TSG.L Regulatory News (TSG)

Trans-Siberian Gold plc

Final results for the year ended 31 December 2015

Notice of Annual General Meeting

Highlights

· Profit before tax $6.6 million (2014: $1.3 million)

· Production 37,984 oz. gold, 49,398 oz. silver, increases of 5.3% and 10.7% respectively

· Asacha plant processed average 13,437 tonnes per month, 3.0% increase

· Cost of sales per oz. gold $742, 13.0% reduction

· Cash cost per oz. gold sold $522, 11.8% reduction

Trans-Siberian Gold plc ("TSG" or "the Company") reports that Asacha's fourth full year of operation produced 37,984 oz. (2014: 36,089 oz.) of refined gold and 49,398 oz. (2014: 44,610 oz.) of refined silver. In 2015 the mine continued to implement the recommendations of an earlier mine audit and to introduce additional methods intended to lower dilution and increase ore grades, including changes in stoping and blasting and improved control of mining activities. Average dilution excluding rockfalls improved significantly from 56.8% in 2014 to 40.4% in 2015, and reduced further to 36.6% in the first quarter of 2016.

In June 2015 ore extraction was impacted by excessive water inflow into the mine due to exceptionally heavy rains and atypically quick snow melting. Increased water inflow at the levels below 200 metres (m) had been anticipated in the mine's design, however the actual inflow in June was substantially higher and necessitated a temporary halt to extraction at the 182 m level and below. By August the inflow had substantially decreased and underground stoping activities resumed at the 182 m and lower levels, however the mine suffered further flooding during November as a result of the cyclone which hit Kamchatka at the end of October.

These events also affected mine development and reduced the amount of higher grade stoping ore available, requiring the processing of lower grade material mined earlier and some tonnage from poor grade ore stockpiles in order to maintain plant throughput. This was the principal factor affecting the average grade of the ore delivered to the plant (7.65 g/t in 2015 compared with 7.68 g/t in 2014). The Company is cautiously optimistic that the proportion of new, richer grade, stoping ore in ore processed by the plant will increase during 2016 and expects that after the 100 m level is reached at the beginning of 2017, enabling the start of cutting in vertical intervals of 50 m, the mine should be able to cut 150 000 mt of stoping ore each year and deliver it to the plant, with a consequent improvement in average ore grades.

Mining and production at Asacha in 2015:

In September 2013 the Federal Agency on Subsoil Use extended the Asacha licence until 1 September 2018, reflecting the seven year mine life envisaged by the mine's original design documentation. TSG's subsidiary ZAO Trevozhnoye Zarevo (TZ) intends to apply for a further extension to the licence term, taking account of the results of the significant exploration at Asacha in the period since its resources were approved by the Russian State Geological Commission for Reserves (GKZ) in 2002. As a first step, the process to obtain GKZ's legal recognition of the increase in reserves commenced in 2015. Following approval by GKZ the required design changes to the project will be undertaken by an external design institute, after which TZ will seek the necessary approvals and agreements from various government bodies and agencies.

In the first quarter of 2016 mine development comprised approximately 1,115 metres, while ore extraction (including ore from stoping and mine development) amounted to 44,067 metric tonnes. Plant throughput averaged 13,433 tonnes per month (7.5% above planned 12,500 tonnes). There was a temporary slowdown of mining activities as a result of a small fire at the Asacha adit site after an earthquake. This caused minimal damage (estimated at US$25,000) and normal production soon resumed. Ore delivered to the plant included 17,398 mt of new stoping ore with an average grade of 10.3 g/t, however, because of the factors discussed above, the average first quarter gold grade was 7.38 g/t. As discussed above, the Company is cautiously optimistic that the average grade of ore processed by the plant will increase during 2016.

Group Mineral Resources

The Company's Asacha property contains approximately 760,000 oz. of gold and about 1.8 million oz. of silver in total mineral resources calculated to JORC standards. The resource estimate for the Asacha deposit was updated by QG Pty Ltd (QG) to the end of December 2015 to incorporate new data from mining development and to account for mining depletion during 2015. A copy of QG's report is available on TSG's website.

