Alhambra Resources Ltd. Announces Year 2012 Financial and Operational Results
CALGARY, ALBERTA -- (Marketwired) -- 07/03/13 -- Alhambra Resources Ltd. (TSX VENTURE: ALH)(PINKSHEETS: AHBRF)(FRANKFURT: A4Y) ("Alhambra" or the "Corporation"), an international gold explorer and producer, announces its financial and operating results for the year ended December 31, 2012. All amounts related to the financial results are expressed in thousands of United States dollars unless otherwise indicated.
YEAR 2012 HIGHLIGHTS
-- Revenue from gold sales amounted to $9.5 million based on the sale of
5,702 ounces ("ozs") at an average gold price of $1,669/oz
-- Cash operating costs were $807 per oz of gold sold
-- Kazakhstan mining operations generated net earnings of $1.3 million
($0.01/share)
-- The Corporation recorded net cash flow from operating activities of $0.4
million ($0.00/share) and a net loss of $5.0 million ($0.05/share)
-- Stacked 136,220 tonnes ("t") of ore on the heaps at an average grade of
0.57 grams per tonne gold ("g/t Au")
-- Production was estimated at 1,620 ozs of gold
-- Lower gold sales were the result of suspension of the mining of new ore
in June of 2012 as well as inability to maintain optimum operating
conditions (such as ripping and fluffing of leach pads, maintenance of
optimum levels of cyanide and resin) due to financial constraints
-- Recorded higher than expected administration costs due to expensing $2.4
million of costs related to a planned dual stock listing
-- The estimated recoverable gold in work in progress ("WIP") as of
December 31, 2012 was 37,757 ozs
-- Exploration expenditures were $0.9 million
-- Received and issued the results of two initial independent National
Instrument ("NI") 43-101 resource estimates for the Shirotnaia and
Dombraly gold projects
-- 7,904 metres ("m") of exploration drilling was completed
-- Assay results on 2,593 drill samples were pending
-- 6,755 drill and soil samples were being prepared for export for analysis
-- A 1,360 km2 ground gravity and magnetic survey completed resulted in the
identification of 18 new primary exploration targets
FINANCIAL HIGHLIGHTS
The financial results for 2011 and 2012 are for the period January 1 to December 31.
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(in thousands of US$
except per share Three Months ended
amounts) December 31 Year ended December 31
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2012 2011 2012 2011
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Gross revenue $ 1,438 $ 2,705 $ 9,518 $ 15,260
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Net income/loss $ (3,343) $ (2,578) $ (4,980) $ (3,779)
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Per share (basic (0.03) (0.03) (0.05) (0.04)
and diluted)
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Weighted average 104,132,059 104,132,059 104,132,059 104,103,679
shares outstanding
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Shares outstanding 104,132,059 104,132,059 104,132,059 104,132,059
at end of period
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In 2012, the Corporation recognized $9.5 million in revenue from the sale of 5,702 ozs of gold at an average price of $1,669/oz. This compares to $15.3 million in revenue from the sale of 9,187 ozs of gold at an average price of $1,661/oz during 2011.
For the year ended December 31, 2012, the net loss for the Corporation was $5.0 million ($0.05/basic and diluted share) compared to a net loss in 2011 of $3.8 million ($0.04/basic share and diluted share). Net cash used in operating activities was $0.4 million ($0.00/share) for the year 2012 compared to net cash used in operating activities of $4.8 million ($0.05/share) for the year 2011.
OPERATING HIGHLIGHTS
During 2012 the Corporation was experiencing financial hardships which prevented it from satisfying some of its outstanding obligations. Due to these financial constraints, the Corporation and its principal mining contractors agreed to suspend mining of new material to conserve cash until the Corporation could raise sufficient funds to pay outstanding obligations. The Corporation continues to pursue financing alternatives and has executed a non-binding term sheet. Due diligence is currently proceeding on various financing alternatives. Should a financing be completed, a portion of the proceeds will go towards the resumption of the mining of ore.
The decrease in revenue in 2012 was primarily due to lower gold sales which was the result of the reduction in the mining of new ore.
Another contributing cause of lower gold sales was the fact that due to the lack of sufficient funds, a number of standard operating procedures which are carried out to enhance recovery of gold stacked on the pad could not be maintained. These procedures need to be followed even if there is no mining of new ore in order to maximize the recovery of work in progress gold inventory. These procedures are as follows:
-- Work done on the pads, such as ripping and fluffing the rested pads,
increases the recovery of gold substantially.
