TSG.L Regulatory News (TSG)

Trans-Siberian Gold plc

Major shareholder update

Proposed capital reduction

Notice of General Meeting

LONDON: 5 September 2016 - Trans-Siberian Gold plc ("TSG" or the "Company") (TSG.L) reported on 28 July 2016 that its major shareholder UFG Asset Management ("UFG") had acquired an additional 28,387,621 TSG ordinary shares, thereby increasing its interest in the Company from 53.82% to 79.62%. This increased UFG shareholding is above the 75% threshold required under the Companies Act 2006 (the "Act") for shareholder approval of special resolutions and under the AIM Rules for shareholder approval of various transactions, including AIM Rule 15 'Fundamental Change of Business'.

The Company has now been advised by UFG that it intends to maintain TSG's AIM listing and to support the Company and the TSG Board in their efforts to develop and expand the Company's asset base.

Proposed capital reduction

The Company intends to seek the approval of both its shareholders and the High Court (the "Court") for a capital reduction, involving the cancellation of the Company's share premium account (the "Capital Reduction"), in order to create sufficient distributable profits to facilitate the future payment of dividends or other methods by which cash may be returned to shareholders.

As at 31 December 2015, the Company's retained earnings amounted to US$10,943,320, however TSG has confirmed with its auditor that these do not constitute distributable profits under the Act and applicable accounting standards, as required to permit the payment of a dividend, or otherwise to return cash, to shareholders. It is also anticipated that, although the Group's activities are currently both profitable and cash generative, in the absence of the Capital Reduction the Company itself is unlikely to generate adequate distributable profits for the foreseeable future. The TSG Board considers it desirable that the Company has both the ability and the maximum flexibility to consider the payment of dividends and other means by which value may be returned to shareholders.

Although under the Act and applicable accounting standards, TSG's share premium account is a non-distributable capital reserve, treated, except in limited circumstances, as part of the Company's paid up share capital, a public company may reduce its capital including its share premium account, providing it obtains the approval of its shareholders and that the Court confirms the reduction. The reserve arising on such a reduction may, subject to any Court order, be utilised in eliminating the accumulated deficit, if any, on a company's profit and loss account and in creating distributable profits available for the payment of dividends, the purchase by the company of its own shares or facilitating other means of returning cash to shareholders or for the company's other corporate purposes.

It is therefore proposed that the amount currently standing to the credit of TSG's share premium account, representing the accumulated difference between the price at which ordinary shares have been issued and their nominal value, (such amount being, as at 2 September 2016, US$89,520,424) be cancelled and, subject to the approval of the Court, that the resulting sum of US$89,520,424 be credited to the distributable profits of the Company.

In order to effect the Capital Reduction, the Company requires the authority of shareholders through the passing of a special resolution (requiring a 75% majority) at a General Meeting of shareholders to be held on 29 September 2016, notice of which will be sent to shareholders today. The Company has received an irrevocable undertaking from UFG to vote in favour of the resolution.

Subject to and following shareholder approval of the Capital Reduction, an application will be made to the Court in order to confirm and approve the Capital Reduction. The Company has provisionally scheduled the two Court Hearings at which, subject to the discretion of the Court, the Capital Reduction will be confirmed. The actual date of the Court hearing to confirm the Capital Reduction will be advertised in a national newspaper, as directed by the Court, at least seven days prior to that hearing.

The Capital Reduction will take effect when the Court Order and a statement of capital approved by the Court have been filed with the Registrar of Companies. The effective date of the Capital Reduction is currently expected to be at the beginning of November 2016. This date is likely to be within a few working days of the second Court Hearing at which the Capital Reduction is confirmed by the Court, which is currently expected to be during October 2016.

In order to approve the Capital Reduction, the Court will need to be satisfied that the interests of the creditors of the Company will not be prejudiced. The Company's share capital, which will be unaffected by the Capital Reduction, amounts to US$18,987,583 and the Company has few creditors, wherefore the Board considers that the interests of the creditors of the Company will not be prejudiced by the Capital Reduction, however the Company will put suitable measures in place, if required to do so by the Court.

Current trading and prospects

Underground mining activity at Asacha in July was affected by an unexpected rockfall. The need to install additional roof supports reduced the amount of new ore cut during that month. The consequential impact on July's production of processing a higher proportion of lower grade stockpile ore was partially offset by increasing plant throughput to 14,137 mt, 13% above the planned level.

Mine preparatory activities have commenced at level 150 m. Mining blocks within 175 and 150 levels will be prepared for stoping shortly. Level 100 m is now expected to be reached in March 2017, with stoping starting there by mid-2017, enabling the delivery each month of up to 12,500 tonnes of high quality stoping ore to the plant.

Mining and production at Asacha in the first seven months of 2016 is shown in the following table.

TSG expects to report its Q3 2016 mining and production data in mid-October 2016.

Ends