Asacha's Main zone hosts six defined veins. Three veins have been defined in the separate East zone, with mineralisation generally of lower tenor and width. Asacha's Resources estimates were classified according to the guidelines of the JORC Code (2012). Classification took account of data quality, confidence in geological interpretation and confidence in block estimations. Some of these aspects are necessarily subjective. Classifications were applied by digitisation of polygon boundaries between classes in long section view. Resources were only classified and reported within constrained vein volumes.

Based on the presence of the operating mine and mill, existing mine economics, the potential for incremental development access to deeper and more distal parts of the orebody, and the potential for further exploration success, QG opined that all of the vein resources defined at Asacha have a reasonable prospect of eventual economic extraction and that a comparison of reported mill production to the undiluted resource model indicates that the achieved tonnage is in line with expectation, after likely mining dilution is taken into consideration.

Rounding in above table may mean that columns do not sum exactly.

4 g/t cut-off

The information in this report relating to Asacha's mineral resources is based on information compiled by Michael Stewart. Michael Stewart is a Member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. He has no interest in, and is entirely independent of, TSG. Michael Stewart has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a 'Competent Person' as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code).

Mr Stewart is a Qualified Person under the AIM Rules and consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.

Financial Review

The result for the year is a profit after tax of $4.5 million (2014 loss: $127,000). The directors do not recommend payment of a dividend (2014: nil).

Revenue from the sale of 37,801 oz. of refined gold (2014: 36,131 oz.) and 49,720 oz. of refined silver (2014: 44,395 oz.) was $43.3 million and $737,000 respectively (2014: $45.4 million and $801,000). Average realised prices were $1,146 per oz. gold and $15 per oz. silver (2014: $1,256 per oz. gold and $18 per oz. silver). Cost of sales was $28.8 million (2014: $31.6 million), the 9.1% reduction principally reflecting the full year impact of the significant depreciation of the Russian rouble, partially offset by the 4.6% increase in gold oz. sold. Cost of sales per oz. gold, net of the credit from silver sales revenue, was $742 (2014: $853). Cash cost per oz. gold including depletion, net of the silver credit and excluding royalty, was $522 (2014: $592).

An additional impairment provision of $722,000 (2014: $4.1m) has been recognised against the ore stockpile, reflecting the difference between its expected net realisable value at a gold price of $1,200/oz. and cost, including processing, refining and royalties. At a gold price of $1,200/oz., the processing and refining of the ore stockpile will be cash generative, wherefore it is expected that the entire stockpile will be processed, with some material likely to be blended with higher grade material.

The Group recorded an operating profit for the year of $8.8 million (2014: $4.4 million), after recognising the $722,000 increase in the inventory impairment provision discussed above, $nil impairment charges against assets under construction and exploration and evaluation expenditure at the Rodnikova property (2014: $58,000) and an exchange loss of $316,000 (2014: $485,000), principally reflecting the impact of the significant depreciation of the Russian rouble on the Group's rouble denominated monetary assets. Administrative expenses amounted to $5.6 million (2014: $5.6 million). Russian administrative expenses amounted to $4.3 million (2014: $4.6 million). UK administrative expenses were $1.3 million (2014: $987,000).

Finance income was $301,000 (2014: $99,000). Finance costs were $2.5 million (2014: $3.3 million).

Total non-current assets decreased from $91.0 million to $85.2 million. Mining properties of $27.0 million (2014: $27.0 million) reflected $1.9 million additional mining and mine development, offset by depletion of $1.9 million. Property, plant and equipment decreased by $4.2 million to $50.3 million, primarily due to depreciation charges, offset by additions to plant. Current assets increased from $15.3 million to $20.1 million. Inventories at Asacha at 31 December 2015 comprised $1.9 million gold and silver in production (2014: $2.8 million), $5.4 million ore stocks (2014: $4.6 million), of which $4.9 million (2014: $4.4 million) has been recognised as a non-current asset and $3.4 million fuel and other materials and supplies (2014: $2.9 million), in aggregate $10.7 million (2014: $10.3 million). As discussed above ore stocks are stated net of impairment provisions totalling $10.3 million (2014 $9.6 million), comprising $9.3 million (2014: $9.1 million) allocated against non-current assets and $1.0 million (2014: $478,000) against current assets. Cash and cash equivalents increased from $8.0 million to $12.6 million.

