TIDMOSU
Orsu Metals Corporation Interim Results for the Period Ended September 30, 2011 (Unaudited)
FOR: ORSU METALS CORPORATION
TSX, AIM SYMBOL: OSU
November 11, 2011
Orsu Metals Corporation Interim Results for the Period Ended September 30, 2011 (Unaudited)
LONDON, UNITED KINDGDOM--(Marketwire - Nov. 11, 2011) - 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 September 30, 2011.
A full Management's Discussion and Analysis of the results for the period ended September 30, 2011 ("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 interim period ended September 30, 2011 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 SEPTEMBER 30, 2011
For the three months ended September 30, 2011 the Company continued to focus on its principle exploration
project, the Karchiga Project and raised additional funds totalling $6.83 million:
=- The Company received the assay results from the central oxide/
transitional drilling program (the "Karchiga Central Oxide") and the
infill drilling program of the North East sulphide (the "Karchiga North
East Sulphide") undertaken between June to September 2011. The positive
results obtained from the Karchiga Central Oxide means that it will now
be included into the definitive feasibility study (the "Karchiga
Definitive Feasibility Study") for the Karchiga Project due in December
2011. In addition, the Karchiga North East Sulphide programme carried
out on the North East Ore body of the Karchiga Project when remodelled
will increase the total tonnage in the indicated resource category which
will form the basis for the economic modelling.
=- The Company received an aggregate of US$6.83 million in cash in
September 2011: $5.5 million in cash from the Open Joint Stock Company
Polymetal ("Polymetal") as early and final settlement of its outstanding
deferred consideration entitlement (the "Deferred Consideration
Agreement"), pursuant to the sale and purchase agreement dated June 13,
2009 (the "SPA"), relating to the sale of the Varvarinskoye gold-copper
project in Kazakhstan (the "Varvarinskoye Project"): a further $1.33
million in cash was received following an agreement between its fifty
five per cent (55%) owned subsidiary Lisburne Holdings Limited
("Lisburne") and the Tasbulat Oil Corporation LLP ("Tasbulat"),
Kazakhstan, for the early and final settlement of Lisburne's oil royalty
entitlement pursuant to the oil royalty agreement dated September 2,
1999 between Lisburne and Tasbulat (the "Tasbulat Oil Royalty
Agreement").
For the three months ended September 30, 2011 the Company reported a net loss of $2.7 million.
QUARTER HIGHLIGHTS
=- July 2011 - the Company announced the commencement of 1,700m infill
drilling of the Karchiga Central Oxide and an additional 2,000m infill
drilling of the Karchiga North East Sulphide as part of the ongoing
definitive feasibility study for the Karchiga Definitive Feasibility
Study.
=- July 2011 - the Company announced that it has entered into the Deferred
Consideration Agreement, with Polymetal to receive $5.5 million in cash
by the end of September 2011 as early and final settlement of its
outstanding deferred consideration entitlement, pursuant to the terms
SPA.
=- September 2011 - the Company announced the on-schedule completion of
1,786m (46 holes) infill drilling of the Karchiga Central Oxide and an
additional 2,278m (26 holes) infill drilling of the Karchiga North East
Sulphide.
=- September 2011 - the Company announced that it had received an aggregate
of US$6.83 million in cash, consisting of US$5.5 million in cash from
Polymetal pursuant to the Deferred Consideration Agreement and US$1.33
million in cash following for the Tasbulat Oil Royalty Agreement.
=- September 2011 - the Company announced that it had received all final
assay results from its 2011 infill drilling programme in the Karchiga
Central Oxide and Karchiga North East Sulphide at its Karchiga Project.
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").
Approximately 100km to the south west of the Talas Project is the Akdjol-Tokhtazan licence area comprising the
Akdjol and Tokhtazan licences (the "Akdjol-Tokhtazan Project").
KARCHIGA COPPER PROJECT, KAZAKHSTAN
2011 Exploration Programme
In April 2011 the Company received positive metallurgical test work results on both the Karchiga Central Oxide
and Karchiga North East Sulphide mineralization of the Karchiga Project. Subsequently in May 2011, the Company
released an updated pit constrained mineral resource estimate as part of the ongoing Karchiga Definitive
Feasibility Study prepared by SRK Consulting (UK) Limited ("SRK") (the "SRK 2011 Mineral Resource Estimate")
which showed an increased (pit constrained) mineral resource estimate from the previously reported pit
constrained mineral resource estimate (the "Karchiga Scoping Study") prepared by Micon International co Limited
("Micon") in May 2010. Details of both the SRK 2011 Mineral Resource Estimate and the Karchiga Scoping Study
can be found in the Company's MD&A under "Operational review - Karchiga Copper Project, Kazakhstan" or under
the company's profile on SEDAR at www.sedar.com.
