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
June 30, 2011.
A full Management's Discussion and Analysis of the results for the period ended
June 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 June 30, 2011 have been prepared
under 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 JUNE 30, 2011
For the three months ended June 30, 2011 the Company was able to complete key
operational and financial objectives in which the Company continued to focus on
its principle exploration project, the Karchiga Project, and achieved key
milestones including the following:
-- The Company received permission from the Ministry of Industry and New
Technologies (MINT) of Kazakhstan to commence mineral extraction for
copper;
-- The Company received results of the final metallurgical test work
undertaken on the oxide mineral resource and the sulphide mineral
resource from the Central and North. The results from the sulphide test
work showed indicated copper recoveries of 91.59% and 96.2% with copper
concentrate grades of 21.6% and 24.15% for the Karchiga North East
sulphide and Karchiga Central Oxide lodes respectively. The test work
from the oxide mineral resource showed indicated copper recoveries of
69% and 98% of leachable material being recovered over a period of 104
days (see "Operational Review" - "Karchiga Copper Project Kazakhstan");
-- The Company received updated pit constrained mineral resource estimates
for the Karchiga Project prepared by SRK Consulting (UK) Limited ("SRK")
which showed indicated mineral resources of 7.1 million tonnes with
mineralization grading of 1.85% copper for 131,860 tonnes of contained
copper and inferred mineral resources of 1.2 million tonnes with
mineralization grading 1.68% copper for 19,860 tonnes of contained
copper (see "Operational Review" - "Karchiga Copper Project Kazakhstan")
and,
-- As a result of the positive metallurgical test results for the oxide
mineral resource the Company announced that it would undertake an
additional oxide drilling program with the objective of converting the
oxide resource (previously considered to be waste) into a mineral
reserve and to be included into the Karchiga Definitive Feasibility
Study.
-- In addition to the oxide drilling the Company has also announced that it
will carry out in the time available this year a limited additional
sulphide drilling program on the North East Lode to increase tonnage in
the indicated mineral resource (see "Operational Review" - "Karchiga
Copper Project Kazakhstan").
During the three months to June 30, 2011 the Company reported net income of $2.0
million. In April the Company completed the acquisition of the remaining 26.1%
of Eildon Enterprises Limited ("Eildon"), which owns 94.75% of GRK MLD LLC
("GRK") the holder of the exploration license for the Karchiga Project for a
cash consideration of $6,187,500 (the "Karchiga Acquisition").
In July 2011, the Company reached an agreement with OJSC Polymetal ("Polymetal")
for the early and final settlement for its deferred consideration entitlement
under the for $5.5 million cash to be received by the end of September 2011
pursuant to the terms of the sale and purchase agreement date June 13, 2009 (the
"SPA) and recorded the transaction in the financial statements as at June 30,
2011.
QUARTER HIGHLIGHTS
-- 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, which owns 94.75 per cent of GRK, for a cash
consideration of $6,187,500.
-- April 2011 - the Company announced that it had received permission from
the 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. Please see
"Operational Review - Karchiga Copper Project, Kazakhstan" of the
Company's MD&A for further information.
POST 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 Karchiga
Definitive Feasibility Study.
-- July 2011 - the Company announced that it has 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 terms of the SPA.
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 of north western Kyrgyzstan:
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 light of the positive heap leach metallurgical test results for the oxide
mineral resources and the increased (pit-constrained) mineral resource
estimates, 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.
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
----------------------------------------------------------------------------
Cut-
Effec- off Grade Metal
tive Cu Tonnes Cu Metal Cu
Estimate Date (%) Lode Type (Mt) (%) Cu (t) (Mlb)
----------------------------------------------------------------------------
Central &
May 6, North
SRK 2011 2011 0.34 East Sulphide 7.1 1.85 131,789 290.5
----------------------------------------------------------------------------
Central &
May 25, North
Micon 2010 2010 0.34 East Sulphide 6.5 1.97 127,804 281.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Inferred Mineral Resources
----------------------------------------------------------------------------
Cut-
Effec- off Grade Metal
tive Cu Tonnes Cu Metal Cu
Estimate Date (%) Lode Type (Mt) (%) Cu (t) (Mlb)
----------------------------------------------------------------------------
May 6, North
SRK 2011 2011 0.34 East Sulphide 1.2 1.68 19,849 43.8
----------------------------------------------------------------------------
May 25, North
Micon 2010 2010 0.34 East Sulphide 1.1 1.71 18,810 41.5
----------------------------------------------------------------------------
Additional Oxide Drilling Program 2011
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 mineralizations, whereas the
North East Composite is a blend of 25% massive and 75% disseminated
mineralizations.
