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 audited annual results for the year ended
December 31, 2011.
A full Management's Discussion and Analysis of the results for the year ended
December 31, 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 year ended December 31, 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.
2011 BUSINESS REVIEW
During 2011 the Company achieved key milestones in relation to the completion of
the Karchiga Project Definitive Feasibility Study, continued to develop the
Talas Project, and took proactive steps to improve its liquidity.
In 2011 the Company undertook an extended drilling program for the Karchiga
Project with the aim of increasing the indicated mineral resource tonnage and
indicated copper metal contained estimates, for the sulphide and oxide
mineralization, from the amounts previously reported in the Karchiga Technical
Report. In December 2011 the Company announced the successful results of the
drilling program in the SRK December 2011 Pit-Constrained Mineral Resource
Estimates which reported a 39% increase in the indicated mineral resource
tonnage and a 30% increase of contained copper metal in the oxide and sulphide
mineralization in comparison with the amounts previously reported in the
Karchiga Technical Report.
Using only the indicated mineral resource estimates in the SRK December 2011
Pit-Constrained Mineral Resource Estimates, in February 2012 the Company
announced the successful completion of the Karchiga Definitive Feasibility
Study, a key milestone in the development of Orsu as a Company. The Karchiga
Definitive Feasibility Study 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 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 3 years.
The Company's other major exploration project is the Talas Project, its 60:40
joint venture with Gold Fields. Work on the Talas Project in 2011 focused on
local communities and environmental studies. In addition, an internal geological
and technical review of the Talas Project identified and prioritized several new
exploration targets in the immediate vicinity of the deposit which the Company
believes could, subject to further testing, potentially result in improvements
of the metal grades, via in-fill drilling, of the existing mineral resources at
the Taldybulak deposit.
During 2011 the Company took proactive steps to improve its liquidity. The
Company received $5.5 million from Polymetal in final settlement of its
outstanding Varvarinskoye Project deferred consideration entitlement.
Furthermore, the Company received $1.3 million in final settlement of its
Tasbulat oil royalty interests. Including the aforementioned receipts, the
Company's net cash outflows for the year ended December 31, 2011 were $9.3
million reflecting corporate and exploration expenditures, the Karchiga
Acquisition and Orsu's 40% funding of the Talas Project.
For the year ended December 31, 2011 the Company reported a net loss of $1.8
million, compared with net income of $5.1 million for 2010. The 2011 loss of
$1.8 million was due primarily to a $2.1 million year on year increase in
exploration costs relating to the Karchiga Definitive Feasibility Study and a
$0.9 million year on year increase in administrative expenditure reflecting
increased office costs at the Karchiga Project.
In 2011 the Company decided to focus its resources into the development of its
remaining exploration properties, the Karchiga Project and the Talas Project,
and as such considered the Akdjol-Tokhtazan Project a non-core asset which would
be made available for sale.
2011 HIGHLIGHTS
-- January 2011 - the Company confirmed that in relation to the
Varvarinskoye Project pursuant to the terms of a sale and purchase
agreement dated June 13, 2009 between the Company and Open Joint Stock
Company Polymetal ("Polymetal") (or the "SPA"), it had earned deferred
consideration for 2010 of $2.7 million and, of this amount, had received
$1.5 million, with the balance of $1.2 million being rolled over and
added (with interest accruing at a rate of 2.8% per annum) to any future
deferred consideration earnings, subject to a maximum total entitlement
of $12 million and a maximum annual payment of $1.5 million.
-- February 2011 - the Company announced the assay results for its 2010
infill drilling programme in the North East lode at its Karchiga
Project. Please see "Operational Review - Karchiga Copper Project,
Kazakhstan" of the Company's MD&A for further information.
-- April 2011 - the Company announced that, pursuant to a sale and purchase
agreement entered into on May 20, 2010 (the "Karchiga SPA"), it had
increased its interest in the Karchiga Project to 94.75% by completing
the acquisition of the remaining 26.1% interest in its indirect
subsidiary, Eildon Enterprises Limited ("Eildon"), which owns 94.75 per
cent of GRK MLD LLC ("GRK"), for cash consideration of $6,187,500 (the
"Karchiga Acquisition").
-- April 2011 - the Company announced that it had received permission from
the Ministry of Industry and New Technologies of the Republic of
Kazakhstan ("MINT") to commence mineral extraction for copper at the
Karchiga Project.
-- April 2011 - the Company announced the results of final metallurgical
test work, which was carried out by the Eastern Research Institute for
Base Metals ("VNIITsvetMet") based in Ust-Kamenogorsk, Kazakhstan, under
the direction of SRK Consulting (UK) Limited ("SRK") as part of the
ongoing definitive feasibility study for the Karchiga Project (the
"Karchiga Definitive Feasibility Study"). Please see "Operational Review
- Karchiga Copper Project, Kazakhstan" of the Company's MD&A for further
information.
