Oxus Gold Plc Regulatory News (OXS)

22 Sep 2005 17:07

Oxus Gold PLC22 September 2005 This announcement replaces RNS 6038R issued at 07.00 today. The earlierannouncement contained a a typographical error, the earnings per share figureswere given as $0.92 (2004: $5.32), the correct figures are $0.0092 and $0.0532.The full text of the amended announcement is set out below. news release Oxus Gold plc Final results for the year ended 30 June 2005 (Amended) Highlights • $4.76 million gross profit for the year; $2.28 million retained profit • Amantaytau has produced more than 270,000 ounces of gold since commencement of operations, of which 166,318 ounces were produced in the year ended 30 June 2005 • Mining commenced at the Vysokovoltnoye silver and gold heap leach deposit • Amantaytau sulphides feasibility study completed • Amantaytau project finance lenders repaid • Successful fund-raising of $59.3 million to fund Jerooy development • Construction of Jerooy gold mine well advanced • Terms agreed for the acquisition of strategic stake in Romania and Ukraine gold operations • Credit approval obtained for $20m corporate credit facility LONDON: 22 September 2005 - Oxus Gold plc (OXS.L) ("Oxus" or "the Company")reports a rise in Group revenue, including attributable joint-venture income,for the 12-month period ended 30 June 2005 to $10.11 million (2004: $5.67m) andan audited profit on ordinary activities of $3.48 million (2004: $11.43m), and$2.28 million (2004: $10.89m) after tax and minority interests. The profit inthe comparable period of 2004 reflected the net gain of $12.25 million from thesale of a minority interest in Marakand Minerals Limited. Net assets increased to $122.73 million (2004: $59.31m) and cash balances to$34.83 million (2004: $5.54m). This includes the residue, net of expenses, ofthe $26.4 million raised in December 2004 through the issue of 27.2 million newshares, and the issue of $32.9 million of convertible redeemable loan notes,which were held in escrow at 31 December 2004, over 99% of which weresubsequently converted into the Company's ordinary shares. As a result of theconversion Oxus issued 33,970,000 new ordinary shares to holders of the loannotes. The total number of shares in issue at 30 June 2005 was 287,017,343.Earnings per share, based on the average number of shares in issue during theyear, were $0.0092 (2004: $0.0532). Amantaytau Goldfields in Uzbekistan contributed $6.44 million (2004: $3.74m)towards the consolidated revenue, being the Group's 50% attributable share ofprofits for the 12-month period. Extracts from the Chief Executive's Review This last year has been a very eventful and challenging period for Oxus Goldwhich has seen one complete year of gold mining operations at the AmantaytauGoldfields Oxides project and culminated in our being able to report a netprofit of $2.28 million from our first full year of mining operations. Operations Amantaytau Goldfields Oxides Project A highlight of the year was the official opening in September 2004 of our firstgold mine at Amantaytau Goldfields (AGF), near Zarafshan in Uzbekistan. AGFcommenced commercial gold production in February 2004 and produced a total of226,000 ounces between then and our year end of 30 June 2005, and a further44,000 ounces by 20 September 2005, 50% of which is attributable to Oxus. The following table summarises the results of AGF operations for the year to 30June 2005: Year ended Year ended 30 June 2005 30 June 2004 Ore mined, tonnes 1,407,200 475,000Ore processed, tonnes 1,225,600 413,000Average grade (g/t) 5.3 5.2Average gold recovery % 79.1 85.9Gold produced - ounces 166,318 59,689Average cash cost $ per oz * 177 133Average total cost $ per oz 225 182Average gold price received $338 $323Net Profit after tax and $12.872m $7.496 m Debt service * calculated in accordance with the Gold Institute's Production Cost Standard As of 20 September 2005, AGF's hedge book has reduced to 20,938 ouncesrepresenting 7.9% of the initial hedge commitment. The original $35 millionproject finance loan has been repaid to the lending syndicate. $17.9 million wasrepaid during the year (2004: $2.0 million). Amantaytau Goldfields repaid afurther $6.7 million after the year end, and the Company bought out the balanceof the debt of $8.4 million. It is expected that the gold hedge will be repaidin the final quarter of 2005, ahead of schedule. Developments Amantaytau Goldfields Sulphides project The feasibility study by Wardell