Orsu Metals Corporation ("Orsu" or the "Company" or the "Group"), is a dual
listed (TSX:OSU)(AIM:OSU) London-based precious and base metals exploration and
development company today reports its audited results for the period ended 31
December 2009. All amounts are reported in United States Dollars unless
otherwise indicated. Canadian Dollars are referred to herein as CAD$.
2009 HIGHLIGHTS
-- January 2009 - Orsu completed an updated mineral resource and mineral
reserve estimates for Varvarinskoye.
-- January 2009 - Orsu announced that the lending syndicate comprised of
Investec Bank Limited, Investec Bank (UK) Limited, Nedbank Limited and
Natixis Bank (the "Lenders") conditionally approved the extension of the
deadline for the Company's principal debt payment of $16.65 million,
which was due on December 31, 2008, to March 31, 2009, which amount was
owed to the Lenders by Joint Stock Company Varvarinskoye ("JSCV"), a
then wholly owned subsidiary of the Company.
-- February 2009 - all necessary approvals were received from Export Credit
Insurance Corporation, South Africa ("ECIC") for the extension of the
deadline for the Company's principal debt payment of $16.65 million to
March 31, 2009.
-- April 2009 - Orsu announced that it had not yet reached an agreement on
the restructuring of the loan repayments and hedging obligations due by
JSCV under its loan and hedging facilities and that the discussions were
ongoing with the Lenders.
-- May 2009 - Orsu provided an update of on-going work at the Talas Project
and Tokhtazan Project in Kyrgyzstan and the Karchiga Project in
Kazakhstan.
-- June 2009 - Orsu entered into a sale and purchase agreement to sell to
Polymetal all of its interest and obligations in the Varvarinskoye
Project.
-- September 2009 - In conjunction with the anticipated sale of the
Varvarinskoye Project, Mr Randy Reichert resigned, effective September
4, 2009, from the position of Chief Operating Officer of the Company to
pursue other business interests.
-- October 2009 - Orsu completed the sale of its 100% owned Varvarinskoye
Project and the transfer of all of its related obligations to Polymetal.
-- November 2009 - Orsu announced the following changes to the Company's
board of directors (the "Board of Directors") and management, effective
from November 12, 2009, following the sale of the Varvarinskoye Project,
to reflect the Company's focus on its exploration:
-- Mr Takhirzhan Baratov resigned as Executive Director of Orsu and was
retained as an executive advisor to Orsu for its remaining and
potential future exploration projects in the Republic of Kazakhstan;
-- Dr Alexander Yakubchuk (formerly Orsu's Director of Exploration) was
appointed as Orsu's Chief Operating Officer.
-- November 2009 - Orsu completed a consolidation of the Company's common
shares on a ten for one basis effective November 24, 2009, immediately
following which the total issued share capital of the Company was
45,696,049 common shares.
-- November 2009 - Orsu reached an agreement to settle the class action
claim, subject to court approval, which was commenced against EMC in the
Ontario Superior Court of Justice in June 2008 (the "Class Action
Claim") for CAD$2.2 million, to be shared equally between Orsu and
Orsu's insurer.
POST YEAR END HIGHLIGHTS
-- February 2010 - Gold Fields Limited, through its subsidiary Gold Fields
Orogen Holding BVI Limited ("Gold Fields"), completed the First Phase of
the Talas Joint Venture in the Kyrgyz Republic, pursuant to which Gold
Fields earned a 60% interest in the Talas joint venture company, Kami
Associates Limited, the Company's subsidiary and the 100% owner of Talas
Copper Gold LLC, (the registered owner of the Talas Project) (the "Talas
Joint Venture Company") by funding exploration expenditures of CAD$10
million. Gold Fields subsequently notified the Company that it would not
exercise the Second Phase Option to increase its interest in the Talas
Joint Venture Company from 60% to 70% through the funding of additional
exploration expenditure. As a result, the "Earning Period" under the
joint venture agreement dated December 3, 2008, as amended on August 14,
2009, between the Company, Gold Fields, Lero Gold Corporation, Talas
Copper Gold LLC and the Talas Joint Venture Company (the "JV Agreement")
was concluded and the Company retained a 40% interest in the Talas Joint
Venture Company, subject to the terms and conditions of the JV
Agreement.
-- February 2010 - the Ontario Superior Court of Justice approved the
settlement of the Class Action Claim. The settlement became effective on
March 22, 2010 following the expiry of a 30-day appeal period with no
appeals having been received by the Company. The Company and the other
defendants retain the right to terminate the settlement agreement if too
many class members opt out during the 60-day opt out period, which will
commence no later than April 6, 2010. However, at this time, it is not
expected that this right will need to be exercised. Under the terms of
the settlement agreement, the Szuszkiewicz action and the Class Action
Claim will be dismissed.
MANAGEMENT'S DISCUSSION AND ANALYSIS
A full Management's Discussion and Analysis of the results for the year ended 31
December 2009 ("MD&A") and Financial Statements ("Financials") and Annual
Information Form for the Company's financial year ended 31 December 2009 will
soon be available on the Company's profile on SEDAR (www.sedar.com) or on the
Company's website (www.orsumetals.com). These can also be obtained on
application to the Company. The following information has been extracted from
the MD&A and the Financials.
FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
For the year ended December 31, 2009 the Company recorded a profit of $99
million, compared with a loss of $322.6 million for the year ended December 31,
2008 and a loss of $77.6 million for the year ended December 31, 2007.
All of the Company's sales revenues and associated cost of sales relate to
discontinued operations.
For continuing operations, the loss for 2009 of $10.6 million is significantly
lower than the loss for 2008 of $104.4 million, mainly due to a $119.5 million
impairment write down of mineral properties in 2008. Excluding such write downs
in 2008, the profit for 2008 was $15.1 million.
Exploration costs for 2009 were broadly in line with 2008, as were net interest
expenses. However, general and administrative costs for 2008 were $8 million
greater than for 2009, mainly due to: 2008 staff termination costs of $3.9
million, relating primarily to changes in senior management in connection with
the Company's acquisition of Lero and lower legal and professional fees incurred
during 2009. Stock based compensation costs were $3.1 million in 2008 compared
with $2 million in 2009, due to the lower net vesting charge from 21 million
stock options lapsing as a result of employees leaving the Company during 2009
following the sale of the Varvarinskoye Project and no new options being granted
during 2009 (16.1 million granted during 2008). The net $35.1 million future
income tax credit in 2008 (2009, $nil) arose from the 2008 impairment of the
Lero mineral properties acquired by the Company.
The Class Action Claim settlement payment was made in November 2009 at a cost of
$1.0 million (CAD$ 1.1 million), pending court approval of the settlement
agreement, which was subsequently received in February 2010.
For continuing operations, the loss for 2007 of $5.9 million is significantly
lower than the losses for both 2009 and 2008, as the Company's administrative
overhead costs were significantly lower during 2007 (pre the Lero acquisition).
Also there were no significant staff termination costs during 2007 and legal and
professional fees were also lower during 2007 (2008 included professional fees
relating to the Lero acquisition; 2009 included professional fees relating to
the Class Action Claim settlement). The majority of the Company's expenses
during 2007 related to the construction of the Varvarinskoye Project and were
capitalised accordingly.
In respect of the Company's cashflows, the decrease in cash and cash equivalents
for continuing operations for the year ended December 31, 2009 was $2.8 million,
compared with a decrease of $17.5 million during 2008. The 2009 decrease in cash
and cash equivalents was driven by the Company's general and administrative
costs, offset in part by a $2.1 million reimbursement of London corporate
overheads costs incurred on behalf of the Varvarinskoye Project, legal and
professional costs as referred to above, the Class Action Claim settlement
payment as referred to above and the Company's ongoing funding of its
exploration projects. The 2008 decrease in the Company's cash and cash
equivalents was greater than for 2009, mainly due to $33.4 million of cash
outflows for the investing activities of the discontinued operations (mainly
capital equipment purchases during its ramp-up phase), $23.9 million of
operational cash outflows attributable to the discontinuing activities, higher
legal and professional fees as referred to above and staff termination costs of
$3.9 million, relating primarily to changes in senior management in connection
with the Company's acquisition of Lero, as referred to above.
