Oxus Gold Plc Regulatory News (OXS)

8 Mar 2006 07:04

Oxus Gold PLC08 March 2006 Oxus Gold plc Interim Results for the six months ended 31 December 2005 London: Wednesday 8 March 2006 - Oxus Gold plc ("Oxus" or the "Company") is pleased to report on its interim results for the 6 months ended 31 December 2005 (the "period"). Highlights • Net profit on ordinary activities of $4.293 million for the period compared to $3.615 million for the same period for 2004 • AGF produces 84,119 ounces of gold for the period and 161,615 ounces for the year ended 31 December 2005 • AGF reports $9.042 million profit for the period and $13.263 million profit for the year ended 31 December 2005 • AGF project finance repaid and hedge commitments eliminated • AGF total gold production now exceeds 10 tonnes (in excess of 328,000 ounces produced to date) • AGF's Vysokovoltnoye heap leach project produces first silver and gold • AGF Sulphides project feasibility study completed and awaiting Uzbek Government approval • AGF reports significant drilling results for the Asaukak cluster of deposits • AGF starts working on major exploration and reserve development programme • Construction of the processing plant and related infrastructure at the Jerooy project achieves approximately 80% completion, prior to suspension in February 2006 pending the reinstatement of the mining licence • The Group increases its stake in Marakand Minerals to 81.6% • $20 million corporate credit facility drawn down in January 2006. Report on Activities Financial Results The Group reported an unaudited profit on ordinary activities of $4.293 millionfor the six months ended 31 December 2005 ($3.615 million - 2004) and $3.779million ($2.981 million - 2004) after taxation and minority interests. Amantaytau Goldfields (AGF) in Uzbekistan, contributed $4.521 million ($4.168million - 2004) towards consolidated revenue, being the Group's 50% attributableshare of profits for the six month period. AGF reports a profit of $13.263million ($16.128m - 2004) for the year to 31 December 2005 after tax and debtservice. Operations The following table summarises operating results for the six months to 31December 2005 Six months to Year to 31 December 31 December 31 December 31 December 2005 2004 2005 2004 Ore mined, tonnes 746,700 586,281 1,567,529 1,062,101 Ore processed, tonnes 795,400 555,554 1,465,454 968,682 Average grade (g/t) 4.3 6.2 4.5 5.8 Average gold recovery (%) 76.7 80.6 77.1 82.6 Gold produced, ounces 84,119 88,822 161,615 148,511 Gold sales, ounces 91,195 86,199 163,666 138,327 Hedge ounces 76,699 70,661 140,307 122,789 Spot ounces 14,496 15,538 23,359 15,538 Average gold price $ per ounce 353 340 346 334 Average cash cost $ per ounce 196 188 202 160 Average total cost $ per ounce 221 211 230 182 Net profit after tax & debt service $9.042m $8.463m $13.263m $16.128m During the period, the AGF hedge book was eliminated, three months ahead ofschedule and Oxus Gold bought out the balance of the project finance debt of$8.4 million. The Vysokovoltnoye project at Amantaytau produced its first silver and goldduring the period under review by the irrigation of test heaps placed on the paddrainage layer. The crushing plant has operated at full production, producingstock piles of crushed ore prior to agglomeration and stacking. Significantquantities of crushed and screened ore have been placed on the pads to form thecushion layer, and the stacking of agglomerated ore has commenced. Stacking of the agglomerated ore will continue on the pads until this hasreached critical mass when irrigation will commence. The Merrill Crowe recoveryplant will be complete in March, in time to recover metal from the first stageof stacking. Vysokovoltnoye has ore reserves of 1.66 million tonnes at grades of 127 grammes/ tonne (g/t) silver (6.78 million ounces of silver) and 1.13 g/t gold (60,000ounces of gold) for ore body number 7 and 2.33 million tonnes at grades of 27 g/t silver (2.02 million ounces of silver) and 1.24 g/t gold (93,000 ounces ofgold) for ore body number 4. Ongoing work aimed at defining extensions of thezones may increase the resource base for future growth. Both ore bodies havevery low stripping ratios. The underground AGF Sulphides project is now undergoing conversion to meet Uzbekregulatory requirements, prior to full acceptance by the Government ofUzbekistan, which is expected within the next six months. Progress with thedetailed design of the plant is ongoing, and in particular the process designcriteria where Oxus is considering various technology partners. Access to theunderground ore-body will be available mid-March 2006 via the refurbished Shaft10 enabling a bulk sample to be