has measured the fair value of this
derivative receivable to be $7.4 million ($7.3 million as at December 31, 2012)
and as a result recoded a derivative gain of $0.2 million for the three months
ended March 31, 2013.
LIQUIDITY AND CAPITAL RESOURCES
As at March 31, 2013 the Company's main source of liquidity was unrestricted
cash and cash equivalents of $7.1 million, compared with $9.8 million as at
December 31, 2012.
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, 2013 the Company's consolidated working
capital was $7.8 million.
The Company's working capital needs as at March 31, 2013 included the
maintenance of funding for its exploration and development activities, including
its expenditure obligations under the New Balkhash Agreement, the acquisition of
new mineral exploration properties, its corporate and administrative
expenditures requirements and potential contributions towards project finance,
if and when arranged, in relation to the Karchiga Project, as deemed
appropriate. The Company expects to fund its working capital requirements for
2013, 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 $7.1 million as at March 31, 2013, proceeds from the Subscription
subject to the Company obtaining the Kazakh Formal Waiver and potential net
proceeds, if any, from the sale of the Akdjol-Tokhtazan Project (as discussed
above). In the Company's view, the consolidated working capital as at March 31,
2013 is sufficient to satisfy its working capital needs, other than as described
below, for at least the next twelve months.
The construction of mining facilities and commencement of mining operations at
the Karchiga Project, if any, will require an estimated initial capital
expenditure requirement of $115 million for which the Company will be required
to raise additional financing in the future. In July 2012, the Company appointed
the Mandated Lead Arrangers to use commercially reasonable efforts to secure
project debt financing. If the Company secures the required debt financing on
acceptable commercial terms then it may also apply a proportion of the Sale
proceeds and, if released from escrow, Subscription proceeds towards the project
financing requirements as the Company determines necessary. Whilst the Company
has been successful in raising debt and other financing in the past, the
Company's ability to raise additional debt and other financing as well as
receiving the Kazakh Formal Waiver for the Subscription 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" in the
Company's MD&A.
Consolidated statements of net loss and comprehensive loss (Unaudited)
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
Three months ended March 31,
2013 2012
$000 $000
Operating expenses
Administration (956) (1,091)
Legal and professional (216) (277)
Exploration (163) (968)
Stock based compensation - (90)
Stock based compensation - non employees (3) (7)
Company's share of Talas Project losses - (158)
Foreign exchange (losses)/ gains (19) 19
-------------------------------
(1,357) (2,572)
Gain on derivative receivable 174 -
Finance income 6 10
-------------------------------
Net loss and comprehensive loss (1,177) (2,562)
-------------------------------
-------------------------------
Net loss attributable to:
Owners of the parent (1,160) (2,498)
Non-controlling interest (17) (64)
-------------------------------
(1,177) (2,562)
-------------------------------
-------------------------------
Loss per share
Basic $ (0.01) $ (0.02)
Diluted $ (0.01) $ (0.02)
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
2013 2012
Assets $000 $000
Current assets
Cash and cash equivalents 7,098 9,771
Prepaid and receivables 1,128 870
Assets of Akdjol-Tokhtazan Project held
for sale 4,481 4,508
Derivative receivable 7,444 7,270
---------------------------------
20,151 22,419
Non-current assets
Deferred finance costs 939 939
Property, plant and equipment 7,396 7,076
Other assets 1,036 879
---------------------------------
9,371 8,894
---------------------------------
Total assets 29,522 31,313
---------------------------------
---------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 750 1,360
Liabilities of Akdjol-Tokhtazan Project
held for sale 73 80
---------------------------------
823 1,440
Non-current liabilities
Other liabilities 120 120
---------------------------------
943 1,560
Equity
Share capital 380,145 380,145
Share purchase options 5,890 5,887
Contributed surplus 28,268 28,268
Non-controlling interest (365) (348)
Deficit (385,359) (384,199)
---------------------------------
28,579 29,753
---------------------------------
Total equity and liabilities 29,522 31,313
---------------------------------
---------------------------------
Consolidated Statements of Cash Flows (Unaudited)
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
Three months ended March 31,
2013 2012
$000 $000
Cash flows used by operating activities
Net loss and total comprehensive loss for
the period (1,177) (2,562)
Items not affecting cash:
Depreciation and amortization 34 35
Gain on derivative receivable (174) -
Share-based payments 3 97
Foreign exchange losses 12 18
Company share of Talas Project losses - 158
-------------------------------
(1,302) (2,254)
Changes in non-cash working capital:
Accounts receivable and other assets (390) 313
