TSG.L Regulatory News (TSG)

Trans-Siberian Gold plc

Final results for the year ended 31 December 2011

Highlights

·; Asacha stoping commenced in June 2011

·; Asacha gold production commenced in September 2011

·; $6.8 million debt converted to equity in November 2011

·; $6.4 million debt converted to equity in February 2012

Chairman's Statement

Trans-Siberian Gold plc ("TSG" or "the Company") (TSG.L) completed the first phase of the construction of the Asacha mining project in 2011 and, in September 2011, commenced gold production at the Asacha processing plant. By the end of December 2011, gold dore containing 7,833 oz. of gold had been shipped from Asacha to the refinery at Novosibirsk.

In June 2011 stoping activities started in the Asacha mine while mine development works continued according to schedule. In 2011 mine development and ore extraction amounted to approximately 3,500 metres and 34,500 tonnes.

By the end of July 2011, the plant building had been completed, its equipment installed and technological piping put in place. The vital infrastructure objects, including tailings storage, repair shop, sewage water treatment facility, fire station, fuel storage and main engineering networks were ready for use. The cyanide and explosives storage facilities had been constructed and commissioned. The site's power unit, comprising 4 diesel generators with a total capacity of 4 megawatts, was successfully commissioned, with the gold plant and other facilities being switched to the permanent power supply.

Completion of the main construction activities facilitated the start of the plant commissioning process. Mechanical checks and hydraulic tests of the plant equipment and piping were conducted and trial operations using waste rock were undertaken. At the beginning of September chemical reagents and low grade ore were loaded into the system and the first trial smelting took place at the end of that month. By the end of the year the plant was operating at a steady rate of about 8,000 tonnes per month. On 19 October the Company was pleased to report the first shipment of 59 kg of gold dore from Asacha to the refinery at Novosibirsk.

In the first quarter of 2012 mine development comprised approximately 1,020 metres (planned 900 metres). Ore extraction (including stoping and mine development) amounted to approximately 33,500 tonnes (96.6% of planned 34,700 tonnes). The ore stockpile at 31 March 2012 was approximately 64,500 tonnes.

In the first quarter of 2012 plant throughput averaged 9,626 tonnes per month (89% of planned 10,835 tonnes). Plant performance was affected by low ore grades, principally due to dilution, although there was an improvement to 9.24 g/t in March. The mining method for the major stoping zone for 2012 has now been adjusted by the introduction of short blocks stoping, leaving recoverable horizontal and vertical pillars. Further recommendations to reduce dilution are expected from a technical audit of mining methods which has been undertaken by a Moscow design institute.

In order to improve mine and plant performance additional equipment has been purchased, the capacity of the site laboratory increased and geologic underground exploration improved. It is expected that these measures will result in improved plant performance by the end of the second quarter of 2012.

Financial Review

Gold production commenced at Asacha in September 2011. Revenue from the sale of 6,539 oz. of refined gold and 7,189 oz. of refined silver was $11.7 million and $223,000 respectively. Average realised prices in 2011 were $1,790 per oz. gold and $31 per oz. silver. Cost of sales per oz. gold, net of the credit from silver sales revenue, was $1,212. Cash cost per oz. gold, net of the silver credit and excluding royalty, was $960.

The Group recorded an operating profit for the year of $590,000 (2010: $3.6 million loss), after crediting an exchange gain of $2.0 million (2010: $270,000). Administration expenses amounted to $1.6 million in UK and $4.2 million in Russia (2010: $1.3 million and $2.8 million respectively), in aggregate $5.8 million (2010: $4.1 million). Russian administration costs in 2011 included the write off of non-recoverable VAT of $926,000 following a court decision.

Finance income was $12,000 (2010: $50,000). Finance costs were $1.5 million (2010: $104,000), net of $3.4 million (2010: $1.6 million) interest capitalised.

Total non-current assets increased from $103.7 million to $128.0 million. Mining properties of $34.2 million (2010: $0) reflected the transfer of Asacha related costs from deferred exploration and evaluation costs. Property, plant and equipment increased by $11.8 million to $84.9 million, principally reflecting the completion of the Asacha processing plant. Capitalised exploration and evaluation costs reduced from $29.9 million to $2.9 million as a result of the transfer of Asacha related costs to Mining Properties. The deferred tax asset of $6.0 million (2010: $0) represents tax losses accumulated during the exploration and development of the Asacha project, which may be carried forward to reduce the Group's future tax liability.