In light of the positive heap leach metallurgical test work results for the Karchiga Central Oxide the Company
believes there is the potential for including the Karchiga Central Oxide material into the Karchiga Definitive
Feasibility Study. The infill sulphide drilling program completed on the Karchiga North East Sulphide will also
allow the Company to increase the total indicated tonnage by upgrading sections which were previously
categorized as inferred.
2011 Metallurgical test work results
The table below shows results from locked cycle tests performed on the Central and North East Composites from
the Central and North East lodes, respectively, and the respective potential pits of the Karchiga deposit. The
Central Composite is a blend of 15% massive and 85% disseminated mineralization, whereas the North East
Composite is a blend of 25% massive and 75% disseminated mineralization.
Locked cycle test for the Central and North East Composites:
=--------------------------------------------------------------------------
Lode % Cu % Zn
% Mass of Grade in Grade in g/t Au
Mineral Concen Concen in Concen % Cu % Zn % Au
-ization -trate -trate -trate Recovery Recovery Recovery
=--------------------------------------------------------------------------
Central 10.34 24.15 1.28 0.34 96.20 73.97 28.18
=--------------------------------------------------------------------------
North
East 9.98 21.60 7.20 1.65 91.59 86.93 54.95
=--------------------------------------------------------------------------
Comparison with previous Pit-Constrained Estimates
The table below shows a comparison between the SRK 2011 Mineral Resource Estimates and previously reported
mineral resource estimates in the Karchiga Scoping Study, both pit-constrained. The cut-off grade of 0.34%
copper used in the mineral resource estimates in the Karchiga Scoping Study was back-calculated based on the
economic parameters used in the Karchiga Scoping Study and shown in the table below. It should be noted that
the SRK 2011 Mineral Resource Estimates are reported without dilution and loss, while the mineral resource
estimates contained in the Karchiga Scoping Study were reported allowing for 5% mining loss and 5% mining
dilution.
Comparison of Pit-Constrained Mineral Resource Estimates for the Karchiga Project:
=---------------------------------------------------------------------------
Indicated Mineral Resources
=---------------------------------------------------------------------------
Estimate Effective Cut-off Lode Type Tonnes Grade Metal Metal
Date Cu (%) (Mt) Cu (%) Cu (t) Cu (Mlb)
=---------------------------------------------------------------------------
Central &
May 6, North
SRK 2011 2011 0.34 East Sulphide 7.1 1.85 131,789 290.5
=---------------------------------------------------------------------------
Central &
Micon May 25, North
2010 2010 0.34 East Sulphide 6.5 1.97 127,804 281.7
=---------------------------------------------------------------------------
=---------------------------------------------------------------------------
Inferred Mineral Resources
=---------------------------------------------------------------------------
Estimate Effective Cut-off Lode Type Tonnes Grade Metal Metal
Date Cu (%) (Mt) Cu (%) Cu (t) Cu (Mlb)
=---------------------------------------------------------------------------
May 6, North
SRK 2011 2011 0.34 East Sulphide 1.2 1.68 19,849 43.8
=---------------------------------------------------------------------------
Micon May 25, North
2010 2010 0.34 East Sulphide 1.1 1.71 18,810 41.5
=---------------------------------------------------------------------------
Additional 2011 Oxide Drilling Programme
In light of the positive heap leach metallurgical test results for the oxide mineral resources the Company
believes there is the potential for including the Karchiga Central Oxide into the Karchiga Definitive
Feasibility Study and for upgrading the inferred mineral resource estimate into an indicated mineral resource
estimate for the Karchiga North East Sulphide, which is expected to maximize the additional value from the
Karchiga Project.
