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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Disenco Energy Plc (Tier2) | TSXV:DIS | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
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Orsu Metals Corporation ("Orsu", or the "Company") (TSX:OSU)(AIM:OSU), the
London-based base and precious metal mining, development and exploration company
today reports its results for the quarter and six months ended 31 March 2009.
All amounts are reported in United States Dollars unless otherwise indicated.
Canadian Dollars are referred to herein as CAD$.
QUARTER OPERATIONAL HIGHLIGHTS
- January 2009 - Orsu announced updated mineral reserve and mineral resource
estimates for Varvarinskoye.
- January 2009 - Orsu announced the existing lending syndicate comprised of
Investec Bank Limited, Nedbank Limited and Natixis Bank (the "Lenders") had
conditionally approved the extension of the deadline for the Company's principal
debt payment of $16.65 million to March 31, 2009.
- February 2009 - Orsu announced all necessary approvals had been received from
Export Credit Insurance Corporation, South Africa ("ECIC") for the extension of
the deadline for the Company's principal debt payment to March 31, 2009.
- March 2009 - Orsu announced the completion and SEDAR filing of a revised mine
plan, including an updated mineral reserve and mineral resource estimates,
entitled "Varvarinskoye Cu/Au Open Pit Mine - Kazakhstan Mine Planning Study".
POST QUARTER HIGHLIGHTS
- April 2009 - Orsu announced that it had not yet reached an agreement on the
restructuring of the loan repayments and hedging obligations, due by Joint Stock
Company Varvarinskoye ("JSCV") under its loan and hedging facilities and that
discussions are ongoing with the Lenders.
- May 2009 - Orsu announced that it has signed an amended and restated offtake
agreement with Trafigura Beheer B.V., Netherlands ("Trafigura") for the purchase
of Varvarinskoye's copper concentrate product.
- May 2009 - Orsu provided an update of on-going work at the Talas and Tokhtazan
exploration licence areas of north west Kyrgyzstan and the Karchiga exploration
area of north east Kazakhstan.
MANAGEMENT'S DISCUSSION AND ANALYSIS
A full Management's Discussion and Analysis of the results for the quarter and
six months ended 31 March 2009 and year ended 2008 ("MD&A") and Financial
Statements ("Financials") for the Company for the six months ended 31 March 2009
and year ended 2008 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 QUARTER ENDED 31 MARCH 2009
Restatement of results for three months to March 31 2008
In February 2008, the CICA issued Handbook section 3064, Goodwill and intangible
assets, which replaced Section 3062. Section 3064 established revised standards
for the recognition, measurement, presentation and disclosure of goodwill and
intangible assets along with guidance for the treatment of pre-production and
start-up costs which are required to be expensed as incurred.
Prior to the adoption of Section 3064, the Company capitalised revenues and
expenses for production activities up to June 30, 2008. The Company adopted the
revised guidance effective from January 1, 2009 and the application of this
section on a retrospective basis has meant the restatement of the results for
the quarter ended March 31, 2008 (see note on Accounting Changes, Goodwill and
intangible assets, for further details).
Overview
As at March 31, 2009 the Company remained in breach of its debt repayment
covenants (as previously reported at December 31, 2008) and was in breach of its
Permitted Indebtedness covenants and had been unable to meet its hedge contract
settlement obligations as they fell due during the first quarter of 2009. The
Company is currently negotiating with the Lenders to try to restructure the debt
facility and gold forward contract obligation terms in such a manner and time
period that would allow the Company to meet its obligations as they fall due,
including funding of any required future capital expenditures. In the Company's
view, the settlement of its future gold forward contract obligations and
long-term debt repayments is uncertain until such time as metal prices, and in
particular copper prices, have recovered, Varvarinskoye operating costs have
been reduced and Varvarinskoye is operating at maximum capacity and the outcome
of current refinancing discussions with the Lenders has been concluded. As a
separate restructuring alternative, management is also investigating the
possibility of disposing of Varvarinskoye property and related term debt and
hedging obligations. Whilst the Company remains in discussion with potential
buyers, such discussions are at a advanced stage but no formalised terms have
been agreed. There is no assurance that the Company will be successful in any
efforts to restructure its current interest in the Varvarinskoye Project.
If the restructuring discussions with the Lenders were to be unsuccessful and
the Company was unable to meet its outstanding and future hedge and debt
commitments or otherwise breached its covenants under these facilities and
failed to remedy the breach within the permitted time, if applicable, or obtain
any requisite waiver or deferral from the Lenders, the Lenders could decide to
terminate the Debt Facility and/or the Varvarinskoye Hedge or enforce their
security over the Varvarinskoye Project or the shares of JSCV. If this were to
occur, the Company would have to repay all amounts owing and would be
responsible for additional fees, costs and expenses owing to the Lenders,
including the costs associated with terminating the Varvarinskoye Hedge, which
could have a material adverse effect on Orsu's business and financial condition.
If the Lenders were to enforce their security, Orsu could lose its interest in
the Varvarinskoye Project.
For the three months ended March 31, 2009, the Company incurred a net loss of
$28.3 million, compared to a restated loss of $37.9 million for the same period
in 2008.
During the quarter the Company recognized revenues of $9.8 million. This was
offset by total losses on derivative instruments of $15.5 million, cost of sales
of $11.4 million, administration costs of $2.9 million, exploration expenditure
of $0.2 million, foreign exchange losses of $3.0 million, stock based
compensation charges of $0.8 million, net interest expense of $2.9 million and
mineral extraction tax charges of $1.4 million.
Revenues
For the three months to March 31, 2009 the Company invoiced sales of $8.8
million plus a future metal price settlement adjustment of $1.2 million less
treatment and refining charges of $0.2 million, resulting in reported revenues
for the year of $9.8 million (compared with $11.6 million for the fourth quarter
of 2008).The settlement adjustments were calculated using estimated final
settlement price for copper per lb of $1.8 at the end of quarter one and $1.69
at the end of quarter four 2008.
During the first quarter of 2009, the Company suspended shipments of copper
concentrate whilst the off take contract with Trafigura was re-negotiated which
resulted in reduced first quarter revenues. The Company successfully agreed
revised terms with Trafigura during the second quarter of 2009. The Company
expects to resume shipments of copper concentrate during the second quarter and
to fully recover revenues in the same period.
For the comparative period of the first quarter of 2008, there were no sales of
copper concentrate as the Varvarinskoye project had not achieved commercial
production.
Cost of sales
Costs of sales expenses were $11.4 million for the quarter, compared to $4.8
million as at March 31, 2008 and $23.9 million for the quarter to December 31,
2008.