obtained. This sample will be used forconfirmatory testwork, essential for the detailed design of plant with a longlead time. The Sulphides project is designed to mine the deeper sulphide extensions to theoxide ore-bodies currently being mined by open-pit methods by AGF at Centralnyand to mine the underground Severny ores. Combined, they contain ore reserves of9.72 million tonnes at an average grade of 7.75 g/t containing 2.42 millionounces of gold (at a cut-off of 3.5 g/t gold) within a total mineral resource of17.73 million tonnes at an average grade of 6.84 g/t, and containing 3.90million ounces of gold at zero cut-off grade. Jerooy On 20 February 2006 the Group announced that it had suspended construction atJerooy pending the reinstatement of the mining licence. With the processingplant approximately 80% complete, remaining construction and subsequentcommissioning of the plant can be achieved during the 3-4 month period requiredto prepare the Jerooy deposit for delivery of ore to the plant, provided themining licence has been reinstated. On 21 February the Group announced that it had served four notices of dispute onthe Kyrgyz Government in respect of each of the UK-Kyrgyz Bilateral InvestmentTreaty, the US-Kyrgyz Bilateral Investment Treaty, the Kyrgyz Law onInvestments, and the Talas Gold Joint Venture Agreement. The dispute noticesinvite the Kyrgyz Government to engage in consultations and negotiations withthe Oxus Group with a view to agreeing upon an amicable resolution of thedisputes, failing which the Oxus Group intends to pursue claims in internationalarbitration. The Group has indicated that it is prepared to improve the returns to the KyrgyzGovernment from the joint venture as currently structured, and is hopeful thatthe licence will be reinstated and that gold production will still commencelater this year. Jerooy is scheduled to produce approximately 180,000 ounces peryear of gold, initially from an open pit mine. The Group expenditure and mining expenditure to date on Jerooy amounts to $47.7million. Other activity In October 2005 the Company announced that it was withdrawing from an offer toacquire assets of, and subsidiary company shares in, Eurogold Limited, a companylisted on the Australian Stock Exchange and on the AIM market of the LondonStock Exchange. As the major shareholder, with 15.4% of Eurogold, the Companycontinues to monitor developments as part of its ongoing strategic investmentstrategy. Since the year end, the Company has acquired a further 24,592,562 shares inMarakand Minerals, increasing its stake from 57.23% to 81.58%. The acquisition,on a three for one basis, will be settled by the issue of 8,197,521 shares inthe Company within five days from the date of this announcement. Marakand has announced that it has acquired two copper / gold licence areas insouthern Turkey. Exploration Reverse circulation (RC) drilling programmes on the Asaukak, Aksai and NorthernAsaukak deposits were completed between October and December 2005. These threedeposits form part of the Asaukak Cluster which is located in close proximity toOxus's current mining operations at Amantaytau (10km to the northeast) andVysokovoltnoye (6.5km to the south). A total of 7,500m of drilling was completedon these deposits as part of the planned 100,000m RC drilling programme for theAGF area. Two RC drill rigs are currently being used and the programme is due forcompletion in 2006. Geological modelling of Asaukak is in progress with theintention of producing a revised resource as the basis for a new reserveestimate. Significant drilled width intersections include: • Drillhole SRA 037 intersected 10.38 g/t over 5m at 47m in Asaukak • Drillhole SRA 153 intersected 5.26 g/t over 20m at 50m in Asaukak • Drillhole SAR 018 intersected 3.52 g/t over 11m at 50m in Northern Asaukak • Drillhole SAR 051 intersected 4.14 g/t over 5m at 18m in Northern Asaukak • Drillhole AK 002 intersected 4.57 g/t over 7m at 53m in Aksai • Drillhole AK 019 intersected 4.70 g/t over 5m at 44m in Aksai. Based on these results, additional RC drilling will be planned for Aksai andNorthern Asaukak. On completion, these resources will be converted to reservesto increase the Oxus Gold plc mineable gold ounces. Overall the drill resultsare in line with the anticipated grades for these deposits, based on Soviet andUzbek resource estimates which were audited by CSMA Consultants. Original Russian and Uzbek estimates gave 200,000 ounces of gold in the C1category and 47,000 ounces of gold in the C2 category for these three deposits.An additional two deposits within this cluster contain a further estimated63,000 ounces of gold in the C1/C2 category that will be evaluated further