In July 2011, the Company announced the commencement of a 1,700 m drilling programme at the Karchiga Central
Oxide. As reported by the Company in the Karchiga Technical Report on March 22, 2010, the Karchiga Central
Oxide has an indicated mineral resource of 0.93Mt of mineralization (at 0.5% Cu cut-off) grading 1.39% Cu and
containing 12,868 t Cu. However, due to a relatively small tonnage, the Karchiga Central Oxide mineral resource
estimate was not included in the economic evaluations contained in the Karchiga Scoping Study. The Karchiga
Scoping Study proposed that the mineralized oxide material be mined as waste material during the first years of
operation at the Central lode to allow access to its sulphide material. However, taking into account current
copper prices and the positive results of the recent metallurgy test work, the Company believes that there is
potential for the Karchiga Central Oxide material to be treated economically via heap leaching, and therefore
potentially representing an important uplift in the economic value of the Karchiga Project. As a result of the
inclusion of the oxide mineralization, the Company expects the Karchiga Definitive Feasibility Study to be
completed in December 2011.
This Karchiga Central Oxide mineral resource estimate also included part of the 1 to 2 m thick transition zone
of secondary sulphides (with chalcocite, covellite and native copper), located between the primary sulphide
(chalcopyrite, pyrrhotite, pyrite) and oxide (malachite, chrysocolla, native copper) mineralization. Due to its
insignificant thickness, the transition zone was not modelled as a separate mineralized body in previous
mineral resource estimates for the Karchiga deposit. Based on the distribution of the greater than 50% acid
soluble copper, the top part of the transition zone was included into oxide mineralization, whereas the bottom
portion was estimated as part of the sulphide mineralization. Additionally, the results of the most recent
metallurgical test work announced by the Company (see the Company's press-release dated April 28, 2011)
indicated that acid leaching of a blend of oxide and transitional secondary sulphide achieved 68% Cu recovery.
As announced in the Company's September 29, 2011 press release, the 2011 infill 1,786m (46 holes) in the
Karchiga Central Oxide revealed better than expected continuity and much greater thickness and grade of the
transition zone than was previously estimated.
The diagram below shows the principal relationships between the oxide, transition and primary sulphide zones in
the Central lode of the Karchiga deposit (full details can be found in the Company's MD&A under "Operational
Review - Karchiga copper project, Kazakhstan"). Dashed blue line shows schematic position of the dividing line
between heap leachable and floatable sulphides from the transition zone. The area above the 50% acid soluble Cu
line is potentially amenable to heap leaching.
To view the diagram of the Karchiga deposit, please visit the following link:
http://media3.marketwire.com/docs/kco-fig1.pdf
Below are the best grade intercepts obtained from the drilling in the Karchiga Central Oxide (a full table of
all the intercepts can be found in the Company's MD&A in Table 13 of the "Operational review - Karchiga Copper
Project, Kazakhstan"):
=- 1.7m grading 7.43% Cu (Hole KGDD11-161);
=- 3.55m grading 6.61% Cu (Hole KGDD11-165);
=- 5.4m grading 5.00% Cu (Hole KGDD11-168);
=- 1.9m grading 33.00% Cu (Hole KGDD11-170);
=- 8.25m grading 2.66% Cu (Hole KGDD11-171);
=- 8.0m grading 3.90% Cu (Hole KGDD11-173);
=- 4.55m grading 1.75% Cu (Hole KGDD11-176);
=- 10.5m grading 3.94% Cu (Hole KGDD11-181);
=- 2.4m grading 23.60% Cu (Hole KGDD11-182);
=- 4.5m grading 6.43% Cu (Hole KGDD11-183);
=- 7.4m grading 4.18% Cu (Hole KGDD11-189);
=- 1.65m grading 5.81% Cu (Hole KGDD11-190);
=- 4.4m grading 4.86% Cu (Hole KGDD11-192);
=- 16.2m grading 7.22% Cu (Hole KGDD11-198);
=- 24.8m grading 2.86% Cu (Hole KGDD11-200).
Additional 2011 Sulphide Infill Drilling Programme
A 2,000m infill drilling programme in the Karchiga North East Sulphide was commenced in July, 2011 and aimed to
convert between 0.5Mt and 1Mt of sulphide mineralization from inferred to indicated mineral resource
categories. On September 1, 2011, the Company reported completion of 2,278m (26 holes) infill drilling of the
Karchiga North East Sulphide and on September 29, 2011, announced all final assay results from this programme.
