TSG.L Regulatory News (TSG)

Trans-Siberian Gold plc

("TSG" or the "Company")

Interim Results for the six months ended 30 June 2018

Trans-Siberian Gold plc (TSG.LN) announces its unaudited interim results for the period ended 30 June 2018.

Financial Highlights

· Record H1 revenue generation of approximately $27.6 million (H1 2017: $18.8 million)

· Profit before tax $3.2 million (H1 2017: $0.5 million)

· EBITDA $8.8 million (H1 2017 $5.4 million)

· Interim dividend of $1.0 million resulting in payment of $0.009 per share (H1 2017: $0.036 per share)

Operational Highlights

· Gold dore increased by 25% to 17,361 oz. (H1 2017: 13,897 oz.)

· Refined gold production 20,698 oz. (H1 2017: 15,007 oz.)

· Mine development 2,802 metres (H1 2017: 2,625 metres)

· Asacha plant processed average 15,370 tonnes per month, 2.3% above H1 2017

· Average gold grade: 6.2g/t (H1 2017: 5.1g/t)

· Average gold selling price of $1,324/oz. (H1 2017: $1,237/oz.)

· Cash cost per oz. gold sold $644 (H1 2017: $553)

Alexander Dorogov, CEO of TSG, commented:

"It is particularly pleasing to report record revenue for an interim period and a return of higher grade ore (6.5-8 g/t) in recent months. Our results in the first half of 2018 reflect the actions taken to address some of the challenges we faced. We will continue our efforts to improve operational performance and drive further efficiencies at Asacha.

I am pleased to announce our fourth consecutive dividend which underlines our commitment to deliver returns for shareholders. We continue to make demonstrable progress and shareholders can look forward to the remainder of the year with optimism."

Copies of the Company's Interim Report and Accounts will be available on the Company's website: www.trans-siberiangold.com 

Ends

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the publication of this announcement via Regulatory Information Service ('RIS'), this inside information is now considered to be in the public domain.

Chief Executive Officer's Review

Operational Review

In the six months to 30 June 2018, the Asacha Gold Mine produced 20,698 oz. (H1 2017: 15,007 oz.) of refined gold and 46,152 oz. (H1 2017: 22,212 oz.) of refined silver. Our total cash cost of $644/oz. (H1 2017: $553/oz.) remains competitive amongst our industry peers globally.

The average realised gold price increased to $1,324/oz., compared to $1,237/oz. in H1 2017. Production of gold in dore increased by 25% to 17,361 oz. (H1 2017: 13,897 oz.), silver in dore increased by 110% to 42,118 oz. (H1 2017: 20,078 oz.).

The average processed ore gold grade was 6.2 g/t, representing a 22% increase above the H1 2017 average of 5.1g/t, with further improvement in July (6.5 g/t) and August (7.9 g/t). Whilst this is a significant year-on-year improvement, the processed gold grade reflected the need to process some lower grade stockpile ore in order to maintain high plant throughput. We are committed to increasing the average gold grade and realise the potential of the orebody. The preparation of new ore blocks is gradually catching up with the stoping ore volume requirements. In H1 2018, stoping ore accounted for 54% of the total ore volume delivered to the plant (H1 2017: 43%).

The steps to address water ingress are on track. All of the major equipment for the main pumping station at level 150m has been delivered to the site. Construction works are progressing well both in the mine and on the surface. Operational testing is being conducted.

The gateway to the adit of Vein 25 is completed, providing access to a new orebody. Decline development is scheduled for 2019 with stoping works to start in 2020 while mining operations of the main deposit continue.

The Asacha plant processed 92,217 tonnes (a run-rate significantly above its designed annual capacity of 150,000 tonnes) and achieved 94.4% average gold recovery (H1 2017: 94.1%). We continue to blend higher grade stoping ore with lower grade stockpiled ore to ensure our processing capacity is fully utilized.

Gold production in H2 2018 is expected to improve as the effects of the installation of additional pumping equipment are felt. Accordingly, the Company's total gold production guidance range of 36,000 - 40,000 oz. for 2018 remains unchanged (2017: 33,872 oz.). The upper end of the range represents a year-on-year increase of approximately 9% in total gold production.

Mining and production data for H1 2018 at the Asacha Gold Mine is shown in the following table:

Employees and Safety

Our employees and their safety are our highest priority.

At 30 June 2018 TSG's subsidiary ZAO Trevozhnoye Zarevo ("TZ") employed 699 staff in Kamchatka (31 December 2017: 711).

The Group adopts a continuous improvement approach to advance health and safety standards at Asacha. During the Period, employees have attended various training courses, including labour and fire safety, accident response and emergency management, electric safety and the safety of hydro-technical facilities.

