Alhambra Resources Ltd. Announces First Quarter 2012 Financial and Operational Results

CALGARY, May 31, 2012 - Alhambra Resources Ltd. (TSX VENTURE:ALH) (PINK SHEETS:AHBRF) (FRANKFURT:A4Y) ("Alhambra" or the "Corporation"), an international gold explorer and producer, announces its financial and operating results for the first quarter ended March 31, 2012. All amounts related to the financial results are expressed in thousands of United States dollars unless otherwise indicated.


HIGHLIGHTS

- Gold production was estimated at 305 ounces ("ozs")

- Revenue from gold sales amounted to $3.1 million based on the sale of 1,846 ozs

- Cash operating costs were $828 per oz ("/oz") of gold sold

- Stacked 28,420 tonnes ("t") of ore on the heaps at an average grade of 0.51 grams/tonne gold ("g/t Au")

- The estimated recoverable gold in work in process ("WIP") as of March 31, 2012 was 40,298 ozs

- Kazakhstan mining operations generated net earnings of $1.8 million ($0.02/basic and diluted share) and cash flow of $0.2 million ($0.00/share)

- The Corporation recorded a net loss of $0.2 million ($0.00/basic and diluted share) and net cash used in operating activities of $0.4 million ($0.00/share)

- 4,804 metres of exploration drilling was completed

- Exploration expenditures were $0.7 million

- Issued an initial National Instrument ("NI") 43-101 gold resource estimate for Dombraly

- Issued an initial NI 43-101 gold resource estimate for Shirotnaia

- 1,360 square kilometres ("km2") of ground gravity and magnetic surveys and a remote sensing survey covering a 60 kilometre ("km") strike length of the Dombraly-Shirotnaia gold trend was completed and resulted in the identification of 18 new primary exploration targets which were correlated with the results of an ASTER satellite imagery analysis

- Received regulatory approval to further extend the expiry date of all outstanding (11.8 million) purchase warrants having various exercise prices and expiry dates to the earlier of either 60 days after receipt of a waiver of right of first refusal from the Government of Kazakhstan or up to either February or March 2013

- Kazakh courts reverse a substantial portion of income tax previously assessed for the 2006 to 2009 tax years


FINANCIAL HIGHLIGHTS

(in thousands of US$ except per share amounts) 		Three Months ended
March 31 	
		2012 			2011 	
Gross revenue 		$ 3,127 			$ 2,466 	
Net loss 		(160) 		(1,686)
	Per share (basic and diluted) 		(0.00) 		(0.01)
Weighted average shares outstanding 		104,132,059 			104,020,851 	
Shares outstanding at end of period 		104,132,059 			104,082,059 	

For the first quarter of 2011, the Corporation recognized $3.1 million in revenue from the sale of 1,846 ozs of gold at an average price of $1,694/oz. This compares to $2.5 million in revenue from the sale of 1,770 ozs of gold at an average price of $1,393/oz during the first quarter of 2011.

Kazakhstan mining operations generated net earnings of $1.8 million and cash flow of $0.2 million for the first quarter of 2012. The Corporation recorded a net loss of $0.2 million ($0.00 per basic and diluted share) for the first quarter of 2011. This compares to a net loss of $1.7 million ($0.01 per basic and diluted share) for the first quarter of 2011. Cash flow used in operating activities for the first quarter of 2012 was $0.4 million ($0.00 per share) compared to cash flow used in operating activities of $1.0 million ($0.01 per share) for the first quarter of 2011.


OPERATING HIGHLIGHTS

During the first quarter of 2012, the Corporation stacked a total of 28,420 t (2011 - 110,740 t) of ore at an estimated average grade of 0.51 g/t (2011 - 1.00 g/t) of gold onto the pads. The estimated recoverable gold mined totaled 305 ozs (2011 - 2,318 ozs). The estimated recoverable gold classified as WIP was 40,298 ozs as of March 31, 2012 (December 31, 2011 - 41,224 ozs). In addition, the Corporation mined 321,953 t (2011 - 513,526 t) of waste during this same period.

Mining operations in Kazakhstan are seasonal such that given no other major operational issues, it is expected that the gold sales during the cold weather months will be less than other months. As a result, monthly sales of gold during the months of December through May will be less than during other months of the year.


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. 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.

Operating costs for the three months ended March 31, 2012 were $1.6 million or $889/oz sold as compared to $1.5 million or $849/oz of gold sold for the three months ended March 31, 2011.

