Alhambra Resources Ltd. Announces Financial and Operating Results for Second Quarter ending June 30, 2012
30.08.2012 | Marketwire
CALGARY, 08/30/12 - Alhambra Resources Ltd. (TSX VENTURE: ALH) (PINK SHEETS: AHBRF) (FRANKFURT: A4Y) ("Alhambra" or the "Corporation") announces its financial and operating results for the quarter ended June 30, 2012. All amounts related to the financial results are expressed in thousands of United States dollars unless otherwise indicated.HIGHLIGHTS FOR THE QUARTER:
-- Gold production was estimated at 1,315 ounces ("ozs")
-- Revenue from gold sales amounted to $2.5 million based on the sale of
1,542 ozs
-- Gold sales were lower than anticipated due to a lower volume of ore
stacked at lower gold grades
-- Cash operating costs were $703 per oz of gold sold
-- Stacked 107,800 tonnes ("t") of ore on the heaps at an average grade of
0.58 grams/tonne ("g/t")
-- The estimated recoverable gold in work in process ("WIP") as of June 30,
2012 was 40,071 ozs
-- Kazakhstan mining operations recorded a net loss of $0.5 million
($0.00/share)
-- The Corporation recorded a net loss of $1.1 million ($0.01/share)
-- The exploration core drilling program at Shirotnaia, initiated in the
first quarter of 2012, was completed in the second quarter
-- Exploration expenditures were $0.3 million
-- Received and SEDAR filed the final technical report related to the
initial National Instrument ("NI") 43-101 gold resource estimate for
Dombraly
-- Received and SEDAR filed the final technical report related to the
initial NI 43-101 gold resource estimate for Shirotnaia
-- Interpretation of a 1,360 square kilometres ("km2") of ground gravity
and magnetic surveys over a 60 kilometre ("km") strike length of the
Dombraly-Shirotnaia gold trend was concluded which resulted in the
identification of 18 new primary exploration targets, of which five were
deemed as being high priority
-- Dombraly 2011 core drilling assay results resulted in the discovery of
two new zones of higher grade gold mineralization
-- The tax lien previously registered against certain Kazakhstan mining
assets was removed
-- Ministry of Industry and New Technology ("MINT") pre-emptive right
approval progressing
-- Commercial discovery bonus payment being appealed
FINANCIAL HIGHLIGHTS
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(in US$000 except per Three Months ended Six Months ended
share amounts) June 30 June 30
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2012 2011 2012 2011
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Revenue from gold sales $ 2,506 $ 3,077 $ 5,633 $ 5,543
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Net income (loss) (1,112) (2,065) (1,272) (3,751)
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Per share (basic and
diluted) (0.01) (0.02) (0.01) (0.04)
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Weighted average shares
outstanding
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Basic and diluted 104,132,059 104,128,123 104,132,059 104,074,828
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Shares outstanding at
end of period 104,132,059 104,132,059 104,132,059 104,132,059
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For the second quarter of 2012, the Corporation recognized $2.5 million in revenue from the sale of 1,542 ozs of gold at an average price of $1,625/oz. This compares to $3.1 million in revenue from the sale of 2,033 ozs of gold at an average price of $1,514/oz during the second quarter of 2011.
Kazakhstan mining operations recorded a net loss of $0.5 million for the second quarter of 2012. This compares to a net loss of $1.0 million for the second quarter of 2011. The Corporation recorded a net loss of $1.1 million ($0.01 per basic and diluted share) for the second quarter of 2012. This compares to a net loss of $2.1 million ($0.02 per basic and diluted share) for the second quarter of 2011.
The increase in revenue for the six months ended June 30, 2012 over the comparable six month period in 2011 was a result of a 14% increase in average gold prices which offset an 11% decrease in sales volumes. While average gold prices in the three months ended June 30, 2012 increased 7% over comparable average gold prices in 2011, the price increases were not sufficient to offset the 24% decline in gold sales volumes. The decrease in sales volumes was the result of lower quantities of new ore at lower grades being stacked. Early in 2012 mechanical issues with the Corporation's mining contractor's equipment resulted in less new ore being stacked on the heap. In addition, as of June 15, 2012, due to financial issues, stacking of new ore on the heap has been suspended. As a result gold sales are currently being generated from the inventory of ore on the heaps. Alhambra anticipates that stacking of fresh ore will resume in the fourth quarter.
