TSG.L Regulatory News (TSG)

28 Sep 2006 07:02

Trans-Siberian Gold PLC28 September 2006 Trans-Siberian Gold plc Interim Results for the half year ended 30 June 2006 CHIEF EXECUTIVE OFFICER'S REPORT Trans-Siberian Gold plc ("TSG" or "the Company") (TSG.L) is pleased to report itsinterim results to 30 June 2006, on a period of further progress in thedevelopment of its Russian gold projects in Kamchatka and Krasnoyarsk Krai. Highlights • Asacha mine development expected to commence in 4th quarter 2006 • Asacha production targeted to commence in 4th quarter 2008 • Indicative terms for Asacha project finance agreed with Standard Bank • Sale of Krasnoyarsk properties for US$40 million agreed in principle TSG is in the exploration and development phase of its gold projects andtherefore received no operating income in the period. Administration expensesfor the half year amounted to US$3.4m compared to US$3.3m for the correspondingperiod of 2005 and US$7.0m for 2005 as a whole. 2005 comparatives have beenrestated as a result of the first time adoption of FRS 20 "Share-based payment". The operating loss was US$2.5m (2005 first half US$4.4m), after creditingUS$874,000 of exchange gains (2005 first half US$1.1m loss) from the impact of aweakening US dollar on sterling denominated bank deposits. Interest earned wasUS$155,000 (2005 first half US$314,000). Interest payable of US$11,000 (2005 US$nil) relates to a US$10m loan fromAngloGold Ashanti Limited ("AGA") received in June 2006. As announced on 21September 2006 it has been agreed that this loan may be converted into TSGshares by the Company at any time after 31 December 2006, subject to shareholderapproval and the provisions of the City Code on Takeovers and Mergers shouldthis lead to AGA's interest in TSG exceeding 29.9%. Such conversion will be atthe then current market price of the Company's shares. Capitalised exploration and evaluation expenditure and tangible assets increasedby US$3.0m and US$3.5m respectively (2005 first half US$4.4m and US$0.7mrespectively). Cash in hand and at bank increased from US$11.9m to US$12.3m,including the receipt of the US$10m AGA loan. Asacha Project, Kamchatka Oblast Work continued in a number of areas to advance the Asacha gold project. Asannounced on 30 May 2006, the Asacha licence condition in respect of the timingof the first 1,000 kg of gold production was amended, extending this conditionto 31 December 2008. The shortcomings in the mining and processing plans identified in the technicalreview undertaken on behalf of the banks mandated to provide up to US$50 millionof project finance for Asacha have been addressed. The Company understands thatthe final technical review report will be delivered to Standard Bank in the nearfuture. Indicative terms for this project finance were agreed in June 2006. Workon the necessary legal due diligence and documentation for the project financefacility has continued in parallel to the technical review. The balance of the funding required for the development of Asacha is expected tobe provided by the sale of TSG's two Krasnoyarsk Krai based subsidiaries to AGAfor US$40 million, in respect of which an agreement in principle was announcedon 21 September 2006. Veduga Project, Krasnoyarsk Krai The pre-feasibility scoping study undertaken by Aker Kvaerner in 2005 concludedthat none of the three oxidation processes for the partially refractory ore atVeduga were economically viable at the then current gold price, through acombination of high capital costs for the oxidation plant, a relatively smallore resource in relation to the capital costs and the absence of grid power. During 2006, efforts have been directed at resolving these issues. Initialscoping studies indicated that modifications to the metallurgical process couldfacilitate greater concentration during flotation, thereby reducing the volumeto be treated with a consequent reduction in operating costs. Reappraisal of thegeochemical data for Veduga in conjunction with a new structural model wasundertaken, prior to commencement in August 2006 of an airborne electro-magneticsurvey of the deposit and the surrounding exploration licence area. This surveywas intended to identify targets for drilling in the 2006/07 winter drillingseason, aimed at increasing the size of the resource and thereby achievingeconomies of scale. As announced in June 2006, grid power for the project isexpected to be available from the second phase of the Boguchanskayahydro-electric power plant. As announced last week, TSG has agreed in principle to sell all of its interestin the Veduga project, as well as its other Krasnoyarsk Krai property, Bogunay,to AGA for a cash consideration of US$40 million. The importance of thistransaction for the Group's financial position and the basis of preparation ofthe interim financial statements is explained in more detail in Note 2 to thefinancial information. Oleg Bagirov 27 September 2006 Contacts: Simon OlsenFinance Director,Trans-Siberian Gold 01223 265760 / 07770 484965 Keith IronsBankside Consultants 020 7367 8873 / 07885 356639 INDEPENDENT REVIEW REPORT TO TRANS-SIBERIAN GOLD PLC Introduction We have been instructed by the directors of Trans-Siberian Gold plc (the"Group") to review the financial information for the six months ended 30 June2006 which comprises the consolidated balance sheet as at 30 June 2006and the related consolidated profit and loss account and cash flowstatement for the six months then ended and related notes. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the AlternativeInvestment Market ("AIM") rules and ensuring that the accounting policies andpresentation applied to the interim figures are consistent with those applied inpreparing the preceding annual accounts except where any changes, and thereasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 1 to the financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the disclosed accounting policies have been applied.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly we do notexpress an audit opinion on the financial information. This report, includingthe conclusion, has been prepared for and only for the company for the purposeof assisting the directors in their ongoing stewardship of the company and forno other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Emphasis of matter - going concern In arriving at our review conclusion, which is not qualified, we have consideredthe adequacy of the disclosures made in Note 2 to the financial informationconcerning the Group's requirements for additional financing and its plans forraising this finance. These conditions indicate the existence of a materialuncertainty which may cast significant doubt about the Group's ability tocontinue as a going concern. The financial information does not include theadjustments that would result if the Group was not able to continue as a goingconcern. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. PricewaterhouseCoopers LLPChartered AccountantsLondon 27 September 2006 -----------------------------------------------------------------------------------CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the 6 months ended 30 June 2006----------------------------------------------------------------------------------- Reviewed Restated (ii) Restated (ii) 6 months to 6 months to 12 months to 30.06.2006 30.06.2005 31.12.2005 US$ US$ US$-----------------------------------------------------------------------------------TURNOVER - - -Administration expenses (3,331,811) (3,293,948) (7,046,509)Exchange gain (loss) (i) 874,322 (1,140,911) (1,853,442)----------------------------------------------------------------------------------- OPERATING LOSS (2,457,489) (4,434,859) (8,899,951) Interest receivable and similarincome 154,528 313,521 643,897Interest payable and similar charges (10,552) - ------------------------------------------------------------------------------------Loss on ordinary activities beforetaxation (2,313,513) (4,121,338) (8,256,054)Tax on loss on ordinary activities (24,889) (6,781) (10,843)-----------------------------------------------------------------------------------Loss on ordinary activities aftertaxation (2,338,402) (4,128,119) (8,266,897)Minority interest - equity 38,279 - (38,279)-----------------------------------------------------------------------------------LOSS FOR THE PERIOD (2,300,123) (4,128,119) (8,305,176)----------------------------------------------------------------------------------- Basic loss per ordinary share(cents) 5.59 10.65 21.40 There is no difference between the loss on ordinary activities before taxationand the loss for the financial period stated above and their historical costequivalents. There are no recognised gains or losses other than those stated above. (i). Exchange gain of $874,322 principally reflects the depreciation of the USdollar on sterling cash deposits. (ii). Restated as a result of the first time adoption of FRS 20 'Share-basedpayment' (see note 1 below). -----------------------------------------------------------------------------------CONSOLIDATED BALANCE SHEETat 30 June 2006----------------------------------------------------------------------------------- Note Reviewed Reviewed Audited 30.06.2006 30.06.2005 31.12.2005 US$ US$ US$-----------------------------------------------------------------------------------FIXED ASSETS Exploration and evaluationproperties 3 27,701,712 22,158,368 24,699,333Tangible assets 4 19,569,258 9,743,571 16,099,665-----------------------------------------------------------------------------------TOTAL FIXED ASSETS 47,270,970 31,901,939 40,798,998 CURRENT ASSETS Debtors Amounts falling due within one year 3,370,274 3,312,943 2,187,805 Amounts falling due after more than one year 4,853,568 4,105,215 4,608,939----------------------------------------------------------------------------------- 8,223,842 7,418,158 6,796,744Cash at bank 