Assays on samples collected from the North East lode sulphide infill drill core returned results, which are
generally as the Company had anticipated and can be seen in Table 14 in the Company's MD&A under the
"Operational review - Karchiga Copper Project, Kazakhstan".
Milestones for the Karchiga Project
The milestones for the Karchiga Definitive Feasibility Study are expected to be:
=- Q2 2011 - finalisation of the metallurgical flow sheet (completed);
=- Q2 2011 - updated NI 43-101 mineral resource, incorporating 2010
drilling results (completed);
=- Q3 2011 - finalisation of metallurgical flow sheet for oxide heap
leaching (completed);
=- Q3 2011 - completion of oxide and sulphide drilling programmes
(completed);
=- Q4 2011 - completion of geological remodelling with the inclusion of the
results from the new drilling;
=- Q4 2011 - start of detailed mine design;
=- Q4 2011 - completion of the locally commissioned Kazakh Feasibility
Study and submission for approval;
=- Q4 2011 - review of the Karchiga Project financing options;
=- Q4 2011 - completion of the Karchiga Definitive Feasibility Study;
=- Q1 2012 - approval of the Kazakh Definitive Feasibility Study and;
=- Q2 2012 - start of construction.
TALAS COPPER-GOLD-MOLYBDENUM PROJECT, KYRGYZSTAN
Exploration Programme
Pursuant to the joint venture agreement dated December 3, 2008, as amended on August 14, 2009, between the
Company, Gold Fields Orogen Holding BVI ("Gold Fields"), Lero, Kami Associates Limited (the "JV Company") and
Talas Copper Gold LLC ("TCG") (the "JV Agreement"), Gold Fields is the project operator for the Talas Project.
Pursuant to the JV Agreement Gold Fields has a 60% interest in the Talas Project and is the project operator
and the Company retains a 40% interest in the Talas Project.
For the Talas Project, Orsu and Gold Fields have approved a 2011 exploration programme and expenditure budget
of $3.6 million. As per the terms of the JV Agreement, the Company is required to fund its 40% pro rata share
of approximately $1.4 million. The majority of the licence expenditures are expected to be incurred in
connection with environmental, social, metallurgical and resource studies, as well as a ground magnetic survey
at the Taldybulak licence. As at September 30, 2011 the Company had contributed $611,000 of its 40% share of
expenditure.
AKDJOL-TOKHTAZAN PROJECT, KYRGYZSTAN
2011 update on progress of the Akdol-Tokhtazan Project
In July 2011, the Company initiated a ground magnetic survey programme at the Akdjol-Tokhtazan Project. The
programme is designed to complete mapping of the magnetic anomalies in both the Akdjol and Tokhtazan licenses.
In September 2011, the Company received preliminary results of the ground magnetic survey, which are currently
being processed. The results are expected to help in interpretation of structural controls of gold
mineralisation in the project area.
The Company mobilized drilling equipment in September 2011 and began a drilling programme consisting of 2,200 m
of drilling at the Tokhtazan licence and 600 m of drilling at the Akdjol licence which is expected to be
completed by the end of the year. In order to complete the planned drilling programme the Company has estimated
potential drilling costs of $659K for the Tokhtazan licence and $91K for the Akdjol licence to meet the
obligations which will be funded from the Company's available funds.
FINANCIAL RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011
For the three months ended September 30, 2011 the Company recorded a net loss of $2.7 million.
The net loss of $2.7 million consisted of administrative costs of $1.1 million, legal and professional expenses
of $0.3 million, exploration costs of $1.7 million, a stock-based compensation charge of $0.3 million, the
Company's share of the Talas Joint Venture losses of $0.3 and $0.1 million net foreign exchange losses
partially offset by a net gain on settlement of the Tasbulat Oil Royalty Agreement of $0.9 million and
unrealized derivative gains of $0.2 million.
In September 2011, the Company received $1.3 million cash per the Tasbulat Oil Royalty Agreement. The Company
had previously recorded as long term other assets a brought forward value of its outstanding oil interest of
$0.4 million. Following the receipt of the outstanding oil interests of $1.3 million the Company recognised net
income of $0.9 million for the three months ended September 30, 2011.