Locked cycle test for the Central and North East Composites
----------------------------------------------------------------------------
% Cu % Zn g/t
% Mass of Grade in Grade in Au in % Cu % Zn % Au
Mineral- Concen- Concen- Concen- Reco- Reco- Reco-
Lode ization trate trate trate very very very
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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 mineralization (at 0.5% Cu cut-off) grading
1.39% Cu and containing 12,868 t Cu. However, due to its 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, Orsu
believes that there is potential for the Karchiga Central Oxide material to be
treated economically via heap leaching, and therefore potentially represents an
important uplift in the economic value of the Karchiga Project. As a result of
the inclusion of the oxide mineralisation, the Company expects the Karchiga
Definitive Feasibility Study to be completed in November 2011.
Additional Sulphide Infill Drilling Program
A 2,000m infill drilling programme in the Karchiga North East Sulphide was
commenced in July, 2011 and aims to convert between 0.5Mt and 1Mt of sulphide
mineralization from inferred to indicated mineral resource categories. The
Company expects that the 2,000m infill drilling programme will be completed in
August 2011 and that final assays will be received in September 2011. The
Company anticipates new resource modeling and reserve optimization will be
performed thereafter.
Karchiga Feasibility Study program and expenditure to completion
The Company originally estimated 2011 expenditure on the Karchiga Definitive
Feasibility Study of $4.1 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 $6.4 million for 2011, which it
expects to fund from its available cash. As at June 30, 2011, the Company had
incurred expenditure of $1.8 million relating to the Karchiga Definitive
Feasibility Study.
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;
-- Q3 2011 - Completion of oxide and sulphide drilling programs;
-- Q3 2011 - Completion of geological remodelling with the inclusion of the
results from the new drilling;
-- Q3 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% 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 June 30, 2011 the Company had contributed $364,000 of its 40%
share of expenditure.
AKDJOL-TOKHTAZAN PROJECT, KYRGYZSTAN
Progress update 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. The results are expected to help in interpretation of
structural controls of gold mineralisation in the project area. The Company
plans to undertake, in the third quarter of 2011, a drilling programme
consisting of 2,200 m of drilling at the Tokhtazan licence and 600 m of drilling
at the Akdjol licence. In order to complete the planned drilling program 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 JUNE 30, 2011
For the three months ended June 30, 2011 the Company recorded net income of $2.0
million.
The net income of $2.0 million consisted of deferred consideration of $1.9
million and unrealized derivative gains of $2.5 million, partially offset by
administrative costs of $0.8 million, legal and professional expenses of $0.3
million, exploration costs of $1.1 million, a stock-based compensation charge of
$0.1 million and the Company's share of the Talas Joint Venture losses of $0.1
million (see "Financial Review" section of the Company's MD&A for details).
In July 2011, the Company entered into the Deferred Consideration Agreement,
pursuant to which the Company is to receive $5.5 million in cash from Polymetal
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. As a result, the Company has recorded deferred
consideration income of $1.9 million in the three months ended June 30, 2011.
In respect of the Company's cash flows, cash and cash equivalents decreased $8.8
million from $19.6 million as at December 31, 2010 to $10.8 million as at June
30, 2011. The decrease of $8.8 million was due primarily to the Karchiga
Acquisition for approximately $6.2 million, exploration expenditure primarily
for the Karchiga Project of $1.7 million, corporate expenditure of $2.3 million
and Orsu's pro-rata funding for the Talas Project of $0.4 million, partially
offset by deferred consideration received of $1.5 million and royalty income in
respect of the Company's investment in the Tasbulat Oil Corporation of $0.3
million.
FINANCIAL POSITION AS AT JUNE 30, 2011 AND DECEMBER 31, 2010
As at June 30, 2011, the Company's net assets were $37.9 million, compared with
$40.4 million as at December 31, 2010, of which $10.8 million consisted of cash
and cash equivalents ($19.6 million as at December 31, 2010).
The decrease of $2.5 million was due to the Karchiga Acquisition of $6.2
million, the Company's 40% share of losses in the Talas Joint Venture of $0.4
million and corporate and exploration expenditure of $3.7 million partially
offset by a $5.9 million decrease in derivative warrant liabilities and deferred
consideration income of $1.9 million.