12,301,644 22,866,955 11,902,705----------------------------------------------------------------------------------- 20,525,486 30,285,113 18,699,449 CREDITORS - AMOUNTS FALLINGDUE WITHIN ONE YEAR (3,418,367) (1,526,250) (2,817,671)----------------------------------------------------------------------------------- NET CURRENT ASSETS 17,107,119 28,758,863 15,881,778----------------------------------------------------------------------------------- TOTAL ASSETS LESS CURRENTLIABILITIES 64,378,089 60,660,802 56,680,776 Convertible debt falling dueafter more than one year (10,000,000) - -Provisions for liabilities andcharges (156,694) (83,177) (156,694)-----------------------------------------------------------------------------------NET ASSETS 54,221,395 60,577,625 56,524,082----------------------------------------------------------------------------------- CAPITAL AND RESERVESCalled up share capital 5 6,951,312 6,933,497 6,951,312Share premium account 6 60,821,126 60,846,822 60,821,126Profit and loss account 6 (13,551,043) (7,202,694) (11,286,635)-----------------------------------------------------------------------------------SHAREHOLDERS' FUNDS 54,221,395 60,577,625 56,485,803Minority Interest - - 38,279-----------------------------------------------------------------------------------CAPITAL EMPLOYED 54,221,395 60,577,625 56,524,082----------------------------------------------------------------------------------- -----------------------------------------------------------------------------------CONSOLIDATED CASH FLOW STATEMENTfor the 6 months ended 30 June 2006----------------------------------------------------------------------------------- Note Reviewed Reviewed Audited 6 months to 6 months to 12 months to 30.06.2006 30.06.2005 31.12.2005 US$ US$ US$----------------------------------------------------------------------------------- NET CASH OUTFLOW FROMOPERATING ACTIVITIES 7 (2,611,793) (4,065,762) (8,313,619) RETURNS ON INVESTMENTS ANDSERVICING OF FINANCE Interest received 163,590 331,337 653,123Interest paid - - ------------------------------------------------------------------------------------Net cash inflow from returnson investments and servicingof finance 163,590 331,337 653,123----------------------------------------------------------------------------------- CORPORATION TAX PAID (60,675) (8,887) (12,949)----------------------------------------------------------------------------------- CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT Purchase of tangible fixedassets (3,418,183) (2,947,471) (6,485,043)Receipts from disposal oftangible fixed assets 15,496 - -Exploration and evaluationexpenditure (4,147,946) (4,486,921) (7,255,755)-----------------------------------------------------------------------------------Net cash outflow fromcapitalexpenditure and financial (7,550,633) (7,434,392) (13,740,798)investment ----------------------------------------------------------------------------------- ACQUISITIONSPayments to acquiresubsidiary - - (10,542)undertakingsCash held by subsidiaries acquired - - ------------------------------------------------------------------------------------ Net cash outflow fromacquisitions - - (10,542)----------------------------------------------------------------------------------- NET CASH OUTFLOW BEFORE USEOF (10,059,511) (11,177,704) (21,424,785)LIQUID RESOURCES ANDFINANCING MANAGEMENT OF LIQUIDRESOURCES Decrease (increase) in bankdeposits 1,183,876 (2,343,758) 6,263,975 FINANCING Issue of ordinary shares,net - 14,493,698 14,485,817of expensesIncrease in convertible debt 10,000,000 - ------------------------------------------------------------------------------------INCREASE IN CASH FOR THEPERIOD 1,124,365 972,236 (674,993)----------------------------------------------------------------------------------- RECONCILIATION OF CASHBALANCES Cash at start of period 390,553 1,066,072 1,066,072Currency exchange 1,176 (1,993) (526)differencesIncrease in cash for theperiod 1,124,365 972,236 (674,993)-----------------------------------------------------------------------------------CASH AT END OF PERIOD 1,516,094 2,036,315 390,553----------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES a. The financial information in the interim report has been prepared on thebasis of accounting policies consistent with those set out in the Annual Reportand Accounts 2005, with the exception of the adoption of FRS 20 'Share-basedpayment' which has been applied for the first time with effect from 1 January2006. The Group makes equity-settled share-based payments to certain employees underthe terms of its employee share option scheme. In accordance with FRS 20, theseequity-settled share-based payments are measured at fair value at the date ofgrant determined using a Black-Scholes valuation model and expensed on astraight-line basis over the vesting period, based on an estimate of the sharesthat will ultimately vest. b. The financial information is unaudited