Included in the three month 2012 operating cost amount is $0.1 million or $61/oz related to the amortization of the bump-up to fair value from the estimated cost of work in progress on re-valuation in 2009. Cash operating costs were therefore $828/oz. In the three months ended March 31, 2011, $0.2 million or $139/oz of similar costs were included in operating costs resulting in the cash cost of gold sold for this period of $710/oz.


CAPITAL AND EXPLORATION PROGRAMS

In the first quarter of 2012, Alhambra recorded $0.7 million in capital expenditures of which substantially all were related to the Corporation's 2012 exploration program in Kazakhstan which is detailed below.

During this period Alhambra completed 4,804 m of exploration core drilling which was focused on two projects, Shirotnaia, one of the Corporation's advanced exploration projects, and the second being Zhanatobe, one of its early stage exploration projects.

The results of a remote sensing study conducted in 2011 over the entire license area and 1,360 km2 of gravity and magnetic surveys which were completed on the eastern side of the license area were interpreted and released. Maiden NI 43-101 resource estimates were finalized and the results were released in February 2012 for two of its three advanced exploration projects, Dombraly and Shirotnaia. The reports been filed on SEDAR.

Assaying of more than 10,400 drill samples from the 2011 drill program was pushed into 2012 due to the significant amount of drilling completed in the fourth quarter of 2011. The following samples were awaiting assaying at the Stewart Kyrgyzstan laboratory:

- Dombraly - 6,026 core,
- Shirotnaia - 532 core,
- Zhanatobe - 1,047 rotary air-blast ("RAB"),
- Vasilkovskoe East - 1,172 soil,
- Kontaktovy - 984 soil,
- Zhusaly - 653 soil.

By the end of the first quarter of 2012, 7,605 drill samples had been assayed as follows:

- Dombraly - 6,026 core,
- Shirotnaia - 532 core,
- Zhanatobe - 1,047 RAB.

All assay results for the 7,605 drill samples have been released (see News Release dated April 24, 2012 for the Dombraly results and the News Release dated May 1, 2012 for the Shirotnaia and Zhanatobe results).

In addition, due to the core drilling completed in the first quarter of 2012, 3,104 additional drill samples (1,529 from Shirotnaia and 1,575 from Zhanatobe) were exported to the Stewart Kyrgyzstan laboratory on March 30, 2012. Assay results are pending.


Shirotnaia

At Shirotnaia, an 18 core hole (3,691 m) drill program was initiated, of which 16 core holes (3,354 m) were completed by the end of the first quarter of 2012. Drilling continued post quarter end. The objective of this drill program was to define the orientation of the gold mineralization and to follow the mineralized zones along strike and at depth.

All drill holes encountered intervals of strong chlorite sericite alteration and sulphide mineralization as well as intervals of carbonate-quartz veins and veinlets. Some of these veinlets contained disseminated pyrite mineralization. A total of 2,508 samples were taken, of which 1,529 samples had been shipped to the Stewart Kyrgyzstan laboratory prior to the end of the quarter. Assay results are pending. The remaining 979 samples are being prepared for export.

In addition, Alhambra received the results of an initial independent NI 43-101 gold resource estimate (the "Shirotnaia Estimate") for Shirotnaia (see News Release dated February 28, 2012). The resources identified in the Shirotnaia Estimate were 645,000 ozs of Inferred mineral resources contained in 34.6 million tonnes grading 0.58 g/t Au and an additional 71,000 ozs of Indicated mineral resources contained in 2.9 million tonnes grading 0.76 g/t Au were identified using natural cut-off grades of 0.1 g/t Au for oxide gold mineralization and 0.2 g/t Au for transitional and primary gold mineralization respectively.

The Shirotnaia Estimate included the results of 73 core holes (9,597 m) and 43 reverse circulation ("RC") holes (2,249 m). Due to the timing of the Estimate, it did not incorporate the analytical results for three core holes (489 m) from the 2011 drilling program as these drill samples were still in the process of being assayed. The assay results for the three core holes were news released on May 1, 2012. These three holes returned 12 mineralized intervals ranging in width from 1.0 to 29.5 m that had grades from 0.2 g/t Au to 2.44 g/t Au. The best intercepts were 2.44 g/t Au over 3.0 m and 1.11 g/t Au over 2.7 m. The results will be included in the current geological model and in the next Shirotnaia resource estimate.