The reduction in the cost of sales for the quarter ended March 31, 2009 and
December 31, 2009, of $12.5 million was due to reduced selling costs of $0.9
million due to the suspension of copper concentrate in the first quarter of
2009, a reduction in the mine, plant and site operating costs of $4.2 million
primarily relating lower net work in progress expensed in the quarter compared
to the previous quarter, decreased depreciation and amortisation charges for the
quarter of $7.5 million following the impairment of the Varvarinskoye assets at
December 31, 2008.
Other (Expenses) Income
- Derivative instruments
At March 31, 2009 the Company's derivative financial instruments were comprised
solely of gold forward sales contracts.
For the three months ended March 31, 2009 the Company booked realised derivative
losses of $7.7million (2008 - $20.5 million) representing 22,000 ounces of gold,
which remained unpaid at the end of the quarter.
The risk adjusted mark to market revaluation of the Company's derivative
liabilities, from a strike price of $574.25 per oz, as at March 31, 2009 at an
average forward gold price of $934 per oz and a risk adjusted rate for the
Company in the range of 14% to 16% per annum, depending on the remaining term of
the derivative liability contracts, gave rise to an unrealized derivative loss
for the quarter of $7.8 million.
At March 31, 2009 the Company was in default on payments as they fell due under
the gold forward contract obligations and the hedge counterparties are entitled
to terminate any open derivative positions and seek full repayment for all
unsettled derivative obligations see note on "Going Concern
The Company had 350,468 ounces of forward gold sales remaining at a price of
$574.25 per ounce as at March 31, 2009 (443,000 remaining at March 31, 2008).
The Company estimates that the Varvarinskoye Hedge represents approximately 57%
of the gold production during the remaining term of the Hedging Facility
(January 2009 to June 2014), but only approximately 28% of the current estimates
(completed in January 2009) of probable reserves of gold at Varvarinskoye.
- Administration charges
Administration costs for the quarter were $2.9 million. This includes office
overheads and salary charges of $2.0 million and legal and professional costs of
$0.6 million.
- Interest expense and income
The interest expense for the quarter was $2.9 million compared with $3.0 for the
same period in 2008. The charge for the quarter was made up of amortised
deferred finance costs of $2.3 million (same period in 2008 - $1.7 million) and
$0.7 million accrued interest (same period in 2008 - $1.3 million) for the debt
facility.
- Foreign exchange losses
On February 4 2009, the Kazakhstan Tenge was devalued from an exchange rate to
the US($) of 120 Tenge to 150 Tenge. As a result of this devaluation, the
Company recorded an exchange loss of $3.0 million during the quarter ended March
31, 2009.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2009 the Company's main source of liquidity was unrestricted cash
of $4.4 million (December 31, 2008 $7.8 million).
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 March 31, 2009, the Company's consolidated working capital was a deficit of
$162.4 million compared with a working capital deficit of $38.9 million at March
31, 2008 and $68.6 million at December 31, 2008.
The movement between March 31, 2009 and 2008 of $123.5 million was primarily due
to the classification of all debt as current, $23.2 million, all derivative
liabilities as current, $73.3 million and a reduction in short term inventory of
$17.5 million. In addition, accounts payable and accrued liabilities are $11.7
million higher due to the additional accrued tax penalty charges non settlement
of prior year withholding taxes at Varvarinskoye.
At December 31, 2008, the Company's consolidated working capital was a deficit
of $68.6 million, representing a decrease between quarter four of 2008 and
quarter one of 2009 of $93.8 million. The movement was primarily due to the
classification of all derivative liabilities at the end of the quarter as
current, being $75.7 million, and the reduction of short term inventory by $11.2
million in the quarter.
For the reasons stated in the Going Concern section of the press release the
Company's working capital as at March 31, 2009 was insufficient to meet its
debt, accounts payable and derivative obligations. The Company's working capital
for the remainder of the year will be significantly affected by, amongst other
things, metal prices, the frequency of product deliveries, production levels and
any amendments to the terms of the Varvarinskoye debt facility and hedge
obligations arising from the ongoing discussions with the Lenders.
The ongoing debt and hedge obligation restructuring discussions with the Lenders
and the potential impact upon the Company should these negotiations prove to be
unsuccessful are described in the "Risks and Uncertainties" section of this
press release.
Going concern
While this press release has been prepared using Canadian generally accepted
accounting principles ("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 become due and,
accordingly, the appropriateness of using accounting principles applicable to
going concern.
At March 31, 2009, the Company had a working capital deficit of $162.4 million,
(December 31, 2008 - working capital deficit of $68.7 million), accumulated
losses of $536 million (December 31, 2008 - $541 million) and shareholders'
deficiency of $103 million (December 31, 2008 - shareholders' deficiency of $109
million). At March 31, 2009 the Company was in default on payments as they fell
due under the gold forward contract obligations and the hedge counterparties are
entitled to terminate any open derivative positions and seek full repayment for
all unsettled derivative obligations. For this reason all derivative liabilities
have been classified as current liabilities at March 31, 2009, contributing to
the increase in the Company's working capital deficit as at March 31, 2009
compared with December 31, 2008.
Following a sharp deterioration in world copper metal prices and higher than
expected operating costs at Varvarinskoye in the fourth quarter of 2008, the
Company reviewed its Varvarinskoye mineral reserve and mineral resource
estimates and engaged an independent expert to update the mineral reserve
estimates based upon a reinterpretation of the central pit geology. Compared
with the previous December 2006 Varvarinskoye Technical Report, the remaining
mine life from January 1, 2009 has been reduced from 14 years to 8 years with a
significant reduction in estimated contained copper and gold metals. Coupled
with management's current long-term copper and gold pricing forecasts, the
Company's revised mineral reserve and mineral resource estimates for
Varvarinskoye create significant doubt regarding the Company's ability to
generate sufficient cash flows from its mining operations to meet its
obligations under the Varvarinskoye project finance debt facility with Investec
Bank Limited, Nedbank Limited and Natixis Bank (the "Lenders") and the
unmargined gold forward sales contracts entered into as a requirement of the
debt facility.
The Company was unable to meet the first repayment tranche under the long-term
debt facility of $16.65 million due on December 31, 2008, and payment of the
first tranche remains outstanding. As at February 24, 2009, the Company was in
breach of its permitted indebtedness covenant with respect to trade creditors,
both in respect of amounts and terms ("Permitted Indebtedness"). This arose
primarily due to temporary delays in shipping concentrate for sale. No waiver
has been obtained from the Lenders for this breach. The Company is forecasting
that, in the absence of additional waivers or modification of the debt terms, it
will remain unable to meet its 2009 scheduled repayment obligations, will remain
in breach of its repayment terms and its Permitted Indebtedness covenants, and
is likely to breach additional covenants of its long-term debt facility. Failure
to remedy existing or future breaches and to comply with the debt repayment
terms will entitle the Lenders to demand immediate repayment of all amounts
owing.