For discontinued operations, the 2008 loss of $218 million included an
impairment charge for the Varvarinskoye assets of $179.4 million (restated).
Excluding such write downs the underlying loss for 2008 was $38.8 million,
compared with a loss for 2009 of $51.2 million. This increase in the
year-on-year loss was mainly due to: derivative (gold forward sales contracts)
losses in 2009 of $54.8 million, compared with a gain in 2008 of $3.1 million,
the variance being due to an increase in year-on-year gold prices; and a future
income tax credit in 2008 of $6.7 million (restated), reflecting the impairment
write down of the Varvarinskoye assets in the fourth quarter of 2008. Gross
operating profit from the Varvarinskoye project were $18.1 million in 2009,
compared with a gross operating loss in 2008 of $28.1 million, due to higher net
realized metal prices in 2009, lower mining costs per tonne (of ore and waste)
in 2009 and lower processing costs per tonne in 2009.
DISCONTINUED OPERATIONS
The Company has, in accordance with Canadian GAAP CICA 3475, accounted for the
financial results associated with the Varvarinskoye Project for the ten month
period up to the date of disposal on October 30, 2009 as discontinued operations
in the Company's financial statements. The Company has also reclassified prior
year results to segregate the results of discontinued operations.
IMPACT OF THE DISPOSAL OF THE VARVARINSKOYE PROJECT ON CONTINUING OPERATIONS
Following the disposition of the Varvarinskoye Project, the Company's operations
no longer include commercial production and the Company has focused its
resources on the exploration and development of its exploration and development
properties and projects in Kyrgyzstan and Kazakhstan, which includes the Talas
Project.
The key effects of the disposal of the Varvarinskoye Project on the Company's
current operations can be summarized as follows:
-- The Company is no longer subject to the operating profits and losses and
cashflows arising from the extraction and processing of ores and the
sale of gold and copper metal;
-- The Company is no longer exposed to the risk of further impairment write
offs relating to the Varvarinskoye assets;
-- The Company is no longer exposed to the gains and losses arising from
the mark to market revaluation of the derivative (gold forward sale)
contracts;
-- The Company and its remaining subsidiaries no longer have any
outstanding long-term debt or hedging liabilities and obligations; and
-- The Company's operations no longer include commercial production and the
Company has focused its resources on its exploration and development
properties and projects in Kyrgyzstan and Kazakhstan.
BACKGROUND TO THE DISPOSAL OF THE VARVARINSKOYE PROJECT
As at the date of disposal of the Varvarinskoye Project on October 30, 2009, the
Company had (directly and/or through its subsidiaries) outstanding debt and
hedging settlement obligations in an aggregate amount of approximately $236
million, which amounts were owing to the Lenders under a debt facility (the
"Debt Facility") arranged by the Lenders in favour of JSCV to facilitate the
construction and development of the Varvarinskoye Project. The Company was the
guarantor of such debt and of the obligations of European Minerals (UK) Limited
("EM Limited"), a wholly-owned subsidiary of the Company, under gold hedge
(forward sales) contracts (the "Hedge Contracts") relating to the Varvarinskoye
Project (collectively, the "Varvarinskoye Project Debt").
The Company was unable to meet the first two repayment tranches under the Debt
Facility of $16.65 million due on December 31, 2008 and $19.4 million due on
June 30, 2009. The Company was also in breach of the permitted indebtedness
covenants under the Debt Facility with respect to its trade creditors, both in
respect of amounts and terms. In addition, the Company had been unable to meet
its settlement obligations under the Hedge Contracts in the aggregate amount of
$23 million as they fell due.
While the Company, assisted by Endeavour Financial International Corporation,
had been working with the Lenders for several months during 2009 to refinance
the Varvarinskoye Project Debt, and had presented various proposals to the
Lenders in respect of same, satisfactory arrangements could not be reached.
During that time, the need for additional capital to fund the Varvarinskoye
Project increased.
As an alternative to refinancing the Varvarinskoye Project Debt, management of
the Company investigated the possibility of disposing of the Varvarinskoye
Project, as well as the Varvarinskoye Project Debt.
Management undertook such investigation as a result of the length of time that
continued discussions with the Lenders required, in light of the lack of
refinancing alternatives generally available to the Company at such time as a
result of the then current global credit and equity market conditions and the
Company's continuing default under the Varvarinskoye Project Debt, and with the
desire to maximise shareholder value in the face of alternative scenarios. On
June 13, 2009, the Company entered into a sale and purchase agreement (the
"SPA") with Polymetal, pursuant to which the Company agreed, subject to certain
conditions, to sell to Polymetal 100% of the shares of its subsidiary Three K
Exploration & Mining Limited ("Three K"), and through such sale, the sale of
JSCV, the registered holder of the Varvarinskoye Project.
The sale was completed on October 30, 2009 and, as a result of the sale:
-- EM Limited novated its Hedge Contracts and related obligations with
respect to the Varvarinskoye Project to Three K;
-- the Company was released from its obligations as guarantor of the
Varvarinskoye Project Debt;
-- the Company completed an inter-company debt reorganisation such that
there is no longer any outstanding indebtedness between the Company or
any of it remaining subsidiaries and Three K or any of its subsidiaries;
and
-- Polymetal thereafter acquired 100% of the issued and outstanding share
capital of Three K from the Company in exchange for initial cash
consideration of $8 million on closing and deferred consideration of up
to $12 million (contingent on future gold and copper prices and
calculated by reference thereto).
As a result of the sale of the Varvarinskoye Project, the Company and its
remaining subsidiaries no longer have any outstanding long-term debt or hedging
obligations.
NET GAIN ON THE DISPOSAL OF THE VARVARINSKOYE PROJECT
Upon the disposal of the Varvarinskoye Project, the Company realized a net gain
on disposal of $161 million, taking into account the initial sale consideration
received of $8 million, costs of disposal of $2.9 million, inter-company debt
write-offs of $80.2 million and the assets and liabilities associated with the
Varvarinskoye Project as at the date of disposal.
Deferred consideration of up to a maximum of $12 million may also be received,
depending upon the hedging program entered into by the purchaser, future gold
and copper metal prices and the future cash flows of JSCV. The value and timing
of any deferred consideration will vary depending on the future price of gold
and copper and accordingly, is accounted for as a derivative. Due to the
uncertainties surrounding future gold and copper metal prices and the future
cash flows of JSCV, the deferred consideration has been assigned an immaterial
fair value under Canadian GAAP as at the date of disposal and as at December 31,
2009.
As at the date of disposal, the Company had been unable to meet any of its debt
repayments under the Debt Facility. At the time of the sale, the Company was
released from its debt obligations under the Debt Facility, which had an
outstanding balance of $60.9 million immediately prior to the release.
The Company was also granted a release from its obligations under the
Varvarinskoye Project derivative liabilities, primarily US dollar flat forward
gold sales contracts. As at the date of disposal, the Company had been unable to
meet any of its gold forward contract settlement obligations for 2009 of $23
million for closed contracts. In addition, as at the date of disposal, the
Company had a future liability of $152 million for future (open) contracts
(before credit risk adjustments). The future obligation had been valued on a
mark to market basis as at October 30, 2009.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2009 the Company's main source of liquidity was unrestricted
cash of $3.4 million, compared with $6.2 million as at December 31, 2008
(excluding cash of $1.6 million held by the Varvarinskoye Project).
The Company measures its consolidated working capital as comprising free cash,
inventory, and accounts receivable, other assets and prepayments, less accounts
payable and accrued liabilities, current portion of the principal on long term
debt and the current portion of derivative liabilities.
At December 31, 2009, the Company's consolidated working capital was $2.8
million compared with a consolidated working capital deficit of $180.2 million
as at September 30, 2009, and a consolidated working capital deficit of $68.6
million as at December 31, 2008.