-- Cyanide needs to be added at regular intervals so that cyanide
concentration can be maintained at the optimum levels to increase gold
recovery efficiency.
-- Resin which is used to extract the gold from the cyanide solution breaks
down over time such that its efficiency is significantly reduced. As the
size of the individual resin beads reduce through use, their ability to
extract the gold from the cyanide solution is significantly reduced. New
resin is needed to return the extraction process to historical levels.
-- Consumed resin volumes must be replaced to maintain high efficiency
recovery. The resin plant is designed with nine columns containing
resin. Currently there are only 7 of the 9 columns filled with resin
between stripping cycles which affects the efficiency of stripping the
gold from the cyanide solution. When preparing for a stripping cycle,
resin from 2 columns is removed and shipped to the Dore plant which
leaves only 5 columns in operation until the resin shipped has been
returned to the plant and put back into the empty columns.
During 2012, the Corporation mined 403,952 tonnes of waste and stacked a total of 136,220 tonnes of ore at an average grade of 0.57 g/t Au onto the pad. The estimated recoverable gold mined totaled 1,620 ozs. As of December 31, 2012, he estimated recoverable gold classified as WIP was 37,757 ozs.
OPERATING EXPENSES
Operating expenses consist of all costs associated with the production of gold, (including direct costs incurred in the mining, leaching and resin stripping processes ("process operating costs"), Mineral Extraction Tax ("MET")), transportation and refining of the cathodic sediment but excluding depletion and depreciation. Except in periods in which no new ore is being mined, all process operating costs are charged to WIP and are expensed on the basis of the quantity of gold sold as a percentage of total recoverable gold mined. In those periods in which no new ore is being mined, certain direct mining costs and depreciation of mining equipment are expensed directly and not charged to WIP.
Operating costs for the year 2012 were $5.0 million or $882/oz of gold sold as compared to $6.6 million or $723/oz of gold sold for 2011. The 2012 figure includes $0.2 million ($38/oz) of mining costs charged directly to operating costs for the months in which there was no new ore mined. There was not a comparable amount in 2011.
Included in the 2012 operating cost amount is $0.4 million or $75/oz related to the amortization of the bump-up to fair value from the estimated cost of work in progress on re-valuation on September 15, 2009. Cash operating costs were therefore $807/oz. In 2011, $1.1 million or $123/oz of similar costs were included in operating costs resulting in the cash cost of gold sold for this period of $600/oz.
The $1.6 million decrease in operating costs is due to the reduction in the quantity of recoverable gold mined and sold during 2012. The $159/oz increase in per unit operating costs is a result of two factors. The first is a decrease in the grade of the ore mined to 0.57 g/t in 2012 as compared to 0.80 g/t in 2011. As mining costs are based on the volume of ore mined and not the grade of that ore, a reduction in grade will result in an increase in the cost per oz of gold mined and sold. The second factor is that even if mining of ore is curtailed, there remains a fixed component of mining costs that are still incurred which results in a higher per unit operating cost.
In 2012, the Corporation expensed to professional fees $2.4 million of costs previously recorded as prepaid expenses related to a planned initial public offering and listing on an Asian stock exchange. This plan was put on hold in 2012 initially due to the requirement to obtain approval from the government of Kazakhstan which took in excess of one and one half years. In the interim, the decline in the trading price of Alhambra's shares combined with the deterioration in the financial markets for equity issues, particularly junior mining companies, resulted in further delays in Alhambra's plans for the listing. Alhambra still has plans to proceed with this listing once market conditions are more receptive to financings and the Corporation's current financial issues are resolved.
IMPAIRMENT TEST
An impairment test was triggered because the carrying amount of property, plant and equipment was more than the Corporation's market capitalization at December 31, 2012 indicating that the assets may be impaired. As a result, a detailed test was carried out and it was determined that based on the Corporation's recoverable resources, gold prices and costs including operating administrative and capital, the value was not impaired and accordingly, no write down of property, plant and equipment was necessary.
An impairment test was not triggered for intangible assets.