tothe ongoing drilling of this cluster. It is the intention of Oxus, to convertall Soviet and Uzbek classified resources to JORC compliant resources andreserves on completion of drilling and remodelling of the deposits. The RC drilling results from Aksai are encouraging as they confirm the presenceof mineralisation over the whole 350m strike extent of the deposit. Thismineralisation is open ended and additional drilling will be required to testthe northern and southern strike extensions of the deposit. At Northern Asaukak,800m of strike length has been evaluated by RC drilling, and mineralisedintersections have been returned from the central 500m of this zone. Themineralisation appears best developed in the south west where the resultssuggest that there may be additional mineralised zones developed. Four new diamond core drilling rigs, two for surface drilling and two forunderground have been recently purchased for use at AGF, two by the Group. Theprimary targets for this drilling will be the Amantaytau Sulphides project.Shaft refurbishment to access the +140 metre level is complete and undergrounddevelopment refurbishment is progressing well. Underground drilling to targetdeeper extensions of the sulphide deposit is scheduled to start in March 2006. Finally, ASTER satellite imagery interpretation was completed in Q4 2005 andthis work identified several anomalies that correlate with known deposits withinthe AGF licence. Other areas (Northern Daugystau, Yuhzny Tumshuktau andPridorojny) show alteration in areas not associated with known deposits thathave favourable exploration potential. A structural and alteration geologyinterpretation of the AGF licence was completed and will be used to focusdrilling activity. Directors Gordon Wylie joined the board of the Company as a non-executive director. MrWylie is a geologist with over 30 years experience in the mining industry bothas an exploration and mining geologist mainly with the Anglo American Group. Heis a former Executive Officer of Exploration and Geology for AngloGold Ashanti.Gordon Wylie will also serve as a geological consultant to the Group. Darryl Norton was appointed as alternate director. Mr Norton has in excess of 23years experience in the engineering and mining industry. He was responsible onbehalf of the contractors, Maed Limited, for the construction of the AmantaytauGoldfields Oxide plant in Uzbekistan. Mr Norton was previously employed byFluor, TWP, Bateman and Gencor before joining Maed Limited. Outlook The Group has a profitable production base, potential for increased productionfrom existing projects in the pipeline, and an impressive resource base. A majorgeological programme is underway in order to convert these resources intoreserves. In addition, with the strong in-house skills base and balance sheet,the Group is well placed to embark on new developments and projects. The Groupremains committed to achieving annual attributable gold production of at least500,000 ounces by 2008, and with this in mind continues to identify and developboth exploration projects and strategic and other alliances. CONSOLIDATED INCOME STATEMENT ------------------------ ----------- ----------- -----------(US$000) Six months Six months Twelve months ended ended ended 31 December 31 December 30 June 2005 2005 2004 ------------------------ ----------- ----------- ----------- (Unaudited) (Unaudited) (Audited)------------------------ ----------- ----------- -----------RevenueGross revenue 2,406 1,328 3,678Income attributable fromjoint venture 4,521 4,168 6,437------------------------ ----------- ----------- ----------- 6,927 5,496 10,115 Expenses Administration expenses (1,889) (1,220) (3,067)Deferred exploration andevaluation expenditureincurred by MarakandMinerals Limited (717) (1,187) (2,281)------------------------ ----------- ----------- ----------- Gross profit 4,321 3,089 4,767 Stock-based compensation (653) - -Foreign exchange (loss) gain (123) 118 (1,487) Legal costs arising fromabortive 2002 project financing (287) (110) (1,410)------------------------ ----------- ----------- -----------Profit from operations 3,258 3,097 1,870 Net interest receivable: - Group 78 155 696 - Joint venture 957 363 914------------------------ ----------- ----------- -----------Profit before taxation 4,293 3,615 3,480Taxation 16 (5) (6)------------------------ ----------- ----------- -----------Profit after taxation 4,309 3,610 3,474Minority interests (530) (629) (1,191)------------------------ ----------- ----------- -----------Profit for the period 3,779 2,981 2,283------------------------ ----------- ----------- -----------Profit per share (US cents)Basic 1.31 1.61 0.92------------------------ ----------- ----------- -----------Diluted 1.29 1.58 0.90------------------------ ----------- ----------- ----------- CONSOLIDATED BALANCE SHEET ---------------------- ------------- ---------- ------------(US$000) As at 31 As at 31 As at 30 June December 2005 December 2004 2005---------------------- ------------- ---------- ------------ (Unaudited) (Unaudited) (Audited)---------------------- ------------- ---------- ------------ASSETSCurrent assetsCash and cash equivalents 7,459 26,974 34,834Trade andother receivables 11,008 38,378 5,954---------------------- ------------- ---------- ------------ 18,467 65,352 40,788InvestmentsInvestments 49,887 26,820 43,306 Non-current assetsExplorationand mining properties 86,101 47,219 60,228---------------------- ------------- ---------- ------------ 154,455 139,391 144,322---------------------- ------------- ---------- ------------LIABILITIESCurrent liabilitiesTrade and other payables 9,123 695 2,635 Non-current liabilities 6,756 4,789 6,093 Convertibleredeemable loan notes - 32,963 - Minority interests 12,385 13,496 12,858 SHAREHOLDERS' EQUITYShare capital 4,606 3,825 4,581Reserves 121,585 83,623 118,155---------------------- ------------- ---------- ------------ 126,191 87,448 122,736---------------------- ------------- ---------- ------------ 154,455 139,391 144,322---------------------- ------------- ---------- ------------ CONSOLIDATED STATEMENT OF CASH FLOWS ----------------------- ---------- ---------- ----------(US$000) Six months Six months Twelve months ended ended ended 31 December 31 December 30 June 2005 2005 2004 ----------------------- ---------- ---------- ---------- (Unaudited) (Unaudited) (Audited)----------------------- ---------- ---------- ----------CASH FLOWS FROM OPERATING ACTIVITIESProfit for the period 3,779 2,981 2,283 Adjustments for: Depreciation 16 28 16Profit on sale of assets - - (6)Income attributable fromjoint venture (4,521) (4,168) (6,437)Loss on foreign exchange - - 13Stock-based compensation 653 - -Debt for servicesconverted to shares 504 - -Salaries and bonusesconverted to shares 18 15 33----------------------- ---------- ---------- ----------Operating profit (loss)before working capital changes 449 (1,144) (4,098)(Increase) decrease intrade and other receivables (4,952) 2,192 1,153Increase in trade andother payables 7,151 2,982 6,226----------------------- ---------- ---------- ----------Cash generated from operations 2,648 4,030 3,281----------------------- ---------- ---------- ----------CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditure and financialinvestmentExploration and miningproperties expenditure (25,889) (6,244) (19,235)Funding of jointventure's capital expenditure (4,363) (856) (8,852)AcquisitionsInvestments - - (6,839)----------------------- ---------- ---------- ----------Net cash (used) ininvesting activities (30,252) (7,100) (34,926)----------------------- ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIESWarrants and options exercised 229 - 146Shares issued - 24,503 60,792----------------------- ---------- ---------- ----------Net cash provided byfinancing activities 229 24,503 60,938----------------------- ---------- ---------- ----------Net (decrease) increasein cash and cash equivalents (27,375) 21,433 29,293----------------------- ---------- ---------- ----------Cash and cash equivalentsas at 1 July 34,834 5,541 5,541----------------------- ---------- ---------- ----------Cash and cash equivalentsas at 31 December 7,459 26,974 34,834----------------------- ---------- ---------- ---------- STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (US$000) Share Capital Accumulated Total Minority Total capital reserve profit interests ------------- ------- -------- ------- ------- ---------- --------Balance as at1 July 2004 3,289 60,446 (4,416) 59,319 14,125 73,444Shares issued 527 23,863 - 24,390 - 24,390Warrants andoptions exercised 9 105 - 114 - 114Conversion ofdirectors'remunerationto shares - 15 15 - 15Profit for the period - - 3,610 3,610 (629) 2,981------------- ------- -------- ---------- ------- -------- ------- Balance as at31 December 2004 3,825 84,429 (806) 87,448 13,496 100,944------------- ------- -------- ---------- ------- -------- ------- Shares issued 754 35,648 - 36,402 - 36,402Warrants and options exercised 1 31 - 32 - 32------------- ------- -------- ---------- ------- -------- -------Conversion ofdirectors' remuneration to shares 1 17 - 18 - 18------------- ------- -------- ---------- ------- -------- -------Capital reservefrom revaluation of investments:------------- ------- -------- ---------- ------- -------- -------Eurogold Limited - (1,383) - (1,383) - (1,383)------------- ------- -------- ---------- ------- -------- -------Ovoca