The significant improvement in the Company's consolidated working capital
position between December 31, 2009 and December 31, 2008 is due to the disposal
of the Varvarinskoye Project during 2009, which resulted in the receipt of an
initial cash consideration of $8 million (net consideration of $5 million after
settlement of all advisory, legal and other sale transaction costs) and the
disposal of all of the debt and derivative liabilities associated with the
Varvarinskoye Project.
As at September 30, 2009, of the Company's consolidated working capital deficit
of $180.2 million, the Varvarinskoye Project working capital deficit was $151.9
million. As at December 31, 2008, of the Company's consolidated working capital
deficit of $68.7 million, the Varvarinskoye Project working capital deficit was
$47.2 million. The significant increase in the Varvarinskoye Project working
capital deficit between December 31, 2008 and September 30, 2009 was due to the
re-classification of all of the debt and derivative obligations as current as at
September 30, 2009 due to the continuing debt and hedge defaults which entitled
the Lenders to demand the immediate repayment of all debt and hedge obligations.
However, whilst Orsu has received the initial sale consideration of $8 million,
there is significant uncertainty in relation to the future receipt of any
deferred consideration proceeds (up to a maximum entitlement of $12 million).
Deferred consideration proceeds are dependent upon the hedging program entered
into by the purchaser, future gold and copper metal price levels and the future
cash flows of JSCV. These key factors are not under the control or influence of
Orsu.
Furthermore, the Company's liquidity at December 31, 2009 is insufficient to
meet the Company's corporate, administrative and exploration costs and
commitments for the next twelve months, if not sooner as a result of any
unexpected events at this time. The Company's main funding requirements are for
its corporate overheads and continuation of its mineral property and project
licence obligations, including funding of its 40% pro-rata share of the Talas
Project exploration funding requirements. As a result, the Company is actively
seeking additional sources of equity financing and has begun planning in this
respect. Whilst the Company has been successful in raising such financing in the
past, the Company's ability to raise additional equity financing may be affected
by numerous factors beyond the Company's control, including, but not limited to,
adverse market conditions and/or commodity price changes and economic downturn
and those other factors are listed under "Risks and Uncertainties" in the
Company's MD&A.
GOING CONCERN
Whilst the Company's financial statements have been prepared using Canadian GAAP
applicable to a going concern, which contemplates the realization of assets and
liquidation of liabilities during the normal course of operations, the adverse
conditions below cast significant doubt as to the Company's ability to meet its
obligations as they became due and, accordingly, the appropriateness of using
accounting principles applicable to going concern as at December 31, 2009.
At December 31, 2009, the Company had cash and cash equivalents of $3.4 million,
consolidated working capital of $2.8 million (a consolidated working capital
deficiency of $68.6 million as at December 31, 2008). The funds on hand at
December 31, 2009 are not sufficient to meet the Company's corporate,
administrative and exploration costs and commitments for the next twelve months,
if not sooner in the event of any unexpected events. While the Company is
actively seeking new sources of equity financing, there can be no assurance that
the Company will be successful in doing so for the reasons set forth above in
the "Liquidity and Capital Resources" section and due to the other factors
listed under "Risks and Uncertainties" in the Company's MD&A. Because of this
uncertainty, there is significant doubt about the ability of the Company to
continue as a going concern.
The Company's consolidated financial statements do not include the adjustments
that would be necessary should the Company be unable to continue as a going
concern. Such adjustments could be material.
COMMITMENTS
The following table summarises the commitments of the Company as at December 31,
2009:
----------------------------------------------------------------------------
2010 2011 2012 2013 2014 + Total
Expressed in $000s $ $ $ $ $ $
----------------------------------------------------------------------------
Lease obligations 352 - - - - 352
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OPERATIONAL REVIEW
ORSU'S COPPER-GOLD EXPLORATION LICENCES IN KYRGYZSTAN & KAZAKHSTAN
The Company is exploring several advanced stage gold and copper deposits in the
Tien Shan metallogenic belt in Kyrgyzstan and the Rudny Altai metallogenic belt
in Kazakhstan. The Tien Shan gold belt is host to some of the world's largest
copper-gold porphyries. These exploration projects are held by Orsu through its
wholly-owned subsidiary, Lero Gold Corporation.
TALAS EXPLORATION LICENCES, KYRGYZSTAN
The Talas exploration area is the Company's material property in Kyrgyzstan, and
includes the Taldybulak, Kentash, Barkol and Korgontash licences.
Table 1
----------------------------------------------------------------------------
Extension
Name of Licence Area Date Granted
Licence No Licence Holder (km2) Granted Expiry Date until
----------------------------------------------------------------------------
Talas Cu-Au
AP-1005 Barkol LLC 223 16/03/2007 31/12/2010
----------------------------------------------------------------------------
Talas Cu-Au
AR-24 Taldybulak LLC 42 14/06/2005 31/12/2010
----------------------------------------------------------------------------
Talas Cu-Au
AP-23 Kentash LLC 46 14/06/2005 31/12/2009 31/12/2012
----------------------------------------------------------------------------
Talas Cu-Au
AP-61 Korgontash LLC 66 02/09/2005 31/12/2009 31/12/2012
----------------------------------------------------------------------------
For avoidance of doubt;
1. The Taldybulak copper-gold porphyry prospect within the Taldybulak
exploration licence area is a separate asset from the Taldybulak
Levoberezhny gold deposit previously owned by Central Asia Gold Limited,
and
2. The Talas Copper Gold Limited Liability Company, holder of the
Taldybulak licence, is a separate company from Talas Gold Mining
Company, which was the owner of the Jerooy Gold Project.
Licence Locations
The Talas exploration area is located in the Western Kyrgyz Range on the north
slope of the Talas Valley, in the Talas Oblast, north western Kyrgyzstan at
elevations of 1,800-3,000m. The region includes deposits such as Andash, Aktash,
Jerooy, Taldybulak Levoberezhny and Centerra's world class Kumtor deposit. The
Talas project is accessible year round via the Bishkek-Talas road (270km from
Bishkek). A rail head is located 140km by road from the deposit and several 10
to 500kV power grid lines pass within 10km of the deposit.
The Taldybulak prospect is the main focus of exploration activity within the
Taldybulak licence that covers an area of 42km2. The Kentash licence is situated
immediately east of Taldybulak and covers an area of 46km2. The Korgontash
licence which covers an area of 66km2 is located approximately 25km east of
Taldybulak. The Barkol licence is the westernmost licence, located immediately
west of Taldybulak and covers an area of 223km2.
Gold Fields Exploration Partnership
Pursuant to the JV Agreement, Gold Fields is the project operator for the Talas
Project. Under the JV Agreement, following the completion of a bankable
feasibility study relating to the Talas Project and if the board of directors of
the Talas Joint Venture Company so determines, Gold Fields is to act as the lead
arranger to obtain any further project financing for development and mining
operations, for which Gold Fields will receive a 1.5% arrangement fee. Gold
Fields and Orsu will otherwise contribute to the project requirements on a
pro-rata basis through to project development.
In February 2010, Gold Fields earned a 60% interest in the Talas Joint Venture
Company, which is the 100% owner of Talas Copper Gold LLC ("TCG") (the
registered owner of the Taldybulak, Barkol, Kentash and Korgontash properties in
the Talas region of the Kyrgyz Republic).
Gold Fields has advised the Company that it intends to continue developing the
Talas Project in accordance with the JV Agreement. Under the terms of the JV
Agreement, both parties are required to fund on a pro-rata basis further project
expenditures, required to continue exploration activities, complete a
feasibility study and complete the project development in accordance with
approved programmes and budgets to be set by Gold Fields. Dilution provisions
apply under the terms of the JV agreement if either party decides not to
contribute to expenditures in accordance with its pro-rata share.
Prior to signing the JV Agreement (and prior to the Company's acquisition of
Lero), Gold Fields participated in three private placement financings with Lero,
contributing a total of CAD$7,733,420 to Lero. Gold Fields currently holds a
total of 1,134,920 common shares of Orsu, or 2.5% of the total issued common
shares of Orsu.