Armstrong of the Amantaytau Phase 2 Sulphideproject in Uzbekistan is complete, following an external review of the miningplan. Initial construction work on the sulphide mining project has commenced,including underground refurbishment and development access. During the first 4 years the project is expected to produce in excess of 180,000ounces of gold annually, commencing Q1 2007, at a direct operating cost of $167per ounce, and an average of 151,000 ounces of gold annually over the estimated13 year life of mine, at a direct operating cost of $194 per ounce. Oxus'attributable interest in this project is 50%. Pre-production capital expenditureis estimated at $88 million. Based on a gold price of $450 per ounce and using a10% discount rate, the feasibility study gives a project NPV of $188.8 million(ungeared) and an IRR of 117.2%. The project is designed to mine the deeper sulphide extensions to the oxideore-bodies currently being mined by open-pit methods by AGF at Centralny and tomine the underground Severny ores. Combined, they contain mineable reserves of9.72 million tonnes at an average grade of 7.75 grammes per tonne (g/t)containing 2.42 million ounces of gold (at a cut-off of 3.5 g/t Au) within atotal resource of 17.73 million tonnes at an average grade of 6.84 g/t, andcontaining 3.90 million ounces at zero cut-off grade. Underground mining will utilize modern trackless methods and truck haulage bothvia shaft access and twin ramps from surface to exploit the sulphide deposits.The existing production shaft has been refurbished to gain access to formerworkings and refurbishment of the primary underground level is underway toaccess the ore. Mine development and construction of the 750,000 tonne per annumsulphide bio-oxidation plant is expected to begin before the end of 2005. The reserves are held within two mineralised zones known as Centralny andSeverny. At Centralny there are six defined ore-bodies, with ore-body 8 showingconsistently high gold grades, up to several hundreds of g/t in places, over astrike length of 420 metres. At Severny there are eight mineralised zones withthe largest and longest being traced over a strike length from 400 metres to 700metres. The underground ore-bodies are open at depth and Oxus believes that there islarge potential to increase reserves. An earlier drilling programme by theformer Soviet operators intersected mineralisation 500 metres below the lowerlimit of the current resources (about 870 metres below surface) comprising aninterval of 8 metres thick at 51.6 g/t gold with grades of up to 72g/t. A majorunderground and surface drilling programme is imminent with the recent arrivalof two new core drill rigs to site, to target deeper known extensions of thedeposits with the objective of substantially increasing resources and reserves. Amantaytau Goldfields Vysokovoltnoye project AGF has started mining at its second operation in Uzbekistan. Mining of ore started at the Vysokovoltnoye silver and gold heap leach projecttwo weeks ago, following the first mine blast on 24 August. Ore will initiallybe stockpiled pending completion of construction and commissioning of theprocess plant. The plant is expected to produce its first silver and gold at thebeginning of October 2005. Vysokovoltnoye has mineable reserves of 1.66 million tonnes at grades of 127 g/tAg and 1.13 g/t Au for ore body number 7 and 2.33 million tonnes at grades of 27g/t Ag and 1.2 4g/t Au for ore body number 4. Ongoing work aimed at definingextensions of the zones may considerably increase the resource base for futuregrowth. Both ore bodies have very low stripping ratios. After commissioning, fullproduction is scheduled for November 2005. Planned mine production is 21,035ounces of gold and 2,469,083 ounces of silver per annum. The capital cost of the project is low at $9.1 million, which has been kept to aminimum due to the existing infrastructure at AGF. It is expected that the cashcosts of metal production in terms of gold equivalent will be approximately $160per ounce. Vysokovoltnoye is an open pit mine and forms part of the AGF licence area and is30 kms away from AGF's existing Amantaytau mining operations. Jerooy At Jerooy in the Kyrgyz Republic negotiations with the Kyrgyz Government areongoing with regard to the status of the mining licence. The Government of theKyrgyz Republic purportedly cancelled the licence to operate this mine in August2004. Oxus immediately repudiated this action, whilst simultaneously