In respect of the Company's cash flows, cash and cash equivalents decreased by $5.6 million in the nine months
to September 30, 2011. The decrease of $5.6 million for the nine months to September 30, 2011 was due primarily
to the Karchiga Acquisition for approximately $6.2 million, exploration expenditure primarily for the Karchiga
Project of $3.4 million, corporate expenditure of $4.0 million and Orsu's pro-rata funding for the Talas
Project of $0.6 million, partially offset by deferred consideration received of $7.0 million and settlement
from the Tasbulat Oil Royalty Agreement of $1.6 million (full details can be found in the Company's MD&A under
"Financial Review").
FINANCIAL POSITION AS AT SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
As at September 30, 2011, the Company's net assets were $35.4 million, compared with $40.4 million as at
December 31, 2010, of which $14.0 million consisted of cash and cash equivalents ($19.6 million as at December
31, 2010).
The decrease of $5.0 million was due to the payment of $6.2 million for the Karchiga Acquisition, the Company's
40% share of losses in the Talas Joint Venture of $0.7 million and corporate and exploration expenditure of
$7.4 million partially offset by a $6.1 million decrease in derivative warrant liabilities, deferred
consideration income of $1.9 million and income from the Tasbulat Oil Royalty Agreement of $1.3 million.
A summary of the carrying value of the Company's equity investment in the Talas Joint Venture as at September
30, 2011 is set out below:
$000s
Fair value of equity investment as at January 1, 2011 10,221
Funding provided by the Company during the six months ended
September 30, 2011 611
Less: Company's 40% share of operating losses for the six months
ended September 30, 2011 (712)
---------
Fair value of equity investment as at September 30, 2011 10,120
---------
---------
LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2011 the Company's main source of liquidity was unrestricted cash of $14.0 million,
compared with $19.6 million as at December 31, 2010.
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 September 30, 2011, the Company's
consolidated working capital was $14.6 million (compared with a consolidated working capital of $21.5 million
as at December 31, 2010), which, in the Company's view, is sufficient to satisfy its working capital needs for
the remainder of 2011.
The Company's working capital needs as at September 30, 2011 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 Definitive Feasibility Study, and the funding of general corporate,
legal and professional expenses. The Company expects to fund the remaining working capital requirements for
2011 as well as the contribution 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
$14.0 million as at September 30, 2011, which includes the $5.5 million cash received in September 2011 from
the Deferred Consideration Agreement and the receipt of $1.3 million in September 2011 from the Tasbulat Oil
Royalty Agreement.
The future advancement, exploration and development of the Company's properties, including continuing
exploration and development projects, and the construction of mining facilities and commencement of mining
operations, if any, will require substantial additional financing in the future. To the extent that such
funding is required in the future, the Company expects that it would try to raise such funding through debt and
equity financing if and when required. 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" on the Company's MD&A.
CONVERSION TO IFRS FROM CANADIAN GAAP
Effective January 1, 2011, the Canadian Accounting Standards Board required all publicly listed companies to
prepare their financial statements in accordance with IFRS from the previous Canadian Generally Accepted
Accounting Principles ("Canadian GAAP"). The Company has prepared in the interim financial statements as at
September 30, 2011 a restated consolidated balance sheet as at September 30, 2010, and statements of net
income/ (loss) and comprehensive income/ (loss) for the three and nine months ended September 30, 2010 (details
can be found in note 3. "Transition to IFRS" of the Company's consolidated financial statements as at September
30, 2011).
Impact on the consolidated balance sheet and equity
The following table summarises the impact of conversion to IFRS on the Company's consolidated equity, as
previously reported under Canadian GAAP for the six months ended September, 2010 and the year ended December
31, 2010:
September December
30 2010 31 2010
$000 $000
Equity as previously reported under Canadian GAAP as at
January 1, 2010 24,833 24,833
--------------------
Reclassification of share purchase warrants to
derivative liabilities (42,041) (42,041)
Expense of share issue costs prior to January 1, 2009 (4,598) (4,598)
Re-measurement of fair value of derivative warrant
liabilities 35,411 35,411
--------------------
Re-stated Equity under IFRS as at January 1, 2010 13,605 13,605
--------------------
Share issue (net of share issue and broker warrant issue
costs) 18,705 18,705
Share purchase warrants issued 1,131 1,131
Share based payments 1,440 1,817
Net loss as previously reported under Canadian GAAP for
the period (7,105) (4,622)
Re-measurement of fair value of derivative warrant
liabilities in period 9,840 11,184
Expense of share issue costs from 2010 (793) (793)
Reversal of future income tax adjustments - (639)
--------------------
Equity under IFRS 36,823 40,388
--------------------
--------------------
Details and further discussion of the impact of the significant accounting policy changes on transition to IFRS
can be found both in the Company's MD&A under "Financial Review - Conversion to IFRS from Canadian GAAP" and
the Company's consolidated financial statements note 3. "Transition to IFRS" as at September 30, 2011.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's derivative instruments consist of derivative assets in the form of deferred consideration
relating to the sale of the Varvarinskoye Project, discontinued operations, and derivative warrant liabilities
in relation to its share purchase warrants.