Unfortunately, on 20 April 2018 there was a fatal accident in the underground mine. A miner fell into a pipeway passage in the upraise from a pump chamber at level 100 to level 150. Investigation procedures involving the regulatory authorities and TZ staff have commenced. TZ is providing support to the miner's family.

During H1 2018 no other injuries were reported.

Asacha Mining Licence

In June 2018, and in line with expectations, the Russian State Subsoil Agency ("Rosnedra") approved TZ's application to extend the existing mining licence at the Asacha Gold Mine for a further six-year period. The extended mining licence will expire on 31 December 2024.

Financial Performance

H1 2018 generated record revenue of approximately $27.6 million (H1 2017: $18.8 million) and a profit before tax of $3.2 million (H1 2017: $0.5 million). The Group will continue to seek efficiencies to reduce our key cost metrics and thereby improve our financial performance wherever practicable.

Interim Dividend

In line with our commitment to make attractive and sustainable dividend payouts to shareholders, I am pleased to report that the Board has declared an interim 2018 dividend of 0.009 US cents per share equal to approximately $1.0 million (H1 2017: $4.0 million).

The Board reviews its dividend policy on a regular basis.

Board & Senior Management

In line with the Company's succession plan, the Board of Directors appointed Alexander Dorogov as Chief Executive Officer in July 2018. Mr. Dorogov succeeded Dmitry Khilov who had been CEO since October 2009 and led TSG through significant moments in its history including bringing the Asacha Gold Mine into production. Mr Dorogov was formerly the Company's Chief Financial Officer.

During H1 2018 and afterwards, a number of senior management appointments have also been made.

In March 2018, Konstantin Kornienko was appointed as Managing Director of TZ. Mr. Kornienko has more than 15 years of experience working at gold-processing plants, of which a decade has been in managerial positions. His previous experience includes building and operating gold-processing plants at Pervenets-Verninskoe (Polyus), Vysochaishy (GV Gold) and Severnoe Zoloto (Kinross Gold). Since 2011 he has been responsible for the gold-processing plant at the Asacha Gold Mine.

In June 2018, Alexey Malevanov was appointed as Chief Engineer of TZ. Mr. Malevanov has more than 15 years of experience in the mining industry, mainly in managerial positions in underground mining operations located in Far-East Russia. Prior to joining TZ, he was Deputy Executive Director at Berezitovy Mine in the Amur Region (Nordgold) between 2016 and 2018. He was Deputy Director of the Severny Rudnik mine (Norilsk Nickel) between 2014 and 2016, and Chief Engineer of Irtysh Rudnik (Kazakhstan, Kazakhmys Corporation) between 2011 and 2013. His previous experience includes managerial positions at the Julietta, Karalveem and Mnogovershinnoe mines.

In August 2018, Eugene Antonov was appointed as Chief Operating Officer of the Company's wholly owned subsidiary Trans-Siberian Gold Management LLC ("TSGM"). Mr. Antonov has more than 20 years of experience in the mining industry, mainly in managerial positions with responsibility for mine site operations and finance. In his previous appointments, he has established a track record of leading change, financial management and harnessing technology to drive operational efficiencies. Most recently he spent 11 years at Kinross Gold Corporation and was an integral part of the leadership team at the Kupol Mine in Far East Russia which generated the largest annual cash flow and achieved the lowest operating cost across the Kinross group. Between 1999 and 2007, he was employed at Bema Gold Corporation in Canada in various executive finance roles, including Director of Finance, until its acquisition by Kinross. His previous experience includes managerial positions at Teck in Canada.

These key leadership appointments are focused on driving operational efficiencies and improvements.

Outlook and priorities

Our number one priority is to enhance our existing mining operations at Asacha.

At the same time, we are well positioned to exploit future growth opportunities. We have a strong investment case and believe our commitment to an attractive and stable dividend pay-out should increase interest in the Company's shares and the Company more widely.

We are committed to acting in a responsible manner, protecting the environment, safeguarding the welfare of our employees and maintaining good relationships with the communities in which we operate.

Financial Review

Results

H1 2018 generated record revenue of approximately $27.6 million (H1 2017: $18.8 million).

Sales of 20,472 oz. of refined gold (H1 2017: 14,954 oz.) and 30,790 oz. of refined silver (H1 2017: 21,845 oz.) were $27.1 million and $0.5 million respectively (H1 2017: $18.4 million and $0.4 million).

Average realised prices were $1,324 per oz. gold and $17 per oz. silver (H1 2017 $1,233 per oz. gold and $17 per oz. silver).

Cost of sales was $19.9 million (H1 2017: $13.3million), reflecting the 37% increase of gold sold and 9% increase in the cost of sales per oz.

Cash cost per oz. gold excluding depletion, net of the silver credit and excluding royalty, was $644 (H1 2017: $553). The variance is attributable to higher fuel prices and consumption as well as higher staff costs. Depletion of mining properties is normally treated as a non-cash cost, however the Group has previously also reported cash cost per oz. including depletion because, in the early years of production, some mining properties costs were amortised over short periods. The Group now only reports cash cost per oz. excluding depletion.