Loans and borrowings totalled $20.2 million (2014: $26.1 million), comprising $19.8 million (2014: $24.9 million) outstanding under two five year facilities, totalling $43.0 million, provided by Sberbank for the development of the Asacha project, $nil short term loan finance (2014: $1.1 million), including accrued interest, provided by TSG's major shareholders UFG Asset Management (UFG) and AngloGold Ashanti Limited (AGA) and $461,000 finance lease obligations (2014: $138,000).

Asacha mine

At a gold price of $1,200/oz., Life of mine ("LOM") cash costs on an all equity basis are forecast at $620/oz., before taking account of a $25/oz. credit from silver production (assuming a silver price of $14/oz. over the remaining mine life). Cash costs including all royalties and taxes (in total $50.5 million, net of VAT recoveries) on an all equity basis are forecast at $703/oz. Total costs on the same basis, after depreciation of all capital expenditure and including all pre-start up mining and other operating expenditure, are forecast at $1,009/oz., giving a $191/oz. margin at a gold price of $1,200/oz.

As previously reported, in light of the fall in the gold price since 2013 and the ore dilution issue which had affected the mine's operating performance the Board carried out an impairment review of the mine's economic model as at 31 December 2014, assuming a gold price of $1,200/oz., an expected economic life of 10 years and a 10.8% discount factor, to determine whether there had been any impairment in the Group's mining properties and/or property, plant and equipment or the Company's investment in TZ which holds the licence for the mine. The Board then concluded that no impairment had arisen in respect of the Group's mining properties or property, plant and equipment but that an impairment provision of $34.4 million was required against the Company's investment in TZ. The Board has undertaken a further impairment review of the mine's economic model as at 31 December 2015, assuming a gold price of $1,100/oz., an expected economic life of nine years and a 17.0% pre-tax discount factor and has concluded that no impairment had arisen in respect of the Group's mining properties or property, plant and equipment and that no adjustment to the provision made in 2014 against the Company's investment in TZ is required.

Events after the reporting date

On 4 April 2016 the interest rates on TZ's two loan facilities for the Asacha project were reduced from 11.5% (including a 1.0% premium in lieu of a gold price hedging programme) to 9.3% (applied to $9.65 million) and 9.7% (applied to $10.35 million). 

Annual General Meeting

The 2015 Annual Report and Accounts have been sent to TSG's shareholders, to be submitted for their approval at the Company's AGM, which will be held in London on 30 June 2016 at 11:30 am at the offices of BDO LLP, 55 Baker Street, London W1U 7EU.

Copies of the Annual Report and Accounts are available at the Company's website at http://www.trans-siberiangold.com/.

Ends

Contacts:

TSG +44 (0) 1480 811871

Simon Olsen +44 (0) 7770 484965

Cantor Fitzgerald Europe +44 (0) 207 894 7000

Stewart Dickson/David Foreman (Corporate Finance)

Trans-Siberian Gold plc

Consolidated Statement of Financial Position

Trans-Siberian Gold plc

Consolidated Statement of Comprehensive Income

Trans-Siberian Gold plc

Consolidated Statement of Cash Flows

Notes

1. Going concern

The Group has reported an operating profit for the year of $8.8 million, which is stated after significant non-cash depreciation and impairment charges. The Directors have reviewed the Group's cash flow forecast for the period to 31 December 2017 and they believe that, taking account of reasonably possible changes in commodity prices, trading performance and expenditure and scheduled repayment of bank loan facilities, the Group has adequate resources to continue in operational existence for the foreseeable future, wherefore the directors are confident that the Group will continue as a going concern and have prepared the financial statements on that basis.

2. Mining properties

Mining properties assets relate to the Asachinskoye (Asacha) mining licence held by the Company's subsidiary ZAO Trevozhnoye Zarevo (TZ).