Deferred consideration
On October 30, 2009, the Company completed the sale of its Varvarinskoye Project to Polymetal for an initial
consideration of $8 million with deferred consideration of up to $12 million and, as a result, the Company was
released from all of its financial and guarantor obligations relating to the Varvarinskoye Project.
As at December 31, 2010, the Company recognized a deferred consideration receivable asset of $5.1 million,
representing the net present value of the Company's estimated future deferred consideration earnings, based
upon the Company's forecast of future gold and copper metal prices and adjusted for counterparty credit risk.
Of the $5.1 million deferred consideration receivable asset as at December 31, 2010 the Company recorded $1.5
million as a current deferred consideration receivable and $3.6 million as a long term deferred consideration
receivable asset.
In July 2011, the Company entered into Deferred Consideration Agreement with Polymetal pursuant to which the
Company is to receive $5.5 million in cash by the end of September 2011 as early and final settlement of its
outstanding deferred consideration entitlement, pursuant to the SPA relating to the sale of the Varvarinskoye
Project. The Company received $5.5 million in September 2011, and as a result recorded net deferred
consideration income of $1.9 million for the nine months ended September 30, 2011.
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 Reporting 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 offering, are not able to be tracked by the Company and are transferable by the warranty
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. As at September 30, 2011 the Company calculated a
fair value for its warrant derivative liabilities of $0.2 million, and recorded an unrealized derivative gain
to $0.2 million to net income for the three months ended September 30, 2011.
Consolidated Statements of Net Income, and Comprehensive Income (Unaudited)
(Prepared in accordance with IFRS)
=---------------------------------------------------------------------------
3 months ended 9 months ended
September 30, September 30,
2011 2010 2011 2010
$000 $000 $000 $000
(Expenses)/ income
Administration (1,074) (836) (2,708) (2,626)
Legal and professional (315) (501) (899) (1,800)
Exploration (1,767) (764) (3,446) (1,028)
Stock based compensation (289) (600) (481) (1,440)
Stock based compensation - non employees (2) (-) (37) (-)
Unrealized derivative gains/ (losses) 155 (2,588) 6,071 9,840
Foreign exchange (losses)/ gains (141) 498 (6) (378)
---------------- ----------------
Net (loss)/ income from operations (3,433) (4,791) (1,506) 2,568
Deferred consideration income - - 1,908 -
Net gain on settlement of oil interests 942 - 942 -
Company's share of Talas Joint Venture
losses (269) (271) (712) (656)
Finance income 22 22 53 30
---------------- ----------------
Net income/ (loss) and comprehensive
income/ (loss) for the period (2,738) (5,040) 685 1,942
---------------- ----------------
---------------- ----------------
Net income/ (losses) attributable to:
Shareholders of the Company (2,653) (4,817) 1,302 2,293
Non-controlling interest (85) (223) (617) (351)
---------------- ----------------
(2,738) (5,040) 685 1,942
---------------- ----------------
---------------- ----------------
Earnings/ (loss) per share
Basic $(0.02) $(0.03) $0.01 $0.02
Diluted $(0.02) $(0.03) $0.01 $0.02
Weighted average number of common shares
(in thousands) 157,696 157,696 157,696 114,209
Consolidated Balance Sheets (Unaudited)
(Prepared in accordance with IFRS)
=---------------------------------------------------------------------------
September 30 December 31
2011 2010
Assets $000 $000
Current assets
Cash and cash equivalents 14,031 19,596
Current deferred consideration receivable - 1,500
Prepaid and receivables 1,342 1,217
--------------------------
15,373 22,313
Non-current assets
Deferred consideration receivable - 3,592
Exploration properties 10,458 10,458
Property, plant and equipment 416 449
Equity investment in Talas Joint Venture 10,120 10,221
Other assets - 392
--------------------------
20,994 25,112
--------------------------
Total assets 36,367 47,425
--------------------------
--------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 670 672
Current portion of derivative warrant liabilities 174 -
--------------------------
844 672
Non-current liabilities
Derivative warrant liabilities - 6,245
Other liabilities 120 120
--------------------------
964 7,037
Equity
Share capital 380,145 380,145
Share purchase warrants 4,897 4,897
Share purchase options 5,893 5,904
Contributed surplus 23,012 22,483
Non-controlling interest (374) (773)
Deficit (378,170) (372,268)
--------------------------
35,403 40,388