At March 31, 2009, the Company had an outstanding future obligation to settle
350,468 ounces of unmargined forward gold sales contracts at a strike price of
$574.25 per ounce, of which contracts for 58,326 ounces are due for settlement
during the remainder of 2009. This future obligation has been valued on a mark
to market basis at March 31, 2009 at $92.3 million. The practice of the Company
has been to settle the gold forward contracts as they fell due on the settlement
date. Up to December 31, 2008, the Company had settled contract amounts
totalling $20.5 million as they fell due. However, the Company was unable to
meet its gold forward contract settlement obligations of: $2,538,000 due on
January 30, 2009, $2,675,750 due on February 27, 2009, $2,471,000 due on March
31, 2009 and $2,261,000 due on April 30, 2009. Under the cross default terms of
the debt facility, a default on payments as they fall due under the gold forward
contract obligations entitles the Lenders to demand immediate repayment of all
amounts owing under the term debt facility and entitles the hedging
counterparties to terminate any open derivative positions.
The Company is currently negotiating with the Lenders to try to restructure the
debt facility and gold forward contract obligation terms in such a manner and
time period that would allow the Company to meet its obligations as they fall
due, including funding of any required future capital expenditures. In the
Company's view, the settlement of its future gold forward contract obligations
and long-term debt repayments is uncertain until such time as metal prices, and
in particular copper prices, have recovered, Varvarinskoye operating costs have
been reduced, Varvarinskoye is operating at maximum capacity and the outcome of
current refinancing discussions with the Lenders have been concluded. In
connection with the breaches of its Permitted Indebtedness covenants, while the
Company is taking all possible steps to avoid disruption to essential supplies,
management believes that it is unlikely that normal supplier payments and
outstanding balances can be restored unless refinancing discussions are
concluded on terms favourable to the Company, and unless an additional working
capital facility is granted by the Lenders as part of the refinancing.
Management considers that if any restructuring or modifications are to be
successful, they must include the following as a minimum: the extension of the
debt repayment period, an increase in the debt facility of a minimum of $10
million for working capital purposes and the conversion of short-term gold
forward contract obligations into scheduled debt repayments. No conclusion from
the Company's current discussions with the Lenders has been reached. To date,
the Lenders have not taken, nor indicated that they intend to take, any action
in respect of the defaults noted above, due to the ongoing discussions with the
Company regarding the renegotiation of the debt facility and gold forward
contract obligations. However, while the Company has been successful in the past
in the past in renegotiating its debt facility and modifying its debt repayment
and forward contract obligation terms, there can be no assurance that it will be
successful in the future.
As a separate restructuring alternative, management is also investigating the
possibility of disposing of the Varvarinskoye mine and related long-term debt
and gold forward contract obligations. Whilst the Company remains in discussion
with potential buyers, such discussions are at a preliminary stage and no
formalized terms have been agreed. There is no assurance that the Company will
be successful in any efforts to restructure or dispose of its current interest
in the Varvarinskoye project.
Commitments
The following table summarises the commitments of the Company as at
March 31, 2009:
-------------------------------------------------------------------------
Less than Beyond 3
Total 1 year 1-2 years 2-3 years years
$ $ $ $ $
Current portion of
long term debt 55,636 55,636 - - -
Accounts payable and
accrued liabilities 26,537 26,537 - - -
Asset Retirement
obligations 13,544 - - - 13,544
Derivative obligation 99,944 99,944 - - -
Lease obligations 110 - - - 110
-------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS
For the three months ended March 31, 2009 and 2008, the Company was party to the
following transactions involving related parties, all of which have been
recorded at the exchange amount:
Dragon Management International Services Limited ("DIS") charged the Company a
total of $27,476 (2008 - $64,000) in respect of the provision of office
facilities, general office overheads and re-charged costs incurred on behalf of
the Company. A former Chairman and director of the Company, beneficially owns
DIS.
Endeavour Financial Corp ("EFC") charged the Company a total of $81,217 (2008 -
$42,000) in respect of the provision of consulting services and related
expenses. A former Chairman and director of the Company, is a shareholder of
EFC.
During the period ended March 31, 2009 the Company was charged $225,921 (nil
2008) for rent and service charges from Oriel PLC a company related through a
common director (whom resigned September 19 2008).
As at March 31, 2009, a total of $26,369 (2008 - $30,000) for related parties
has been included in accounts payable.
CORE ASSETS
Orsu's principal asset is the Varvarinskoye open pit gold-copper mine in the
Urals belt in northern Kazakhstan. Its other exploration and development
projects include the Karchiga Volcanogenic Massive Sulphide ("VMS") deposit in
Kazakhstan and the Talas and Tokhtazan exploration licence areas in Kyrgyzstan.
The business acquisition of Lero positioned Orsu as a premier growth company
with the primary objective of bringing Varvarinskoye up to commercial production
levels, whilst at the same time aggressively continuing the exploration and
development of its other copper-gold projects in Kyrgyzstan and Kazakhstan and
pursuing new opportunities and acquisitions in countries of the Former Soviet
Union ("FSU").
- Varvarinskoye Gold-Copper Mine, Kazakhstan - Located in north west Kazakhstan,
Orsu's 100% owned Varvarinskoye Project commenced production of gold dore in
December 2007 and copper-gold concentrate in March 2008. In the first quarter of
2009, the Varvarinskoye Project produced a total of 423,627 grams (13,599 troy
oz) of gold and 1,743 tonnes of copper recovered to concentrate. In January
2009, the Company completed an updated mine plan, including updated mineral
reserve and mineral resource estimates, for the Varvarinskoye Project. The
"qualified person" (as such term is defined in National Instrument 43-101) who
supervised the preparation of and is responsible for the 2009 updated mineral
reserve and mineral resource estimates for the Varvarinskoye Project disclosed
in this press release is Mr Stephen Craig, Managing Director of Orelogy,
Australia. The complete technical report respecting the 2009 updated mineral
reserve and mineral resource estimates (entitled "Varvarinskoye Cu/Au Open Pit
Mine, Mine Planning Study" and dated 30 January 2009) can be viewed on
www.sedar.com.