The licence includes the right to extract gold and silver and, pursuant to the decision of the Federal Agency on Subsoil Use on 12 September 2013, its term has been extended for four years until 1 September 2018, reflecting the seven year mine life envisaged by the mine's original design documentation. TZ intends to apply for a further extension to the licence term, taking account of the results of exploration at Asacha since its resources were approved by the Russian State Geological Commission for Reserves (GKZ) in 2002.

In light of the fall in the gold price since 2013 and the problem with ore dilution which affected the mine's operating performance in 2014 the Board carried out an impairment review of the mine's economic model as at 31 December 2014, assuming a gold price of $1,200/oz., an expected economic life of 10 years and a 10.8% discount factor, to determine whether there had been any impairment in respect of mining properties. The Board undertook a further impairment review of the mine's economic model as at 31 December 2015, assuming a gold price of $1,100/oz., an expected economic life of nine years and a 17.0% pre-tax discount factor and are satisfied that no impairment has arisen in respect of mining properties in either 2014 or 2015.

3. Property, plant and equipment

i. Assets under construction comprise $932,589 (2014: $512,576) for building construction and infrastructure at Asacha.

ii. $340,383 of the depreciation charge is included in additions to mining properties (2014: 1,004,623). $50,114 (2014: $157,357) of the depreciation charge related to property, plant and equipment used on exploration and evaluation projects or assets under construction and was capitalised in exploration and evaluation costs or property, plant and equipment in accordance with the Group's accounting policy. $688,469 (2014 $1,949,178) of the depreciation charge is included in inventories.

iii. The net carrying amount of property, plant and equipment includes the following amounts in respect of assets held under finance leases

As discussed in Note 2 the Board carried out an impairment review of the mine's economic model and are satisfied that no impairment has arisen in respect of property, plant and equipment.

4. Deferred exploration and evaluation costs

Deferred exploration and evaluation expenditure relates to the "Asacha East" zone, a separate orebody within the Asacha mineral rights licence discussed in Note 2, and the Rodnikova mining licence, also held by the Company's subsidiary ZAO Trevozhnoye Zarevo (TZ) which was terminated in September 2014.

i Additions include capitalised PPE depreciation (see Note 7ii).

In 2012 the Federal Service for Supervision of Natural Resources Management prescribed the implementation of two provisions of the Rodnikova licence by April 2014, first the finalisation of the design documentation, secondly the commencement of work at the deposit, failing which the federal authorities would consider the termination of the licence. Although TZ sought to comply with these requirements, it was unclear in 2012 whether there was adequate time or available funding to do so. Therefore a full impairment provision was recognised in 2012 in respect of Rodnikova's deferred exploration and evaluation costs. A design institute's pre-feasibility study indicated that, at the lower gold prices which have prevailed since the second half of 2013, exploitation of the Rodnikova deposit would not be economically justified. TZ applied to the federal authorities for an extension of the licence term beyond its scheduled expiry on 1 September 2014 in order to evaluate the cost effectiveness of various technical solutions to improve the project's economics identified by the design institute, however on 5 September 2014 the Company was informed that the licence had been terminated.

5. Deferred tax

Deferred income tax at 31 December relates to the following:

6. Inventories

Gold in progress, silver in progress and ore stocks include mining properties depletion $150,000 (2014: $90,000). Ore stocks, part of which are classified as non-current inventories, are stated net of an impairment provision of $10.3 million (2014: $9.6 million), which reflects the difference between the ore stockpile's expected net realisable value at a gold price of $1,200/oz. and cost, including processing, refining and royalties.

