Alhambra Resources Ltd. Announces Financial and Operating Results for Third Quarter Ending September 30, 2012
CALGARY, ALBERTA -- (Marketwire) -- 11/30/12 -- Alhambra Resources Ltd. (TSX VENTURE: ALH)(PINKSHEETS: AHBRF)(FRANKFURT: A4Y) ("Alhambra" or the "Corporation") announces its financial and operating results for the quarter ended September 30, 2012. All amounts related to the financial results are expressed in thousands of United States dollars unless otherwise indicated.
HIGHLIGHTS FOR THE QUARTER:
-- Received approval from the Kazakhstan Ministry of Industry and New
Technology ("MINT") to proceed at the Corporation's discretion with the
issue of new shares
-- Executed a non-binding term sheet to complete a financing
-- Suspended mining operations in the quarter; no fresh ore was stacked on
the heaps
-- Gold sales were realized from the drawdown of recoverable gold inventory
from work in progress ("WIP")
-- Revenue from gold sales amounted to $2.4 million based on the sale of
1,452 ounces ("ozs")
-- The estimated recoverable gold in WIP as of September 30, 2012 was
38,619 ozs
-- Cash operating costs were $751 per oz of gold sold
-- Kazakhstan mining operations recorded net income of $0.1 million
($0.00/share)
-- The Corporation recorded a net loss of $0.4 million ($0.01/share)
-- A reverse circulation ("RC") exploration drilling program was completed
at Shirotnaia and a RC drilling program was initiated at Zhusaly
-- Exploration expenditures were $0.4 million
-- Announced board of director changes
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
(in US$000 except per Three Months ended Nine Months ended
share amounts) September 30 September 30
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue from gold
sales $ 2,447 $ 7,012 $ 8,080 $ 12,555
----------------------------------------------------------------------------
Net income (loss) (365) 2,550 (1,637) (1,201)
----------------------------------------------------------------------------
Per share (basic and
diluted) (0.01) 0.02 (0.02) (0.01)
----------------------------------------------------------------------------
Weighted average
shares outstanding
----------------------------------------------------------------------------
Basic 104,132,059 104,132,059 104,132,059 104,094,115
----------------------------------------------------------------------------
Diluted 104,132,059 106,079,287 104,132,059 104,094,115
----------------------------------------------------------------------------
Shares outstanding at
end of period 104,132,059 104,132,059 104,132,059 104,132,059
----------------------------------------------------------------------------
For the third quarter of 2012, the Corporation recognized $2.4 million in revenue from the sale of 1,452 ozs of gold at an average price of $1,686/oz. This compares to $7.0 million in revenue from the sale of 3,858 ozs of gold at an average price of $1,817/oz during the third quarter of 2011.
Kazakhstan mining operations recorded net income of $0.1 million for the third quarter of 2012. This compares to net income of $3.5 million for the third quarter of 2011. The Corporation recorded a net loss of $0.4 million ($0.01 per basic and diluted share) for the third quarter of 2012. This compares to net income of $2.6 million ($0.02 per basic and diluted share) for the third quarter of 2011.
OPERATING HIGHLIGHTS
During the third quarter of 2012, no fresh ore was stacked on its heap leach pads (2011 - 257,003 tonnes ("t")) nor was any waste mined during the same period (2011 - 279,846 t). Gold sales were realized from the drawdown of recoverable gold inventory from WIP. As of September 30, 2012, the estimated recoverable gold classified as WIP was 38,619 ozs.
During the nine months ended September 30, 2012, the Corporation mined a total of 403,952 t of waste and stacked 136,220 t of ore at an average gold grade of 0.57 grams/t ("g/t"). This compares to 1,178,980 t of waste mined and 570,068 t of ore stacked at an average gold grade of 0.85 g/t during the nine months ended September 30, 2011. The reduction in tonnes mined for the nine months ended September 30, 2012 as compared to the comparable period in 2011 is a result of issues with the mining contractor. Earlier in 2012 the mining contractor had mechanical issues with its equipment which impacted their ability to mine ore. In addition, because of the Corporation's constrained financial resources, both the mining contractor and the Corporation agreed at the end of the second quarter of 2012 to suspend mining operations in order to conserve cash during this period of financial hardship. As previously announced, the Corporation has executed a non-binding term sheet to complete a financing and is currently completing the due diligence process related to that financing. Should this financing be successfully concluded, a portion of the use of the proceeds will go towards resuming the mining of ore.