announcingthat it would continue to build the mine. In November, the Government advisedTalas Gold Mining Company, the project operating subsidiary, that provided itwas able to show that it had raised adequate funds to construct the mine, andhad met certain additional technical requirements, the licence would bere-instated. Having raised the appropriate funds, the detailed technical workwas completed to the satisfaction of the relevant licensing authorities, whorecommended to the Government that the licence be reinstated. The Company is in continuous discussion with the Kyrgyz Government and stillexpects a positive outcome to these negotiations and, in the meantime, hascontinued with construction at the project site with the full knowledge of theKyrgyz Government. Construction started in mid-2004 and the mine is expected tostart production in the second quarter of 2006 at an annual rate of 180,000ounces a year. Oxus has now spent $27 million at Jerooy, including $17 millionout of the $59 million raised last December to complete the construction. Jerooy is the largest unexploited gold deposit in the Kyrgyz Republic with areserve of 9.88 million tonnes of ore at a grade of 7.5 g/t gold that equates to2.38 million ounces of gold. The Group owns 66.7% of Talas Gold Mining Company,and the balance is held by Kyrgyzaltyn (Kyrgyz State Mining Enterprise). Thedeposit is located in the Talas Region, some 190 kms west of the capital cityBishkek. The deposit is to be mined by both open pit and underground methods and has aninitial mine life of 12 years, with an additional four years of potentialcurrently in the inferred category of resources. Additional exploration targetsinclude several known occurrences of gold within the vicinity of Jerooy. Other Activity Eurogold In February 2005 the Group acquired a strategic shareholding in EurogoldLimited, an Australian Company with gold exploration and mining operations inRomania and the Ukraine and since the year end Oxus has agreed terms to acquireEurogold's operations and exploration territory which will substantiallyincrease Oxus's gold mining operations in the former Soviet Bloc countries.Subject to completion of due diligence, this transaction is due to completetowards the end of 2005. Eurogold is an Australian company with its shares traded both in Australia andin the UK on AIM. Persuant to the agreed terms, Oxus will be acquiring all ofthe issued capital of Eurogold (Bermuda) Limited, a subsidiary of Eurogold,which controls the assets in the Ukraine; all of the issued capital of ExplorerSA, an exploration subsidiary in Romania which holds largely exploration assets;and certain assets at fair market value of Transgold SA, a joint venture companyin which Eurogold holds a 50% interest. Transgold operates a carbon-in-leach(CIL) plant at Baia Mare in southern Romania for the treatment of gold tailings. Transgold has historically derived most of its production from the retreatmentof tailings, where in excess of 138,000 ounces of gold and 700,000 ounces ofsilver has been produced. More recently, with the successful delineation of theNorth-West Corridor licence area, the company has changed its emphasis to thedevelopment of its hardrock portfolio. Exploration by Transgold suggests asignificant trendline incorporating its three deposits of June 11, Sophia andHanau. The Hanau deposit is currently being mined using open-pit methods and the ore istrucked some 20 kms to the company's CIL plant at Baia Mare. In the Ukraine, Eurogold has a 99.9% interest in the Saulyak gold projectlocated only 60 kms from the Baia Mare CIL plant. A rail line runs close to theSaulyak deposit and connects to Baia Mare and provides the opportunity totransport the ore to the CIL plant for treatment. The Saulyak deposit has an estimated resource of 2.14 million tonnes at 8.4 g/t,containing approximately 578,000 ounces of gold under the Russian C1 and C2classification. In addition 2.53 million tonnes at 8 g/t, being 650,000 ounces,has been identified from the 2004 drilling programme, and classified by Eurogoldas "Inferred" under the JORC resource classification system. This increases thecombined total resource potential to 1.2 million ounces of gold. Eurogoldbelieves that the 2005 exploration programme will continue to expand thisdeposit. Over 9 kms of underground development work was completed by the formerowners which is expected to reduce the capital costs to bring the mine intoproduction. The total value