but has been reviewed by the auditorsand their report is set out above. c. The financial information shown for the year ended 31 December 2005 does notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985 ("the Act") and has been extracted from the full Annual Report andAccounts for the year ended 31 December 2005 which has been filed with theRegistrar of Companies. The Independent Auditors' Report on the financialinformation contained in the Annual Report and Accounts 2005 was unqualified,however because of the existence of a material uncertainty which castsignificant doubt about the Group's ability to continue as a going concern, theIndependent Auditors' Report contained an emphasis of matter to this effect. TheIndependent Auditors' Report did not contain a statement under either Section237(2) or (3) of the Act. 2. GOING CONCERN As discussed in Note 2 'Going concern' in the Group's Annual Report and Accounts2005, the Group has significant funding needs in order to finance the Asachaproject, continue exploration at its properties and provide ongoing workingcapital. The Company anticipated being able to raise equity during the thirdquarter of 2006 to enable it to meet its funding requirements. However, asannounced on 17 August 2006, it was not possible to raise the required level ofequity funding on acceptable terms, wherefore the Company elected to consider anumber of financing alternatives. As stated in the Chief Executive Officer's Report and discussed further in Note8 'Subsequent events', on 21 September 2006 the Company announced that, subjectto limited due diligence and the required regulatory approvals, including anamendment to the Veduga licence, it had agreed in principle to sell all of itsinterests in its two wholly owned subsidiaries, OOO GRK Amikan ("Amikan") andOOO AS Angarskaya Proizvodstvennaya Kompaniya ("AS APK"), to AngloGold AshantiLimited ("AGA") for a cash consideration of US$40 million. The Group intends to utilise the majority of the proceeds from the sale ofAmikan and AS APK, together with project finance of up to US$50 million fromStandard Bank plc as announced on 9 June 2006, to bring the Asacha mine intoproduction by late 2008 with the balance to be used for the Group's generalworking capital requirements until Asacha is in production. As at the date of publication of the interim report, the sale of Amikan and ASAPK and the project finance from Standard Bank plc remain subject to finalagreement. Should the Company be unable to conclude the sale of Amikan and ASAPK in the short term and secure the project finance from Standard Bank plc, theGroup may not be able to develop the Asacha project or continue as a goingconcern for the foreseeable future. Based on their discussions with the Group's financial advisers and majorshareholders, the directors believe that the sale of Amikan and AS APK willproceed as planned and the project finance from Standard Bank plc will besecured in a timescale which enables the residual Group to continue inoperation. Accordingly, they are confident that the Group will continue as agoing concern and have prepared the interim financial information on that basis.The interim financial information does not include the adjustments that wouldresult if the Group was not able to continue as a going concern. 3. EXPLORATION AND EVALUATION PROPERTIES Movements on deferred exploration and evaluation expenditure, by location of theproperty, are as follows: -------------------------------------------------------------------------------- 01.01.2006 Additions 30.06.2006 US$ US$ US$--------------------------------------------------------------------------------Kamchatka - Asacha 9,491,185 1,893,791 11,384,976Krasnoyarsk - Veduga 14,181,128 594,558 14,775,686Krasnoyarsk - Bogunay 1,027,020 514,030 1,541,050-------------------------------------------------------------------------------- 24,699,333 3,002,379 27,701,712-------------------------------------------------------------------------------- 4. TANGIBLE FIXED ASSETS ---------------------------------------------------------------------------------------------------------- Plant and Motor Office Assets under Buildings machinery vehicles equipment construction(a) Total and furniture US$ US$ US$ US$ US$ US$----------------------------------------------------------------------------------------------------------COST At 01.01.2006 981,333 1,817,921 1,145,838 557,965 12,753,915 17,256,972Additions 12,891 227,644 9,364 18,380 3,568,981 3,837,260Disposals (14,208) (14,690) - (1,545) - (30,443)----------------------------------------------------------------------------------------------------------At 30.06.2006 980,016 2,030,875 1,155,202 574,800 16,322,896 21,063,789---------------------------------------------------------------------------------------------------------- ACCUMULATED DEPRECIATION At 01.01.2006 (210,725) (367,239) (299,354) (279,989) - (1,157,307)Charge for