-- May 2011 - the Company announced updated pit-constrained mineral
resource estimates for its Karchiga Project, prepared by SRK as part of
the ongoing Karchiga Definitive Feasibility Study (the "SRK May 2011
Pit-Constrained Mineral Resource Estimates"). Please see "Operational
Review - Karchiga Copper Project, Kazakhstan" of the Company's MD&A for
further information.
-- July 2011 - the Company announced the commencement of 1,700m infill
drilling of the central oxide ("Karchiga Central Oxide") and an
additional 2,000m infill drilling of the North East sulphide ("Karchiga
North East Sulphide") as part of the ongoing Karchiga Definitive
Feasibility Study. Please see "Operational Review - Karchiga Copper
Project, Kazakhstan" of the Company's MD&A for further information.
-- July 2011 - the Company announced that it had reached an agreement (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 SPA (see "Derivative Financial Instruments - Deferred
Consideration Income" under Financial Review for further information).
-- 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 $6.83 million in cash, consisting of $5.5 million in cash from
Polymetal pursuant to the Deferred Consideration Agreement and $1.33
million in cash following an agreement between its fifty five per cent
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").
-- 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.
Please see "Operational Review - Karchiga Copper Project, Kazakhstan" of
the Company's MD&A for further information.
-- December 2011 - the Company announced an increase in its pit constrained
mineral resource (effective December 8, 2011) for the Karchiga Project
comprising an indicated mineral resource of 10.8Mt of combined sulphide
and oxide mineralisation grading 1.73% Cu for 187,200t (412.7 Mlb) of
contained Cu and an inferred mineral resource of 0.02Mt of sulphide
mineralisation grading 1.28% Cu for 300t (0.7 Mlb) of contained Cu (the
"SRK December 2011 Pit-Constrained Mineral Resource Estimates"). Please
see "Operational Review - Karchiga Copper Project, Kazakhstan" of the
Company's MD&A for further information.
POST YEAR END HIGHLIGHTS
-- February 2012 - the Company announced the positive results of the
Karchiga Definitive Feasibility Study completed by SRK which reported
for the Karchiga Project a total production of 149kt (328 Mlb) of copper
over a mine life of 11.5 years, a post tax NPV of $150 million and an
IRR of 30% based on a 100% equity financing and a copper price of
$3.25/lb Cu. In addition, the Company announced a probable mineral
reserve estimate of 8.5 million tonnes of sulphide ore in the central
and north east pits containing 145,227t (320 Mlb) of copper at an
average grade of 1.71% Cu to be amenable to flotation and additional 1.5
million tonnes of ore in the central pit containing 21,399t (47.2 Mlb)
of copper at an average grade of 1.43% Cu to be amenable to heap
leaching (the "2012 Mineral Reserve Estimates"). Please see "Operational
Review - Karchiga Copper Project, Kazakhstan" for further information.
-- March 2012 - the Company announced the filing of the Karchiga Definitive
Feasibility Study Report.
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").
In 2011 the Company decided to focus its resources on the development of its
principle exploration properties, the Karchiga Project and the Talas Project,
and as such considered the Akdjol-Tokhtazan Project a non core asset which would
be made available for sale.
KARCHIGA COPPER PROJECT, KAZAKHSTAN
Karchiga Definitive Feasibility Study
In September 2010, the Company commenced the Karchiga Definitive Feasibility
Study 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 Definitive Feasibility Study the Company undertook associated
exploration and test work programmes which include:
-- In-fill resource drilling program 2010 (details can be viewed in the
Company's MD&A);
-- Metallurgical test work April 2011 (details can be viewed in the
Company's MD&A);
-- SRK May 2011 Pit-Constrained Mineral Resource Estimates (details can be
viewed in the Company's MD&A);
-- SRK December 2011 Pit-Constrained Mineral Resource Estimates (as
described below); and
-- Karchiga Definitive Feasibility Study and the 2012 Mineral Reserve
Estimates (as described below).
In February 2012, SRK completed the Karchiga Definitive Feasibility Study and,
in connection therewith, a complete technical report entitled "Karchiga
Feasibility Study, NI43-101 Technical Report", and 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, (the "Karchiga Definitive Feasibility Study Report"). A copy of the
Karchiga Definitive Feasibility Study Report can be viewed under the Company's
profile on SEDAR at www.sedar.com.
SRK December 2011 Pit-Constrained Mineral Resource Estimates
The SRK December 2011 Pit-Constrained Mineral Resource Estimates have been
prepared by SRK in relation to oxide and sulphide mineralization in both the
Central and North East lodes of the Karchiga deposit.