In accordance with IFRS, 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 unaudited financial statements
as at June 30, 2011).
A summary of the carrying value of the Company's equity investment in the Talas
Joint Venture as at June 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 June
30, 2011 364
Less: Company's 40% share of operating losses for the six months
ended June 30, 2011 (443)
---------
Fair value of equity investment as at June 30, 2011 10,142
---------
---------
LIQUIDITY AND CAPITAL RESOURCES
As at June 30, 2011 the Company's main source of liquidity was unrestricted cash
of $10.8 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 June 30, 2011, the Company's consolidated working
capital was $16.8 million (compared with a consolidated working capital of $21.5
million as at December 31, 2010.
The Company's working capital needs as at June 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 (minimum license expenditure
obligations of approximately $2.2 million for 2011), the completion of the
Karchiga Definitive Feasibility Study (budgeted expenditures of approximately
$6.4 million for 2011), and the funding of general corporate expenses (budgeted
expenditures of approximately $4.2 million for 2011). The Company also expects
the receipt of $5.5 million in cash by the end of September 2011 from the
Deferred Consideration Agreement which it expects to use towards its working
capital requirements 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.
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 June 30, 2011 a restated consolidated balance sheet as at June 30, 2010,
and statements of net income/ (loss) and comprehensive income/ (loss) for the
three and six months ended June 30, 2010 (note 3. "Transition to IFRS" of the
financial statements).
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 June, 2010 and the year ended December 31, 2010:
June December
30 31
2010 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 843 1,817
Net loss as previously reported under
Canadian GAAP for the period (4,653) (4,622)
Re-measurement of fair value of derivative
warrant liabilities in period 12,428 11,184
Expense of share issue costs from 2010 (793) (793)
Reversal of future income tax adjustments - (639)
--------------------------------
Equity under IFRS 41,266 40,388
--------------------------------
--------------------------------
Details and further discussion of the impact of the significant accounting
policy changes on transition to IFRS can be found in the Company's MD&A under
"Financial Review - Transition to IFRS" and the financial statements as at June
30, 2011 under note 3 "Transition to IFRS".
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. As a result, the Company has recorded deferred
consideration income of $1.9 million for the three months ended June 30, 2011
and $5.5 million as a current deferred consideration receivable asset in the
financial statements as at June 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 June 30, 2011 the Company calculated
a fair value for its warrant derivative liabilities of $0.3 million, and
recorded an unrealized derivative gain to $2.5 million to net income for the
three months ended June 30, 2011.
Consolidated Statements of Net Income, and Comprehensive Income (Unaudited)
(Prepared in accordance with IFR)
----------------------------------------------------------------------------
3 months ended June 30, 6 months ended June 30,
2011 2010 2011 2010
$000 $000 $000 $000
Income/ (expenses)
Administration (829) (1,060) (1,599) (1,787)
Legal and professional (327) (975) (618) (1,299)
Exploration (1,140) (64) (1,680) (263)
Stock based compensation (55) (740) (192) (842)
Stock based compensation
- non employees (13) (1) (35) (1)
Unrealized derivative
gains 2,572 2,212 5,916 12,428
Foreign exchange gains/
(losses) 38 (823) 135 (876)
----------------------------------------------------
Net income/ (loss) from
operations 246 (1,451) 1,927 7,360
Deferred consideration
income 1,908 - 1,908 -
Company's share of Talas
Joint Venture losses (133) (172) (443) (386)
Finance income 14 - 31 8
----------------------------------------------------
Net income/ (loss) and
comprehensive income/
(loss) for the period 2,035 (1,623) 3,423 6,982
----------------------------------------------------
----------------------------------------------------
Net income/ (losses)
attributable to:
Shareholders of the
Company 2,374 (1,542) 3,955 7,110
Non-controlling interest (339) (81) (532) (128)
----------------------------------------------------
2,035 (1,623) 3,423 6,982
----------------------------------------------------
----------------------------------------------------
Earnings/ (losses) per
share
Basic $0.01 $(0.02) $0.02 $0.10
Diluted $0.01 $(0.02) $0.02 $0.10
Weighted average number
of common shares (in
thousands) 157,696 73,170 157,696 73,170
Consolidated Balance Sheets (Unaudited)
(Prepared in accordance with IFR)
----------------------------------------------------------------------------
June 30 December 31
2011 2010
Assets $000 $000
Current assets
Cash and cash equivalents 10,847 19,596
Current deferred consideration receivable 5,500 1,500
Prepaid and receivables 1,091 1,217
-------------------------
17,438 22,313
Non-current assets