--------------------------
Total equity and liabilities 36,367 47,425
--------------------------
--------------------------
Consolidated Statements of Cash Flows (Unaudited)
(Prepared in accordance with IFRS)
=-------------------------------------------------------------------------
Nine months ended
September 30,
2011 2010
$000 $000
----------------------
Operating activities
Income for the period 685 1,942
Items not affecting cash:
Company share of Talas Joint Venture losses 712 656
Gain on settlement of oil interests (942) -
Depreciation and amortization 94 112
Deferred consideration (1,908) -
Share-based payments 518 1,440
Unrealized foreign exchange losses/ (gains) 13 (124)
Unrealized derivative gains (6,071) (9,840)
----------------------
(6,899) (5,814)
Changes in non-cash working capital
Accounts receivable and other assets (373) (125)
Accounts payable and accrued liabilities (15) (317)
----------------------
Net cash used by the operating activities (7,287) (6,256)
Cash flows from/ (used by) investing activities
Expenditures on property, plant and equipment (61) (42)
Proceeds from settlement of oil interests 1,582 241
Deferred consideration received 7,000 -
Funding of investment in Talas Joint Venture (611) (592)
Acquisition of Eildon minority interest (6,188) -
----------------------
Net cash generated from/ (used by) investing 1,722 (393)
activities
Cash flows from financing activities
Gross proceeds of share issue - 27,646
Share issue costs - (1,609)
----------------------
Cash flows from financing activities - 26,037
----------------------
----------------------
Net (decrease)/ increase in cash and cash
equivalents (5,565) 19,388
----------------------
Cash and cash equivalents - Beginning of period 19,596 3,386
----------------------
Cash and cash equivalents - End of period 14,031 22,774
----------------------
----------------------
Consolidated Statements of changes in Equity (Unaudited)
(Prepared in accordance with IFRS)
=---------------------------------------------------------------------------
Consolidated statements of changes to equity as at December 31, 2010 and
September 30, 2011:
Share capital
------------------------
Share Share
Number of Share purchase purchase
shares capital warrants options
(000s') $0000 $000 $000
------------------------------------------------
Balance as at January 1,
2010 45,696 361,440 6,609 12,550
Share issue 112,000 21,445 - -
Share issue costs - (1,862) - -
Broker Warrant issue costs - (878) - -
Share-based payments - - - 1,817
Share purchase warrants
issued - - 1,131 -
Share purchase warrants
lapsed - - (2,843) -
Share options forfeited or
lapsed - - - (8,463)
Net income/ (loss) for the
period - - - -
------------------------------------------------
Balance as at December 31,
2010 157,696 380,145 4,897 5,904
------------------------------------------------
------------------------------------------------
Share-based payments - - - 518
Share options forfeited or
lapsed - - - (529)
Eildon minority interest
acquisition - - - -
Net income/ (loss) for the
period - - - -
------------------------------------------------
Balance as at September 30,
2011 157,696 380,145 4,897 5,893
------------------------------------------------
------------------------------------------------
Consolidated Statements of changes in Equity (Unaudited)
(Prepared in accordance with IFRS)
=---------------------------------------------------------------------------
Consolidated statements of changes to equity as at December 31, 2010 and
September 30, 2011:
Non-
Contributed controlling Total
surplus interest Deficit equity
$000 $000 $000 $000
------------------------------------------------
Balance as at January 1,
2010 11,177 - (378,171) 13,605
Share issue - - - 21,445
Share issue costs - - - (1,862)
Broker Warrant issue costs - - - (878)
Share-based payments - - - 1,817
Share purchase warrants
issued - - - 1,131
Share purchase warrants
lapsed 2,843 - - -
Share options forfeited or
lapsed 8,463 - - -
Net income/ (loss) for the
period - (773) 5,903 5,130
------------------------------------------------
Balance as at December 31,
2010 22,483 (773) (372,268) 40,388
------------------------------------------------
------------------------------------------------
Share-based payments - - - 518
Share options forfeited or
lapsed 529 - - -
Eildon minority interest
acquisition - 1,016 (7,204) (6,188)
Net income/ (loss) for the
period - (617) 1,302 685
------------------------------------------------
Balance as at September 30,
2011 23,012 (374) (378,170) 35,403
------------------------------------------------
------------------------------------------------
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: the continued and future