Table 1 presents the SRK December 2011 Pit-Constrained Mineral Resource
Estimates which comprise an indicated mineral resource of 10.8Mt of combined
sulphide and oxide mineralization with a mean grade of 1.73% Cu for 187,200t of
contained Cu and inferred mineral resources of 0.02Mt of sulphide mineralization
grading 1.28% Cu for 300t of contained Cu. These mineral resources have been
constrained by two optimized pits and are reported at a cut-off grade of 0.3%
copper for mineralization considered to be amenable to flotation ("FL") and at a
cut-off grade of 0.7% copper for mineralization considered to be amenable to
heap leaching ("HL").
----------------------------------------------------------------------------
Table 1: SRK December 2011 Pit-Constrained Mineral Resource Estimate:
Indicated Mineral Resources effective December 8, 2011
----------------------------------------------------------------------------
Cut-off Tonnes Grade
Lode Type Cu (%) (Mt) Cu (%)
----------------------------------------------------------------------------
Central Oxide HL 0.7 1.5 1.24
----------------------------------------------------------------------------
Central Transition HL 0.7 0.1 3.39
----------------------------------------------------------------------------
Central Sulphide HL 0.7 0.2 1.72
----------------------------------------------------------------------------
Central Total HL 0.7 1.8 1.41
----------------------------------------------------------------------------
Central Oxide FL 0.3 0.3 1.15
----------------------------------------------------------------------------
Central Transition FL 0.3 0.1 3.19
----------------------------------------------------------------------------
Central Sulphide FL 0.3 3.8 1.87
----------------------------------------------------------------------------
North East Sulphide FL 0.3 4.9 1.75
----------------------------------------------------------------------------
Total FL 0.3 9.1 1.80
----------------------------------------------------------------------------
Total All material 10.8 1.73
----------------------------------------------------------------------------
Inferred Mineral Resources
----------------------------------------------------------------------------
Cut-off Tonnes Grade
Lode Type Cu (%) (Mt) Cu (%)
----------------------------------------------------------------------------
North East Sulphide 0.3 0.02 1.28
----------------------------------------------------------------------------
Metal Metal Grade Metal Metal
Lode Cu (Kt) Cu (Mlb) Au (g/t) Au (t) Au (koz)
----------------------------------------------------------------------------
Central 18.2 40.0 0.06 0.08 2.70
----------------------------------------------------------------------------
Central 3.3 7.3 0.06 0.01 0.20
----------------------------------------------------------------------------
Central 3.3 7.3 0.14 0.03 0.85
----------------------------------------------------------------------------
Central 24.8 54.6 0.07 0.12 3.75
----------------------------------------------------------------------------
Central 3.2 7.0 0.11 0.03 1.00
----------------------------------------------------------------------------
Central 3.3 7.3 0.06 0.01 0.20
----------------------------------------------------------------------------
Central 70.3 154.9 0.13 0.51 16.30
----------------------------------------------------------------------------
North East 85.7 188.9 0.21 1.02 32.80
----------------------------------------------------------------------------
Total 162.5 358.1 0.17 1.57 50.30
----------------------------------------------------------------------------
Total 187.2 412.7 0.16 1.69 54.05
----------------------------------------------------------------------------
Inferred Mineral Resources
----------------------------------------------------------------------------
Metal Metal Grade Metal Metal
Lode Cu (Kt) Cu (Mlb) Au (g/t) Au (t) Au (Koz)
----------------------------------------------------------------------------
North East 0.31 0.67 0.20 0.005 0.15
----------------------------------------------------------------------------
(i)Some figures may not sum exactly due to rounding.
The above estimate reflects a 28% increase in the sulphide-hosted indicated
mineral resource tonnage, and a 23% increase in the copper metal contained
within this, compared to the SRK May 2011 Pit-Constrained Mineral Resource
Estimates. This has been achieved not only through the upgrading of practically
all previously reported inferred mineral resources to the indicated category,
but also through the addition of 0.8 Mt of sulphide mineralization in the North
East which had not previously been delineated. The most significant difference,
however, is the increase in the oxide mineral resource. Specifically SRK
reported a 137% increase in tonnage and a 109% increase in contained copper
metal in comparison with the WAl 2010 Estimate.
As part of its work, SRK produced updated geological models for both the Central
and North East lodes primarily based on a geological cut-off of 0.1% Cu and
capped high grades where it considered this to be appropriate based on a
statistical analysis of the available assay results.
SRK also remodeled the footwall of the oxide mineralization and in addition to
this has modeled a transition zone between the sulphide and oxide mineralization
based on an updated drill hole database and acid solubility data.
Notwithstanding this, the resulting mineral resource estimate has been reported
using a 40% acid solubility threshold which assumes that material which has an
acid solubility greater than 40% will be processed using heap leaching and that
which has an acid solubility of less than 40% will be processed in the flotation
concentrator.