- Talas Exploration Licence Area, Kyrgyzstan - The Taldybulak copper-gold
porphyry deposit is the primary exploration property within the Taldybulak-Talas
licence which comprises core assets of the Company in Kyrgyzstan including the
Taldybulak, Kentash, Barkol and Korgontash licences. In April 2008, the Company
completed a National Instrument 43-101 mineral resource estimate. In December
2008, Orsu announced it had signed a joint venture agreement with Gold Fields
for the further exploration and development of the Talas licence area. The
mineral resource estimates at Taldybulak were prepared by Julian Woodcock (Chief
Geologist, Orsu) and under the supervision of Matthew Boyes (Mineral Resources
Manager, Orsu), a 'qualified person' (as defined by National Instrument 43-101).
These results were also reviewed and approved by Wardell Armstrong International
("WAI"). However, WAI has relied upon the data presented by Lero in formulating
its opinion. WAI's complete technical report respecting the mineral resource
estimates at Taldybulak (entitled "Technical Report on the Exploration Licences
Held by Lero Gold Corporation In Kyrgyzstan & Kazakhstan, Central Asia" and
dated May 2008) can be viewed on www.sedar.com.
- Tokhtazan Exploration Licence Area, Kyrgyzstan - The Tokhtazan exploration
licence area is located in the Jalal-Abad Oblast, western Kyrgyzstan and is
covered by two exploration licences, Akdjol and Tokhtazan. Access to the deposit
is via the main Bishkek-Osh bitumen road for 400 km, then 14km on a gravel road.
- Karchiga Copper Project, Kazakhstan - The ("Karchiga" or the "Karchiga
Project") 47.3km2 exploration licence contains the Karchiga VMS deposit. The
Karchiga copper-gold deposit is located in the extreme north east of the
Republic of Kazakhstan, within 40km of the Chinese border and within the Rudny
Altai belt which is ranked in the top four VMS belts in the world. In April
2008, the Company released a National Instrument 43-101 mineral resource
estimate. The mineral resource estimate at Karchiga was prepared by Matthew
Boyes (Mineral Resources Manager, Orsu), a "qualified person" (as defined by
National Instrument 43-101). The mineral resource estimation methodology was
reviewed by WAI. Assays were conducted at the internationally certified Alex
Stewart Lab in Bishkek, Kyrgyzstan. Orsu operates a stringent QA/QC policy that
includes external certified standard samples and blanks in each individual batch
sent for analysis. WAI's complete technical report respecting the mineral
resource estimates at Karchiga (entitled "Technical Report on the Exploration
Licences Held by Lero Gold Corporation In Kyrgyzstan & Kazakhstan, Central Asia"
and dated May 2008) can be viewed on www.sedar.com.
Qualified Person
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.
REVIEW OF OPERATIONS
VARVARINSKOYE GOLD-COPPER MINE, KAZAKHSTAN
The Varvarinskoye Project is located 130km southwest of Kostanai in northern
Kazakhstan. The mine produces for sale gold dore and copper-gold concentrate.
Orsu's main focus has been the ramp-up of mining operations at Varvarinskoye.
The mine commenced production of gold dore in December 2007 and copper-gold
concentrate in March 2008.
Mining and Processing Operations
In January 2009, the mill's grinding circuits continued to feed the leaching and
flotation circuits. During the fourth quarter 2008, the mill's throughput was
reduced due to worn mill lifters. Necessary repairs carried out during the first
quarter of 2009 ensured grinding returned to expected levels.
Total gold production during the first quarter of 2009 was slightly higher than
that of the fourth quarter of 2008. Compared to the fourth quarter of 2008,
production of copper recovered to concentrate during the first quarter of 2009
was reduced by 11%. This reduction was due to the switch back during February of
the grinding circuit to normal operation. In November and December 2008, the
grinding circuits were switched to maximise copper-gold concentrate production
in light of metals prices during those months.
Mining during the first quarter of 2009 was hampered by equipment failure. Major
maintenance was carried out on two excavators which were down for a total of
1,080 hours, leading to a reduction of 14% in total tonnes mined in the first
quarter compared to the same period in 2008.
Concurrently, the use of targeted RC drilling lead to improved grade control and
therefore an increase of gold and copper grades.
First Quarter 2009 Production
During the first quarter of 2009, the plant processed a total of 380,513 tonnes
of ore.
A total of 423,627 grams (13,599 troy oz) of gold was produced during the first
quarter of 2009 compared to 416,175 grams (13,375 troy oz) in the fourth quarter
of 2008. Gold grade of feed to the flotation circuit during the first quarter of
2009 was 1.21g/t compared to 1.09g/t in the fourth quarter of 2008. Copper
production during the first quarter was 1,743 tonnes compared to 1,962 tonnes in
the fourth quarter of 2008. Copper feed grade to the flotation circuit was 0.91%
during the quarter compared to 0.84% in the fourth quarter of 2008. Gold feed
grade to the leach circuit was 0.94g/t in the quarter compared to 0.83 g/t in
the fourth quarter of 2008.
Table 1: Varvarinskoye Operating Statistics:
--------------------------------------------------------------------------
Varvarinskoye 1st 4th 3rd 2nd 1st
Production Quarter Quarter Quarter Quarter Quarter
2009 2008 2008 2008 2008
--------------------------------------------------------------------------
Mining
--------------------------------------------------------------------------
Total mined tonnes 3,672,800 4,281,200 3,930,900 2,319,200 2,738,400
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Processing
--------------------------------------------------------------------------
Flotation
--------------------------------------------------------------------------
Processed tonnes 239,994 295,663 187,603 184,948 62,698
--------------------------------------------------------------------------
Grade Cu % 0.91% 0.84% 0.72% 0.99% 0.46%
--------------------------------------------------------------------------
Grade Au g/t 1.21 1.09 1.11 1.64 0.66
--------------------------------------------------------------------------
Recovery Cu to
concentrate % 80.2% 79.3% 82.0% 68.9% 57.6%
--------------------------------------------------------------------------
Recovery Au to
concentrate % 50.7% 49.5% 59.0% 51.3% 49.9%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Leach
--------------------------------------------------------------------------
Processed tonnes 380,513 391,164 581,060 449,537 173,308
--------------------------------------------------------------------------
Grade Au g/t 0.94 0.83 0.61 0.60 0.79
--------------------------------------------------------------------------
Recovery Au (onto
carbon) % 75.1% 74.3% 69.5% 66.3% 68.6%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Metal Produced
--------------------------------------------------------------------------
Concentrate tonnes 9,608 10,334 6,036 6,497 1,105
--------------------------------------------------------------------------
Cu recovered to
concentrate tonnes 1,743 1,962 1,106 1259 166
--------------------------------------------------------------------------
Total gold produced
grams 423,627 416,175 375,022 349,522 122,979
--------------------------------------------------------------------------
Low Cost Project Upgrade
The Company intends to expand the Varvarinskoye processing plant during 2009
with the addition of a secondary low cost screening and crushing plant which is
expected to significantly increase throughput in the leach and flotation
grinding circuits. Engineering is on-going, while a cone crusher unit is
awaiting delivery. Other than engineering requirements, construction of the
project has been temporarily suspended until the restructuring of the Company's
loan repayments and hedge obligations has been completed. As a result, the
project is expected to be commissioned during the fourth quarter of 2009, rather
than the second quarter as previously anticipated. This delay will have an
impact on forward-looking gold and copper production.