Deferred consideration receivable - 3,592
Exploration properties 10,458 10,458
Property, plant and equipment 432 449
Equity investment in Talas Joint Venture 10,142 10,221
Other assets 392 392
-------------------------
21,424 25,112
-------------------------
Total assets 38,862 47,425
-------------------------
-------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 563 672
Current portion of derivative warrant liabilities 329 -
-------------------------
892 672
Non-current liabilities
Derivative warrant liabilities - 6,245
Other liabilities 120 120
-------------------------
1,012 7,037
Equity
Share capital 380,145 380,145
Share purchase warrants 4,897 4,897
Share purchase options 5,932 5,904
Contributed surplus 22,682 22,483
Non-controlling interest (289) (773)
Deficit (375,517) (372,268)
-------------------------
37,850 40,388
-------------------------
Total equity and liabilities 38,862 47,425
-------------------------
-------------------------
Consolidated Statements of Cash Flows (Unaudited)
(Prepared in accordance with IFR)
----------------------------------------------------------------------------
Six months ended June 30,
2011 2010
$000 $000
--------------------------
Operating activities
Income for the period 3,423 6,982
Items not affecting cash:
Company share of Talas Joint Venture losses 443 386
Depreciation and amortization 63 75
Deferred consideration (1,908) -
Share-based payments 227 843
Unrealized foreign exchange (gains)/ losses 9 (30)
Unrealized derivative gains (5,916) (12,428)
--------------------------
(3,659) (4,172)
Changes in non-cash working capital
Accounts receivable and other assets (128) 55
Accounts payable and accrued liabilities (115) (271)
--------------------------
Net cash used by the operating activities (3,902) (4,388)
Cash flows (used by)/ from investing activities
Expenditures on property, plant and equipment (46) (3)
Proceeds from net investment in residual oil and
gas interests 251 241
Deferred consideration received 1,500 -
Funding of investment in Talas Joint Venture (364) (338)
Acquisition of Eildon minority interest (6,188) -
--------------------------
Net cash used by investing activities (4,847) (100)
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 (8,749) 21,549
--------------------------
Cash and cash equivalents - Beginning of period 19,596 3,386
--------------------------
Cash and cash equivalents - End of period 10,847 24,935
--------------------------
--------------------------
Consolidated Statements of changes in Equity (Unaudited)
(Prepared in accordance with IFR)
----------------------------------------------------------------------------
Consolidated statements of changes to equity as at December 31, 2010 and
June 30, 2011:
Share capital
-------------------------
Share Share
Number Share purchase purchase
of shares capital warrants options
(000s') $ $ $
------------------------------------------------------
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 - - - 227
Share options
forfeited or lapsed - - - (199)
Eildon minority
interest acquisition - - - -
Net income/ (loss)
for the period - - - -
------------------------------------------------------
Balance as at June
30, 2011 157,696 380,145 4,897 5,932
------------------------------------------------------
------------------------------------------------------
Non-
control-
Contributed ling Total
surplus interest Deficit equity
$ $ $ $
------------------------------------------------------
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 - - - 227
Share options
forfeited or lapsed 199 - - -
Eildon minority
interest acquisition - 1,016 (7,204) (6,188)
Net income/ (loss)
for the period - (532) 3,955 3,423
------------------------------------------------------
Balance as at June
30, 2011 22,682 (289) (375,517) 37,850
------------------------------------------------------
------------------------------------------------------
FORWARD-LOOKING INFORMATION
The Company' MD&A and this press release 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,
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 next twelve months
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" of the Company's MD&A; 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 production of
marketable concentrates from, and a reduction in future transportation costs at,
the Karchiga Project; 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 Company's anticipated receipt of
deferred consideration from Polymetal in connection with the Deferred
Consideration Agreement and the timing related thereto; 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 in this press release 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, 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" of
the Company's MD&A), the parameters and assumptions employed in the Karchiga
Scoping Study, the SRK 2011 Mineral Resource Estimates, 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; the Company's failure to
receive the anticipated deferred consideration in connection with the Deferred
Consideration Agreement from Polymetal; 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 figures referred to in 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.
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