TSG.L Regulatory News (TSG)

21 Sep 2005 07:00

Trans-Siberian Gold PLC21 September 2005 news release For release: 07:00, 21 September 2005 Trans-Siberian Gold plc Results for the half year ended 30 June 2005 Highlights • Second subscription by AngloGold Ashanti completed • Revised mining and metallurgical plans completed at Asacha • Asacha project financing discussions continue with international and Russian banks • Veduga pre-feasibility study nearing completion • Geological structural model of Veduga project area completed • Promising exploration indications at Bogunay Trans-Siberian Gold plc ("Trans-Siberian") (TSG.L) is pleased to report with itsinterim results to 30 June 2005, on a period of further progress in thedevelopment of its two gold projects at Asacha in Kamchatka, far east Russia,and at Veduga in Krasnoyarsk Krai, central Siberia. Trans-Siberian is in the development phase of its two projects and thereforereceived no operating income in the period. Administration expenses for the halfyear amounted to US$3.2m compared to US$2.6m for the corresponding period of2004 and US$6.1m for 2004 as a whole. The operating loss was US$4.3m (US$2.3m), after charging US$1.1m of exchangelosses (US$340,000 gain) from the impact of a strengthening US dollar onsterling denominated bank deposits. Interest earned was US$314,000 (US$282,000). Capitalised exploration and evaluation expenditure and tangible assets increasedby US$4.4m and US$0.7m respectively (US$4.0m and US$0.3m respectively).Prepayments of US$1.8m relating to the purchase of construction materials forthe Asacha camp were also made. Cash in hand and at bank increased from US$20.4mto US$22.9m, including the receipt of US$14.5m net of issuing costs, from thesecond subscription for Trans-Siberian shares by AngloGold Ashanti Limited ("AGA") under the Subscription Agreement dated 30 June 2004 and subsequently amended. Asacha Project, Kamchatka Oblast Work continues in a number of areas to advance the project; however a fullgo-ahead decision for construction of the mine and processing facility has yetto be made. Raising the debt finance for the project is now in process with the mandatedbanks (Standard Bank/EBRD) continuing their due diligence. Their consultantsHatch have reviewed the revised mining plan prepared by the Russian institute,VNIPIPromtechnologi. This revised mining plan took the mining plan prepared byAMC in the May 2004 feasibility study and adapted it to conform to Russianregulations. There are some outstanding issues in reconciling the State approvedreserves with the JORC resource prepared by AMC, and there are concerns aboutthe mining methods to be used in certain ground conditions and the amount ofwaste removal in the plan. Although these issues have yet to be resolved, theVNIPI plan has built-in flexibility to allow the mine operator to adapt miningmethods to suit actual conditions. Hatch also expressed concerns about certain elements of the metallurgicaltestwork on which the MDM feasibility study flowsheet was based. Consequentlynew samples were collected from across the orebody, and sent to the Russianinstitute, IRGIRIDMET, in Irkutsk for a programme of testwork. The MDM designfor crushing and grinding was based on a bond index value of 23.0 kW.h/t, whichwas considered high. The new testwork has shown an average value of 14.6 kW.h/t,which will permit the utilisation of a smaller mill and reduce powerconsumption. In other respects the testwork has validated the design approach ofMDM and allowed for some optimisation. A re-design of the proposed tailingsfacility based on a study of the options by IRGIRIDMET is in train. In parallel with the dialogue with Standard Bank and EBRD, alternative debtfinance sources from within Russia have been actively pursued. Discussions areadvanced with two leading Russian State-owned