Resources plc - 266 - 266 - 266------------- ------- -------- ---------- ------- -------- -------On consolidation - 4 85 89 (76) 13------------- ------- -------- ---------- ------- -------- -------Profit for the period - - (136) (136) (562) (698)------------- ------- -------- ---------- ------- -------- ------- ------------- ------- -------- ---------- ------- -------- -------Balance as at 1July 2005 4,581 119,012 (857) 122,736 12,858 135,594------------- ------- -------- ---------- ------- -------- -------Warrants andoptions exercised 25 709 - 734 - 734------------- ------- -------- ---------- ------- -------- -------Conversion ofdirectors'remuneration to shares - 17 - 17 - 17------------- ------- -------- ---------- ------- -------- -------Stock-basedcompensation - 653 (57) 596 57 653------------- ------- -------- ---------- ------- -------- -------Stock-basedcompensationtransferred todeferred revenue expenditure - 102 - 102 - 102------------- ------- -------- ---------- ------- -------- -------Capital reservearising on revaluation ofinvestments:------------- ------- -------- ---------- ------- -------- -------Eurogold Limited - (2,298) - (2,298) - (2,298)------------- ------- -------- ---------- ------- -------- -------Ovoca Resources plc - (5) - (5) - (5)Profit for the period - - 4,309 4,309 (530) 3,779------------- ------- -------- ---------- ------- -------- -------Balance as at 31December 2005 4,606 118,190 3,395 126,191 12,385 138,576------------- ------- -------- ---------- ------- -------- ------- NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. The unaudited Interim Consolidated Financial Statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards ("IFRS"). Certain prior year amounts have been reclassified to conform to account presentation in the current period. 2. These Interim Consolidated Financial Statements follow the same accounting policies and their methods of application as the 2005 accounts and should be read in conjunction with the Company's 2005 audited Consolidated Financial Statements. 3. The interim financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. Statutory accounts for the year ended 30 June 2005 have been filed with the Registrar of Companies. 4. The consolidated income statement includes Oxus Gold plc and its attributable shares of subsidiaries and joint ventures. 5. In accordance with the terms of IFRS2, the cost of stock based compensation, amounting to $653,000, has been expensed in the income statement during the period. This figure includes $180,000 relating to the prior year period. 6. The basic and diluted profit per share has been calculated by reference to a profit, after taxation, of $3,779,000 (December 2004: $2,981,000) (June 2005: $2,283,000) and the weighted average number of ordinary shares in issue of 287,432,807 (December 2004: 224,048,919) (June 2005: 248,790,894). Diluted earnings per share is based on the weighted average number of shares inissue for the period plus potential dilutive ordinary shares arising from shareoptions and warrants for the period of 292,140,689 (December 2004: 228,479,082)(June 2005: 253,401,202). 7. The Directors are not declaring a dividend for this period. 8. Copies of this report are being sent to all shareholders. Additional copies will be available to the public at the registered office, 105 Piccadilly, London, W1J 7NJ and will be posted on the company's website at www.oxusgold.co.uk CORPORATE DETAILS Company Oxus Gold plc 105 Piccadilly, London, W1J 7NJ, United Kingdom Phone: +44 (0)207 907 2000 Fax: +44 (0)207 907 2001 Email: oxus@oxusgold.co.uk Web: www.oxusgold.co.uk Board of Directors: Douglas Sutherland Non-executive Director William Trew Chief Executive Officer Richard Wilkins Executive Director Jonathan Kipps Finance Director Oliver Prior Non-executive Director Gordon Wylie Non-executive Director Darryl Norton Alternate Director Company Secretary: Richard Wilkins Nominated Advisor Canaccord Capital (Europe) LimitedAnd Broker: 1st Floor Brooke House, 27 Upper Brook Street London W1K 7QF, United KingdomPhone: +44 (0)207 518 2777 Auditors: BDO (Isle of Man) 9 Myrtle Street, Douglas, Isle of Man, IM1 1ED, British Isles Registrars: Capita Registrars The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom For further information please visit www.oxusgold.co.uk or contact: OXUS GOLD PLC Jonathan Kipps - Finance Director Tel: +44 (0) 207 907 2000Joanna Solino - Investor Relations Officer Tel: +44 (0) 207 907 2005 Bankside Consultants Keith Irons Tel: +44 (0) 207 367 8888Oliver Winters This information is provided by RNS The company news service from the London Stock Exchange