7. Borrowings

Movement in borrowings is analysed as follows:

In 2009 and 2010 ZAO Trevozhnoye Zarevo (TZ) arranged two loan facilities for the Asacha project, in total $43 million, with the Russian bank Sberbank. Repayments under the initial five year $25 million facility and the second $18 million facility, each of which initially bore an annual interest rate of 10.5%, commenced in November 2011 and September 2012 respectively. The loans are secured by pledges over certain moveable assets and the shares of TZ and OOO Trans-Siberian Gold Management, TSG's other subsidiary. In September 2013 the terms of the two loan facilities were extended to December 2018. Repayment of the $26.5 million then outstanding under the two facilities commenced in March 2014. On 20 March 2015, in addition to the $300,000 repayment due on that date, TZ prepaid $2.2 million, which had been scheduled to be repaid in 2018. Also in March 2015 TZ made further prepayments of $800,000 and $900,000, respectively due in June 2015 and December 2015. On 12 August 2015, TZ made a further prepayment of $1.0 million which had been due in 2016.

In accordance with IAS39, the fees and commissions paid to Sberbank in respect of the loan restructuring are amortised over the extended terms of the facilities, resulting in a net present value adjustment of $297,000 (2014: $354,000). It was agreed that a gold price hedge programme would be implemented for the revised term of the facilities. It was subsequently agreed with the bank to defer the start of the price protection programme in consideration of an increase to the interest rate to 11.5% until such commencement. On 4 April 2016, the interest rates on the two loan facilities were reduced to 9.3% (applied to $9.65 million) and 9.7% (applied to $10.35 million).

In 2012 UFG Asset Management (UFG) and AngloGold Ashanti Limited (AGA), each a related party by virtue of their then respective 54.42% and 31.17% holdings in the shares of the Company, agreed to provide short term loan facilities, in aggregate $781,000 (increased to $891,000 in January 2013), on commercial terms including interest at 8%. In September 2012 the terms of the two facilities were extended to 1 March 2013, the revised facility agreements each including an option for the lender, subject to the requisite approval of TSG's shareholders, to convert any part of the outstanding loan into TSG shares at a price equivalent to the volume weighted average price of TSG's shares for the period of 60 business days prior to notice of such conversion, exercisable prior to scheduled repayment. The terms of the two facilities were further extended, ultimately to 31 March 2015. Both facilities were repaid in full on 12 March 2015.

8. Share capital and premium

All shares are ordinary shares with a par value of 10 pence.

9. Revenue

10. Cost of sales

11. Directors' remuneration and other interests

The aggregate remuneration of the directors of the Company was as follows:

The following table shows the directors who served during the year or in the previous year together with an analysis of their remuneration:

Mr Khilov's employment contract includes an entitlement to two cash bonus payments, each in amount equivalent to eight months' salary then payable, for which the performance criteria agreed by the Remuneration Committee in 2014 comprise Asacha plant production, average gold grades in ore delivered to the Asacha plant and full cash cost targets, full cash cost being the total cost of sales excluding depletion, depreciation and royalty less revenue from sales of silver (net of royalty) divided by gold ounces sold. In each case, all the required performance criteria must be satisfied over a twelve month period. The performance criteria for the first cash bonus payment to Mr Khilov were satisfied in the twelve months ended 30 June 2015.

The following table shows the beneficial interests of the directors who held office at the end of the year in the ordinary shares of the Company (except for the beneficial interests of Messrs Sasson and Ryan by virtue of their connection with the Company's major shareholder UFG Asset Management):

No directors have any interests in share options. The options granted to three directors in respect of qualifying services under an employee share option scheme approved by special resolution of the Company on 18 August 2008 expired in 2014.

12. Events after the reporting date

On 4 April 2016, the interest rates on ZAO Trevozhnoye Zarevo's two loan facilities for the Asacha project were reduced from 11.5% to 9.3% (applied to $9.65 million) and 9.7% (applied to $10.35 million).

13. Basis of accounting and presentation of financial information

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. However this announcement does not in itself contain sufficient information to comply with IFRS.

The financial information does not constitute the Group's statutory financial statements as defined in section 434 of the Companies Act 2006 but is derived from those accounts. The financial information for the year ended 31 December 2015 has been extracted from the audited accounts of Trans-Siberian Gold plc which will be delivered to the Registrar of Companies in due course. The auditors reported on those accounts and their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The financial information for the year ended 31 December 2014 has been extracted from the audited accounts of Trans-Siberian Gold plc which have been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.