OPERATING HIGHLIGHTS
During the second quarter of 2012, the Corporation stacked a total of 107,800 t (2011 - 209,325 t) of ore at an estimated average grade of 0.58 g/t (2011 - 0.74 g/t) of gold onto the pads. The estimated recoverable gold mined totaled 1,315 ozs (2011 - 3,239 ozs). The estimated recoverable gold classified as WIP was 40,071 ozs as of June 30, 2012. In addition, the Corporation mined 81,999 t (2011 - 385,608 t) of waste during this same period.
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 June 30, 2012 totaled $1.2 million or $789/oz of gold sold. Included in this amount is $0.1 million or $86/oz related to the amortization of the bump-up to fair value from the estimated cost of WIP on re-valuation in 2009. Cash operating costs for the second quarter were therefore $703/oz. This was $125/oz lower than the $828/oz incurred during the first quarter of 2012.
Operating costs for the six months ended June 30, 2012 totaled $2.9 million or $844/oz of gold sold as compared to $3.4 million or $887/oz of gold sold for the same period in 2011. Included in this amount for the six months ended June 30, 2012 is $0.2 million or $72/oz (six months ended June 30, 2011 - $0.5 million or $133/oz of gold sold) related to the amortization of the bump-up to fair value from the estimated cost of WIP on re-valuation in 2009. Cash operating costs for the six months ended June 30, 2012 were therefore $772/oz as compared to $754/oz for the six months ended June 30, 2011.
CAPITAL EXPLORATION PROGRAMS
Six months ended June 30, 2012
During the three months ended June 30, 2012 the Corporation recorded capital expenditures of $0.3 million which relates to Corporation's 2012 exploration program which is detailed below.
During the three months ended June 30, 2012, Alhambra completed the exploration core drilling on one of its advanced exploration projects at Shirotnaia which was initiated in the first quarter of 2012. In addition, soil sampling programs were initiated and completed at the early stage exploration areas of Vasilkovskoe East and Zhusaly.
In April, the interpretation of Alhambra's 1,360 km2 (Phase 1) ground gravity and magnetic surveys over the Dombraly-Shirotnaia gold trend was concluded which resulted in the identification of 18 new exploration targets, of which five were deemed as being high priority see News Release dated April 10, 2012). In addition, the Corporation received and SEDAR filed the final technical report related to the initial independent NI 43-101 gold resource estimate (the "Shirotnaia Estimate") for Shirotnaia (see News Release dated April 16, 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 grams per tonne gold ("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.
Also in April, the Dombraly 2011 core drilling program assay results were released. The program resulted in the discovery of two new zones of higher grade gold mineralization and extended the known areas of gold mineralization both north and south, and at least five known zones of gold mineralization were significantly extended or the mineralization in these zones had been upgraded in terms of both grade and width, the best mineralized intervals being 17.29 g/t Au over 3.9 m, 4.40 g/t Au over 14.1 m and 3.57 g/t Au over 14.7 m (see News Release dated April 24, 2012).
Since the beginning of 2012, two batches of core drill samples (totaling 5,146, 2,160 and 2,986 samples respectively) from Shirotnaia and Zhanatobe have been sent to the Kyrgyzstan Stewart Group laboratory for assaying.
As of the end of the second quarter of 2012, the assay results pending from the Stewart Kyrgyzstan laboratory were as follows:
- Shirotnaia - 3,691 core and 7 QA/QC core re-sampling,
- Zhanatobe - 1,448 core.
In addition, as of the end of the second quarter of 2012, 1,417 soil samples were being prepared for export as follows:
- Vasilkovskoe East - 844,
- Zhusaly - 573.
Additional updates were made to the planned 2012 drilling program in this quarter.