EXPLORATION LICENCES WITHIN THE TALAS EXPLORATION AREA
TALDYBULAK, KYRGYZSTAN
Project History
In September 2006, Lero acquired 100% of the Taldybulak licence which hosts the
Taldybulak copper-gold porphyry. Taldybulak was discovered in 1976 from a
regional geochemical survey and a subsequent trenching programme over
gold-copper-silver-molybdenum anomalies outlined an elliptical gold-copper
mineralisation zone with dimensions of 1,200m by 700m. The anomalies were tested
at depth where 10 of the drill holes intersected gold-copper mineralisation. Two
of the drill holes terminated in strong mineralisation at a depth of over 400m.
Four additional holes were drilled to test additional targets, located 2km to
3km to the east of the prospect. No further work was conducted on the deposit
until the late 1990's when British Commonwealth Minerals (BCM) drilled 11
shallow reverse circulation holes near the centre of the deposit.
The Taldybulak copper-gold porphyry is currently the Company's most advanced
project.
2010 Mineral Resource Estimates
WAI was contracted by Orsu in early 2010 to review and audit an updated mineral
resource estimate in relation to the Talas Project, from which WAI completed its
own mineral resource estimate. A National Instrument 43-101 mineral resource
estimate for the Taldybulak-Talas licence area of the Talas Project was reported
during March 2010 (Table 2) in the report titled "Updated Technical Report on
the Taldybulak property held by Orsu Metals Corporation, Kyrgyzstan", dated
March 22, 2010 and prepared by J C Osmond and M L Owen, a copy of which has been
filed and is available under the Company's profile on SEDAR at www.sedar.com.
The Indicated Resources reported at 0.3 g/t Au Cut-off are 141Mt @ 0.66 g/t Au,
0.17% Cu and 0.01% Mo and Inferred Resources reported at 0.3g/t Au Cut-off are
153Mt @ 0.66 g/t Au, 0.15% Cu and 0.012% Mo
Table 2: Taldybulak-Talas Project, Mineral Resource estimate (WAI) March 22, 2010
----------------------------------------------------------------------------
WAI Indicated Resources across all domains (WAI March 22, 2010)
----------------------------------------------------------------------------
Cut Off Tonnes Au Contained Au Contained Mo Contained
(Au g/t) (Mt) (g/t) (Moz) Cu (%) Cu (Mlb) (ppm) Mo (Mlb)
----------------------------------------------------------------------------
0.0 446 0.31 4.45 0.15 1474 81 80
----------------------------------------------------------------------------
0.3 141 0.66 2.99 0.17 527 96 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
WAI Inferred Resources across all domains (WAI March 22, 2010)
----------------------------------------------------------------------------
Cut Off Tonnes Au Contained Au Contained Mo Contained
(Au g/t) (Mt) (g/t) (Moz) Cu (%) Cu (Mlb) (ppm) Mo (Mlb)
----------------------------------------------------------------------------
0.0 384 0.35 4.32 0.13 1100 99 84
----------------------------------------------------------------------------
0.3 153 0.66 3.24 0.15 506 120 40
----------------------------------------------------------------------------
(i)All inferred resources are reported exclusively of indicated mineral
resources. Mineral resources are shown at a 0.0 g/t Au cut-off for comparison
purposes only, Orsu does not expect the mineral resources to be economically
extractable at this cut-off grade. Mineral resources are shown at a 0.3 g/t Au
as this is a possible economic cut-off grade for this deposit; although,
economic and mining studies are required to determine the actual cut-off grade.
Mineral resources are reported without mining constraints other than the cut-off
grade, no pit shell, mine design, or minimum mining width has been used to
restrict the reported mineral resources.
The audit, review and classification of the updated Indicated and Inferred
mineral resource estimates were carried out under the supervision J C Osmond,
BSc, MSc (MCSM), ProfGradIMMM, CGeol, FGS, EurGeol, Principal Geologist with WAI
and M L Owen, BSc,MSc, MCSM, CGeol, EurGeol, FGS, Technical Director of WAI,
each a qualified person as such term is defined in National Instrument 43-101. J
C Osmond and M L Owen have reviewed the contents of this MD&A and are
responsible for the preparation of the report titled "Updated Technical Report
on the Taldybulak property held by Orsu Metals Corporation, Kyrgyzstan" dated
March 22, 2010. J C Osmond and M L Owen are employees of WAI.
Gold and copper estimates are based upon an ordinary kriged 20m east by 20m
north by 10m elevation block model which has been constrained by geological and
grade threshold wireframes created in section from interpretation of all
available drillhole and channel sampling data. A total of 36,988m of diamond
drilling, 1,326m of reverse circulation drilling and 12,615m of surface
trenching data was used when constructing geological and grade boundaries,
subsequently the surface trenching and reverse circulation drilling results were
not utilised for the grade interpolation process. WAI verified the location of
all drill holes with respect to wireframe models and surface topography. The
drill hole data was audited with checks carried out for duplicate results,
errors in sample position downhole, hole surveys and collar positions with
respect to topography. Variography and geostatistical modelling was completed to
quantify the spatial variability for copper and gold within the mineralised
area.
The results of this latest resource estimation represent an increase to the
previously reported mineral resource estimate from May 2008, at 0.30g/t Au
cut-off, in terms of contained gold ounces for the Indicated category of 1.38
Moz or an 86% increase, and in terms of contained copper the increase was 226Mlb
or 57%.
The Company has filed on SEDAR (www.sedar.com) a new National Instrument 43-101
technical report on the Talas project which includes the updated mineral
resource estimates referred to in this MD&A. This report, which was prepared by
WAI, is entitled "Updated Technical Report on the Taldybulak Property held by
Orsu Metals Corporation, Kyrgyzstan" and dated March 22, 2010
Exploration Activities in 2008 and 2009
Orsu and Gold Fields recommenced exploration activities in May 2008. A 2008/2009
drilling programme was completed to better delineate the extent and geometry at
Taldybulak Central and assess the additional tonnage potential through the
testing of peripheral targets along strike to the east, north west and south of
the central high grade core. An overall exploration expenditure for the Talas
Project since the inception of the joint venture until February 2010 was CAD$10
million, all of which was contributed by Gold Fields.
2008 saw Orsu finalise local drilling contracts which enabled, as of 6 April
2009, for the completion of approximately 10,890m drilling, representing 64% of
the planned 17,000m.
In 2008-2009, the Talas Joint Venture Company drilled the Taldybulak Cu-Au
porphyry deposit with 80x80 m drill spacing. Scout drilling was performed in the
adjacent licences to test exploration targets. In total, TCG contractors have
drilled a total of 23,000 m on all licenses since May 2008. All field
exploration works were suspended in November 2009.
During 2010 testwork will be carried out specifically aimed at recovering a
higher percentage of gold from the oxide and sulphide rock types and increasing
the final grade of the shipping concentrate.
BARKOL, KYRGYZSTAN
Licence Information
In March 2007, the 223km2 Barkol exploration licence was granted to the Company.
Located immediately to the west of the Taldybulak licence, it was acquired at no
cost to the Company. The Barkol licence contains numerous occurrences of known
mineralisation, with one small copper-gold-molybdenum vein deposit occurring
within a 2km2 excision (the Chonur licence). Orsu has undertaken an estimated
annual expenditure commitment on the Barkol licence of $200,000.
2008 / 2009 Drilling Programme
The Company undertook some limited drill testing and further geophysical
investigations on the licence area. Significant thicknesses of post-mineral
Devonian volcanics overly the north eastern part of the license. Scout core
drilling was performed in 2009 with no significant results received and the
Company will not follow up exploration in these already tested areas.
KORGONTASH, KYRGYZSTAN
Licence Information
The 66km2 Korgontash licence area hosts the Tokhtonnisai copper-gold skarn
prospect, Talas Oblast, north-west Kyrgyzstan. The Korgontash licence is located
in the easternmost part of the copper-gold metallogenic trend on the southern
slope of the Kyrgyz ridge. In the central part of the licence is the 2km2
exclusion zone covered by Aktash licence, controlled by Turan Metals Ltd, a
Kyrgyz-Kazakh joint-venture company.
