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28 Jul 2008 07:00
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Trans-Siberian Gold plc
Proposed placing to raise US$13.6 million
Proposed equity conversion of US$8.2 millionĀ existingĀ debtĀ
Asacha Project update
Extraordinary General Meeting
LONDON:Ā 28 JulyĀ 2008Ā -Ā Trans-Siberian Gold plc ("TSG" or "the Company") (TSG.L)Ā reported on 24 June 2008 that the Group's total requirement for additional funds before the Asacha mine is cash flow positive was US$44 million and that this requirement was US$6 million lower than previously reported as a result of AngloGold Ashanti's ("AGA")Ā agreement to convert the US$6 millionĀ outstandingĀ balance ofĀ its loanĀ (the "AGA Loan")Ā into TSG shares, at the same time and on the same terms as the planned equity raising which the Company had announced onĀ 22 May 2008.
The Company also reported that it planned to satisfy that forecast additional funding requirement of US$44 million, and to avoid a delay to the project because of funding constraints, through raising additional equity by means of a placing of up to US$19 million and debt finance of US$25-30 million. It further reported that UFGĀ Asset Management ("UFG"), which currently holds 34.92% of the Company's shares,Ā had confirmed its commitment to subscribe for a minimum of US$10 million in the placing and, if necessary, to provide part of this amount as bridging finance prior to the completion of the placing. OnĀ 17 July 2008, UFG advanced US$2 million to the Company as bridging financeĀ (theĀ "UFG Loan"), whichĀ is being utilised to fund capital expenditure at Asacha.
TSG is now pleased to announceĀ proposals to strengthen its capital base and provide additional financial resources by raisingĀ US$13.4Ā million, net of expenses,Ā through aĀ conditionalĀ placingĀ ofĀ newĀ ordinaryĀ shares at 25.5p per shareĀ (the "Placing")Ā and by convertingĀ the AGA Loan and the UFG Loan, in aggregateĀ US$8.2Ā million,Ā into newĀ ordinaryĀ shares in the CompanyĀ (the "Conversion"),Ā also at 25.5p per share.
Proposed Placing
The proposed Placing involves a conditional placing by Seymour Pierce of 26,657,899 new ordinary shares with UFG, two Directors (Alexander Doumnov and Peter Burnell) and other shareholders. The Placing is conditional on the approval by TSG's shareholders at an Extraordinary General Meeting of the Company, to be held on 18 August 2008 (the "EGM").Ā The majority of these funds will be utilised in the completion of the Asacha mine and its associated plant and infrastructure inĀ Kamchatka,Ā Far EastĀ Russia, the balance to be used for further exploration at TSG's properties inĀ KamchatkaĀ and for general corporate purposes.Ā
The PlacingĀ price of 25.5 pence perĀ share is based on the volume weighted averageĀ closingĀ priceĀ of TSG's sharesĀ for the 20 trading daysĀ up to and includingĀ 23 July 2008.Ā
The PlacingĀ shares, when issued and fully paid, will represent approximately 31.8%Ā ofĀ TSG's enlargedĀ issuedĀ shareĀ capital.
ConversionĀ of the AGA and UFG Loans
Subject to shareholder approval at the EGM, the loans will be converted into new TSG ordinary shares by applying the closing US dollar:pound sterling exchange rate on 15 August 2008 and a Conversion price of 25.5p. At an exchange rate of US$2.00:Ā£1, the Conversion will result in the issue of approximately 16,062,748 new ordinary shares in the Company, of which 3,962,825 shares will be issued to UFG and 12,099,923 shares to AGA respectively, in consideration of the release of the Company's indebtedness to UFG and AGA under their respective loans.
The ConversionĀ shares, when issued,Ā will represent approximately 19.1%Ā ofĀ TSG's enlarged issuedĀ shareĀ capital.Ā The ConversionĀ shares to be issued to UFG are in addition to the PlacingĀ shares to be issued to UFG.Ā
Effect of the Placing and the Conversion
TheĀ new ordinaryĀ shares to be issued pursuant toĀ the Placing and the Conversion will represent approximately 50.93%Ā of the Company'sĀ enlargedĀ issuedĀ shareĀ capital.Ā As a result ofĀ the Placing and the Conversion, UFG's interest willĀ increase toĀ approximately 52.25%Ā and AGA's interest will reduce to approximately 29.04%Ā of theĀ Company's shares.