of Oxus's acquisitions will not exceed £17.34 million, equal to7p per Eurogold share, with the consideration met by the issue of up to 37.1million new Oxus shares. Oxus already owns 43,188,100 shares in Eurogold, equalto 17.44% of the fully diluted share capital, which we acquired earlier thisyear at an average price of 8.4p a share. These shares will be cancelled as partof this transaction. Thus, the net purchase consideration, after set off, willbe £14.3m, with 30.6m new Oxus shares being issued, based on the average closingprice of 46.7p of Oxus shares over 6, 7 and 8 July 2005. On a fully diluted basis Eurogold has 247,679,494 shares outstanding, which havetraded on AIM between 5.0p and 9.25p over the last year. The transaction willresult in Eurogold holding approximately 10% of Oxus and Eurogold willdistribute these shares to its shareholders as a dividend in specie. The transaction has been structured as an asset and subsidiary company purchasein order to avoid the transfer of certain contingent liabilities to Oxus. Kosmanachi In March 2005 the Group signed a co-operation agreement with the Navoi Miningand Metallurgical Combinat to work together with a view to developing theKosmanachi silver/gold deposit situated near the AGF mine. The project has beenextensively explored and is estimated to contain Soviet classified resources inthe C1 and C2 categories of at least 40 million ounces of silver at an averagegrade of 105 g/t and 270,000 ounces of gold at an average grade of 0.5 g/t.Oxus will carry out a detailed review of all the existing data and undertake adrilling programme to confirm the earlier exploration results in order tocomplete the pre-feasibility study. Kosmanachi also has additional resources inthe Soviet P category. Assuming favourable economics, it is hoped that a full feasibility study can becompleted and plant construction commenced. Test work to date indicates that aheap leach plant would recover in excess of 70% of the silver and gold. Themine is situated within 20 kms of AGF's existing operations and thereforeminimal infrastructure will be required. Exploration Having developed a strong production base at AGF, we intend to focus onexploration work to bring our exploration potential into the resource categoryand to increase our confidence in, and to upgrade our additional resources. Inorder to achieve this, Oxus intends to carry out further reverse circulation andcore drilling. New underground and surface drill rigs have been purchased forthis purpose, and a programme of geophysical investigation is also planned inorder to define the margins of the known mineralised zones and to investigategeological structures for further mineral potential. Marakand Marakand Minerals Limited ("Marakand") is 57%-owned by Oxus. It is developingthe Khandiza poly-metallic deposit in Uzbekistan which has a JORC classifiedmeasured and indicated resource above a 2% zinc cut-off of 11.83 million tonnesat an average grade of 7.66% zinc, 3.65% lead, 0.921% copper, 129 g/t silver and0.38 g/t gold. The mineable reserve above a 4% zinc break-even cut-off, for thefirst 15 years of production, totals 9.61Mt at an average grade of 7.90% zinc,3.78% lead, 0.95% copper, 129 g/t silver and 0.37 g/t gold. The Company's primary focus has been to secure agreement with the UzbekGovernment on the commercial structure of the project. The Government hasproposed that the more commonly used joint venture structure be considered,similar to that of a number of other successful joint ventures already operatingin the mining sector in Uzbekistan, such as AGF. Marakand has submitted jointventure documentation to the Uzbek State Committee of Geology who await finalauthorisation from the Uzbek Government to proceed on this basis. It isanticipated that this process will now be concluded in the fourth quarter of2005. This will initiate the project funding process, detailed design and thecommencement of construction with a view to starting production in 2007. Marakand has made substantial progress in advancing the permitting process forthe project, including technical and environmental approvals. Following thesubmission of the Khandiza Feasibility Study to the Uzbek Government inSeptember 2004, Marakand has focused on advancing the permitting stage andnegotiating the final form of project development for the Khandiza Project. Inaddition, framework agreements have been concluded for the toll smelting andsale of zinc, lead and copper