2009 Production Guidance
Once to the delay in the construction and commissioning of the secondary
screening and crushing plant is over, 2009 gold production is estimated at
between 110,000 ounces and 115,000 ounces, while production of copper contained
in concentrate is expected at between 18 million pounds and 20 million pounds.
ORSU'S COPPER-GOLD EXPLORATION LICENCES IN KYRGYZSTAN & KAZAKHSTAN
The Company is also exploring and developing 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.
TALAS EXPLORATION LICENCES, KYRGYZSTAN
The Talas exploration area comprises the core assets of the Company in
Kyrgyzstan including the Taldybulak-Talas, Kentash, Barkol and Korgontash
licences. The primary exploration property is the Taldybulak-Talas copper-gold
porphyry licence.
For avoidance of confusion;
1. The Taldybulak-Talas copper-gold porphyry prospect within the
Taldybulak-Talas 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-Talas licence, is a separate company from Talas Gold Mining Company,
which was the owner of the Jerooy Gold Project.
TALDYBULAK-TALAS PROJECT
(100% owned by Orsu via Talas Copper Gold LLP)
Targeted Mineralisation
Copper-gold porphyry and high sulphidation gold mineralisation is associated
with Late Ordovician dioritic-dacitic stocks, intruding Lower Ordovician
intermediate volcaniclastics. The Taldybulak-Talas copper-gold porphyry deposit
was discovered during the Soviet era, but had been subject to limited
exploration.
Gold Fields Exploration Partnership
On 3 December 2008 Orsu announced the signing of a joint venture agreement (the
"JV agreement") with Gold Fields for the further exploration and development of
the Talas licence area, north west Kyrgyzstan. Gold Fields has become the
project operator and Gold Fields has reimbursed Orsu for all exploration
expenditures incurred since March 2008 (approximately $3.5 million), as part of
the agreed program and budget.
Under the JV agreement, Gold Fields has the right to:
- During Phase One: earn up to a 60% interest in the joint venture company which
is the indirect owner of the Taldybulak-Talas, Barkol, Kentash and Korgontash
properties in the Talas region by funding exploration expenditures of CAD$10
million;
- During Phase Two: increase its effective interest in the project by a further
10% (to a total of 70%) by funding the lesser of (i) exploration expenditures of
up to a further CAD$10 million, or (ii) exploration expenditures required to
complete a feasibility study, pursuant to approved programmes and budgets; and
- After Phase Two: act as lead arranger to obtain any further project financing
for the project development, 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.
Phase One will conclude no later than 13 August 2010. During Phase One, the
funding will be focused on exploration work in all Talas licence areas with an
emphasis on further defining known mineralised systems and their strike
extensions. In addition, a scoping study for the Taldybulak-Talas deposit in the
Taldybulak licence is due to be completed during 2009. Phase Two will continue
for an additional period of up to three years after completion of Phase One and
will include the provision to include additional mineral resources in the case
of further exploration success in the Talas project area.
Exploration Update
The previously announced 2008 / 2009 drilling programme which is intended to
better delineate the extent and geometry at Taldybulak Central and assess the
additional tonnage potential through the testing of peripheral targets of the
central high grade core is underway. An overall exploration expenditure of
CAD$7.8 million is budgeted for the exploration of the Talas exploration area in
2009, all of which will be funded by Gold Fields.
Table 2: Proposed 2008-2009 Drilling Programme Within the Taldybulak-Talas
Exploration Licences
---------------------------------------------------------------------------
Licence Proposed
Area Purpose Target Metres
---------------------------------------------------------------------------
Drill out Taldybulak Central 7,000m
---------------------------------------------------------------
Taldybulak Exploration Taldybulak West extension &
Taldybulak Central deeps 2,000m
---------------------------------------------------------------
Exploration Taldybulak East 2,000m
---------------------------------------------------------------------------
Barkol Exploration Taldybulak West IP Anomaly 3,000m
---------------------------------------------------------------------------
Exploration Taldybulak East extension in to
Mag & IP Anomaly 800m
---------------------------------------------------------------
Kentash Exploration Lower Kentash (Dzhangiturmish SE
extension) SW Soils & IP Anomaly 1,000m
---------------------------------------------------------------
Exploration Kokkiya 400m
---------------------------------------------------------------------------
Korgontas Exploration Tokhtonnisai 800m
---------------------------------------------------------------------------
TOTAL 17,000m
---------------------------------------------------------------------------
As at the date of this press release, a total of 12,291m have been drilled,
representing 72% of the initially planned 17,000m drill programme. A total of
10,168 samples have been delivered to the Alex Stewart laboratory, (Karabalta,
Kyrgyzstan) for elemental analysis, of which 9,861 assay results, or 97% of
submitted samples have been received.
The results in Table 3 below confirm that the Taldybulak-Talas prospect contains
broad and coherent copper-gold porphyry mineralisation at above-average gold
grades for this style of mineralisation.