In 2009, TCG drilled one hole at the Tokhtonisai prospect to test the extent of
Cu-Au mineralization to depth. Results are pending.
KENTASH, KYRGYZSTAN
Limited work has been performed on the Kentash licence to date. The works
included soil and chip geochemical sampling and assessment of anomalies. As part
of the regional programme, the Kentash license as well as all other Talas
licenses were covered by the ground gravity survey.
TOKHTAZAN GROUP OF LICENCES, KYRGYZSTAN
Licence Information
The Tokhtazan exploration licence area contains the Akdjol (108km2) and
Tokhtazan (4km2) licences, both of which are held by Oriel in Kyrgyzstan LLC
("Oriel"), the Company's indirect subsidiary. The licences and related
agreements and land rights expired on December 31, 2009 and were extended for 2
months until February 20, 2010 to allow the Company to prepare a progress
report. During 2009, Oriel had fulfilled its financial obligations but had not
fully completed its work commitments under the licences, which is a violation of
Kyrgyz laws and could impact Oriel's ability to receive a further extension of
the licences and related agreements and land rights. On February 19, 2010, Orsu
filed progress reports with the Ministry of Natural Resources of the Kyrgyz
Republic with respect to exploration works at both of the Tokhtazan and Akdjol
licences. The Company expects a decision on the extension of the licences and
related agreements and land rights to be made by the end of March 2010.
2008 / 2009 Exploration Works
Within the 2008/2009 exploration programme, works undertaken within the
Tokhtazan licence included 1,540m3 of trenching and road cutting, with 640
samples being collected. In addition, a 642.5m reverse circulation ("RC") and
diamond drilling programme was completed.
Table 3 shows assay results from core and RC drilling which confirm the presence
of the previously interpreted mineralised structure at Tokhtazan.
Table 3: Significant Mineral Intersections from Drilling Works within the
Tokhtazan Licence
----------------------------------------------------------------------------
ID Type From (m) To (m) Length (m) Au g/t
----------------------------------------------------------------------------
TDD08-01 Diamond Drill hole 6 22 16 1.01
----------------------------------------------------------------------------
TDD08-01B Diamond Drill hole 0 23 23 1.36
----------------------------------------------------------------------------
TDD08-07 Diamond Drill hole 76 80 4 0.63
----------------------------------------------------------------------------
TDD08-07 Diamond Drill hole 130.2 134.2 4 2.21
----------------------------------------------------------------------------
TTR08-07 RC Drill hole 67 99 32 1.89
----------------------------------------------------------------------------
TTR08-07 RC Drill hole 112 125 13 0.94
----------------------------------------------------------------------------
TTR08-08 RC Drill hole 2 3 1 1.00
----------------------------------------------------------------------------
TTR08-08 RC Drill hole 57 80 23 2.04
----------------------------------------------------------------------------
TTR08-08 RC Drill hole 84 85 1 1.85
----------------------------------------------------------------------------
TTR08-08 RC Drill hole 94 95 1 0.52
----------------------------------------------------------------------------
TTR08-08 RC Drill hole 119 125 6 1.02
----------------------------------------------------------------------------
Note: Estimated true widths vary from 70-75% of drilled width.
Trenching within the Bulderek area of the Akdjol licence, located 3.5 km
south-southwest from the Tokhtazan licence, was accompanied by geophysical
exploration, including:
-- 12.8 km of Dipole-Dipole Induced Polarisation ("DD-IP") survey;
-- 41.45 km of magnetic survey;
-- 43.3 km of gamma-ray spectrometry.
Table 4 shows assay results received in 2009 for the 2008 channel sampling.
Table 4: Significant Mineral Intersections from 2008 Trenching Works at the
Bulderek Prospect, Akdjol License
----------------------------------------------------------------------------
Trench ID From (m) To (m) Thickness (m) Au g/t Cu %
----------------------------------------------------------------------------
TR 08-06 2.0 9.0 7 1.63 0.47
----------------------------------------------------------------------------
22.0 28.0 6 - 0.40
----------------------------------------------------------------------------
TR 08-07 50.0 58.0 8 0.78 0.2
----------------------------------------------------------------------------
82.0 133.0 51 - 0.41
----------------------------------------------------------------------------
TR 08-08 36.0 38.0 2 1.86 0.28
----------------------------------------------------------------------------
43.0 46.0 3 - 0.58
----------------------------------------------------------------------------
69.0 84.0 15 0.95 0.31
----------------------------------------------------------------------------
95.0 99.0 4 4.39 0.18
----------------------------------------------------------------------------
106.0 119.0 13.0 - 0.55
----------------------------------------------------------------------------
TR 08-10 7.0 23.0 16 0.78 0.24
----------------------------------------------------------------------------
2.0 23.0 21 - 0.26
----------------------------------------------------------------------------
TR 08-11 11.0 22.0 11 - 0.50
----------------------------------------------------------------------------
46.0 50.0 4 - 0.42
----------------------------------------------------------------------------
63.0 64.0 1 3.47 1.2
----------------------------------------------------------------------------
TR 08-12 16.0 20.0 4 0.51 0.37
----------------------------------------------------------------------------
37.0 53.0 16 - 0.78
----------------------------------------------------------------------------
TR 08-13 9.0 14.0 5 - 0.37
----------------------------------------------------------------------------
61.0 65.0 4 - 0.61
----------------------------------------------------------------------------
TR 08-14 1.0 37.0 36 0.18 0.19
----------------------------------------------------------------------------
59.0 63.0 4 0.23 5.2
----------------------------------------------------------------------------
88.0 95.0 7 - 0.40
----------------------------------------------------------------------------
TR 08-15 2.0 20.0 18 0.61 0.40
----------------------------------------------------------------------------
27.0 33.0 6 - 1.15
----------------------------------------------------------------------------
TR 08-23 2.0 6.0 4.0 - 0.26
----------------------------------------------------------------------------
9.0 19.0 10.0 - 0.27
----------------------------------------------------------------------------
32.0 34.0 2 0.46 0.36
----------------------------------------------------------------------------
TR 08-24 3.0 4.0 1.0 1.28 0.17
----------------------------------------------------------------------------
7.0 8.0 1 1.01 0.22
----------------------------------------------------------------------------
15.0 17.0 2 1.58 0.21
----------------------------------------------------------------------------
26.0 27.0 1 4.69 0.21
----------------------------------------------------------------------------
TR 08-27 1.0 5.0 4 1.22 0.46
----------------------------------------------------------------------------
6.0 12.0 6 - 0.27
----------------------------------------------------------------------------
23.0 52.0 29 3.02 0.53
----------------------------------------------------------------------------
Based on current geological observations, the trenched sample widths are
considered to be representative of the true width of the outcropping
mineralisation, although the true thickness of the mineralisation down dip is
yet to be confirmed. The 2009 field investigations revealed a lens-shaped nature
of this mineralization. This fact, in combination with steep topography, led to
Company's decision not to proceed with drill testing of the Bulderek prospect.
KARCHIGA, KAZAKHSTAN
Licence Information
The Karchiga copper VMS is located in the extreme east of the Republic of
Kazakhstan, within 40km of the Chinese border. The deposit is situated within
the north west striking, mid-Palaeozoic, Rudny Altai VMS terrain, the host of
numerous world class VMS deposits, including the Leninogorsk (also known as
Ridder-Sokolnoye), Zyryanovsk, and Maleevskoye deposits. The Rudny Altai is
ranked in the top four VMS belts of the world.
The Karchiga deposit was originally exploited by ancient artisans and was
re-discovered and explored by Soviet geologists during the 1940's and 50's. The
Soviet era exploration included more than 100 cored drill holes and an
exploration shaft into the ore body.
The Company's interest (through its indirect subsidiary GRK MLD LLP ("GRK")) in
the Karchiga Project is governed by an exploration and production contract (the
"Karchiga Project Contract") granted to GRK by the former Ministry of Energy and
Mineral Resources of the Republic of Kazakhstan (the "Former MEMR") until
February 28, 2022. Pursuant to the Karchiga Project Contract, GRK was granted
the right to explore and produce copper within the boundary of the contract
area.