banks, Sberbank and Vneshtorgbank. In Kamchatka work is in progress to finish and upgrade the 60 km access road tothe mine which was constructed in 2004. The General Contractor has beenmobilised to assemble the prefabricated camp which was acquired in 2004 andshipped to Kamchatka. Following environmental approval by the State Expertise inMoscow, reclassification of forest land for industrial purposes has begun,initially with category three forest covering the main site area. Plans are inhand to start the rehabilitation of the existing underground workings as aprelude to mining. Major equipment items for the mine, power generation plant and processingfacility have been sourced and are ready to be ordered. An application for an amendment to the Asacha licence condition covering thetiming of the first 1,000 kg of gold production has been lodged with therequisite authorities and is being processed. The diamond drilling programme started in July 2004 was finished in July 2005.The principal reason for the drilling was to upgrade the inferred resources tomeasured and indicated and to delineate the orebody at depth. In total some24,500 metres were drilled, 9,000 metres by contractors and 15,500 metres by theCompany's own Boart Longyear LM55 wireline rig. The majority of the drilling hasbeen either in-fill or step-out from the main vein zone containing the currentresources. There have been 19 intersections above 5 g/t gold of which 13 hadvalues in excess of 10 g/t and 5 over 20 g/t. There have also been 35 low grade(between 1 and 5 g/t) intersections. All intersections were narrow (average 1.66m) and have associated silver values. The local geologists calculate that thedrilling has added about 30,000 oz or about 5% to the current Asacha Russianresource figure and some reclassification will also result. Although theseresults have been input to the Datamine database for Asacha no new resourcecalculation has, as yet, been made. Plans have been drawn up by the Company's geologists for an exploration drillingprogramme designed to delineate new resources within the 24 sq km Asacha licencefrom targets separate from the current ore zone. Eight prospective targets havebeen identified based on the recommendations of Dr Greg Corbett, who visited thearea in 2001 and 2003, and also of AGA's geologist Eric Roth who was there inFebruary 2005. Veduga Project, Krasnoyarsk Krai The pre-feasibility study being undertaken by Aker Kvaerner is close tocompletion. The parallel 'Substantiation of Investment' study by the Moscowinstitute Giprotsvetmet, required for Russian permitting purposes, is alsonearing completion. Based on testwork results, three viable processing optionsfor the partially refractory Veduga ore are being evaluated - whole ore pressureoxidation, concentrate pressure oxidation and concentrate bio-oxidation. Allthree routes are energy intensive and it is evident that the availabilities andcosts of power are going to be key drivers in the economic evaluation. Openpittable ore reserve estimates for all three options have been established byDMT, together with an oxide reserve and options for underground mining. Athroughput rate of the order of 850,000 tpa is envisaged. Associated laboratorytestwork for the three processing options, geotechnical work and environmentalbase line studies have also been carried out. During the year to the end of August 2005 a total of some 11,800 metres ofdrilling has been completed at Veduga, 4,000 by a contractor and 7,800 by theCompany's own rigs. About 5,800 metres of the drilling has been directly linkedto the pre-feasibility study (data verification, hydrogeological/geotechnicaland sterilisation). 