concentrates. Demand for concentrates and metalscontinues to be in excess of planned production and Marakand is well positionedto benefit from its proximity to high growth developing economies. Directors Douglas Sutherland and Oliver Prior joined the board as non-executive directors.Michael Beckett, non-executive chairman, stood down as chairman following thelast annual general meeting. Mr Sutherland acts as chairman, pending theappointment of a successor to Mr Beckett. Mark Wellesley-Wood and Dan Kappesalso retired as non-executive directors. Each of the retiring directors made asignificant contribution to the Company and we wish them well for the future. Outlook The significant increase in shareholders' funds, the Group's strong cashflow andthe strength of the balance sheet will provide the springboard for the nextphase of Oxus's development. With profitable gold production underway at AGF Phase 1 Oxides, Vysokovoltnoyeabout to commence production, Jerooy scheduled to commence production next yearand the AGF Phase 2 Sulphides scheduled to come into production in early 2007 welook forward to a significant increase in gold production over the next eighteenmonths. We are pleased that we have been able to agree terms with Eurogold, subject todue diligence, to purchase its assets which we believe will also providesubstantial benefits to our shareholders. In Romania, Transgold has been inoperation for a number of years, and presents substantial opportunities for Oxusto expand its hardrock production, using Oxus' complementary skills inconstruction and operation. In the Ukraine, we will be looking to advance theSaulyak project into early production. These assets complement our existingmining operations, and together with our development projects, give us a soundplatform on which to build a company producing in excess of 500,000 ounces ofattributable gold by 2008. I believe that we can look forward with confidence to a growing productionprofile and improving profitability as we continue to search for newopportunities to form the basis for the second phase of the Company'sdevelopment. Enquiries: Oxus Gold plc Tel: +44 (0)20 7907 2000Bill Trew, Chief Executive OfficerJonathan Kipps, Finance Director BanksideKeith Irons Tel: +44 (0)20 7367 8873 / 07885 356 639Simon Rothschild Tel: +44 (0)20 7367 8871 / 07703 167 065 CONSOLIDATED INCOME STATEMENT (US$000) Year Year ended ended 30 June 2005 30 June 2004 RevenueGross revenue 3,678 1,932Income attributable from joint venture 6,437 3,738 10,115 5,670ExpensesAdministration expenses (3,067) (5,832)Deferred exploration and evaluation expenditure incurred by (2,281) (1,198)Marakand Minerals LimitedGross profit (loss) 4,767 (1,360)Foreign exchange (loss) gain (1,487) 545Legal costs arising from abortive 2002 project financing (1,410) (634)Legal costs arising on the application to court to convert the - (156)share premium to distributable reservesProfit (loss) from operations 1,870 (1,605)Net interest receivable:- Group 696 212- Joint venture 914 575Net gain on disposal of minority interest in Marakand Minerals - 12,252LimitedProfit before taxation 3,480 11,434Taxation (6) (5)Profit after taxation 3,474 11,429Minority interests (1,191) (539)Profit for the year 2,283 10,890Profit per share (US cents)Basic 0.92 5.32Diluted 0.90 5.20 CONSOLIDATED BALANCE SHEET (US$000) As at 30 June 2005 As at 30 June 2004ASSETSCurrent assetsCash and cash equivalents 34,834 5,541Trade and other receivables 5,954 7,107 40,788 12,648Non-current assetsExploration and mining properties 60,228 41,003Investments 43,306 22,295 144,322 75,946 LIABILITIESCurrent liabilitiesTrade and other payables 2,635 741 Non-current liabilities 6,093 1,761Minority interests 12,858 14,125 Shareholders' EquityCapital stock 4,581 3,289Reserves 118,155 56,030 122,736 59,319 144,322 75,946 CONSOLIDATED STATEMENT OF CASH FLOWS (US$000) Year Year ended ended 30 June 2005 30 June 2004CASH FLOWS FROM OPERATING ACTIVITIESProfit for the year 2,283 10,890 Adjustments for: Depreciation 16 48Profit on sale of assets (6) -Salaries and bonuses converted to shares 33 529Net gain on disposal of minority interest in Marakand Minerals - (12,252)LimitedIncome attributable from joint venture (6,437) (3,738)Loss (profit) on foreign exchange 13 21Operating loss before working capital changes (4,098) (4,502)(Increase) /decrease in trade and other receivables 1,153 (6,842)Increase in trade and other payables 6,226 344Cash generated (used) from