Table 3: Significant Mineral Intersections Received From the 2008/2009
Taldybulak Drill Programme
-------------------------------------------------------------------
BHID From (m) To (m) Length (m) Au g/t Cu % Mo %
-------------------------------------------------------------------
TB0030 10.3 188.0 177.7 0.3 0.30 0.013
-------------------------------------------------------------------
Including 10.3 22.8 12.5 0.3 0.78 0.004
-------------------------------------------------------------------
TB0031 62.0 439.8 377.8 0.9 0.23 0.015
-------------------------------------------------------------------
Including 299.6 439.8 140.2 1.7 0.30 0.024
-------------------------------------------------------------------
TB0032 182.4 320.6 138.2 1.2 0.25 0.025
-------------------------------------------------------------------
Including 266.5 297.9 31.4 2.0 0.25 0.021
-------------------------------------------------------------------
TB0035 92.5 299.0 206.5 0.8 0.20 0.020
-------------------------------------------------------------------
including 92.5 205.0 112.5 1.0 0.25 0.021
-------------------------------------------------------------------
TB0038 129.0 421.0 292.0 0.3 0.27 0.015
-------------------------------------------------------------------
including 129.0 222.0 93.0 0.1 0.33 0.011
-------------------------------------------------------------------
TB0038 541.0 677.5 136.5 1.4 0.11 0.014
-------------------------------------------------------------------
including 649.3 677.5 28.2 2.6 0.17 0.011
-------------------------------------------------------------------
TB0043 200.0 338.4 138.4 1.8 0.14 0.009
-------------------------------------------------------------------
including 202.0 227.0 25.0 3.8 0.06 0.020
-------------------------------------------------------------------
TB0044 3.5 183.0 179.5 0.5 0.24 0.006
-------------------------------------------------------------------
TB0045 112.9 162.7 49.8 0.1 0.28 0.006
-------------------------------------------------------------------
TB0045 204.7 241.0 36.3 0.1 0.31 0.008
-------------------------------------------------------------------
TB0046 13.0 124.0 111.0 1.8 0.33 0.005
-------------------------------------------------------------------
including 64.0 99.2 35.2 3.4 0.42 0.008
-------------------------------------------------------------------
TB0046 159.0 197.6 38.6 0.9 0.24 0.012
-------------------------------------------------------------------
TB0047A 500.6 549.8 49.2 0.2 0.24 0.010
-------------------------------------------------------------------
TB0049 185.0 277.7 92.7 1.2 0.08 0.008
-------------------------------------------------------------------
Including 254.7 276.9 22.2 2.2 0.03 0.003
-------------------------------------------------------------------
TB0050 148.0 294.0 146.0 0.6 0.13 0.009
-------------------------------------------------------------------
TB0052 146.7 176.0 29.3 0.5 0.28 0.011
-------------------------------------------------------------------
TB0052 534.0 629.0 95.0 1.0 0.14 0.020
-------------------------------------------------------------------
including 580.0 629.0 49.0 1.6 0.18 0.022
-------------------------------------------------------------------
Estimated true widths vary from 85-95% of drilled width
BARKOL EXPLORATION LICENCE, KYRGYZSTAN
(100% owned by Orsu via Talas Copper Gold LLP)
Targeted Mineralisation
Copper-gold porphyry mineralisation
Exploration Update
During the first quarter of 2009, the Company undertook limited drill testing
and further geophysical investigations within the Barkol licence area. During
2009, the Company is planning following up of anomalies detected during the 2007
induced polarisation ("IP") geophysical survey and soil geochemical sampling
programmes. As indicated within table 2, further core drilling is planned for
2009.
KORGONTASH PROJECT
(100% owned by Orsu via Talas Copper Gold LLP)
Targeted Mineralisation
Palaeozoic copper-gold porphyry and associated skarn and quartz vein hosted
mineralisation.
Exploration Update
In the third quarter of 2008, a 15km2 ground magnetic survey over the north west
extents of the Korgontash licence was completed. The presence of magnetic highs
to the west of the Aktash exclusion zone indicates potential for additional
skarn type mineralisation as well as a potential deeper-seated magnetic
intrusive. Follow up work with additional IP lines mainly focused on the area
west of the Aktash exclusion zone is planned for 2009.
KENTASH PROJECT
(100% owned by Orsu via Talas Copper Gold LLP)
Targeted Mineralisation
Palaeozoic copper-gold porphyry and associated skarn and quartz vein hosted
mineralisation.
Exploration Update
Limited work has been performed on the Kentash licence to date, however stream
sediment geochemistry completed during 2006 returned high copper and gold
values, indicating potential for further occurrences of mineralisation along the
corridor linking Andash and Taldybulak.
During 2007 Lero completed a widely-spaced soil geochemical survey over the
entire Kentash licence which returned gold, copper and molybdenum anomalies
within three areas. In addition, a widely-spaced IP survey during 2007 revealed
chargeability anomalies in the central part of the licence. These anomalies are
due to be further assessed during 2009.
During the third quarter of 2008 three pole dipole induced polarisation
("PD-IP") lines totalling 9.55km were completed in the Kentash licence over the
south west anomaly. At the end of the fourth quarter 2008 assays were received
for Kentash soil sampling programme. A comprehensive review is due to be
undertaken during 2009 to ascertain if any new geochemical targets can be
identified.
TOKHTAZAN EXPLORATION LICENCE, KYRGYZSTAN
Tokhtazan Project
(100% owned by Orsu via Oriel in Kyrgyzstan LLP)
Exploration Update
Within the 2008 / 2009 exploration programme, works undertaken within the
Tokhtazan licence included 1,540 cubic metres 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 4 below summarises the quantities of drilling completed in this
exploration phase as of March 31, 2009.
Table 4: Drilling Works Completed on the Tokhtazan Licences (as of
March 31, 2009)
------------------------------------------------------------------
BHID Hole Depth Samples(i)
------------------------------------------------------------------
TBDD08-01 153.40 177
------------------------------------------------------------------
TBDD0801B 37.40 24
------------------------------------------------------------------
TBDD08-03 25.55 16
------------------------------------------------------------------
TBDD08-07 150.80 124
------------------------------------------------------------------
TTR08-07 125.00 149
------------------------------------------------------------------
TTR08-08 125.00 149
------------------------------------------------------------------
Total 617.5 639
------------------------------------------------------------------
(i)includes standards and blanks
In total, 3,102 samples have been delivered to the Alex Stewart laboratory,
(Karabalta, Kyrgyzstan) for analysis. All core drilled has been sampled and all
results received for diamond drilling.
Table 5 shows assay results from core and RC drilling which confirm the presence
of the previously interpreted mineralised structure. Orsu intends to carry out
further investigative drilling during the 2009 / 2010 exploration season.
Table 5: Significant Mineral Intersections Within the Tokhtazan Licence
Drilling Works
--------------------------------------------------------------------------
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
--------------------------------------------------------------------------
Estimated true widths vary from 70-75% of drilled width
Akdjol Project
(100% owned by Orsu via Oriel in Kyrgyzstan LLP)
Exploration Update
Within the ongoing 2008 / 2009 exploration programme, the Company performed
3,140m3 of trenching and road cut sampling, with some 2,532 samples collected.
In 2008, the works were focused on the Bulderek occurrence located 3.5 km
south-southwest from the Tokhtazan licence. The works included prospecting,
trenching and geophysical exploration:
- DD-IP (interval: 50m, depth: 200m, total: 12.8km);
- magnetic survey (interval: 25m, total: 41.45km);
- gamma-ray spectrometry (interval: 25m, total: 43.3km).
The 2008 works identified a previously unknown Cu-Au anomalous zone. Table 6
below shows assay results received for the 2008 channel sampling.
Table 6: Significant Mineral Intersections from Akdjol's 2008 Trenching
Works
----------------------------------------------------------------
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.