Inventories comprised $1.3 million gold and silver in production, $4.7 million ore stocks and $4.5 million fuel and other materials and supplies, in aggregate $10.5 million (2010: $642,000). Recoverable VAT was $3.2 million (2010: $5.1 million), all of which (including $762,000 outstanding since prior to 2005) is expected to be received during 2012.

Loans and borrowings at 31 December 2011 totalled $48.5 million (2010: $32.9 million), comprising $40.0 million (2010: $30.9 million) outstanding under two five year bank loans, totalling $43.0 million, for the Asacha project, $8.2 million outstanding on short term loan facilities provided by TSG's major shareholders UFG Asset Management (UFG) and AngloGold Ashanti Limited (AGA) in September 2011 and $334,000 finance lease obligations.

Shareholder loans

On 8 April 2011 UFG provided TSG with a loan facility of $2.0 million on commercial terms. On 18 April 2011 AGA agreed to provide TSG with a loan facility of $2.3 million on commercial terms.Each of these loan facilities was repayable in two equal tranches, respectively on the fourth and fifth anniversaries of the commencement of gold production at Asacha. Eachfacility agreement included 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. The same conversion option applied to a $2 million loan facility provided by UFG in October 2010.

On 8 November 2011 4,541,313 ordinary shares were issued to UFG and AGA in consideration of the conversion of the outstanding amounts of the above three loan facilities, in aggregate $6,802,279 including accrued interest.

When the Company was faced with a delay (from mid-year until September 2011) in the start of gold production at Asacha, when mechanical checks and hydraulic tests of the plant equipment took longer than expected, UFG and AGA made available short term loan finance, of $5 million and $3 million respectively. In February 2012 $6.4 million of this indebtedness, including accrued interest, was converted into new TSG ordinary shares, the remaining $1.8 million repaid to UFG and AGA in March and April 2012.

Asacha project

The total project cost until the commencement of gold production at Asacha was $130.8 million, net of $10.9 million VAT recoveries, compared to the May 2011 estimate of $130.2 million, net of $10.1 million VAT recoveries. The total pre-start up project cost included pre-commissioning mining and plant costs of $4.4 million, other pre-operating expenditure of $39.9 million and "first fill" equipment spares and consumables of $1.2 million.

A further $23.1 million of capital expenditure, including contingency of $3.7 million, will be incurred after the commencement of production, comprising:

The above table does not include the construction cost of an external powerline to Asacha. In light of current concerns regarding the availability and cost of external power, it is now envisaged that Asacha's further power requirements will be met by the installation of additional gensets, which are likely to be leased, rather than by the construction (at an estimated cost of $13.3 million including contingency) of a powerline from a geothermal power station.

At a gold price of $1,200/oz., Life of mine ("LOM") cash costs on an all equity basis on total expected gold production of 590,000 oz. are forecast at $315/oz., before taking account of a $51/oz. credit from silver production (assuming a silver price of $30/oz.). Cash costs including all royalties and taxes (in total $112.4 million, net of VAT recoveries) on an all equity basis are forecast at $506/oz. Total costs on the same basis, after depreciation of all capital expenditure (including $23.1 million post start up) and pre-start up mining and other operating expenditure, are forecast at $775/oz., giving a $425/oz. margin at a gold price of $1,200/oz.

Rodnikova Project, Kamchatka Krai

Activities were limited, as TSG concentrated its efforts on bringing Asacha into production. No field work was conducted in 2011. The geologic results of the 2008 drilling programme were processed and evaluated and the Report on Mineral Reserves and pre-feasibility study were developed. After the Report on Mineral Reserves for Rodnikova deposit had been approved by the Kamchatka authorities, the Russian State Commission for Reserves approved the expert opinion on the Report on Reserves and Pre-feasibility study of the Rodnikova deposit, with a recommendation for underground mining.

The Commission has recorded Rodnikova's mineral resources as 5.8 million tonnes of ore in the C1+C2 categories, at an average grade of 5.3 g/t gold and 44.6 g/t silver, at 2 g/t gold cut-off, with C1+C2 category reserves of 30,887.6 kg gold and 258.3 tonnes silver.