operations 3,281 (11,000) CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditure and financial investmentExploration and mining properties expenditure (19,235) (3,408)Funding of joint venture's capital expenditure (8,852) (1,632)Acquisitions and disposalsInvestment in strategic alliance company (6,839) -Sale of minority shares in subsidiary on flotation - 5,846Sale of minority shares in subsidiary - 689Net cash (used) generated in investing activities (34,926) 1,495 CASH FLOWS FROM FINANCING ACTIVITIESWarrants and options exercised 146 4,715Shares issued 60,792 6,476Net cash provided by financing activities 60,938 11,191Net increase in cash and cash equivalents 29,293 1,686Cash and cash equivalents as at 1 July 5,541 3,855Cash and cash equivalents as at 30 June 34,834 5,541 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (US$000) Share Capital reserve Accumulated loss Total Minority Total capital interests Balance as at 1 July 2003 2,824 - (22,590) 33,990 10 34,000Merger reserve 34,929Share premium account 18,827Shares issued 108 6,368 - 6,476 - 6,476 Warrants and options exercised 346 4,369 - 4,715 - 4,715 Conversion of directors' 11 518 529 529remuneration to sharesTransfer to distributable - (24,221) 24,221 - - - reserve, February 2004Capital reserve Capital reserve arising on - 16,296 16,296 12,160 28,456 revaluation of explorationrights in Marakand MineralsLimited Capital reserve arising on - 3,360 - 3,360 2,508 5,868 issue of shares in MarakandMinerals LimitedDistribution of Marakand - - (17,490) (17,490) - (17,490) Minerals Limited sharesMinority interestadjustmentsrelating toprevious years:- Marakand Minerals Limited - - 6 6 (6) -- Talas Gold Mining Company - - 8 8 (8) -Profit for the year - - 11,429 11,429 (539) 10,890Balance as at 1 July 2004 3,289 60,446 (4,416) 59,319 14,125 73,444Shares issued 1,281 59,511 - 60,792 - 60,792Warrants and options exercised 10 136 - 146 - 146Conversion of directors' 1 32 - 33 - 33remuneration to sharesCapital reserve arising onrevaluation of investments:Eurogold plc - (1,383) - (1,383) - (1,383)Ovoca Resources plc - 266 - 266 - 266On consolidation - 4 85 89 (76) 13Profit for the year - - 3,474 3,474 (1,191) 2,283Balance as at 30 June 2005 4,581 119,012 (857) 122,736 12,858 135,594 NOTES 1. The above financial information for the year ended 30 June 2005 is audited, with an unqualified opinion, and does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The financial information for the year ended 30 June 2004 has been extracted from the accounts for that year, which has been delivered to the Registrar of Companies and on which the auditors gave an unqualified opinion. Statutory accounts for the year ended 30 June 2005 will be delivered to the Registrar of Companies. The Annual Report will be posted to shareholders in mid-October 2005 and the Annual General Meeting will be held on 17 November 2005. 2. The basic and diluted profit per share has been calculated by reference to a profit, after taxation, of $2,283,000 (2004: $10,890,000) and the weighted average number of ordinary shares in issue of 248,790,894 (2004: 204,519,144). 3. The directors do not recommend the payment of a dividend in respect of this period (2004 - nil). 4. The Consolidated Financial Statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards ('' IFRS'') issued by the International Accounting Standards Board (''IASB'') and the interpretations issued by the Standing Interpretations Committee of the IASB. 5. The Company will account for stock-based compensation under the rules of IFRS 2, Accounting for Share-Based Payments, with effect from 1 July 2005, whereby the fair value of such options is expensed to the income statement in accordance with the specific vesting periods. The Company has not taken any charge in its financial statements in the year ended 30 June 2005, but had IFRS 2 been implemented a charge of $90,000 would have been made to the income statement and an adjustment to capital reserves of $90,000. In addition a charge of $93,000 would be made in respect of Marakand Minerals Limited, of which $ 40,000 relates to minority interests. These charges will be made as a prior year adjustment in the 2006 accounts, in accordance with IFRS 2. The basic and diluted profit per share, taking these adjustments into account, is US cents 0.86 per share (basic) and US cents 0.84 per share (diluted). This information is provided by RNS The company news service from the London Stock Exchange