Shirotnaia
During the second quarter of 2012, the first stage of the Shirotnaia exploration core drilling program, which was initiated in the first quarter of 2012, was completed. Two holes (337 m) were drilled in April. All core was logged, cut and sampled. The entire core drilling program completed in the first and second quarters of 2012 amounted to 18 holes (3,691 m). A total of 3,691 samples were taken and shipped to the Kyrgyzstan Stewart Group laboratory (of which 1,538 samples had been shipped prior to the end of the first quarter). Assay results are pending. 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.
Vasilkovskoe East
In the second quarter of 2012, a soil sampling program on the Vasilkovskoe East early stage project was commenced and completed. This project includes three areas where soil sampling was planned - Western, Alexandrovsky and Vasilkovskoe Northeast. In the Western area as a result of the 2011 exploration program, several gold anomalies in soil were established. More detail sampling around these anomalies was completed with 189 samples taken along 6 lines. In the Alexandrovsky area, 3 lines were sampled (183 samples taken) and completed. More detailed sampling was also carried out in this area (229 samples along 4 lines). Sampling in the Vasilkovskoe Northeast area targeted to check the ASTER anomalies established there. 226 soil samples were collected along 9 separate lines. In total, 844 soil samples were taken from the Vasilkovskoe East project. The soil samples were dried, screened to -80#, and were ready for export to Kyrgyzstan.
Zhusaly
In the second quarter of 2012, soil sampling on the Zhusaly early stage project commenced and was almost completed. As a result of the 2011 exploration program, two gold anomalies in soil were established there. For the 2012 field season more detailed sampling around the southeastern anomaly was planned as well as a NE extension of the regional soil grid targeting to cover the main part of the negative magnetic anomaly. In June, 573 soil samples were taken along 11 lines. They will be now dried and screened to -80#.
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.
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 the first four high priority targets.
Capital Expenditure Activity Subsequent to June 30, 2012
Shirotnaia
A reverse circulation ("RC") drilling program was initiated in Shirotnaia in July. The objective of this drilling program is to check for possible extensions of gold mineralization to the north where it is marked on the surface by anomalous soil and trench samples taken earlier. This area has significant potential according to the recently prepared structural model. A total of 26 (2,600 m) RC holes are planned to be drilled. As of the end of July 2012, 7 holes totaling 616 m were drilled and 638 samples had been taken which were being prepared for export.
Uzboy
Alhambra's independent consultants (Micromine and ACA Howe International) continued to work on updating the Uzboy NI 43-101 resource estimate and Preliminary Economic Assessment. Both of these updates, which were anticipated to have been completed by mid-year 2012, have been delayed. Micromine has advised Alhambra that it has been experiencing difficulties in modeling the updated designed pit to the actual existing pit surface. Upon completion of these studies, the Corporation will press release the study results.
OBJECTIVES FOR 2012
Alhambra plans to continue implementing its 2012 exploration program during the remainder of 2012 which will include completion of the Dombraly East soil sampling programs as well as RC drilling at Shirotnaia, Kerbay, Kontactovy, Stepnyak and Vasilkovskoe East. Core drilling at its advanced "resource definition" exploration projects of Uzboy, Dombraly and Shirotnaia is also planned. In addition the Corporation plans to initiate the Pre-Feasibilbity Study for the Uzboy primary gold (sulphide gold) production development project.
Contingent on the availability of financing, availability of drill rigs, and favourable weather conditions, Alhambra continues to anticipate a $3 million exploration program for 2012.
The pursuit of a dual listing of Alhambra's common shares on an Asian Exchange was halted in 2011 due to the delays incurred in receiving a formal reply from MINT on its pre-emptive right application, delays in generating and analyzing drill results, and delays in generating the new and updated NI 43-101 resource report and Preliminary Economic Assessment (Scoping Study) for Uzboy. Alhambra will continue to work on the dual listing once these issues have been resolved.
LEGAL CHALLENGE OF TAX ASSESSMENT
As an update to the outstanding tax assessments which Alhambra's wholly owned Kazakhstan operating subsidiary Saga Creek has been subject to, please see the Corporation's second quarter 2012 financial statements and MD&A which 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.