Events after the reporting date

In February 2012, 5,842,390 ordinary shares were issued to UFG and AGA in settlement of the Company's indebtedness, in aggregate $6,445,099 including accrued interest. 3,738,665 ordinary shares were issued to UFG, 2,808,151 ordinary shares on 1 February 2012 at 69.94 pence per share and 930,514 ordinary shares on 3 February 2012 at 69.98 pence per share, in consideration of the conversion of the outstanding amounts of three of the four short term loan facilities provided in September as discussed above. 2,103,725 ordinary shares were issued to AGA, 1,578,620 ordinary shares on 1 February 2012 at 69.98 pence per share and 525,105 ordinary shares on 3 February 2012 at 69.75 pence per share, in consideration of the conversion of part of the outstanding amount of its short term loan facility.

Ends

Contacts:

TSG +44 (0) 1480 811871

Simon Olsen

Seymour Pierce +44 (0) 20 7107 8000

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

The reclassification corrects the disclosure of the cash inflows from issuance of ordinary shares and cash outflows from the repayment of borrowings and interest charges which had no cash impact.Notes

1. Mining Properties

Mining Properties assets relate to the Asachinskoye (Asacha) mining licence held by the Company's subsidiary ZAO Trevozhnoye Zarevo (TZ), discussed in Note 3.

i Transfers from Deferred exploration and evaluation costs represent assets brought into use on the commencement of production, see Note 3.

2. Property, plant and equipment

i Assets under construction comprise $0 (2010: $5,492,166) in relation to the construction of an access road to Asacha, $798,727 (2010: $51,750,233) for building construction and infrastructure, and $1,023,727 (2010: $10,178,029) for plant and equipment at Asacha.

ii $2,636,164 (2010: $1,551,553) 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.

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

3. Deferred exploration and evaluation costs

Movements on deferred exploration and evaluation expenditure, by location of the property, are as follows:

i Additions include capitalised PPE depreciation (see Note 2Error! Reference source not found.i).

ii Transfers to mining properties represent assets brought into use with the commencement of production, see Note 1.

Under the Licencing Agreement as revised in 2006, the Company's subsidiary ZAO Trevozhnoye Zarevo (TZ) was required to bring the Asacha mine into operation at its projected capacity in accordance with the technical design at a rate of at least 1,000 kg of gold per annum by 31 December 2008. That requirement was partially fulfilled in 2008, with the commencement of mining activities and first ore extraction. In December 2008 the Kamchatka regional governmental commission noted the delay in mining but concluded that work to finalise construction should continue to put the gold plant into operation in 2009. Government authorities have since been kept advised of the development of the project and although funding constraints arising in 2008-09 delayed completion of construction at Asacha until the middle of 2011 with gold production commencing in September 2011, the Company believes that there will be no adverse consequences of the delay. Discussions in respect of any required amendments to the licence have already commenced with the appropriate authorities and it is expected that these will be concluded in 2013.

4. Deferred tax

Deferred income tax at 31 December relates to the following:

5. Borrowings

Movement in borrowings is analysed as follows:

In 2009 ZAO Trevozhnoye Zarevo (TZ) arranged a three year $25 million loan facility for the Asacha project. This initial borrowing was refinanced in December 2009 with a five year facility from Sberbank at an annual interest rate of 11.75%, reduced to 10.5% in May 2010. Repayments were scheduled to commence in December 2011, however TZ prepaid the first instalment in November 2011 and paid the second instalment due in March 2012 in December 2011. In October 2010 TZ agreed a further loan facility of $18 million for the Asacha project with Sberbank at an annual interest rate of 10.5%. Repayments are scheduled to commence in September 2012.

In 2009 UFG Asset Management (UFG), a related party by virtue of its then 51.55% holding in the shares of the Company, provided TSG with two loan facilities, totalling $6.5 million respectively, on commercial terms. TSG repaid $2.5 million to UFG in December 2009.

Each of the UFG facilities was repayable in two equal tranches, the first on the earlier of the first anniversary of the commencement of gold production at Asacha and 30 September 2011, and the second on the earlier of the second anniversary of the commencement of gold production at Asacha and 30 September 2012, each facility agreement including an option for UFG, 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. On 23 March 2010 the UFG loans, in aggregate $4,366,781 including accrued interest, were converted into TSG shares as discussed in Note 6.