A total of four domains have been modeled in the Central lode, and two in the
North East lode. 3D wireframes were created from 2D sections which were spaced
at a 25m interval in the Central and North East lodes. No more than 2m of waste
was included in the 2D sections used to produce the 3D wireframes. SRK and Orsu
previously interpreted four post-mineralization faults which strike across the
deposit but only one of these is now thought to have an effect on the
mineralization, offsetting it in the northern portion of the Central lode by
some 120m. Further, drilling information does not suggest that the
mineralization is terminated by these faults as previously thought.
All other methodologies behind the SRK December 2011 Pit-Constrained Mineral
Resource Estimates remained generally the same as in May 2011, except that 2011
drilling data was also used to enable separate density regression plots to be
established for the sulphide mineralization in the Central and North East lodes.
Table 2 shows the pit optimization parameters that were used to define a pit
outline which was then used to constrain the SRK December 2011 Pit-Constrained
Mineral Resource Estimates to material with reasonable prospects for economic
extraction. The slope angle parameters are the result of the geotechnical study
undertaken by SRK. The Mining, Processing, and Operating Cost and the NSR
parameters were derived based on the then on-going technical work as part of the
Karchiga Definitive Feasibility Study by SRK. A long term price of $3.25/lb Cu
was assumed based on market consensus forecasts, previously a price of $3.00/lb
Cu had been used by SRK in May 2011 and in the Karchiga Scoping Study.
----------------------------------------------------------------------------
Table 2: Pit Optimization Parameters Value
Parameter
----------------------------------------------------------------------------
Overall slope angle
Central Pit:
Hanging Wall
Footwall 49 degrees
North East Pit: 47 degrees
Hanging Wall 51 degrees
Footwall 45 degrees
Northern Wall 47 degrees
----------------------------------------------------------------------------
Mining & Processing
Mining Recovery 95.0%
Mining Dilution 5.0%
Fresh Cu Processing Recovery 94.00%
Oxide Cu Processing Recovery 55.00%
----------------------------------------------------------------------------
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 7,163 $/t Cu (3.25 $/lb)
NSR 83%
----------------------------------------------------------------------------
Quality Assurance / Quality Control
The above mineral resource estimates were based on historical drilling performed
in Soviet times as well as drilling undertaken by Orsu since 2007, including
in-fill drilling completed in 2011 as disclosed above. Assays for the 2011
in-fill drilling program were completed for Cu, Zn, Pb, and Au in the laboratory
of the Eastern Institute for Base Metals, based in Ust-Kamenogorsk, Eastern
Kazakhstan, which is independent from Orsu and SRK. Standard, blank, and
duplicate samples were inserted after approximately every twenty ordinary core
samples. The ordinary half core samples were taken from visually mineralized
intervals and 5 m of visually unmineralised material below and above the
mineralized intervals. The remaining half core samples are stored at the Orsu
facility in Ust-Kamenogorsk, Kazakhstan. The SRK December 2011 Pit-Constrained
Mineral Resource Estimates used all data available at the end October 2011.
Comparison with Previous Estimates
Table 3 shows a comparison between the SRK December 2011 Pit-Constrained Mineral
Resource Estimates and the SRK May 2011 Pit-Constrained Mineral Resource
Estimates and the WAI 2010 Estimate.
----------------------------------------------------------------------------
Table 3: Comparison of Pit-Constrained Mineral Resource Estimates for
Karchiga Project Indicated Mineral Resources
----------------------------------------------------------------------------
Estimate Cut-off Lode Type Tonnes Grade Metal Metal
Cu (%) (Mt) Cu (%) Cu (Kt) Cu (Mlb)
----------------------------------------------------------------------------
SRK May 2011 0.3 Central & Sulphide 7.1 1.85 131.86 290.69
North East
----------------------------------------------------------------------------
SRK December 0.3 Central & FL 9.1 1.80 162.5 358.1
2011 North East
----------------------------------------------------------------------------
Variance, % 28.17 -2.70 23.24 23.24
----------------------------------------------------------------------------
WAI 2010 0.7 Central Oxide 0.76 1.57 11.89 29.9
----------------------------------------------------------------------------
SRK December 0.7 Central HL 1.8 1.41 24.8 54.6
2011
----------------------------------------------------------------------------
Variance, % 136.84 -10.19 108.58 108.58
----------------------------------------------------------------------------
Inferred Mineral Resources
----------------------------------------------------------------------------
Estimate Cut-off Lode Type Tonnes Grade Metal Metal
Cu (%) (Mt) Cu (%) Cu (t) Cu (Mlb)
----------------------------------------------------------------------------
SRK May 2011 0.3 North East Sulphide 1.2 1.68 19,849 43.8
----------------------------------------------------------------------------
SRK December 0.3 North East Sulphide 0.02 1.28 300 0.7
2011
----------------------------------------------------------------------------
Variance, % -98.33 -23.81 -98.45 -98.40
----------------------------------------------------------------------------
(i) Some figures may not sum exactly due to rounding. All HL and FL
recoverable material is reported here with oxide and sulphide resources,
respectively, for comparison purposes.