KARCHIGA EXPLORATION LICENCE, KAZAKHSTAN
Karchiga Project
(70% owned by Orsu via GRK MLD LLP)
Targeted Mineralisation
Copper VMS
Exploration Update
Drilling works within the 2008 / 2009 exploration programme focused on the
Central and North East lodes of the Karchiga Project. The primary scope of the
2008 / 2009 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 10,599.8m, of which 9,804.7m was
drilled at Karchiga's Central and North East lodes, with an additional 795m
completed to test new exploration targets. All samples have now been submitted
to the Alex Stewart laboratory, Kyrgyzstan and subsequent to receiving the final
assay results; Orsu will provide an update in due course. By the end of 2008,
Orsu completed 8,000m of diamond drilling within the Central lode of Karchiga.
Data from 60 diamond drill holes within the Central lode has confirmed the
continuity of the mineralised zone as delineated in the 2008 mineral resource
model. The new drilling works demonstrated that the total strike length of the
North East lode is continuous for 2,768m, which was only partially included into
the April 2008 mineral resource model.
Trenching work to sample the oxide mineralisation in the Central lode at
Karchiga was completed in the fourth quarter 2008. Sampling of surface trenches
has been completed with 571 rock chip samples sent for analysis to the Alex
Stewart laboratory (Karabalta, Kyrgyzstan), while geochemical samples were sent
to the Ultratrace laboratories (Perth, Australia).
A soil geochemistry survey has been completed over the entire licence area on
soils on 100?50m grid. Samples have been sent to the Ultratrace laboratories. An
IP and resistivity survey was completed on 18 profiles, totalling 63.55km. A
preliminary interpretation was received in the third quarter of 2008 and was
used for positioning the exploration drill holes in two anomalous zones, similar
to Karchiga, where a non-outcropping area of mineralisation is being targeted.
The identification of these new targets is based on historical work plus
recently acquired geochemical and IP geophysical data carried out by Orsu since
obtaining the licence in 2006. The target areas lie approximately 5km east along
strike from the Central zone with the area exhibiting very similar geological
terrain and structural characteristics. The Company drilled some of the new
anomalies in the fourth quarter of 2008 and as at the date of this press
release, results are pending.
Metallurgical test work on Karchiga sulphide ores was also completed by the
VNIITsvetMet Institute (Ust-Kamenogorsk, Kazakhstan) with positive results
suggesting that a 15.9% Cu concentrate can be produced from the Karchiga ores at
98% recovery. This result requires optimisation of concentrate grade versus
recovery. For the purposes of a feasibility study, three 400kg metallurgical
samples have been collected and delivered to the VNIITsvetMet Institute for
further tests.
These samples represent the three types of Karchiga ore (oxidized, primary
disseminated and massive). The analysis of primary ores at Karchiga showed that
18% of ores are massive (1m average) and 82% of ores is disseminated (4.5 m
average). It is also planned to study a variability of these ore types
throughout the deposit. Metallurgical sampling was completed in the fourth
quarter of 2008 with results of metallurgical test-work due approximately in the
second quarter of 2009.
In September 2008, Micon International Co Limited was contracted to carry out a
preliminary assessment (the "Scoping Study") of the Karchiga Project. The
Scoping Study is targeted to provide a preliminary estimate of mineral
resource/reserve conversion, an estimate of costs including capital costs, as
well as preliminary appraisal of the environmental aspects of the project. As at
the date of this press release, the Scoping Study was pending.
Orsu Metals Corporation
Consolidated Balance Sheets
For the Period Ended 31 March 2009 (Unaudited) and 2008
---------------------------------------------------------------------------
March 31 2009 December 31 2008
$ $
Assets
Current assets
Cash and cash equivalents 4,415 7,774
Inventory 10,212 21,461
Accounts receivable 46 507
Other assets 5,047 4,034
-------------------------------
19,720 33,776
Other assets 15,605 19,688
Inventory 16,913 6,419
Restricted cash 85 142
Property, plant and equipment 45,606 45,748
Net investment in oil and gas residual
interests 884 884
-------------------------------
98,813 106,657
-------------------------------
-------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 26,537 24,440
Current portion of long-term debt 55,636 53,751
Current portion of derivative liabilities 99,944 24,221
-------------------------------
182,117 102,412
Derivative liabilities - 92,773
Future income tax 6,877 6,877
Asset retirement obligations 13,544 13,357
-------------------------------
202,538 215,419
-------------------------------
Shareholders' (Deficiency) Equity
Share capital 361,440 361,440
Share purchase warrants 48,650 48,650
Share purchase options 19,631 19,000
Contributed surplus 2,863 2,715
Deficit (536,309) (540,567)
-------------------------------
(103,725) (108,762)
-------------------------------
98,813 106,657
-------------------------------
-------------------------------
Going concern
Measurement uncertainty
Commitments
Contingencies
Orsu Metals Corporation
Consolidated Statements of Operations, Comprehensive Loss and Deficit
For the Period Ended 31 March 2009 and 2008 (Unaudited)
---------------------------------------------------------------------------
Three months
ended March 31
2009 2008
$ $
Sales revenues
Gold 7,898 2,270
Copper 1,898 -
----------------------
9,796 2,270
----------------------
Cost of sales
Operating expenses (10,646) (925)
Selling and distribution costs (382) (48)
Depreciation, depletion and amortization (142) (3,802)
Accretion (187) -
----------------------
(11,357) (4,775)
----------------------
Other (expenses) income
Unrealized derivative losses (7,808) (22,214)
Realized derivative losses (7,685) (6,251)
General and administrative (2,854) (2,729)
Exploration (215) (432)
Stock-based compensation (780) (138)
Interest expense (2,970) (2,955)
Interest income 7 204
Foreign exchange losses (3,054) (926)
Mineral extraction tax (1,365) -
----------------------
(26,724) (35,441)
----------------------
Loss before income taxes (28,285) (37,946)
Recovery of income taxes - -
----------------------
Loss and comprehensive loss for the period (28,285) (37,946)
Deficit - Beginning of period - as previously stated (540,567) (217,955)
Adjustment on adoption of EIC 173 32,543 -
Deficit - Beginning of period - Restated (508,024) (217,955)
----------------------
Deficit - End of period (536,309) (255,901)
----------------------
----------------------
Loss per common share $ (0.06) $ (0.13)
----------------------
----------------------
Weighted average number of common shares
Basic and diluted 456,959 303,329
----------------------
----------------------
Orsu Metals Corporation
Consolidated Statements of Cash Flows
For the Period Ended 31 March 2009 and 2008 (Unaudited)
-------------------------------------------------------------------------
Three months
ended March 31,
2009 2008
Cash flows from operating activities $ $
Loss for the year (28,285) (37,946)
Items not affecting cash
Depreciation, amortization and deferred finance
charges 2,599 3,802
Realized and unrealized derivative losses 15,493 22,214
Stock-based compensation 780 138
Unrealized foreign exchange loss 3,983 684
Inventory write-downs 6,488 -
Mineral extraction tax 1,365 -
-------------------
2,423 (11,108)
Change in non-cash working capital
Increase in inventories (5,729) (8,995)
Decrease in contractor advances - -
Increase in accounts receivable and other assets (937) 203
Increase in accounts payable and accrued
liabilities 827 657
-------------------
(3,416) (19,243)
-------------------