The Group recorded an operating profit for the period of $ 3.6 million (H1 2017: $1.3 million), driven by higher volumes of gold sold (H1 2018: 20,472 oz. vs. H1 2017: 14,954 oz.) and higher average selling price (H1 2018: $1,324/oz. vs. H1 2017: $1,237/oz.).

Total administrative expenses were stable at $3.9 million (H1 2017: $3.9 million).

Finance expense reduced to $0.5 million (H1 2017: $0.9 million), reflecting the lower interest rate of 6.2% on the loan facilities with VTB Bank which were entered into in June 2017. The Group's previous loan facilities had an average interest rate of approximately 10%.

The profit for the period was $2.6 million (H1 2017: $29,000) net of exchange gains of $0.3 million (H1 2017: $0.2 million). The profit for the period included a tax charge of $0.6 million (H1 2017: $0.5 million).

Financial Position

Total equity was $78.3 million at 30 June 2018 compared to $78 million at 31 December 2017.

Capital expenditure amounted to $10.2 million (H1 2017: $8.7 million) relating primarily to active mine development at level 100m to secure stoping mining in 2019-2020 and achieving strategic goal of plant feed with high-grade ore as well as construction of underground pumping station at level 150m to address water ingress.

Ore stocks are stated net of impairment provisions of $4.5 million (31 December 2017: $4.0 million), representing the difference between the ore stockpile's expected net realisable value at a gold price of $1,250/oz. (H1 2017: $1,243/oz.) and cost, including processing, refining and royalties.

Cash generated from operations before working capital changes has increased from $5.7 million in H1 2017 to $12.3 million in H1 2018 reflecting the record level of revenue generated in the period. The cash balance reduced from $7.5 million at 31 December 2017 to $5.7 million mainly due to the repayment of borrowings.

Loans and borrowings reduced from $19.8 million at 31 December 2017 to $16.0 million at 30 June 2018 mostly due to $4.7 million repayment in the period off-set by $1.0 million of a further draw-down from the available facility.

Events after the reporting date

As previously stated, the Company executed its CEO succession plan with the appointment of Mr. Dorogov and other senior management changes.

There were no other significant events after the end of the reporting period.

Alexander Dorogov

Chief Executive Officer

25 September 2018

Consolidated Statement of Comprehensive Income

for the period ended 30 June 2018

Consolidated Statement of Financial Position

as at 30 June 2018

Consolidated Statement of Changes in Equity

for the period ended 30 June 2018

Consolidated Statement of Cash Flows

for the period ended 30 June 2018

Notes to the consolidated interim financial information

for the period ended 30 June 2018

1. General information

Trans-Siberian Gold plc (the Company) is a UK-based resources company, with the objective of acquiring and developing a portfolio of quality gold-mining assets in Russia.

The Company is a public limited company, incorporated and domiciled in the United Kingdom, and has subsidiaries based in the Russian Federation. The Company's registered office is 39 Parkside Cambridge CB1 1PN United Kingdom. The registered number of the Company is 1067991. The Company's shares are traded on the AIM Market of the London Stock Exchange.

2. Basis of preparation

The consolidated interim financial information has been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. It does not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2017 Annual Report.

The consolidated interim financial information for the six months ended 30 June 2018 and 30 June 2017 is unreviewed and unaudited and does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The comparative financial information for the year ended 31 December 2017 has been derived from the statutory financial statements for that year. Statutory financial statements for the year ended 31 December 2017 were approved by the Board of Directors on 29 May 2018 and filed with the Registrar of Companies. The Independent Auditors' Report on those financial statements was unqualified.

2.1 Going concern

The Group's operations are cash generative and management tightly control the level of committed expenditure to ensure that the Group has sufficient resources available to meet its liabilities as they fall due. Regular cash forecasts are reviewed to assess the potential impact of factors such as changes in commodity prices, production rates and the timing of capital expenditure.

The Group has reported an operating profit for the period of $3.6 million. The Directors have reviewed the Group's cash flow forecast for the period to 31 December 2019 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.

2.2 Critical accounting judgements and uncertainties

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this consolidated interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017.

2.3 New standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the consolidated interim financial information are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2017, except for the adoption of new standards effective as of 1 January 2018. However, the Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these new standards.

The following new standards and interpretations became effective on 1 January 2018 and have been adopted by the Group:

IFRS 15 has replaced IAS 18 Revenue and IAS 11 Construction Contracts as well as various interpretations previously issued by the IFRS Interpretations Committee. The Group's accounting policies have remained unchanged from those previously disclosed in the 2017 annual financial statements.