Karchiga Definitive Feasibility Study
Using only the indicated mineral resource estimates forming part of the SRK
December 2011 Pit-Constrained Mineral Resource Estimates, the Karchiga
Definitive Feasibility Study Report supports a probable mineral reserve estimate
of 8.5 million tonnes of sulphide ore in the Central and North East pits
containing 145,227t (320 Mlb) of copper at an average grade of 1.71% Cu to be
amenable to FL and additional 1.5 million tonnes of ore in the Central pit
containing 21,399t (47.2 Mlb) of copper at an average grade of 1.43% Cu to be
amenable to HL.
Table 4. Probable Mineral Reserves Estimates as of February 18, 2012
----------------------------------------------------------------------------
Orebody Ore Type Tonnes Cu % Au g/t Cu Metal Cu Metal Au Metal
(Mt) (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 National Instrument 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 5 below.
Table 5. 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 Capital Expenditure 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. 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 a 27.9% 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 Definitive Feasibility Study 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 6 below.
Table 6. Key Performance Indicators
----------------------------------------------------------------------------
Parameter Units Key Performance 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 7 below.
Table 7. 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 Definitive Feasibility Study Expenditure
The Company originally estimated expenditure on the Karchiga Definitive
Feasibility Study 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 December 31, 2011, the Company had
incurred expenditure of $8.0 million relating to the Karchiga Definitive
Feasibility Study since August 2010.
Other matters
Two key issues which the Company is currently reviewing separately to the
Karchiga Definitive Feasibility Study are the use of high quality equipment
sourced from the People's Republic of China (or "China") in order to minimise
the project capital costs and identify potential off-takers for the copper
concentrate in both 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
2011 Exploration Programme
In January 2011, the Kyrgyz Government reviewed all exploration licences in the
country to improve transparency and accountability in natural resource
exploration, which led to a temporary suspension of all exploration activities
in the country. The Ministry of Natural Resources of the Kyrgyz Republic
reviewed the Talas Project on 24 April 2011 and recognised that TCG had fully
complied with all licence requirements and approved the TCG's request for a
three month suspension of the 2011 exploration requirements to allow TCG time to
win support from the local communities for the Talas Joint Venture's long term
exploration goals and undertake environmental studies.
In May 2011, Gold Fields and Orsu completed an internal geological and technical
review of the Talas Project, which identified and prioritized several new
exploration targets in the immediate vicinity of the deposit (falling within a
three kilometre radius as well as at deeper levels of the deposit itself). The
Company believes that the testing of these targets could potentially further
enlarge the mineral endowment of the Taldybulak mineral resources and that there
could be further improvements in metal grades via in-fill drilling of the
existing resources at the Taldybulak deposit.
From August to September 2011, TCG renewed its exploration activity and
collected 864 Mobile Metal Ion ("MMI") samples and completed 54km of a high
resolution ground magnetic survey programme. The samples were sent to SGS
Australia Pty Limited in Perth, Australia (which is independent of Orsu) for
analysis and conceptual targets were outlined. The previously planned infill
drilling programme of 6,000m for 2011 has been postponed until the second
quarter of 2012.
In October 2011, Orsu and Gold Fields decided to undertake a complete review of
the previously reported mineral resource estimates for Taldybulak. This included
partial reclogging of the Taldybulak drill core. In total, approximately 11,000
m of core out of total 30,000 m core drilled since 2005 was reclogged by Orsu
and TCG in November 2011. The principal goal of this study was to identify
additional geological controls of copper, molybdenum and gold mineralization.
Primary attention was paid to the identification of porphyry phases and
alteration, particularly potassic alteration, which usually controls higher
grades of copper.
By the end of December 2011, Orsu had produced all necessary geological data in
order to proceed with an updated mineral resource estimate for Taldybulak. It is
expected that Gold Fields will complete a study in the second quarter of 2012
and which will result in updated mineral resource estimates for Taldybulak.
For the Talas Project, the Company contributed $838,000 of its 40% share of
expenditure in 2011 ($951,000 for 2010). The majority of the 2011 licence
expenditures were incurred in connection with environmental, social,
metallurgical and resource studies, as well as a ground magnetic survey at the
Taldybulak licence. For 2012 Orsu and Gold Fields have agreed a budget of $0.6
million of which Orsu's 40% share will be $0.2 million.
AKDJOL-TOKHTAZAN PROJECT, KYRGYZSTAN
2011 update
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.
In 2011 the Company decided to focus its resources on the development of its
principle exploration properties, the Karchiga Project and the Talas Project,
and as such considered the Akdjol-Tokhtazan Project a non core asset which would
be made available for sale.
FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2011
For the year ended December 31, 2011 the Company reported an IFRS net loss of
$1.8 million.
The 2011 net loss of $1.8 million consisted of: administrative costs of $3.8
million, legal and professional costs of $1.3 million, exploration costs of $5.0
million, a stock-based compensation charge of $0.7 million, the Company's share
of the Talas Joint Venture losses of $0.9 and impairment losses of $0.3 million
for an asset held for sale. These losses were partially offset by unrealized
derivative gains of $6.2 million, a net gain on the settlement of the Company's
oil interests of $2.0 million, deferred consideration income of $1.9 million and
interest income of $0.1 million.
As at December 31, 2011 the Company had net assets of $32.1 million ($40.4
million as at December 31, 2010) of which $10.3 million was cash and cash
equivalents compared to $19.6 million as at December 31, 2010 representing a
decrease of $9.3 million in cash can cash equivalents. The decrease in cash and
cash equivalents was due primarily to corporate and exploration expenditure of
$10.8 million, the Karchiga Acquisition of $6.2 million and Orsu's 40% funding
of the Talas Joint Venture of $0.8 million partially offset by deferred
consideration receipts of $7.0 million (see note "Derivative financial
instruments - Deferred consideration income" below) and royalty income from the
Company's oil interest of $1.6 million (see "Net investment in oil interests"
below).
In 2011 the Company decided to make its Akdjol-Tokhtazan Project available for
sale, subject to standard conditions of sale (see note on "Asset held for sale"
below) and recognised an impairment loss of $0.3 million for the year ended
December 31, 2011 for the fair value of the assets held for sale. Under IFRS 5,
"Non-current assets held for sale and discontinued operations", the Company has
disclosed the assets and liabilities, measured at fair value less costs to sell,
on the balance sheet and in the notes net losses of the Akdjol-Tokhtazan Project
as "Asset Held for Sale".
FINANCIAL POSITION AS AT DECEMBER 31, 2011 AND DECEMBER 31, 2010
As at December 31, 2011, the Company's net assets were $32.1 million, compared
with $40.4 million as at December 31, 2010, of which $10.3 million consisted of
cash and cash equivalents ($19.6 million as at December 31, 2010).
The decrease of $8.3 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 $0.9 million and corporate and exploration expenditure of $10.6
million partially offset by a $6.2 million decrease in derivative warrant
liabilities, deferred consideration income of $1.9 million and income relating
to the Tasbulat Oil Royalty Agreement of $1.3 million.
In accordance with IAS 27, the Company has accounted for the Karchiga
Acquisition as a change in a non-controlling interest and as such has attributed
the cost, $6,187,500, to the shareholders of the Company (see "Consolidated
Statements of Changes in Equity" of the Company's audited financial statements
as at December 31, 2011).
A summary of the carrying value of the Company's equity investment in the Talas
Joint Venture as at December 31, 2011 is set out below:
$000
Fair value of equity investment as at January 1, 2011 10,221
Funding provided by the Company during year 838
Less: Company's 40% share of operating losses for the year (948)
------------
Fair value of equity investment as at December 31, 2011 10,111
------------
------------
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.
In 2011 the Company decided to focus its resources on the development of its
principal exploration and development projects, the Karchiga Project and the
Talas Project and as such considered the Akdjol-Tokhtazan Project a non core
asset which would be made 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 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 Company derived a fair value, less costs to sell, for the Akdjol-Tokhtazan
Project and as a result, an impairment loss of $331,000 was recognized on
initial classification of the disposal group as held for sale in the
consolidated statement of net loss and comprehensive loss for the year ended
December 31, 2011. The amount of comprehensive loss attributable to non
controlling interests in relation to the losses incurred by the disposal group
in the period ended December 31, 2011 is nil.
NET INVESTMENT IN OIL INTERESTS
Pursuant to the terms of the Tasbulat Oil Royalty Agreement the Company had an
entitlement to a 1% gross overriding royalty (based on gross sales proceeds less
certain sales related costs and taxes) which would be payable to the Company
from all oil produced from Tasbulat exceeding 2.0 million barrels of oil
equivalent. As at December 31, 2010 the Company had a net outstanding oil
interest in Tasbulat of $392,000 recorded as a long term other asset. In the
first quarter of 2011, the Company received net income of $0.3 million in
relation to its 2010 oil interest entitlement. Thereafter, in September 2011,
the Company received a total of $2.4 million cash in early and final settlement
of all its outstanding oil interests in the Tasbulat Oil Royalty Agreement. The
Company netted off the $2.4 million against the $392,000 long term other asset,
as mentioned above, and as a result recognised a gain on settlement as other
income of $2.0 million for the year ended December 31, 2011.