period(b) (83,478) (100,161) (98,762) (66,299) - (348,700)Disposals 4,960 6,078 - 438 - 11,476----------------------------------------------------------------------------------------------------------At 30.06.2006 (289,243) (461,322) (398,116) (345,850) - (1,494,531)---------------------------------------------------------------------------------------------------------- NET BOOK VALUE At 31.12.2005 770,608 1,450,682 846,484 277,976 12,753,915 16,099,665----------------------------------------------------------------------------------------------------------At 30.06.2006 690,773 1,569,553 757,086 228,950 16,322,896 19,569,258---------------------------------------------------------------------------------------------------------- (a). Assets under construction comprise $4,331,652 in relation to the constructionof an access road to Asacha, and $11,267,862 for building construction and$723,382 for plant and equipment at Asacha, Veduga and Bogunay. (b). $261,298 of the depreciation charge related to fixed assets used onexploration and evaluation projects and was charged to deferred costs inaccordance with the group's accounting policy. 5. CALLED UP SHARE CAPITAL-------------------------------------------------------------------------------------------- Number 30.06.2006 Number 31.12.2005 £ £--------------------------------------------------------------------------------------------AUTHORISEDOrdinary shares of 10p each 100,000,000 10,000,000 100,000,000 10,000,000-------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- Number 30.06.2006 Number 31.12.2005 US$ US$--------------------------------------------------------------------------------------------ALLOTTED AND FULLY PAID At the beginning of period 41,163,949 6,951,312 34,932,364 5,815,464Shares issued:Placing for cash - - 6,131,585 1,118,033Options exercised - - 100,000 17,815--------------------------------------------------------------------------------------------At the end of period 41,163,949 6,951,312 41,163,949 6,951,312-------------------------------------------------------------------------------------------- 6. RESERVES--------------------------------------------------------------------------------SHARE PREMIUM 30.06.2006 31.12.2005 US$ US$--------------------------------------------------------------------------------At the beginning of period 60,821,126 47,471,157Shares issued:Placing for cash - gross - 13,416,399 - costs - (128,783)-------------------------------------------------------------------------------- - 13,287,616Options exercised - 62,353--------------------------------------------------------------------------------At the end of period 60,821,126 60,821,126-------------------------------------------------------------------------------- --------------------------------------------------------------------------------PROFIT AND LOSS ACCOUNT Restated 30.06.2006 31.12.2005 US$ US$--------------------------------------------------------------------------------At the beginning of period (11,286,635) (3,167,691)Share-based payments charged to profit and loss 35,715 186,232Loss for the period (2,300,123) (8,305,176)--------------------------------------------------------------------------------At the end of period (13,551,043) (11,286,635)-------------------------------------------------------------------------------- 7. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES -------------------------------------------------------------------------------------- Restated Restated 6 months to 6 months to 12 months to 30.06.2006 30.06.2005 31.12.2005 US$ US$ US$--------------------------------------------------------------------------------------Operating loss (2,457,489) (4,434,859) (8,899,951)Depreciation 87,402 81,443 159,719Loss on disposal of fixed assets 3,471 5,316 8,871Provision for liabilities andcharges - - 73,517Increase in debtors and prepayments (242,384) (151,016) (189,157)Increase in VAT debtor (199,023) (833,774) (1,405,695)Increase in creditors and accruals 618,965 305,638 175,183(Profit) loss on foreign exchange (458,450) 868,374 1,577,662Share-based payments charged toprofit and loss 35,715 93,116 186,232--------------------------------------------------------------------------------------Net cash outflow from operatingactivities (2,611,793) (4,065,762) (8,313,619)-------------------------------------------------------------------------------------- 8. SUBSEQUENT EVENTS On 21 September 2006, the Company announced that, subject to limited duediligence and the required regulatory approvals, including an amendment to theVeduga licence, it had agreed in principle to sell all of its interests in itstwo wholly owned subsidiaries, OOO GRK Amikan and OOO AS AngarskayaProizvodstvennaya Kompaniya, to AngloGold Ashanti Limited for a cashconsideration of US$40 million. The Interim Report was approved by the Board of Directors on 27 September 2006. This information is provided by RNS The company news service from the London Stock Exchange