TSG.L Regulatory News (TSG)

21 Feb 2006 07:01

Trans-Siberian Gold PLC21 February 2006 Trans-Siberian Gold plc TSG to go ahead with Asacha - work ongoing at Veduga LONDON: 21 February 2006 - Trans Siberian Gold plc ("TSG" or "the Company")(TSG.L) is pleased to announce that, subject to completion of financingarrangements, the Company is to proceed with the development of the Asacha goldmine in Kamchatka, Far East Russia. Following the appointment of Mr Jonathan Best as Chief Executive Officer inNovember 2005, TSG has undertaken an in-depth financial and technical review ofboth the Asacha and Veduga projects. The directors have agreed to move ahead asquickly as practicable with development at Asacha and, subject to completion ofproject financing, expect to start underground development in August this year,with plant construction starting in September. It is expected that plantcommissioning will commence in December 2007 with first gold production in early2008. The total capital and pre-production costs of the Asacha project are estimatedat US$90 million (including recoverable VAT of US$11 million), of which $22million has already been spent, leaving US$68 million to be funded throughproject finance and equity or an equity linked instrument. Talks with StandardBank Plc together with the European Bank for Reconstruction and Development onproject financing are ongoing and Anglogold Ashanti Ltd, a 29.8% shareholder inTSG, has agreed to participate in this funding to maintain its shareholding. It is anticipated that project finance can be arranged by May 2006 andconsequently development of the Asacha mine will then begin in earnest. Theproject finance is subject to fulfilment of certain technical conditions and toreceiving certain regulatory approvals, permits and an extension to theproduction condition in the Asacha license. Every effort will be made tocomplete all outstanding items to meet the May 2006 target. Asacha mine Work at Asacha has continued on engineering studies, site preparation and incompleting construction of the access road, while discussions with banks andlending agencies on project finance have been ongoing. The current mineral resource contains 534,493 oz of gold equivalent (in gold andsilver credits) in the measured and indicated categories (80%) and 131,653 ozin the inferred category (20%) for a total of 666,146 oz (20.7 tonne) containedgold equivalent. There is potential to increase this resource as explorationresults to date have revealed further mineralization in two parallel structuresto, and in one structure below, the current main Asacha orebody. The operationalplan includes an exploration programme in order to bring this mineralizationinto the mineral resources and ultimately into a mineable ore reserve. The current plan allows for ore extraction by underground mining methods only,but a study has now been completed which indicates that it is technicallyfeasible to open pit the top portion of the orebody. Work will continue in thisarea as extraction of the upper portion of the orebody should increase themineable ore reserves and improve the safety and economics of the project. On the basis of current resources with an average recovered grade of 15.1 grams/tonne and planned ore production of 200,000 tonnes a year, Asacha will have amine life of approximately 6.5 years, producing some 608,000 ounces of gold and1.1 million ounces of silver at an average total cash cost of US$200 per ounce.After the start of production there will be further capital expenditure totalingUS$12 million over the life of mine. Gold production is expected to be 30,000ounces in 2008 and then approximately 100,000 oz per annum over the subsequent 5years before tailing off towards the end of the current planned life of theoperation. There is also potential for Rodnikova, TSG's other project in Kamchatka some 65kilometres north of Asacha, to provide additional ore for the Asacha mill. TSGwill begin exploration at Rodnikova in 2006 to increase the size of the historicresource. Veduga TSG has also completed a preliminary review of its Veduga project in centralSiberia after an initial pre-feasibility scoping study indicated thatconstruction of a complex metallurgical plant to produce gold metal at the sitewas not economically viable due primarily to the high energy costs.Nevertheless, the Company believes there is considerable value at Veduga and, asa result, has been examining a number of alternative processing and otheroptions. These have included the production of flotation concentrates to betransported to plants in the Urals, Kazakhstan and/or China which have thetechnical capability to treat such material. Further recent study has indicated that in the short term the option ofconcentrating the sulphide ore and shipping it to a smelter may be a viabletreatment route for a first phase development of the project. Additionalflotation and concentrate test-work and economic analyses are underway and areexpected to be completed during the next 6 months. In addition, if thisprocessing route is pursued then the approximately 1.5 million tonnes of oxideore could be treated at the same time. In parallel with this TSG is activelypursuing its exploration programme with a view to increasing the overallmineable mineral resource from the existing 2.8 million ounces of which 1.9million are measured and indicated. In the longer term, development will depend on the results of additionalflotation test-work, utilizing a biological-oxidation process which hasindicated that further optimisation may be possible. This could improve theeconomics of this relatively higher capital cost and power consuming processingroute. This second phase development route is also encouraging in light of therecent announcement regarding the completion of the Boguchanskaya hydro-electricpower station which should allow for the provision of grid power to Veduga in2009. Ten boreholes were drilled in the Powerline (LEP) Prospect totaling 1,621.0 m.at the end of 2005. The holes hit a 'buried' gently dipping body of gold-bearingquartz-sericite metasomatic mineralization. A 20-50 m wide metasomatic zone canbe traced for 150 m along strike at 100-130 m depth from the surface.Mineralized intervals 10-20 m in width were revealed in the drill holes.Gold-bearing metasomatics are located near the plane of the Maloveduginskythrust, which is the main governing structure within the Greater Licence Area.This favorable geology and structure is indicative that the orebody is notclosed off and that extensions to the orebody are still probable. Work is continuing on a structural interpretation of the Veduga ore systemincluding the development of a 3D model. All the ore zones recognised so farwithin the Veduga mining licence have been identified from surface exposure.Initial results from the structural modelling have been encouraging and thereappears considerable scope for the identification of 'buried' ore zone similarto the one identified within the Greater Licence Area at LEP. Bogunay Diamond drilling at the Bogunay gold prospect commenced in December 2005, and asof January 27th a total of six holes had been completed for some 750m. Thedrilling is in follow up to our trenching programme completed during the summer.Trench results have been encouraging, with some significant gold assays. Whilstthe assay results of the diamond drilling are still awaited, all six holes haveintersected a zone of mineralisation consistent with that previously found intrenching. New significant shareholder It was recently announced that Russia's UFG Asset Management had formed aPrivate Equity Fund. On 16 February the Company was advised that UFG PrivateEquity Fund ILP had acquired 25% of the Company's issued shares. Commenting on the Board's decision, Jonathan Best, CEO, said: "We have undertaken a detailed review of the Company's position and areconfident that we are now well placed to go forward with the development ofAsacha as quickly as possible while we consider further the options available tous at Veduga. "We are optimistic that it will be possible to produce gold from Veduga on aneconomic basis, although we have yet to define the optimum method. "Asacha, although on current reserves a short-life mine, will be profitablebecause of its high grade. An updated reserve/resource statement taking intoaccount recent drilling and a higher gold price should give additional ouncesand we anticipate that we will be able to further extend the mine life throughan exploration programme within the Asacha license area and at nearbyRodnikova." On the new significant shareholder he said "It is encouraging to have a largeRussian investor and we look forward to meeting with them in the near future" -ends- Contacts: Jonathan Best (Managing Director, TSG) +44 1223 265761 Chris Howard (Collins Stewart) +44 20 7523 8314 Keith Irons (Bankside) +44 20 7367 8873Oliver Winters (Bankside) +44 20 7367 8874 This information is provided by RNS The company news service from the London Stock Exchange