6,000 metres have been exploratory but in and aroundexisting orebodies to delineate these and to improve the resource definition.Grade has been encountered in 34 holes, with values in line with previousresults. Under the auspices of the AGA Technical Consultancy Agreement a majorre-interpretation of the structural controls of the Veduga orebodies has beencarried out by the Company's geologists and AGA's Dr Rod Holcombe. This hasinvolved extensive new mechanical trenching (of the order of 5,000 metres) andre-logging of 8,500 metres of old drill core. This new structural model explainsthe main features of the geology of the Veduga area in the vicinity of theorebodies. The timing of mineralization in relation to deformation and theformation of key faults can now be determined with confidence. This andpreliminary results from the trenching has opened up new possibilities in anumber of areas. In the Greater Licence Area field work has continued. In the area immediately tothe south and southwest of the main Veduga orebodies (the Interessny and Westernzones) where low grade mineralisation in metasediments was encountered in 2004 asystematic trenching programme has been completed with some promising visibleindications. To the north (about 2 km from the main Veduga ore zones) in thePowerline prospect a recently drilled diamond drill hole over a soil anomalyencountered a 30 metre interval of sulphide mineralisation (pyrite andarsenopyrite). Bogunay, Krasnoyarsk Krai Exploration activity in the 47.5 sq km Bogunay licence 150 km east ofKrasnoyarsk city, which was acquired in 2004, has been concentrated in twoareas, the Krasnoyarsky zone, the location of mining activity in the 1940s, andthe new Bogunay Vostochny prospect in the eastern part of the property. Somepromising indications have resulted. In the Krasnoyarsky zone 20 trenches have been cut across the 2.3 km knownstrike extent. Mineralisation is associated with 'beresitic' alteration withwidths of the order of 10 metres. Few results of sampling are yet to handhowever in one trench, K 26, located in the vicinity of an old adit (no. 16) a12 metre auriferous zone has been identified with economic mineralisation over 5metres including a 1.25 metre section assaying 16 g/t gold. It is evident thatthe Krasnoyarsky zone has high grade sections however it appears that they maybe sporadic. More results are needed before any conclusions can be drawn. The metalliferous potential of the Vostochny prospect area was confirmed by asoil geochemical survey carried out in May 2005 from which the presence of gold,zinc and lead at levels 50 to 100 times above background were detected. Theanomaly, as defined geochemically, has a strike length of over 1 km, trending NWand conformable with the regional structure of the Bogunay sector of theAngara-Kansk Block, and a width of some 300 metres. Using the plans of thegeochemical and geophysical surveys, a series of 6 trench lines have been cutacross the anomalous zone in a NE direction exposing segments along 700m of theanomaly. The exposures in the trenches reveal a zone of strongly developed andcontinuous beresitic alteration with a width of 80 to 100m. This is very wellexposed in trenches 41 and 44. Within the zone of beresitic alteration finelydisseminated pyrite is ubiquitous. Locally there are zones up to 1-2m wide withchalcopyrite and associated galena. 100 channel samples are being sent toIRGIRIDMET for analysis. As the Vostochny prospect lies within a well-developedsystem of hydrothermal alteration with a paragenesis of sulphide minerals moreor less identical to that found in the main Bogunay workings the Company'sgeologists are optimistic that significant gold values will be returned. If thatis confirmed, a follow-up drilling programme would be justified. Ends Contacts: Jocelyn WallerManaging DirectorTrans-Siberian Gold 07778 164376 Simon OlsenFinance Director,Trans-Siberian Gold 01223 265768 Keith IronsBankside Consultants 020 7367 8873 / 07885 356639 Trans-Siberian Gold