CAPITAL PROGRAM
In 2012 the Corporation recorded capital expenditures of $0.9 million, virtually all in Kazakhstan. Of that total, less than $0.1 million relates to buildings, machinery and equipment used in the operations in Kazakhstan. In 2012 the Corporation had recorded $0.7 million of exploration costs as a result of the assessment by the tax authorities for the Commercial Discovery Bonus. The Corporation appealed the ruling and as a result of the March 12, 2013 decision by the appeals court, the bonus was reduced to just under $0.2 million. This $0.6 million reduction was accounted for in 2012 as a reduction in capital expenditure. The remaining $1.5 million relates to the Corporation's 2012 exploration program detailed below.
2012 EXPLORATION DRILLING UPDATES
In 2012, Alhambra received the results of two initial independent National Instrument ("NI") 43-101 gold resource estimates for its 100% owned Dombraly gold deposit ("Dombraly") and Shirotnaia gold project ("Shirotnaia"), both being advanced exploration projects. The results, based on limited drilling data, were very encouraging.
During 2012 Alhambra completed 7,904 metres ("m") of exploration drilling, 5,140 m of core drilling and 2,764 m of reverse circulation ("RC") drilling. The core drilling was focused on two projects, the first being to delineate additional gold resources at Shirotnaia, and the second being Zhanatobe, one of the Corporation's early stage exploration projects. The RC drilling was focused on two projects, Shirotnaia, and the second being Zhusaly, another one of its early stage exploration projects. As well, soil sampling programs were completed at Zhusaly, Vasilkovskoe East and Dombraly East.
Two batches of core drill samples (totaling 5,146 samples) from Shirotnaia and Zhanatobe were sent to the Kyrgyzstan Stewart Group laboratory for assaying in 2012. However, as of December 31, 2012, there were 2,593 Shirotnaia assay results pending (2,586 core and 7 QA/QC core re-sampling) from the laboratory, and in addition, 6,755 samples (including 887 QA/QC samples) were being prepared for export as follows:
-- Shirotnaia - 2,871 (RC samples),
-- Zhusaly - 386 (RC samples) and 650 (soil samples),
-- Vasilkovskoe East - 959 (soil samples) and 2 (rock chip samples),
-- Dombraly East - 1,887 (soil samples).
For the detailed 2012 exploration drilling results, see the Corporation's 2012 MD&A.
GOVERNMENT OF KAZAKHSTAN PRE-EMPTIVE RIGHT
Alhambra's original application to the relevant Kazakhstan authority (MINT) included a floor price for the issuance of common shares at $0.60 per share. Unfortunately, during the time period that MINT was considering the Corporation's application, the trading price of Alhambra's common shares dropped below that floor. The Corporation applied to MINT to have that floor price reduced to $0.20 per common share. The Corporation received the approval effective December 25, 2012 and it is effective until June 25, 2013. As provided for under Kazakhstan legislation, the Corporation has applied for an extension.
COMMERCIAL DISCOVERY BONUS
On February 22, 2012 Saga Creek was given notice by Kazakhstan tax authorities that it was required to pay a Commercial Discovery Bonus ("CDB") based on the approved commercial reserves for Uzboy. Payment was due on May 24, 2011. Saga Creek filed a notice of objection with the tax authorities on the basis that Clause 6.2 (b) of the Subsoil use contract explicitly defines that Saga Creek "pays a commercial discovery bonus at a zero rate" which in effect means that Saga Creek is not obliged to pay this CDB at all.
The tax authorities rejected Saga Creek's notice of objection. Saga Creek appealed that decision to the Akmola Court which rendered their decision on December 27, 2012. While the Akmola Court ruled that Saga Creek was liable to pay the CDB, it reduced the quantity of precious metal subject to the tax. The tax authorities appealed the decision of the Akmola Court. On March 12, 2013 the appeals court decided to uphold the decision of the Akmola Court.
As a result of the court decisions, the amount of the CDB due has been reduced by $0.6 million. In addition, the penalty and interest has been reduced by $0.4 million.
2013 OBJECTIVES
Currently Alhambra's efforts are focused on arranging financing, the use of proceeds from which will be directed towards the settlement of outstanding accounts payable, the re-initiation of the stacking of ore on the heap leach pads and the resumption of exploration and development programs. The Corporation has identified a number of exploration targets it wishes to drill once funds have been raised. In addition the Corporation plans to begin a pre-feasibility study directed towards bringing into production the transitional and sulphide zones of Uzboy. However, these programs as well as the Corporation's ability to continue on as a going concern are dependent on Alhambra completing one or more of the financing transactions it is currently investigating. While the Corporation has been successful in the past, there is no guarantee that the Corporation will be successful in the future in raising sufficient funds to continue as a going concern.