The original exploration period under the Karchiga Project Contract was for a
period of three years until February 2010 (the "Exploration Period"). However,
the Karchiga Project Contract provides that the Exploration Period may be
further extended for two additional two year periods if GRK can prove that extra
time is required to fully evaluate the mineral prospectivity before mining can
commence.
On September 23, 2008, GRK made an application to the Former MEMR to: (i)
approve an increase to the work program under the Karchiga Project Contract; and
(ii) delay the obligation to return the contract area until the expiration of
the Exploration Period (the "First Application"). On November 25, 2008, the
Former MEMR approved the First Application (including the delay of the
obligation to return the contract area until September 28, 2010) and ordered
that the Karchiga Project Contract be amended accordingly (the "First
Amendments") and registered with the Former MEMR before February 20, 2009 in
order to give effect to the First Application.
On November 26, 2009, prior to the expiration of the Exploration Period, GRK
made a further application to the Former MEMR to approve an extension of the
Exploration Period for two years until February 28, 2012 (the "Second
Application"). In February 2010, GRK was notified by the Former MEMR that the
Second Application had been approved, that an extension of the Exploration
Period had been granted until February 28, 2012 and that the execution and
registration of such amendment (the "Second Amendment", and the Second Amendment
together with the First Amendments, the "Karchiga Amendments") was to occur
before May 29, 2010.
As of the date hereof, the Karchiga Amendments have not been executed or
registered with the Former MEMR (or its successor, the Competent Authority (as
defined below)). The Company is currently negotiating the execution of the
amended Karchiga Project Contract with the Competent Authority. Reference should
be made to the heading "Risks relating to the Karchiga Project Contract" under
"Risks and Uncertainties" for a discussion of the potential implications of the
Company's failure to register an executed amended Karchiga Project Contract with
the Former MEMR or Competent Authority.
Anticipated expenditure obligations of GRK on the Karchiga Project are outlined
below:
Table 5: Anticipated Karchiga Project Contract Expenditure Obligations
----------------------------------------------------------------------------
Year $Expenditure
----------------------------------------------------------------------------
2007 700,000
----------------------------------------------------------------------------
2008 800,000
----------------------------------------------------------------------------
2009 1,000,000
----------------------------------------------------------------------------
2010(1) 425,000
----------------------------------------------------------------------------
2011(1) 425,000
----------------------------------------------------------------------------
(1) The payment during 2010 and 2011 of an aggregate of $850,000 is a condition
to the Second Amendment, which has not yet been executed or registered with the
Competent Authority.
In addition, under the Karchiga Project Contract, GRK is required to submit a
year-end report on an annual basis outlining the works completed and expenditure
made during the year. Before exploration work can commence for the following
year, a work program is required to be submitted and approved by the Competent
Authority. As a result of the delay in the registration of the First Amendments,
GRK has not obtained from the Former MEMR the formal annual approval required
for its work program for 2009. In addition, GRK has yet to obtain formal
approval for its work program for 2010. Reference should be made to the heading
"Risks relating to the Karchiga Project Contract" under "Risks and
Uncertainties" for a discussion of the potential implications of the Company's
failure to obtain formally approved work programs for 2009 and 2010.
2010 Mineral Resource Estimates
WAI was contracted by Orsu in early 2010 to review and audit Orsu's updated
mineral resource estimate in relation to the Karchiga Project, from which WAI
completed its own mineral resource estimate. A National Instrument 43-101
mineral resource estimate for Karchiga was reported during March 2010 (Table 6)
in the report titled "Updated Report on the Karchiga Property held by Orsu
Metals Corporation, Kazakhstan", dated March 22, 2010 and prepared by M L Owen
and L S Carroll, a copy of which has been filed and is available under the
Company's profile on SEDAR at www.sedar.com. At a 0.50% copper cut-off, the
Indicated Sulphide mineral resource is 7.56Mt @ 2.02% Cu, at a 0.50% copper
cut-off, the Indicated Oxide mineral Resource is 0.93Mt @ 1.39% Cu and at a
0.50% copper cut-off, the Inferred mineral resources total 1.79Mt @ 1.62% Cu.
The "qualified persons" (as such term is defined in National Instrument 43-101)
responsible for these updated mineral resource estimates are Mr. M L Owen and L
S Carroll (who are both employees of WAI).
Table 6: Karchiga Project, Mineral Resource Estimates March 22, 2010
----------------------------------------------------------------------------
Indicated Mineral Resources for Karchiga Cu VMS Project
----------------------------------------------------------------------------
Cut-off Cu Tonnes Grade Cu Metal Cu Metal Cu
(%) Area Type (Mt) (%) (t) (Mlb)
----------------------------------------------------------------------------
Central + North
0.3 East Sulphide 8.05 1.93 154,958 342
----------------------------------------------------------------------------
Central + North
0.5 East Sulphide 7.56 2.02 153,000 337
----------------------------------------------------------------------------
0.3 Central Oxide 1.09 1.25 13,545 30
----------------------------------------------------------------------------
0.5 Central Oxide 0.93 1.39 12,868 28
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Inferred Mineral Resources for Karchiga Cu VMS Project(i)
----------------------------------------------------------------------------
Cut-off Cu Tonnes Grade Cu Metal Cu Metal Cu
(%) Area Type (Mt) (%) (t) (Mlb)
----------------------------------------------------------------------------
0.3 North East Sulphide 1.83 1.60 29,260 65
----------------------------------------------------------------------------
0.5 North East Sulphide 1.79 1.62 29,120 64
----------------------------------------------------------------------------
(i)All Inferred resources are quoted completely exclusive of the Indicated
resources. Mineral resources are shown at a 0.3 % Cu and 0.5% Cu as these are
considered to be possible economic cut-off grade for this deposit; although,
economic and mining studies are required to determine the actual cut-off grade.
Mineral resources are reported without mining constraints other than the cut-off
grade, no pit shell, mine design, or minimum mining width has been used to
restrict the reported mineral resources
The resource estimates use all data available at the end December 2009.
Indicated and inferred resources were categorized based upon a block model
utilising 5m by 10m by 5m blocks respectively. Grades were estimated utilising
the Inverse Distance cubed algorithm with interpolation parameters based upon
the results of Geostatistical modelling completed for the relevant oxide and
sulphide data sets. WAI carried out database verification and a review of the
orebody modelling and domaining for each individual mineralised zone. WAI was
provided with solid models (wireframes), surface topography, drillhole databases
including Lithology, assay and density data, location plans and all internal and
external quality control data collected since the commencement of the project.
The estimation was completed using 2m downhole composite drillhole samples
selected within a hard boundary Cu grade wireframe. All wireframe models were
constructed from sectional interpretation of geological and grade boundaries
with each of the 12 individual wireframe models utilised to domain the blocks
within the grade estimation model. Material types and samples data were
subsequently extracted and subset within these discrete domains and grade
interpolation was constrained to each individual domain separately. Specific
gravity measurements were carried out for the different material types collected
from Karchiga diamond drill core and an in-situ bulk density value assigned to
the block model based upon observed grade to bulk density relationship.
2008 and 2009 Work Programme
Drilling works during 2008 were focused on the Central and North East lodes of
Karchiga. The primary scope of the 2008 programme is designed to upgrade the
previously reported mineral resource estimate at the Karchiga project to
Measured and Indicated categories under National Instrument 43-101.
The total drilling programme consisted of 10,559m, of which 9,804m was drilled
at Karchiga's Central and North East lodes, with an additional 1,349m to test
new exploration targets. The new drilling works demonstrated that the total
strike length of the North East lode is continuous for 1,115m, which was only
partly included into the May 2008 mineral resource model.
In 2008, preliminary metallurgical testwork on Karchiga sulphide ores was
completed by the VNIITsvetMet Institute in Ust-Kamenogorsk, Kazakhstan with
positive results suggesting that a 15.9% Cu concentrate can be produced from the
Karchiga ores at 98% recovery. The Company is of the opinion that the testwork
methodology requires optimisation of the concentrate grade versus the recovery
as too much emphasis was placed upon achieving a high recovery which was
detrimental to the final concentrate grade produced.