plcConsolidated profit and loss account for the 6 months ended 30 June 2005 Reviewed Unaudited Audited 6 months to 6 months to 12 months to 30.06.2005 30.06.2004 31.12.2004 US$ US$ US$TURNOVER - - -Administration expenses (3,200,832) (2,641,890) (6,055,468)Exchange (loss) gain (i) (1,140,911) 340,924 1,635,704 OPERATING LOSS (4,341,743) (2,300,966) (4,419,764) Interest receivable and similar income 313,521 282,466 677,861Loss on ordinary activities before taxation (4,028,222) (2,018,500) (3,741,903)Tax on loss on ordinary activities (6,781) - (50,340) (4,035,003) (2,018,500) (3,792,243)Minority interest - equity - 73,770 134,518LOSS FOR THE PERIOD (4,035,003) (1,944,730) (3,657,725) Basic loss per ordinary share (cents) 10.41 6.79 11.60 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 loss of $1,140,911 principally reflects the appreciation of the US dollar on sterling cash deposits. Trans-Siberian Gold plc Note Reviewed Unaudited AuditedConsolidated balance sheet at 30 June 2005 30.06.2005 30.06.2004 31.12.2004 US$ US$ US$ FIXED ASSETSExploration and evaluation properties 1 22,158,368 13,100,521 17,787,680Tangible assets 2 9,743,571 2,946,993 9,016,252TOTAL FIXED ASSETS 31,901,939 16,047,514 26,803,932 CURRENT ASSETSDebtorsAmounts falling due within one year 3,312,943 1,027,425 1,253,597Amounts falling due after more than one year 4,105,215 1,689,182 3,198,513 7,418,158 2,716,607 4,452,110Cash at bank 22,866,955 19,440,305 20,419,335 30,285,113 22,156,912 24,871,445 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR (1,526,250) (1,119,263) (1,473,270) NET CURRENT ASSETS 28,758,863 21,037,649 23,398,175 TOTAL ASSETS LESS CURRENT LIABILITIES 60,660,802 37,085,163 50,202,107 Provisions for liabilities and charges (83,177) - (83,177) NET ASSETS 60,577,625 37,085,163 50,118,930 CAPITAL AND RESERVESCalled up share capital 3 6,933,497 4,693,974 5,815,464Share premium account 4 60,846,822 33,785,135 47,471,157Profit and loss account 4 (7,202,694) (1,454,696) (3,167,691)SHAREHOLDERS' FUNDS 60,577,625 37,024,413 50,118,930Minority Interest - 60,750 -CAPITAL EMPLOYED 60,577,625 37,085,163 50,118,930 Trans-Siberian Gold plcConsolidated cash flow statement for the 6 months ended 30 June 2005 Note Reviewed Unaudited Audited 6 months to 6 months to 12 months to 30.06.2005 30.06.2004 31.12.2004 US$ US$ US$ NET CASH OUTFLOW FROM OPERATING ACTIVITIES 5 (4,065,762) (3,366,884) (8,272,983) RETURNS ON INVESTMENTS AND SERVICING OFFINANCEInterest received 331,337 331,262 706,465Interest paid - - -Net cash inflow from returns on investments 331,337 331,262 706,465and servicing of finance CORPORATION TAX PAID (8,887) - (48,234) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPurchase of tangible fixed assets (ii) (2,947,471) (1,424,940) (7,686,456)Receipts from disposal of tangible fixed - - 1,000assetsExploration and evaluation expenditure (4,486,921) (3,964,452) (8,013,515)Net cash outflow from capital expenditure and (7,434,392) (5,389,392) (15,698,971)financial investment ACQUISITIONSPayments to acquire subsidiary undertakings - - (120,951)Cash held by subsidiaries acquired - - -Net cash outflow from acquisitions - - (120,951) NET CASH OUTFLOW BEFORE USE OF LIQUID (11,177,704) (8,425,014) (23,434,674)RESOURCES AND FINANCING MANAGEMENT OF LIQUID RESOURCES(Increase) decrease in bank deposits (2,343,758) 10,110,714 8,703,504 FINANCINGIssue of ordinary shares, net of expenses 14,493,698 141,380 14,948,892 INCREASE IN CASH FOR THE PERIOD 972,236 1,827,080 217,722 RECONCILIATION OF CASH BALANCESCash at start of period 1,066,072 846,369 846,369Currency exchange differences (1,993) (19,272) 1,981Increase in cash for the period 972,236 1,827,080 217,722CASH AT END OF PERIOD 2,036,315 2,654,177 1,066,072 ii. Purchase of tangible fixed assets of $2,947,471 includes prepayments of $1,839,969 relating to the