The $2.4 million total cash received by the Company was reduced to $1.3 million
after the payment of $1.1 million to the non controlling interests of Tasbulat
(see Consolidated statements of changes in equity of the Company's financial
statements).
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2011 the Company's main source of liquidity was unrestricted
cash of $10.3 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 December 31, 2011, the Company's consolidated
working capital was $11.5 million (compared with a consolidated working capital
of $21.5 million as at December 31, 2010).
The Company's working capital needs as at December 31, 2011 included the
maintenance of the Company's interests in, and the further exploration and
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 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 $10.3 million as at December 31, 2011. In
the Company's view, the consolidated working capital as at December 31, 2011 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 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" section of 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 financial statements as at
December 31, 2011 a restated consolidated balance sheet as at December 31, 2010,
and statements of net income and comprehensive income for the year ended
December 31, 2010 (details can be found in note 6. "Transition to IFRS" of the
Company's consolidated financial statements as at December 31, 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 year
ended December 31, 2010:
2010
$000
Equity as previously reported under Canadian GAAP as at
January 1, 2010 24,833
-------------
Reclassification of share purchase warrants to derivative
liabilities (42,041)
Expense of share issue costs prior to January 1, 2009 (4,598)
Re-measurement of fair value of derivative warrant
liabilities 35,411
-------------
Re-stated Equity under IFRS as at January 1, 2010 13,605
-------------
Share issue (net of share issue and broker warrant issue
costs) 18,705
Share purchase warrants issued 1,131
Share based payments 1,817
Net loss as previously reported under Canadian GAAP for the
period (4,622)
Re-measurement of fair value of derivative warrant
liabilities in period 11,184
Expense of share issue costs from 2010 (793)
Reversal of future income tax adjustments (639)
-------------
Equity under IFRS 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 6. "Transition to IFRS" as at
December 31, 2011.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's derivative instruments as at December 31, 2011 consist of
derivative assets in the form of deferred consideration relating to the sale of
the Varvarinskoye Project and derivative warrant liabilities in relation to its
share purchase warrants.
Deferred consideration income
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.
For the year ended December 31, 2011 the Company received total cash of $7.0
million relating to deferred consideration for the Varvarinskoye Project. In
January 2011 the Company received, pursuant to the terms of the SPA, $1.5
million of deferred consideration entitlement in relation to earnings for 2010.
Thereafter in July 2011, the Company entered into the Deferred Consideration
Agreement with Polymetal to receive $5.5 million 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 year ended December 31, 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 Presentational 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 December 31, 2011 the Company calculated a fair
value for its warrant derivative liabilities of nil ($6.2 million as at December
31, 2010).
Consolidated Statements of Net (loss)/ income, and Comprehensive (loss)/
income
For the years ended December 31, 2011 and December 31, 2010
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
2011 2010
$000 $000
(Expenses)/ income
Administration (3,746) (2,910)
Legal and professional (1,328) (2,429)
Exploration (4,991) (2,907)
Stock based compensation (701) (1,785)
Stock based compensation - non employees (36) (32)
Derivative gains 6,246 11,184
Foreign exchange gains/ (losses) 49 (229)
Impairment loss on asset held for sale (331) -
--------- ---------
Net (loss)/ income from continuing operations (4,838) 892
Deferred consideration income 1,908 5,092
Net gain on settlement of oil interests 2,028 -
Company's share of Talas Joint Venture losses (948) (970)
Finance income 62 116
--------- ---------
Net (loss)/ income for the year before income tax (1,788) 5,130
Income tax - -
--------- ---------
Net (loss)/ income and comprehensive (loss)/ income for
the year (1,788) 5,130
--------- ---------
--------- ---------
Net (losses)/ income attributable to:
Shareholders of the Company (2,458) 5,903
Non-controlling interest 670 (773)
--------- ---------
(1,788) 5,130
--------- ---------
--------- ---------
(Loss)/ earnings per share
Basic $(0.01) $0.04
Diluted $(0.01) $0.04
Weighted average number of common shares (in thousands) 157,696 125,170
Consolidated Balance Sheets
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
December 31 December 31 January 1
2011 2010 2010
Assets $000 $000 $000
Current assets
Cash and cash equivalents 10,319 19,596 3,386
Current deferred consideration
receivable - 1,500 -
Prepaid and receivables 1,394 1,217 1,860
Assets classified as held for sale 6,116 - -
------------------------------------
17,829 22,313 5,246
Non-current assets
Deferred consideration receivable - 3,592 -
Exploration properties 4,404 10,458 20,321
Property, plant and equipment 353 449 1,078
Equity investment in Talas Joint
Venture 10,111 10,221 -
Other assets - 392 643
------------------------------------
14,868 25,112 22,042
------------------------------------
Total assets 32,697 47,425 27,288
------------------------------------
------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 448 672 1,941
Current portion of derivative warrant
liabilities - - 2,676