IFRS 9 has replaced IAS 39 Financial Instruments: Recognition and Measurement. All financial assets of the Group continue to be classified and measured at amortised cost. There are no material financial assets subject to the expected credit loss model defined within IFRS 9, except for cash. The level of credit risk that the Group is exposed to has not given rise to material allowances within the expected credit loss model.

3. Restatement

During 2017 accounting errors were identified that required an adjustment of balances reported at 31 December 2016. This effected the opening financial position of the comparative period in this consolidated interim financial information.

These errors principally related to the earlier than intended depreciation of certain plant and machinery assets acquired under finance lease arrangements and the incorrect posting of payments made on initial inception of these arrangements as foreign exchange losses.

The errors have been corrected by restating each of the affected financial statement line items for the prior period, as follows:

Consolidated statement of financial position

4. Segment information

The Group's operations are entirely focused on gold production and exploration and development activities within the Russian Federation, with its corporate head office in the UK. The operating segment has been identified on the basis of internal reports about the components of the Group provided to the chief operating decision makers. The chief operating decision makers have been identified as the Chief Executive Officer and the non-executive board members.

The Group has one reportable segment, being operations in Russia. The operating results of this segment are regularly reviewed by the Group's chief operating decision makers in order to make decisions about the allocation of resources and to assess their performance. With the exception of $1.1 million corporate costs (H1 2017: $2.2 million), the numbers in the primary statements reflect the results of the sole operating segment.

5. Property, plant and equipment

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

Capitalisation of depreciation

· $526,000 (H1 2017: $309,000) of the depreciation charge is included in additions to mining properties

· $23,000 (H1 2017: $35,000) of the depreciation charge is included in additions to assets under construction

· $243,000 (H1 2017 $662,000) of the depreciation charge is charged to inventories

6. Inventories

Ore stocks' impairment provision reflects the difference between their expected net realisable value at a gold price of $1,250/oz. (H1 2017: $1,243/oz.), and cost, including processing, refining and royalties. Gold in progress, silver in progress and ore stocks include mining properties depletion $243,000 (H1 2017: $662,000).

7. Borrowings

Movement in borrowings is analysed as follows:

On 19 June 2017, the Company's wholly owned subsidiary TZ entered into an agreement with VTB Bank for a $15 million loan facility for a 5-year term, repayable in equal amounts quarterly with the first repayment effective seven calendar quarters after initial drawdown.

On 21 June 2017, TZ entered into a further agreement with VTB Bank for an additional $5 million debt facility for a 3-year term, repayable on the loan expiry date.

Both loan facilities bear annual interest at 6.2% and are secured against the equity and fixed assets of TZ only. Additionally, TZ was required to enter into an exclusive gold sales agreement with VTB Bank, which became effective from January 2018.

The new facilities were used to repay TZ's loans with Sberbank amounting to $16.5 million and to provide additional funds for working capital and other corporate purposes.

8. Share capital

Share capital at 30 June 2018 amounted to $18.9 million (31 December 2017: $18.9 million). During the period, no ordinary shares in the Company were issued.

9. Revenue

10. Earnings per share

The calculation of basic profit per 10p ordinary share is based on the retained profit for the period of $2,557,000 (H1 2017: $29,000) and on 110,053,073 (H1 2017: 110,053,073) ordinary shares, being the weighted average number of ordinary shares in issue and ranking for dividends during the year.

The Group had no dilutive potential ordinary shares in either periods that would serve to reduce the profit per ordinary share. There is therefore no difference between the basic and diluted profit per share for either year.

11. Dividends paid and proposed

A final dividend of $0.021 per ordinary share, equivalent to approximately $2.3 million, that relates to the period to 31 December 2017 was paid on 25 July 2018.

An interim dividend of $0.009 per ordinary share was declared by the Board of directors on 25 September 2018. It is payable on 26 October 2018 to shareholders who are on the register at 05 October 2018. This interim dividend, amounting to $1 million, has not been recognised as a liability in this interim financial information. It will be recognised in shareholders' equity in the year to 31 December 2018.

12. Cash generated from operations

13. Contingencies

Management have identified a potential income tax exposure in respect of the taxation of intragroup interest. The directors have obtained specialist advice in this respect and believe that prior years' available tax losses should be sufficient to shelter any possible tax liability. No provision in relation to this possible exposure has been recognised in these consolidated financial statements as the likelihood of a liability arising is considered to be remote.

The Company's wholly owned subsidiary TZ has received a claim from the Federal Service for Supervision of Use of Natural Resources, RosPrirodNadzor ("RPN") over the classification of payments for disposal of waste materials following a site inspection in 2016. Having taken appropriate advice, management believe that TZ has a strong legal position and as such, dispute the claim made by RPN. The claim could potentially amount to approximately $2.1 million.

14. Events after the reporting date

There were no significant events after the end of the reporting period.