Regarding Saga Creek's Corporate Income Tax ("CIT") assessment, as a result of a May 14, 2012 decision of the courts related to the CIT assessment, the lien previously registered against certain assets of Saga Creek has been removed.
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 heard, there is no guarantee that it will reverse the decision of the Akmola Court. If however the final result is the appeal is heard and decided in favor of the tax authorities, the effect on the Corporation's Consolidated Statement of Financial Position as at June 30, 2012 would be to increase trade and other payables by $0.6 million and to increase loss by $0.6 million.
GOVERNMENT OF KAZAKHSTAN PRE-EMPTIVE RIGHT
The Subsoil and Subsoil Use Act (the "Act") in Kazakhstan grants the Government of Kazakhstan the first right of refusal to purchase any direct or indirect interest in any subsoil license or legal entity holding that license or the legal entity controlling the holder of the subsoil use license at market prices should the license or shares or instruments convertible or giving rights to shares (joint, the "Subsoil Use Assets") come up for sale. As a result, before a company can accept an offer to sell its Subsoil Use Assets, it must first get approval from relevant Kazakhstan authorities. The Act extends this obligation to require a company whose main business is connected with subsoil use in Kazakhstan to get approval should it desire to issue any common shares or issue any derivative instruments that are convertible into common shares. On April 21, 2011, the Corporation completed and filed an application with the relevant Kazakhstan agency to have pre-approved, any shares that may be issued upon conversion of outstanding warrants and options as well as requested that the Government of Kazakhstan pre-approve a private placement that the Corporation would contemplate doing in the near future to finance its exploration and development activities. This application was amended on August 16 and October 25, 2011 which included responses to certain questions received from the Kazakhstan agency.
Alhambra has been advised that its application has been reviewed, a recommendation has been made and forwarded to the Government of Kazakhstan's Interdepartmental Commission, and that a decision on whether or not the Government of Kazakhstan will waive its pre-emptive right to participate in the financing has been made. Alhambra has been further advised that the Corporation's Application has been forwarded to MINT's Expert Commission, who is responsible for formalizing the government's final decision regarding its waiver. The Corporation has yet to receive a formal decision from MINT. The Corporation is not aware of any such applications that have been rejected by the Government of Kazakhstan.
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 (the "Bonus") based on the approved commercial reserves for Uzboy. According to the notification, Saga Creek is required by law to pay an amount equal to 0.1% of the commercial value of the 14,455.8 kg of gold and 48,100 kg of silver of reserves approved under Kazakhstan legislation for Uzboy. In addition, Saga Creek will be required to pay a 50% penalty plus interest at the prescribed rate which is approximately 17.5%. Payment of the Bonus was due on May 24, 2011. Saga Creek has filed a notice of objection with the tax authorities on the basis that its 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 bonus at all.
The tax authorities have rejected Saga Creek's notice of objection. Saga Creek intends to appeal that decision to the Kazakhstan courts. The Corporation also anticipates that the lower courts in Kazakhstan will uphold the tax authorities' assessment which will necessitate Saga Creek filing its appeal to the Supreme Court of Kazakhstan. As the Corporation is uncertain at this time how the Kazakhstan courts will ultimately decide on Saga's obligation regarding the Bonus, the Corporation has recorded the Bonus and related interest and penalties up to June 30, 2012. Saga Creek has estimated the amount of the Bonus to be $0.7 million and has charged this amount to intangible assets. In the six months ended June 30, 2012 the Saga Creek accrued $0.06 million in interest related to the unpaid Bonus bringing the total interest and penalties accrued to June 30, 2012 to approximately $0.5 million.
UNAUDITED FINANCIAL STATEMENTS AND MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A")
The Corporation's second 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 per ACA Howe International UK and Micromine Consulting Services UK 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 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, an anticipated $3 million exploration program for 2012, availability of capital to fund the anticipated 2012 projects, pursuing a dual listing on an Asian stock exchange, initiating the Uzboy pre-feasibility study, 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, an anticipated $3 million exploration program for 2012, availability of capital to fund the anticipated 2012 projects, pursuing a dual listing on an Asian stock exchange, initiating the Uzboy pre-feasibility study; 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.
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
www.alhambraresources.com