Zhanatobe

A core drilling program was initiated at Zhanatobe with the objective of verifying the gold anomalies established by RAB drilling in 2010. Nine core holes (1,449 m) were drilled. Numerous intervals of intensive hydrothermal alteration, pervasive silicification, quartz veinlets and sulfide mineralization were intercepted. Assay results for all the 1,047 samples have been released (see News Release dated May 1, 2012).


Dombraly

Alhambra received the results of an initial independent NI 43-101 gold resource estimate (the "Dombraly Estimate") for Dombraly (see News Release dated February 7, 2012). The resources identified in the Dombraly Estimate were 301,000 ounces ("ozs") of Inferred current mineral resources contained in 9.3 million tonnes grading 1.01 g/t Au and an additional 22,000 ozs of Indicated current mineral resources contained in 0.60 million tonnes grading 1.22 g/t Au using natural cut-off grades of 0.13 g/t Au, 0.10 g/t Au and 0.20 g/t Au for the low grade stockpile, pit infill and in-situ mineralized zones respectively.

The Dombraly Estimate, included the results of 23 core holes (5,835 m) and 37 reverse circulation ("RC") holes (880 m). Due to the timing of the Estimate, the Dombraly Estimate did not incorporate the analytical results for the 32 core hole (5,528 m) drilling program which was completed at the end of October 2011. These drill samples were assayed in January 2012 and the results have been received, interpreted and released in late April 2012. Two new zones (i.e. lenses) of gold mineralization were discovered and at least five known zones - significantly extended and upgraded. A northern extension of lens 1 was identified as being about 120 m long. The intercepts in this part of the lens range from 0.77 g/t Au over 20.8 m to 9.95 g/t Au over 1.5 m. Drilling of the southern part of the same lens discovered 14.7 m of oxide mineralization grading 3.57 g/t Au. Three of four mineralized zones located on the southern edge of the deposit were extended by at least 60 m and remain open to the south. The best result returned here by one of the zones was 1.52 g/t Au over 3.0 m of oxide mineralization. Several new parts of lens 2 were discovered which have extended the mineralization by at least 240 m along strike and by 65 to 140 m along the dip. The best intercepts were 4.40 g/t Au over 14.1 m and 2.01 g/t Au over 9.0 m. Two new mineralized lenses have been discovered returning intercepts of 4.0 m at 1.18 g/t Au and 8.2 m at 1.66 g/t Au and remaining open along strike in the northerly direction.


Capital Expenditure Activity Subsequent to March 31, 2012

Shirotnaia

The first stage of the Shirotnaia exploration program, including the drilling of 18 core holes (3,691 m) was completed in April. A total of 3,691 samples were taken of which 2,438 samples are awaiting to be exported.


Uzboy

Alhambra's independent consultants continued to work on updating the Uzboy NI 43-101 resource estimate and Preliminary Economic Assessment. It is anticipated that both of these updates will be completed and reported on prior to mid year 2012.


Remote Sensing and Gravity and Magnetic Survey

The interpretation of the 1,360 km2 (Phase one) ground gravity and magnetic surveys over the Dombraly-Shirotnaia gold trend was completed and resulted in the identification of 18 new primary exploration targets which were correlated with the results of an ASTER satellite imagery analysis (see News Release dated April 10, 2012).

These 18 new primary targets were prioritized, with five of them deemed as being high priority. It is anticipated that a soil sampling program followed by a reverse circulation drilling program will be implemented in 2012 to further test the gold potential of these five high priority targets.


LEGAL CHALLENGE OF CORPORATE INCOME TAX ASSESSMENT

As an update to the outstanding tax assessments which Alhambra's wholly owned Kazakhstan operating subsidiary, Saga Creek, has been subject to (see News Release dated May 1, 2012), on May 11, 2012 the Specialized Inter-district Economic Court of the Akmola Oblast ("Akmola Court") rendered its decision and reversed a substantial portion of the assessment amounting to approximately $0.4 million related to the corporate income tax deductions for the 2006 to 2009 taxation years ("CIT") including interest and penalties.

As at December 31, 2011 the Corporation had accrued a total of $0.6 million related to the CIT assessment including interest and penalties. The decision by the court reduced that amount to approximately $0.04 million. As a result the Corporation has recorded a recovery of approximately $0.6 million of which $0.3 has been recorded as a recovery of current income taxes, $0.1 has been recorded as a reduction in finance costs and $0.2 as a reduction in administrative expenses.

