Asacha project and funding update


 

TIDMTSG 
 
RNS Number : 8157R 
Trans-Siberian Gold PLC 
07 May 2009 
 

 
 
 
 
Trans-Siberian Gold plc 
 
 
Asacha project and funding update 
 
 
LONDON: 7 May 2009 - Trans-Siberian Gold plc ("TSG" or "the Company") (TSG.L) 
reported on 16 December 2008 that the requirement for additional funds before 
the Asacha mine is cash flow positive, previously forecast at US$27 million, had 
reduced to US$22 million. It also reported that a leading Russian bank had 
expressed its positive view of the project and indicated its willingness to 
proceed further, while making clear that no new credit approvals would be 
obtained until early 2009. Accordingly the Group's short term spending plans 
were revised to ensure that existing funds were sufficient until April 2009. 
 
 
The Company reports that while the Russian bank has maintained its positive 
stance towards the project, it has not yet provided its decision in respect of 
project finance. The Group's short term spending plans have therefore been 
revised further to ensure that existing funds are sufficient until mid June 
2009. 
 
 
Given the deteriorating conditions in the Russian credit market and the 
potential for a delayed decision from the bank, the Company has also been 
discussing the Group's further funding requirements with other parties including 
the Company's major shareholder UFG Asset Management. 
 
 
UFG has agreed in principle to contribute part of the additional funding 
required, which is now forecast at US$25 million, provided that the Company 
secures the balance from other sources. UFG has also agreed to consider the 
provision of bridge finance while negotiations continue with other potential 
sources of funding. 
 
 
Although the Company believed in December 2008 that first gold production by the 
end of 2009 remained feasible in spite of the delay in plant commissioning due 
to the short term expenditure cuts, the further expenditure slowdown, which has 
included a two stage reduction in the Asacha workforce of approximately 50%, 
will inevitably impact on the work which can be undertaken during the 2009 
summer season in Kamchatka. As a consequence, TSG now expects first gold 
production at Asacha in the second half of 2010, by which time the ore stockpile 
(currently around 30,000 tonnes) will have increased to 69,000 tonnes. The 
Company believes that, in the current economic environment, this delay will not 
create any serious problems in its relationship with the authorities with 
respect to fulfilling the license agreement. 
 
 
The total capital cost of the Asacha project prior to commencement of production 
is now estimated at US$102.9 million, net of US$9.7 million VAT recoveries, 
compared to the December 2008 estimate of US$101.6 million. The total project 
cost includes pre-commissioning mining costs of US$3.8 million, other 
pre-operating expenditure of US$29.1 million, "first fill" equipment spares and 
consumables of US$1 million and contingency of US$1.6 million. Increased 
pre-operating costs stemming from the later commencement of production are 
expected to be offset by a US$3.4 million reduction in capital costs (including 
a US$1.4 million reduction in the costs of installing the external power 
supply), in part reflecting a weaker Russian rouble (RUR35:US$1, compared with 
RUR27:US$1 in the December 2008 projection). 
 
 
Projected operating costs have also further reduced through the changed exchange 
rate assumption. At a gold price of US$750/oz, Life of mine ("LOM") cash costs 
on an all equity basis on total gold production of 590,000 oz are forecast at 
US$163/oz, before taking account of a US$18/oz credit from silver production. 
Cash costs including all royalties and taxes (in total US$66 million, net of VAT 
recoveries) on an all equity basis are forecast at US$274/oz. Total costs on the 
same basis, after depreciation of all capital expenditure (including US$9.3 
million post start up) and pre-start up mining and other operating expenditure, 
are forecast at US$467/oz, giving a US$283/oz margin at a gold price of 
US$750/oz. 
 
 
Actual expenditure on the project up to February 2009 amounted to US$79.8 
million, net of US$4.2 million VAT recovered. The remaining costs prior to the 
commencement of production are estimated at US$23.1 million, net of further VAT 
recoveries of US$5.5 million, comprising: 
 
 
+---------------+---------------------------------------------------------+------------+ 
|               |                                                         |        US$ | 
|               |                                                         |    million | 
+---------------+---------------------------------------------------------+------------+ 
| Capital       | Mine and mining equipment and facilities                |        2.5 | 
| expenditure   |                                                         |            | 
+---------------+---------------------------------------------------------+------------+ 
|               | Gold plant, site facilities and tailings storage (1st   |        5.5 | 
|               | phase)                                                  |            | 
+---------------+---------------------------------------------------------+------------+ 
|               | Off-site power supply and other infrastructure          |        7.9 | 
+---------------+---------------------------------------------------------+------------+ 
|               | Contingency                                             |        1.6 | 
+---------------+---------------------------------------------------------+------------+ 
|               | Total capital                                           |       17.5 | 
+---------------+---------------------------------------------------------+------------+ 
| Other costs   | Pre-production mining, spares and consumables and other |       11.1 | 
|               | operating costs                                         |            | 
+---------------+---------------------------------------------------------+------------+ 
|               |                                                         |       28.6 | 
+---------------+---------------------------------------------------------+------------+ 
| Less VAT      |                                                         |        5.5 | 
| recoveries    |                                                         |            | 
+---------------+---------------------------------------------------------+------------+ 
|               |                                                         |       23.1 | 
+---------------+---------------------------------------------------------+------------+ 
 
 
A further US$9.3 million of capital expenditure (including US$0.8 million 
contingency) will be incurred after the commencement of production on mine 
development and the second phase of tailings storage and solid waste landfill, 
previously estimated at US$9.2 million. 
 
 
In line with the aim to minimise all expenditure not directly related to the 
Asacha project, the Toft office has been closed, at an annual saving of around 
US$50k, although TSG's Finance Director remains UK based. 
 
 
A further announcement will be made in due course. 
 
 
Ends 
Contacts: 
 
 
TSG 
Simon Olsen  +44 (0) 1480 811871 
Seymour Pierce 
John Depasquale +44 (0) 20 7107 8000 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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