Cash flows from investing activities
Expenditures on property, plant and equipment - (516)
Restricted cash 57 56
Recovery of net investment in oil and gas residual
interests - 329
-------------------
57 (131)
-------------------
Cash flows from financing activities
Proceeds from exercise of stock options - 990
Proceeds from long-term debt - 127
Deferred financing costs - (229)
-------------------
- 888
-------------------
(Decrease) increase in cash and cash equivalents (3,359) (18,486)
Cash and cash equivalents - Beginning of period 7,774 25,250
-------------------
Cash and cash equivalents - End of period 4,415 6,764
-------------------
-------------------
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 Company's planned
implementation of a second low cost screener and crusher at Varvarinskoye and
the resulting increase in throughput expected; the estimated costs associated
with the proposed upgrade of the screener and crusher; management's expectations
of increased grades of mined ore at Varvarinskoye over the next three financial
quarters; the estimated value of copper and gold produced from Varvarinskoye and
the estimated life of mine; the Company's expectations with respect to its
planned operations during 2009 at Varvarinskoye and its other projects;
reductions in operating costs and increased operating capacity at Varvarinskoye;
estimates relating to gold production levels from and probable reserves of gold
at Varvarinskoye; the anticipated timing for completion of the Taldybulak-Talas
and Karchiga scoping studies; completion of the follow-up work at Korgontash
being planned; the expected timing of the commencement of investigations of the
anomalies identified at Barkol and Kentash and the Barkol core drilling
programme; development and operational plans and objectives; the Company's
expectation of financial support and the timing of same with respect to the
joint venture agreement Gold Fields, with respect to the Barkol, Kentash,
Taldybulak and Korgontash licences; the proposed work programs for the Company's
exploration properties and their respective timing; the Taldybulak 2008/2009
drilling programme resulting in the better delineation of the extent and
geometry at Taldybulak; the proposed meters to be drilled at Taldybulak; the
potential for further occurrences of mineralization at Kentash; the planned
comprehensive review at Kentash to determine if new geochemical targets can be
identified; expectations regarding the upgrading of the mineral resource
categories of the Karchiga Project to Measured and Indicated; the planned
feasibility study for Karchiga; the potential for a joint venture with Gold
Fields; the timing of metallurgical test-work at Karchiga; the resumption of
shipments of copper concentrate during the second quarter of 2009; the full
recovery of revenues in the second quarter;
inaction by the Lenders in respect of the Company's defaults under the Debt
Facility; the Company's forecast that, in the absence of additional waivers or
modifications of its debt terms, it will be unable to meet its scheduled
repayment obligations, will remain in breach of its repayment obligation and
Permitted Indebtedness covenants and is likely to breach additional covenants;
continued efforts and a conclusion with the Lenders regarding the restructuring
of the Debt Facility in a manner and time that would allow the Company to meet
its obligations as they fall due; the Company's ability to reasonably estimate
its own credit risk for the purposes of deriving a reliable risk-adjusted fair
value of its derivative liabilities; the recovery of metal prices; the
consequences of a failure to reach a successful restructuring conclusion with
the Lenders combined with an inability to meet its obligations there under or
rectify any breaches thereof (including the termination of the Debt Facility,
enforcement upon the Varvarinskoye Project or the shares of JSCV or the loss of
the Varvarinskoye Project); the impact on the Company's working capital of,
among other things, metal prices, frequency of production deliveries, production
levels and any amendments to the terms of the Debt Facility; reductions in
estimated contained copper and gold metals; current long-term copper and gold
pricing forecasts; the ability to restore normal supplier payments and
outstanding balances following the successful conclusion of the refinancing
discussions; the minimum requirements in order for any restructuring or
modifications to the Debt Facility to be successful, including an extension of
the debt repayment period, an increase on the Debt Facility of a minimum of $10
million and the conversion of short-term gold forward contract obligations; the
possible disposition of the Varvarinskoye Project and related debt and
obligations; the materiality of adjustments to the carrying value of assets and
liabilities, the reported revenues and expenses and balance sheet
classifications; the Company's plans with respect to the change to IFRS,
including the Company's expected timing for implementing same and the
development of an effective plan; the continuation of assessments relating to
resource and training requirements; the Company's plans with respect to the
preparation of more complete disclosure of the implementation of IFRS exceptions
and exemptions as well as the impact of IFRS on the Company's financial
statements; the Company's plans for adopting and/or implementing changes to
accounting policies; and the Company's expectations with respect to pursuing new
opportunities in countries of the FSU.
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 Company's ability to generate sufficient cash flow from
operations and capital markets to meet its future obligations, the regulatory
framework in Kazakhstan and Kyrgyzstan with respect to, among other things,
permits, licences, authorisations, royalties, taxes and environmental matters,
the ability of management to continue commercial mining operation at
Varvarinskoye, and 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.
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: the grade and recovery of
ore which is mined varying from estimates; the nature of mineral exploration and
mining; capital and operating costs varying significantly from estimates;
inflation; changes in exchange rates; fluctuations in commodity prices; the
ability to obtain required financing; production delays at Varvarinskoye caused
by unavailability of equipment, labour or supplies, climatic conditions, delays
in the delivery and installation of plant and equipment or otherwise; the
Company's inability to restructure the loan repayments and hedging obligations
due by the Company's wholly-owned subsidiary JSCV, under its loan and hedging
facilities; the Lenders enforcing their security over Varvarinskoye or the
shares of JSCV; the inherent risks associated with the use of derivatives;
inability to delineate additional mineral resources or reserves; and other
factors including, but not limited to, those listed under "Risk and
Uncertainties" 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 and mineral reserve 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 and mineral reserve estimates in respect of its properties are well
established, by their nature mineral resource and mineral reserve estimates are
imprecise and depend, to a certain extent, upon statistical inferences which may
ultimately prove unreliable. If such mineral reserve and 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 its Annual
Information Form, dated April 24, 2009 (the "Annual Information Form") available
under the Company's profile on SEDAR at www.sedar.com.
Additional information about the risks and uncertainties of the Company's
business is provided in its disclosure materials, including its Annual
Information Form, available under the Company's profile on SEDAR at
www.sedar.com.
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