In 2009, three more 400kg metallurgical samples were collected from existing
diamond core samples and submitted for additional testwork. The 2009 programme
also included an optimization study to test variability of the oxidized, primary
disseminated and massive ore types throughout the deposit. Metallurgical
testwork was completed by the VNIITsvetMet Institute in Ust-Kamenogorsk and
demonstrated that 20-25% Cu concentrates from Karchiga ores can be produced
through the use of standard flotation technology, the overall recovery was
estimated at 89% Cu.
In December 2009, GRK submitted a resource calculation study to the Kazakh
authorities. This work consists of initial study outlining various options for
potentially economic cutoff copper grades to be followed by the actual resource
calculation study on the basis of approved cutoff grade. The work and approvals
are expected to be completed during Q2 2010.
Qualified Person
Except for the technical information derived from the technical reports referred
to in this press release, Mr Matthew Boyes, who is Mineral Resources Manager for
Orsu and a "qualified person" (as such term is defined in National Instrument
43-101), has reviewed and approved the technical information in this press
release. Mr Boyes has verified the data disclosed in this press release in
respect of exploration results, including sampling and analytical data
underlying the information.
For The Years Ended 31 December 2009 and 2008 Consolidated Balance Sheets
(Prepared in accordance with Canadian GAAP)
----------------------------------------------------------------------------
2009 2008
$000 $000
Assets
Current assets
Cash and cash equivalents 3,386 6,200
Prepaid and receivables 1,860 1,296
Current assets related to discontinued operations - 26,280
----------------------
5,246 33,776
Exploration properties 27,198 27,198
Office, furniture and equipment 1,078 1,027
Net investment in oil and gas residual interests 643 884
Long term assets related to discontinued operations - 43,772
----------------------
34,165 106,657
----------------------
----------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 2,455 2,644
Current liabilities related to discontinued
operations - 99,768
----------------------
2,455 102,412
Future income tax 6,877 6,877
Long term liabilities related to discontinued
operations - 106,130
----------------------
9,332 215,419
----------------------
Shareholders' Deficiency
Share capital 361,440 361,440
Share purchase warrants 48,650 48,650
Share purchase options 12,550 19,000
Contributed surplus 11,177 2,715
Deficit (408,984) (540,567)
----------------------
24,833 (108,762)
----------------------
34,165 106,657
----------------------
----------------------
For The Years Ended 31 December 2009 and 2008 Consolidated Statements of
Cash Flows
(Prepared in accordance with Canadian GAAP)
----------------------------------------------------------------------------
2009 2008
$000 $000
Cash flows from operating activities
Net loss for the period from continuing activities (10,612) (104,434)
Items not affecting cash
Depreciation, amortization and deferred finance
charges 248 119
Stock-based compensation 2,013 3,095
Unrealized foreign exchange gain (79) (2,271)
Future income tax recovery - (35,139)
Warrants issued to agents - 311
Impairment of mineral properties - 119,550
---------------------
(8,430) (18,769)
Change in non-cash working capital
Increase in accounts receivable and other assets (485) (325)
(Decrease)/ increase in accounts payable and accrued
liabilities (196) 1,055
---------------------
Cash flows used by the operating activities of the
continuing operations (9,111) (18,039)
Cash flows from/ (used) by the operating activities of
the discontinuing operations 2,484 (23,859)
---------------------
(6,627) (41,898)
---------------------
Cash flows from investing activities
Expenditures on property, plant and equipment (293) -
Net cash acquired on acquisition of Lero - 34,051
Proceeds from net investment in residual oil and gas
interests 480 329
Net proceeds from disposal of Varvarinskoye Project 5,072 -
---------------------
Cash flows from the investing activities of the
continuing operations 5,259 34,380
Cash flows used by the investing activities of the
discontinuing operations (3,559) (33,429)
---------------------
1,700 951
Cash flows from financing activities
Proceeds from exercise of stock options (note 10a) - 1,331
Proceeds from debt - 5,000
Lero cash advances to EMC pre-acquisition - 25,000
Repayment of debt - (5,000)
---------------------
Cash flows from the financing activities of continuing
operations - 26,331
Cash flows from / (used) in the financing activities
of discontinuing operations 2,113 (2,860)
---------------------
2,113 23,471
---------------------
---------------------
(Decrease) in cash and cash equivalents (2,814) (17,476)
---------------------
---------------------
Cash and cash equivalents - Beginning of year 6,200 23,676
---------------------
Cash and cash equivalents - End of year 3,386 6,200
---------------------
---------------------
For The Years Ended 31 December 2009 and 2008 Consolidated Statements of
Operations
(Prepared in accordance with Canadian GAAP)
----------------------------------------------------------------------------
2008
2009 (Restated)
------------
$000 $000
(Expenses) / income
Impairment of mineral properties - (119,550)
General and administrative (5,946) (10,133)
Termination costs (98) (3,880)
Class action settlement (1,027) -
Exploration (1,617) (2,093)
Stock-based compensation (2,013) (3,095)
Interest expense (54) (533)
Interest income 19 398
Foreign exchange gains/ (losses) 124 (687)
------------------------
Loss from continuing operations before income taxes (10,612) (139,573)
Future income tax - 35,139
------------------------
Loss from continuing operations (10,612) (104,434)
------------------------
Loss from discontinued operations (51,160) (218,178)
Net gain from disposal of discontinued operations 160,812 -
------------------------
Net income/ (loss) and comprehensive income / (loss)
for the year 99,040 (322,612)
Deficit - Beginning of year - as previously stated (540,567) (217,955)
Adjustment on adoption of EIC 173 32,543 -
------------------------
Deficit - Beginning of year - Restated (508,024) (217,955)
------------------------
Deficit - End of year (408,984) (540,567)
------------------------
------------------------
(Loss)/ income per common share
(Loss) per common share from continuing operations $(0.23) $(2.71)
(Loss) per common share from discontinuing
operations $(1.12) $(5.65)
Net income/ (loss) per common share $2.17 $ (8.36)
Weighted average number of common shares
Basic and diluted (in thousands) 45,696 38,598
Summary of the Quarterly Results of Operations for 2009 (UNAUDITED)
(Selected Quarterly Information)
(Prepared in accordance with Canadian GAAP)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Expressed in US$000s except Dec 31 Sep 30 Jun 30 Mar 31
where indicated 2009 2009 2009 2009
$000 $000 $000 $000
(unaudited) (unaudited) (unaudited) (unaudited)
Loss from continuing
operations (1,871) (2,661) (3,050) (3,030)
(Loss)/ profit from
discontinued operations(i) (10,584) (21,076) 5,755 (25,255)
Net gain on disposal of
discontinued operations 160,812 - - -
------------------------------------------------
Net income/ (loss) and
comprehensive income/
(loss) for the period 148,357 (23,737) 2,705 (28,285)
------------------------------------------------
------------------------------------------------
Sales revenues (included
within results of
discontinued operations)
(i) 6,867 22,632 32,495 9,796
(Loss)/ income per common
share (note 1)
(Loss) per common share from
continuing operations $(0.04) $(0.06) $(0.07) $(0.07)
Net income /(loss) per
common share $3.25 $(0.52) $0.06 $(0.62)
Weighted average number of
common shares - basic and
diluted (in thousands) 45,696 45,696 45,696 45,696
----------------------------------------------------------------------------
Note 1: Per share information has been retroactively restated to give effect to
the 10 for 1 share consolidation which occurred in November, 2009.