Saga Creek has made application to the Kazakhstan tax authorities to remove a lien filed against some of Saga Creek's assets to secure the government's claim for the indebtedness outstanding related to these tax assessments. To date this lien has been substantially reduced and as a result of the May 11, 2012 decision related to the CIT assessment, the Corporation believes that the remaining portion of the lien will be eliminated in the near future.

Similarly, the tax authorities and the public prosecutor have until May 11, 2013 to appeal the decision of the Akmola Court related to the CIT assessment. Again there is no guarantee that the tax authorities will in fact appeal or that the appeal will be heard and if it is heard, there is no guarantee that it will reverse the decision of the Akmola Court.


2012 OBJECTIVES

During 2012, Alhambra is planning to accelerate the development of its advanced "resource definition" exploration projects of Uzboy, Shirotnaia and Dombraly. The Corporation also anticipates advancing numerous early stage exploration projects and assessing a number of other gold targets of anticipated high potential over its vast mineral license area. These projects include Vasilkovskoe East, Zhanatobe, and targets along the 60 km Dombraly-Shirotnaia trend, located on the eastern flank of the Uzboy Project exploration license.

Alhambra is anticipating spending approximately $3.0 million on exploration activities in 2012, subject to sufficient cash flow and suitable financing. The main focus will continue to be on Uzboy, Dombraly and Shirotnaia with continuing resource development drilling and production development assessments, including metallurgical and gold recovery tests. In the second half of 2012 the Pre-Feasibility Study for the Uzboy primary gold (sulphide gold) production development project will be initiated. Utilizing the existing oxide heap leach production infrastructure should enhance the overall primary gold production economics while potentially reducing project start up time.

Alhambra will continue to position itself for ongoing growth and to create growing wealth for its shareholders through the ongoing exploitation of its vast exploration and development license. In addition, the Corporation will continue developing and upgrading its staff to meet its future challenges and objectives.

Alhambra will continue to work towards a dual listing of its common shares on an Asian stock exchange. The expected benefits of the dual listing are increased market liquidity and access to capital markets, which should support Alhambra's share price moving to reflect intrinsic asset value, and greater access to capital in the rapidly developing and buoyant Asian capital market. The pursuit of the dual listing was halted in 2011 due to the delays incurred in generating and analyzing drill results, and in generating the new and updated NI 43-101 resource reports and Preliminary Economic Assessment (Scoping Study).

The Corporation has filed an application with the Kazakhstan Ministry of Industry and New Technology ("MINT") to obtain approval to proceed at its discretion with equity financing to raise capital through the issue of common share equity in 2012 to the extent it is deemed necessary to help finance the 2012 exploration program and other corporate objectives. While Alhambra anticipates spending approximately $3 million on exploration activities during 2012, given early approval from MINT and additional financing, Alhambra could expand this program up to $7.5 million.


UNAUDITED FINANCIAL STATEMENTS AND MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A")

The Corporation's first quarter 2012 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 gold resources as noted below:
Measured (M) Indicated (I) M + I Inferred
Project Grade Grade Grade Grade
Tonnes (g/t) Ounces Tonnes (g/t) Ounces Tonnes (g/t) Ounces Tonnes (g/t) Ounces

Uzboy(1) 14,317,200 1.52 700,000 7,009,500 1.22 275,500 21,326,700 1.42 975,500 11,258,200 1.17 421,700
Dombraly(2) - - 559,000 1.22 22,000 559,000 1.22 22,000 9,317,000 1.01 301,000
Shirotnaia(3) - - 2,900,000 0.76 71,000 2,900,000 0.76 71,000 34,577,000 0.58 645,000
TOTAL 14,317,200 1.52 700,000 10,468,500 1.09 368,500 24,785,700 1.34 1,068,500 55,152,200 0.77 1,367,700

(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 gold mineralization and 0.2 g/t for transitional and primary gold mineralization 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. Mr. Stewart has reviewed the technical information contained in this news 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, spending $3 million on exploration activities in 2012, initiating the Uzboy pre-feasibility study in the second half of 2012, availability of capital to fund the anticipated 2012 projects, completing a listing on an Asian stock exchange, 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, spending $3 million on exploration activities in 2012, initiating the Uzboy pre-feasibility study in the second half of 2012, availability of capital to fund the anticipated 2012 projects, availability of capital to fund exploration and production development projects, ability to complete a listing on an Asian stock exchange; 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.

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.



Contact

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