maintenance, exploration and development of the Company's properties, including the proposed work programs,
anticipated milestones and the timing related thereto; development and operational plans and objectives; the
Company's ability to satisfy its future expenditure obligations on mineral properties in which it has an
interest; mineral resource estimates and updates and upgrades relating thereto as well as the impact thereof on
the value of certain of the Company's projects; estimated project economics, cash flow, costs, expenditures,
and sources of funding; the sufficiency of the Company's current working capital for the remainder of the year
and anticipated exploration expenditures and estimates relating thereto; the estimated LOM, NPV and IRR for,
and forecasts relating to tonnages and amounts to be mined from, and average recoveries and grades at, the
Karchiga Project and/or Taldybulak as well as the other forecasts, estimates and expectations relating to the
Karchiga Scoping Study, the SRK 2011 Mineral Resource Estimates, the NI 43-101 Taldybulak Scoping Study Report
and the Taldybulak Scoping Study set out above in "Operational Review"; future prices and trends relating to
copper, gold and molybdenum; the completion of the Karchiga Definitive Feasibility Study (and the expected mineral
resource estimates to be included therein) and the potential start of construction at the Karchiga Project
(including the expected timing for same); the anticipated completion of a mineral reserves estimate for, the
productionof marketable concentrates from, and a reduction in future transportation costs at, the Karchiga Project;
estimates and expectations relating to the transition zone and the anticipated impact thereof on the economics and
payback on Karchiga operations; the potential for further enlarging the mineral endowment and improving metal
grades at, and completion of a pre-feasibility study for, the Taldybulak deposit; 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 expected use of the net proceeds from the Offering; 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 new funding.
The forward-looking information referred to 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 to meet its future expected obligations and planned activities, the Company's business
(including the continued exploration and development of its properties and the methods to be employed with
respect to same), the estimation of mineral resources (as set out above under "Operational Review"), the
parameters and assumptions employed in the Karchiga Scoping Study, the SRK 2011 Mineral Resource Estimates, as
well as in defining the pit optimization of the Karchiga deposit, the NI 43-101 Taldybulak Scoping Study Report
and the Taldybulak Scoping Study, the economy and the mineral exploration 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, 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 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 Definitive Feasibility Study 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 Definitive Feasibility Study, 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; 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 resources estimates; 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 Scoping Study, the SRK 2011 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 Scoping Study, the SRK 2011 Mineral Resource Estimates, the NI 43-101
Taldybulak Scoping Study Report and/or the Taldybulak Scoping Study, as applicable; a delay in the completion
of the Karchiga Definitive Feasibility Study; the Company's inability to obtain, maintain, renew and/or extend
required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities 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; 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 delineate mineral reserves; and future unforeseen liabilities and
other factors including, but not limited to, those listed under "Risk and Uncertainties" in this MD&A.
Any mineral resource 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 estimates in respect of its properties are well established, by
their nature mineral resource estimates are imprecise and depend, to a certain extent, upon statistical
inferences which may ultimately prove unreliable. If such mineral resource 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/or 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
FOR FURTHER INFORMATION PLEASE CONTACT:
Orsu Metals Corporation
Petro Mychalkiw
CFO
+44 (0) 20 7518 3999
OR
Orsu Metals Corporation
Tania Tchedaeva
Company Secretary
+44 (0) 20 7518 3999
www.orsumetals.com
OR
Canaccord Genuity Limited
Ryan Cohen/Andrew Chubb
+44 (0) 20 7050 6500
OR
Vanguard Shareholder Solutions
+1 604 608 0824
Orsu Metals Corporation
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