Summary of the Quarterly Results of Operations for 2008 (UNAUDITED)
(Selected Quarterly Information)
(Prepared in accordance with Canadian GAAP)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Expressed in $000s except Dec 31 Sep 30 Jun 30 Mar 31
where indicated 2008 2008 2008 2008
$000 $000 $000 $000
(unaudited) (unaudited) (unaudited) (unaudited)
Loss from continuing
operations (88,681) (5,753) (5,986) (4,014)
(Loss)/ profit from
discontinued operations(i) (174,911) 1,720 (10,937) (34,050)
------------------------------------------------
Net loss and comprehensive
loss for the period (263,592) (4,033) (16,923) (38,064)
------------------------------------------------
------------------------------------------------
Sales revenues (included
within results of
discontinued operations)
(i) 11,622 15,512 13,225 2,260
(Loss)/ income per common
share (note 1)
Loss per common share from
continuing operations $(2.30) $(0.19) $(0.19) $(0.13)
Loss per common share $(6.83) $(0.13) $(0.54) $(1.25)
Weighted average number of
common shares - basic and
diluted (in thousands) 38,598 31,015 31,383 30,333
----------------------------------------------------------------------------
Note 1: Per share information has been retroactively restated to give effect to
the 10 for 1 share consolidation which occurred in November, 2009.
FORWARD-LOOKING INFORMATION
This press release contains or refers to forward-looking information. All
information, other than information regarding historical fact that addresses
activities, events or developments that the Company believes, expects or
anticipates will or may occur in the future is forward-looking information. Such
forward-looking information includes, without limitation: the amount and timing
of deferred consideration that may be payable to the Company by Polymetal
pursuant to the sale of the Varvarinskoye Project; the expected effect of the
sale of the Varvarinskoye Project on the Company's current operations; the
Company's expectations with respect to the filing and timing of an application
for a waiver of the Competent Authority's pre-emptive right with respect to the
current trading of the Company's common shares on the TSX and AIM and the
Company's ability to obtain same; the execution and registration of the amended
Karchiga Project Contract; the continued exploration and the development of the
Company's properties and the costs related thereto; the anticipated receipt of
drill results relating to Korgontash; development and operational plans and
objectives; continued financial support from, and development efforts by, Gold
Fields with respect to the Barkol, Kentash, Taldybulak and Korgontash licences;
the completion of a feasibility study on the Talas Project; mineral resource
estimates; estimates relating to copper concentrate production at the Karchiga
Project; the proposed work programs for the Company's exploration properties and
their respective timing; the Company's expectation regarding the submission of a
resource calculation study with an approved cut off grade to the Kazakh
authorities with respect to the Karchiga Project and the receipt of an approval
in connection therewith; the receipt and timing of a decision regarding the
extension of the Akdjol and Tokhtazan licences and related agreements and land
rights; estimates relating to critical accounting policies; the Company's plans
with respect to the conversion to IFRS, including the Company's expected timing
for completing the phases of its plan and the development of an effective plan;
the continuation of assessments relating to resource and training requirements
and the impact of IFRS on, amongst other things, the Company's accounting
policies, information technology and data systems; the Company's plans for
adopting and/or implementing changes to accounting policies and the impact of
same on the Company's financial statements; that the Company and the other
defendants will not need to terminate the settlement agreement as a result of
class members opting out of the settlement, the significance of any claims by
members who opt out and the dismissal of the Class Action Claim and the
Szuszkiewicz action; the Company's expectations with respect to pursuing new
opportunities and acquisitions and its future growth; and the Company's ability
to raise new funding.
The forward-looking information in this press release reflects the current
expectations, assumptions or beliefs of the Company based on information
currently available to the Company. With respect to forward looking information
contained in this press release, the Company has made assumptions regarding,
among other things, the treatment of the Varvarinskoye Project as discontinued
operations, the appropriateness of using accounting principles applicable to a
going concern, the Company's ability to generate sufficient funds from capital
markets to meet its future obligations (including expenditures to be made
pursuant to the terms of the JV Agreement in order to retain the Company's
interest in the Talas Project) following the disposition of the Varvarinskoye
Project, the effectiveness of the Company's design relating to the
implementation of IFRS, assumptions relating to the Company's critical
accounting policies, the Company's business, the economy and the mineral
exploration industry in general, the regulatory frameworks in Kazakhstan and
Kyrgyzstan with respect to, among other things, royalties, taxes, environmental
matters and the Company's ability to obtain, maintain, renew and/or extend
required permits, licences, authorisations and/or approvals from the appropriate
regulatory authorities (including the Company's ability to: (i) execute and
register the amended Karchiga Project Contract; (ii) obtain an extension of the
Taldybulak and Barkol licences beyond December 31, 2010; (iii) obtain an
extension of the Tokhtazan and Akdjol licences and related agreements and land
rights; and (iv) obtain a waiver of the Competent Authority's pre-emptive right
relating to the Karchiga Project); the Company's ability to continue to obtain
qualified staff and equipment in a timely and cost-efficient manner to meet the
Company's demand, and has also assumed that no unusual geological or technical
problems occur, plant and equipment work as anticipated, no material adverse
change in the price of copper or gold occurs and no significant events occur
outside of the Company's normal course of business.
Forward-looking information is subject to a number of risks and uncertainties
that may cause the actual results of the Company to differ materially from those
discussed in the forward-looking information, and even if such actual results
are realised or substantially realised, there can be no assurance that they will
have the expected consequences to, or effects on, the Company.
Factors that could cause actual results or events to differ materially from
current expectations include, but are not limited to: risks normally incidental
to exploration and development of mineral properties; uncertainties in the
interpretation of drill results; the possibility that future exploration,
development or mining results will not be consistent with expectations;
uncertainty of mineral resources estimates; the Company's inability to obtain,
maintain, renew and/or extend required licences, permits, authorizations and/or
approvals from the appropriate regulatory authorities and other risks relating
to the regulatory frameworks in Kazakhstan and Kyrgyzstan (including the failure
to execute and register an amended Karchiga Project Contract or obtain the
Competent Authority's waiver of its pre-emptive right relating to the Karchiga
Project or the Company's inability to obtain the necessary extensions relating
to its Taldybulak, Barkol, Tokhtazan and Akdjol licences and the agreements and
rights, as applicable, related thereto); adverse changes in the laws governing
the Company, its subsidiaries and their respective business activities; capital
and operating costs varying significantly from estimates; inflation; changes in
exchange and interest rates; adverse changes in commodity prices; the inability
of the Company to obtain required financing; adverse changes with respect to the
Talas joint venture; the Company's inability to continue as a going concern;
adverse general market conditions; the possibility of class members opting out
of the settlement in respect of the Class Action Claim; the Company's inability
to delineate additional mineral resources and delineate mineral reserves; future
unforeseen liabilities and other factors including, but not limited to, those
listed in this press release.
Any forward-looking information speaks only as of the date on which it is made
and, except as may be required by applicable securities laws, the Company
disclaims any intent or obligation to update any forward-looking information,
whether as a result of new information, future events or results or otherwise.
Although the Company believes that the assumptions inherent in the
forward-looking information are reasonable, forward-looking information is not a
guarantee of future performance and accordingly undue reliance should not be put
on such information due to the inherent uncertainty therein.
Any mineral resource figures referred to in this press release are estimates and
no assurances can be given that the indicated levels of minerals will be
produced. Such estimates are expressions of judgment based on knowledge, mining
experience, analysis of drilling results and industry practices. Valid estimates
made at a given time may significantly change when new information becomes
available. While the Company believes that the mineral resource estimates in
respect of its properties are well established, by their nature mineral resource
estimates are imprecise and depend, to a certain extent, upon statistical
inferences which may ultimately prove unreliable. If such mineral resource
estimates are inaccurate or are reduced in the future, this could have a
material adverse impact on the Company. Due to the uncertainty that may be
attached to inferred mineral resources, it cannot be assumed that all or any
part of an inferred mineral resource will be upgraded to an indicated or
measured mineral resource as a result of continued exploration.
Additional information about the risks and uncertainties of the Company's
business is provided in its disclosure materials, including the Company's Annual
Information Form, available under the Company's profile on SEDAR at
www.sedar.com.
Gray Rock Resources (TSXV:GRK)
過去 株価チャート
から 5 2024 まで 6 2024
Gray Rock Resources (TSXV:GRK)
過去 株価チャート
から 6 2023 まで 6 2024