purchase of construction materials for the Asacha camp. Notes to the financial statements 1. EXPLORATION AND EVALUATION PROPERTIES Movements on deferred exploration and evaluation expenditure, by location of the property, are as follows: 01.01.2005 Additions 30.06.2005 US$ US$ US$Kamchatka - Asacha 7,756,941 1,804,007 9,560,948Krasnoyarsk - Veduga 9,701,888 2,395,540 12,097,428Krasnoyarsk - Bogunay 328,851 171,141 499,992 17,787,680 4,370,688 22,158,368 2. TANGIBLE FIXED ASSETS Office equipment (a) Plant and Motor and Assets under Buildings machinery vehicles furniture construction Total US$ US$ US$ US$ US$ US$ COSTAt 01.01.2005 839,710 1,713,727 641,505 499,470 5,719,892 9,414,304Additions 5,680 82,407 501,419 41,932 476,064 1,107,502Disposals (2,182) (4,115) - (335) - (6,632)At 30.06.2005 843,208 1,792,019 1,142,924 541,067 6,195,956 10,515,174 ACCUMULATED DEPRECIATIONAt 01.01.2005 (41,865) (145,203) (82,602) (128,382) - (398,052)Charge for period (79,859) (142,446) (71,429) (81,133) - (374,867)(b)Disposals 436 857 - 23 - 1,316At 30.06.2005 (121,288) (286,792) (154,031) (209,492) - (771,603) NET BOOK VALUEAt 31.12.2004 797,845 1,568,524 558,903 371,088 5,719,892 9,016,252At 30.06.2005 721,920 1,505,227 988,893 331,575 6,195,956 9,743,571 a. Assets under construction comprises $3,474,526 in relation to the construction of an access road to Asacha, and $2,684,552 for building construction and $36,878 for plant and equipment at Asacha, Veduga and Bogunay. b. $293,424 of the depreciation charge related to fixed assets used on exploration and evaluation projects and was charged to deferred costs in accordance with the group's accounting policy. Notes to the financial statements (continued) 3. CALLED UP SHARE CAPITAL 30.06.2005 31.12.2004 Number £ Number £ AUTHORISEDOrdinary shares of 10p each 100,000,000 10,000,000 100,000,000 10,000,000 30.06.2005 31.12.2004 Number US$ Number US$ ALLOTTED AND FULLY PAIDAt the beginning of period 34,932,364 5,815,464 28,650,779 4,675,704Shares issued:Placing for cash 6,131,585 1,118,033 6,131,585 1,112,147Options exercised - - 150,000 27,613At the end of period 41,063,949 6,933,497 34,932,364 5,815,464 On 31 May 2005, 6,131,585 ordinary shares of 10p each were issued at 130p for atotal cash consideration, before issuing costs, of £8.0m ($14,534,432) toAngloGold Ashanti Limited, being the second subscription under the SubscriptionAgreement dated 30 June 2004 as amended on 22 December 2004, 15 April 2005 and27 April 2005. The revised terms of the Subscription Agreement were approved bythe Company's shareholders at the EGM on 27 May 2005. 4. RESERVES SHARE PREMIUM 30.06.2005 31.12.2004 US$ US$At the beginning of period 47,471,157 33,721,190Shares issued:Placing for cash - gross 13,416,399 14,118,705 - costs (40,734) (465,384) 13,375,665 13,653,321Options exercised - 96,646At the end of period 60,846,822 47,471,157 PROFIT AND LOSS ACCOUNT 30.06.2005 31.12.2004 US$ US$At the beginning of period (3,167,691) 490,034Loss for the period (4,035,003) (3,657,725)At the end of period (7,202,694) (3,167,691) Notes to the financial statements (continued) 5. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 6 months to 6 months to 12 months to 30.06.2005 30.06.2004 31.12.2004 US$ US$ US$Operating loss (4,341,743) (2,300,966) (4,419,764)Depreciation 81,443 90,948 128,802Loss on disposal of fixed assets 5,316 49,250 5,045Provision for liabilities and charges - - 83,177Increase in debtors and prepayments (151,016) (287,949) (615,485)Increase in VAT debtor (833,774) (596,901) (2,195,467)Increase in creditors and accruals 305,638 19,658 262,811Loss (profit) on foreign exchange 868,374 (340,924) (1,522,102)Net cash outflow from operating activities (4,065,762) (3,366,884) (8,272,983) This information is provided by RNS The company news service from the London Stock Exchange