Asacha
Further progress has continued to be made at the Asacha Project. By the end of June, more than 300 metres of mine development had been completed. In addition, the manufacture of the main process plant equipment has been completed and the equipment is currently being shipped fromĀ China.Ā Excavation of the plant's foundation area has also been completed, as well as its gravel backfilling. The construction of concrete bedding for the plant has started and the road between the plant site and the tailings storage site has been completed. The first tailings storage compartment has been cleared of trees and approximately 50% of vegetation cover. Finally, contracts for the design of the external 35kV power supply system, in line with the decision to rely on grid power instead of diesel power generation (to avoidĀ the latter's increasingly high costs and supply risks), and for Asacha's on-site power networks have been signed.
The total capital cost of the Asacha project to the start of production is now estimated at US$105.7 million, net of US$9.2 million VAT recoveries, compared to the May 2008 estimate of US$105.6 million. The total project cost includes pre-commissioning mining costs of US$5.2 million, other pre-operating expenditure of US$23.9 million, "first fill" equipment spares and consumables of US$1.0 million and contingency of US$1.8 million. Although certain costs have increased due to the assumption of a stronger Russian rouble against the US dollar, this has been offset by a US$3.0 million increase in forecast VAT refunds prior to the start of production, with US$2.6 million now expected to be recovered in the second half of 2008, and a reduction of US$2.2 million in the contingency provision. US$63.1 million, net of US$1.4 million VAT recovered, has been spent up to the end of June 2008. A further US$42.6 million, net of US$7.8 million VAT recoveries, is forecast to be spent prior to the start of production. US$10.4 million of capital expenditure will be incurred after the commencement of production.
Project finance, the terms of which are being negotiated with 2 Russian banks, is expected to contribute around US$27 million of the remaining cost of US$42.6 million. Production of gold is expected to commence in the third quarter of 2009.Ā
Rodnikova
The drilling programme in the first half of 2008 encompassed more than 5,500 metres. Analysis of three holes drilled on the southern flank of the vein zone traced the zone to a depth of 150 metres, with intercepts of 19 metres @ 7.8 grammes/tonne (g/t) Au, 85.4 g/t Ag, 21.8 metres @ 6.05 g/t Au, 40.5 g/t Ag and 10 metres @ 4.76 g/t Au, 39.0 g/t Ag. Further results from the drilling programme on the southern flank of Zone 44 betweenĀ VilyuchaĀ RiverĀ and Spokolny Creek are expected during the second half of 2008, following which a decision on a further exploration programme will be taken.
Extraordinary General Meeting
Shareholders' approval is being sought at the EGM for an increase in the Company's authorised share capital and for an increase in the Directors' authorities to allot shares and to disapply statutory pre-emption rights in relation to the PlacingĀ and the Conversion.Ā Shareholders' approval is also being sought forĀ aĀ new Employee Share Option Scheme, to replace the current scheme whose 5 year term expires in September 2008. The proposed new scheme retainsĀ the commencement of the production of gold by any Group CompanyĀ as a pre-condition to any exerciseĀ of options.
Related Party TransactionsĀ
The Placing and the Conversion are defined as related party transactions under the AIM Rules.Ā The Directors, other thanĀ Dr Fedorov and Messrs Fenner and Khilov (who are connected to UFG)Ā and Messrs Doumnov and BurnellĀ whoĀ areĀ alsoĀ participating in the Placing,Ā having been so advised byĀ Seymour Pierce, the Company's nominated adviser, consider the terms of the Placing to be fair and reasonable insofar asĀ the Company's shareholders are concerned.
The Directors, other thanĀ the three directorsĀ who are connected to UFG, having been so advised by Seymour Pierce, consider the terms of the Conversion to be fair and reasonable insofar asĀ the Company's shareholdersĀ are concerned.
Ends
Contacts:
TSG
Simon OlsenĀ +44 (0)Ā 1223Ā 265760
SeymourĀ Pierce
Stuart Lane +44 (0) 20Ā 7107 8000
Geological information in this report is based on data reviewed by Mr V Zhouravlev, Chief Geologist of OOO Trans-Siberian Gold Management who is an expert of the GKZ (State Reserves Commission of theĀ Russian Federation) with 45 years relevant experience in mineral exploration and a Qualified Person underĀ AIMĀ rules. Mr Zhouravlev consents to the inclusion of the information in the form and context in which it appears.
Copies of theĀ theĀ CircularĀ sent toĀ TSGĀ shareholdersĀ are available at theĀ offices of Seymour Pierce Limited (20 Old Bailey,Ā London,Ā EC4M 7EN) uponĀ request. Copies of the Circular are also available fromĀ TSG'sĀ website inĀ accordance with Rule 26 of theĀ AIMĀ Rules for Companies,Ā http://www.trans-siberiangold.com
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