Accounts payable and accrued liabilities (628) 98
-------------------------------
Net cash used by operating activities (2,320) (1,843)
Cash flows used by investing activities
Expenditures on property, plant and
equipment (353) (9)
Funding of investment in Talas Project - (152)
-------------------------------
Net cash used by investing activities (353) (161)
-------------------------------
Net decrease in cash and cash equivalents (2,673) (2,004)
-------------------------------
Cash and cash equivalents - Beginning of the
period 9,771 10,341
-------------------------------
Cash and cash equivalents - End of the
period 7,098 8,337
-------------------------------
-------------------------------
Cash and cash equivalents per the
consolidated balance sheets 7,098 8,332
Included in the Akdjol-Tokhtazan Project
classified held for sale - 5
FORWARD-LOOKING INFORMATION
This press release and the Company's MD&A contain or refer 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: development and operational plans and objectives, including the
Company's expectations relating to the continued and future maintenance,
exploration and development, as applicable, of the Karchiga Project and the
Balkhash Project and the timing related thereto and its acquisition and
development of new mineral exploration licenses, properties and projects; the
Company's ability to satisfy certain future expenditure obligations; mineral
resource and mineral reserve estimates; 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 anticipated arranging of a debt
facility by the Mandated Lead Arrangers and the potential participation by other
debt providers; the anticipated receipt by the Company of the proceeds of the
Subscription and the value attributed thereto and the Company's expected uses
thereof and the proceeds from the Sale; the potential raising of additional
funding through the disposition of the Company's Kyrgyz assets and the proposed
uses thereof; the estimated mine life, NPV and IRR for, and forecasts relating
to tonnages and amounts to be mined from, and processing and expected recoveries
and grades at, the Karchiga Project as well as the other forecasts, estimates
and expectations relating to the Karchiga DFS Report; the expected effect of
copper prices on the economic results of the Karchiga Project; the mine design
and plan for the Karchiga Project, including mining at, and production from, the
Karchiga Project, as well as the expected timing; the estimated holdings of the
Gold Fields Group in the Common Shares and Warrants following the completion of
the Subscription; the anticipated sale of the Akdjol-Tokhtazan Project
(including the valuation attributed to the expected proceeds thereon); the
future political and legal regimes and regulatory environments relating to the
mining industry in Kazakhstan and/or Kyrgyzstan; 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; receipt of the Kazakh Formal Waiver or the waiver thereof by
Gold Fields as a condition to the completion of the Subscription; 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.
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 debt sources and/or capital
markets to meet its future expected obligations and planned activities
(including the ability of the Mandated Lead Arrangers to secure a project debt
finance facility on terms acceptable to the Company), the Company's business
(including the continued exploration and development of, as applicable, the
Karchiga Project and the Balkhash Project and the timing and methods to be
employed with respect to same), the estimation of mineral resources and mineral
reserves, the parameters and assumptions employed in the Karchiga DFS Report,
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, taxes, environmental matters and the Company's ability to obtain,
maintain, renew and/or extend required permits, licenses, authorisations and/or
approvals from the appropriate regulatory authorities, including the Kazakh
Formal Waiver and that the previous 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, assumptions relating to the Company's critical accounting
policies, 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; adverse changes in commodity
prices; the inability of the Company to obtain required financing on favourable
terms or at all (including with respect to the debt financing expected to be
secured by the Mandated Lead Arrangers) or to complete the Subscription or the
disposition of the Akdjol-Tokhtazan Project; the Company's inability to obtain,
maintain, renew and/or extend required licenses, 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 the Kazakh Formal Waiver, 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 general
market conditions; lack of availability, at a reasonable cost or at all, of
equipment or labour; the 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 and 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.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Orsu Metals Corporation
Kevin Denham
Chief Financial Officer and Company Secretary
+44 (0) 20 7518 3999
www.orsumetals.com
Canaccord Genuity Limited
Ryan Gaffney
+44 (0) 20 7523 8000
Canaccord Genuity Limited
Andrew Chubb
+44 (0) 20 7523 8000
Vanguard Shareholder Solutions
+1 604 608 0824
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