AUDITED FINANCIAL STATEMENTS AND MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A")
The Corporation's 2012 audited financial statements and MD&A are available on the Corporation's website, can be obtained on application from the Corporation and are available under the Corporation's profile on SEDAR at www.sedar.com.
ABOUT ALHAMBRA
Alhambra is a Canadian based international exploration and gold production corporation with NI 43-101 resources as noted below:
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Measured (M) Indicated (I)
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Project Grade Grade
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Tonnes (g/t) Ounces Tonnes (g/t) Ounces
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Uzboy (1) 14,317,200 1.52 700,000 7,009,500 1.22 275,500
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Dombraly (2) - - 559,000 1.22 22,000
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Shirotnaia (3) - - 2,900,000 0.76 71,000
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TOTAL 14,317,200 1.52 700,000 10,468,500 1.09 368,500
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M + I Inferred
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Project Grade Grade
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Tonnes (g/t) Ounces Tonnes (g/t) Ounces
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Uzboy (1) 21,326,700 1.42 975,500 11,258,200 1.17 421,700
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Dombraly (2) 559,000 1.22 22,000 9,317,000 1.01 301,000
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Shirotnaia (3) 2,900,000 0.76 71,000 34,577,000 0.58 645,000
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TOTAL 24,785,700 1.34 1,068,500 55,152,200 0.77 1,367,700
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1. Effective as of Dec 31/07 as per ACA Howe per news release dated Apr 8/08
at a 0.40 g/t cut-off
2. Effective as of Nov 27/11 as per ACA Howe per news release dated Feb 7/12
using natural cut-off grades of 0.13 g/t, 0.1 g/t and 0.2 g/t for the low
grade stockpile, pit infill and in-situ mineralized zones respectively.
3. Effective as of Jan 9/12 as per ACA Howe per news release dated Feb 28/12
using cut-off grades of 0.1 g/t for oxide material and 0.2 g/t for
transitional and primary mineralized zones respectively.
Alhambra holds exploration and exploitation rights to a 2.4 million acre (9,800 km2), 100% owned license called the Uzboy Project, located in the Northern Kazakhstan Metallogenic Province which hosts numerous world-class gold deposits. Over 100 mineral targets, including three advanced exploration areas, are contained within the Uzboy Project.
Alhambra common shares trade in Canada on The TSX Venture Exchange under the symbol ALH, in the United States on the Over-The-Counter Pink Sheets Market under the symbol AHBRF and in Germany on the Frankfurt Open Market under the symbol A4Y. The Corporation's website can be accessed at www.alhambraresources.com.
Elmer B. Stewart, MSc. P. Geol., a technical consultant, is the Corporation's nominated Qualified Person.
Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the Policies of the TSX Venture Exchange Inc.) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
Certain statements contained in this news release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements regarding the formalization of a financing, re-initiation of the stacking of ore on the heap leach pads, the resumption of exploration and development programs, initiating the Uzboy pre-feasibility study, availability of capital to fund ongoing projects and other factors and events described in this news release should be viewed as forward-looking statements to the extent that they involve estimates thereof. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans, "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and should be viewed as "forward-looking statements". Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and other factors include, among others, the formalization of a financing, the re-initiation of the stacking of ore on the heap leach pads, the resumption of exploration and development programs, initiating the Uzboy pre-feasibility study, the availability of capital to fund exploration and production development; political, social and other risks inherent in carrying on business in a foreign jurisdiction and such other business risks as discussed herein and other publicly filed disclosure documents. Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.
Forward looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Corporation undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law.
This news release contains forward-looking statements based on assumptions, uncertainties and management's best estimates of future events. When used herein, words such as "intended" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on assumptions by and information available to the Corporation. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Actual results may differ materially from those currently anticipated. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
Contacts:
Alhambra Resources Ltd.
Ihor P. Wasylkiw
VP & Chief Information Officer
+1 (403) 508-4953
Alhambra Resources Ltd.
Donald D. McKechnie
VP Finance & Chief Financial Officer
+1 (403) 228-2855
(403) 228-2865 (FAX)
www.alhambraresources.com