In consideration of the first of the UFG 2009 facilities, the Company also agreed, subject to obtaining the necessary shareholder approvals, to issue warrants to subscribe for additional TSG shares to UFG on terms to be agreed and considered as fair and reasonable by the Company's Board (excluding those directors connected to UFG) after consultation with TSG's Nominated Adviser. No warrants were issued in 2010 or 2011 or after the reporting date.

On 26 October 2010 and 8 April 2011 UFG provided TSG with two loan facilities, each of $2 million, on commercial terms. On 18 April 2011 AngloGold Ashanti Limited(AGA), also a related party by virtue of its then 30.7% holding in the shares of the Company, agreed to provide TSG with a loan facility of $2.3 million on commercial terms. Each of the three loan facilities provided by UFG and AGA in 2010 and 2011 was repayable in two equal tranches, respectively on the fourth and fifth anniversaries of the commencement of gold production at Asacha and each facility agreement included the same conversion option as the 2009 UFG loan facilities.

On 8 November 2011, as discussed in Note 6, 4,541,313 ordinary shares were issued to UFG and AGA in consideration of the conversion of the outstanding amounts of the above three loan facilities, in aggregate $6,802,279 including accrued interest.

In September 2011 UFG provided TSG with short term loan facilities amounting to $5 million on commercial terms, each with the same conversion option as their previous loans, exercisable prior to scheduled repayment 180 days after drawdown, comprising loans of $1 million on 1 September 2011, $2 million on 14 September 2011, $1 million on 15 September 2011 and $1 million on 19 September 2011. On 23 September 2011 AGA agreed to provide a short term loan facility of $3 million on commercial terms, with the same conversion option as the UFG loans, exercisable prior to scheduled repayment 180 days after drawdown.

After the reporting date, as discussed in Note 9, three of the short term loan facilities provided by UFG and part of the short term facility provided by AGA were converted into TSG ordinary shares. The fourth UFG facility and the remaining part of the AGA facility were repaid in March 2012 and April 2012 respectively.

.

6. Share capital and premium

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

On 8 November 2011, 4,541,313 ordinary shares were issued to UFG Asset Management (UFG) and AngloGold Ashanti Limited (AGA) in settlement of the Company's indebtedness, in aggregate $6,802,279 including accrued interest. 2,938,890 ordinary shares were issued to UFG, at 93.4 pence per share, and 1,602,423 ordinary shares were issued to AGA, at 93.6 pence per share, in consideration of the conversion of the outstanding amounts of three loan facilities as discussed in Note 5.

On 23 March 2010 3,533,534 ordinary shares were issued to AGA at 30.8 pence per share for a total cash consideration, before issuing costs, of £1.1 million ($1,636,956).

Also on 23 March 2010 11,222,805 ordinary shares were issued, also at 30.8 pence per share, to UFG and to AGA in settlement of the Company's indebtedness, in aggregate $5,209,133 including accrued interest. 9,408,002 shares were issued to UFG in consideration of the conversion of the outstanding amounts of two loan facilities as discussed in Note 5. 1,814,803 ordinary shares were issued to AGA in settlement of technical consultancy services provided by AGA.

The issue of shares to UFG and AGA in February 2012 in settlement of the Company's indebtedness, in aggregate $6,445,099 including accrued interest, is discussed in Note 9.

7. Revenue

8. Cost of sales

9. Events after the reporting date

In February 2012, 5,842,390 ordinary shares were issued to major shareholders UFG Asset Management (UFG) and AngloGold Ashanti Limited (AGA) in settlement of the Company's indebtedness, in aggregate $6,445,099 including accrued interest. 3,738,665 ordinary shares were issued to UFG, 2,808,151 ordinary shares on 1 February 2012 at 69.94 pence per share and 930,514 ordinary shares on 3 February 2012 at 69.98 pence per share, in consideration of the conversion of the outstanding amounts of three loan facilities as discussed in Note 5. 2,103,725 ordinary shares were issued to AGA, 1,578,620 ordinary shares on 1 February 2012 at 69.98 pence per share and 525,105 ordinary shares on 3 February 2012 at 69.75 pence per share, in consideration of the conversion of part of the outstanding amount of a loan facility as discussed in Note 5.

10. 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 2011 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 2010 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.