Liabilities classified as held for sale 66 - -
------------------------------------
514 672 4,617
Non-current liabilities
Derivative warrant liabilities - 6,245 8,552
Other liabilities 120 120 514
------------------------------------
634 7,037 13,683
Equity
Share capital 380,145 380,145 361,440
Share purchase warrants 1,131 4,897 6,609
Share purchase options 6,062 5,904 12,550
Contributed surplus 26,828 22,483 11,177
Non-controlling interest (254) (773) -
Deficit (381,849) (372,268) (378,171)
------------------------------------
32,063 40,388 13,605
------------------------------------
Total equity and liabilities 32,697 47,425 27,288
------------------------------------
------------------------------------
Consolidated Statements of Cash Flows
For the years ended December 31, 2011 and December 31, 2010
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
2011 2010
$000 $000
Cash flows from operating activities
Net (loss)/ income for the year (1,788) 5,130
Items not affecting cash:
Company share of Talas Joint Venture losses 948 970
Gain on settlement of oil interests (2,028) -
Depreciation and amortization 123 148
Deferred consideration (1,908) (5,092)
Impairment of mineral properties 331 -
Share-based payments 737 1,817
Foreign exchange losses/ (gains) 23 47
Derivative gains (6,246) (11,184)
----------------------
(9,808) (8,164)
Changes in non-cash working capital
Accounts receivable and other assets (758) (119)
Accounts payable and accrued liabilities (171) (784)
----------------------
Net cash used by the operating activities (10,737) (9,067)
Cash flows from/ (used by) investing activities
Expenditures on property, plant and equipment (74) (50)
Proceeds from settlement of oil interests 2,668 241
Deferred consideration received 7,000 -
Funding of investment in Talas Joint Venture (838) (951)
Acquisition of Eildon minority interest (6,188) -
----------------------
Net cash generated from/ (used by) investing 2,568 (760)
activities
Cash flows (used by)/ from financing activities
Gross proceeds of share issue - 27,646
Share issue costs - (1,609)
Distribution to non-controlling interest (1,086) -
----------------------
Cash flows (used by)/ from financing activities (1,086) 26,037
----------------------
Net (decrease)/ increase in cash and cash equivalents (9,255) 16,210
----------------------
Cash and cash equivalents - Beginning of the year 19,596 3,386
----------------------
Cash and cash equivalents - End of the year 10,341 19,596
----------------------
----------------------
Cash and cash equivalents per the consolidated 10,319 19,596
balance sheet
Included in the assets held for sale 22 -
Consolidated Statements of changes in Equity
For the years ended December 31, 2011 and December 31, 2010
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
Consolidated statements of changes to equity as at December 31, 2010 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, 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 year - - - -
--------------------------------------------
Balance as at December 31, 2010 157,696 380,145 4,897 5,904
--------------------------------------------
--------------------------------------------
Share-based payments - - - 737
Share options forfeited or
lapsed - - - (579)
Share purchase warrants lapsed - - (3,766) -
Eildon minority interest
acquisition - - - -
Distribution to non-controlling
interest - - - -
Net loss for the year - - - -
--------------------------------------------
Balance as at December 31, 2011 157,696 380,145 1,131 6,062
--------------------------------------------
--------------------------------------------
Consolidated Statements of changes in Equity
For the years ended December 31, 2011 and December 31, 2010
(Prepared in accordance with IFRS)
----------------------------------------------------------------------------
Consolidated statements of changes to equity as at December 31, 2010 and
December 31, 2011:
Contri- Non-
buted 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 year - (773) 5,903 5,130
--------------------------------------------
Balance as at December 31, 2010 22,483 (773) (372,268) 40,388
--------------------------------------------
--------------------------------------------
Share-based payments - - - 737
Share options forfeited or
lapsed 579 - - -
Share purchase warrants lapsed 3,766 - - -
Eildon minority interest
acquisition - 935 (7,123) (6,188)
Distribution to non-controlling
interest - (1,086) - (1,086)
Net loss for the year - 670 (2,458) (1,788)
--------------------------------------------
Balance as at December 31, 2011 26,828 (254) (381,849) 32,063
--------------------------------------------
--------------------------------------------
FORWARD-LOOKING INFORMATION
This press release and along with 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; upgrades and
updates relating to mineral resource estimates as well as to metal grades 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 Definitive Feasibility Study 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 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 potential for further enlarging the mineral endowment and improving metal
grades at, and completion of a pre-feasibility study for, the Taldybulak
deposit; 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 out above under
"Operational Review" of the Company's MD&A), the parameters and assumptions
employed in the Karchiga Definitive Feasibility Study 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 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 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 Definitive Feasibility Study 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 Definitive Feasibility Study 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 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. 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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