The decrease in revenue for the nine months ended September 30, 2012 over the comparable nine month period in 2011 was a result of a 37% decrease in sales volume which was offset partially by a 2% increase in the average price of gold. The majority of the decrease in sales volume occurred in the first and third quarters of 2012 as a result of the Corporation not mining any fresh ore to stack on the heaps due to the contractor equipment issues and the Corporation's current financial constraints described above. Revenues from gold sales were also negatively impacted by a 7% decline in the average price of gold in the third quarter of 2012 as compared to the third quarter of 2011.
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 September 30, 2012 totaled $1.2 million or $831/oz of gold sold as compared to $3.2 million or $819/oz of gold sold for the same period in 2011. Included in this amount is $0.1 million or $80/oz (three months ended September 30, 2011 - $0.4 million or $107/oz) related to the amortization of the bump-up to fair value from the estimated cost of WIP. Cash operating costs for the third quarter were therefore $751/oz (compared to $712/oz for the third quarter of 2011). This was $48/oz higher than the $703/oz incurred during the second quarter of 2012.
Operating costs for the nine months ended September 30, 2012 totaled $4.1 million or $840/oz of gold sold as compared to $6.5 million or $853/oz of gold sold for the same period in 2011. Included in this amount for the nine months ended September 30, 2012 is $0.4 million or $74/oz (nine months ended September 30, 2011 - $0.9 million or $120/oz of gold sold) related to the amortization of the bump-up to fair value from the estimated cost of WIP. Cash operating costs for the nine months ended September 30, 2012 were therefore $766/oz as compared to $733/oz for the nine months ended September 30, 2011.
CAPITAL EXPLORATION PROGRAMS
Nine months ended September 30, 2012
During the three months ended September 30, 2012 the Corporation recorded capital expenditures of $0.4 million which relates to the Corporation's 2012 exploration program which is detailed below.
During the three months ended September 30, 2012, Alhambra completed a reverse circulation ("RC") drilling program at Shirotnaia, one of its advanced exploration projects, and initiated a RC drilling program and completed a soil sampling program at Zhusaly, one of its early stage exploration projects.
Since the beginning of 2012, two batches of core drill samples (totaling 5,146 samples) from Shirotnaia and Zhanatobe have been sent to the Kyrgyzstan Stewart Group laboratory for assaying.
As of the end of the third quarter of 2012, there were 1,987 Shirotnaia assay results pending (1,978 core and 7 QA/QC core re-sampling) from the Stewart Kyrgyzstan laboratory.
In addition, as of the end of the third quarter of 2012, 3,942 samples were being prepared for export as follows:
-- Shirotnaia - 2,525 (RC samples),
-- Vasilkovskoe East - 844 (soil samples),
-- Zhusaly - 573 (soil samples).
Shirotnaia
During the third quarter of 2012, 1,596 assay results for eight of 18 core holes (3,691 metres ("m")) completed in the first half of 2012 were received. The assays were being interpreted. All drill holes encountered intervals of strong chlorite sericite alteration and sulphide mineralization as well as intervals of carbonate-quartz veins and veinlets.
Late in the third quarter of 2012, a RC drilling program which was initiated earlier in the quarter, was completed. The objective of this drilling program was 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 (2,434 m) RC holes were completed and 2,525 samples were taken which have been prepared for export.
Uzboy
Alhambra's independent consultants (Micromine and ACA Howe International) continued to work on updating the Uzboy National Instrument ("NI") 43-101 resource estimate and Preliminary Economic Assessment. Upon completion of these studies, the Corporation will press release the study results.
Zhusaly
In the third quarter of 2012, soil sampling on the Zhusaly early stage project, which commenced in the second quarter, was completed. 573 soil samples were taken along 15 lines. They have been dried, screened and prepared for export.
A planned seven hole (1,050 m) RC drilling program was initiated at Zhusaly prior to the end of the third quarter. The purpose of this drill program is to check the soil anomaly established in 2011. Two NW orientated RC lines are planned. The proposed drill lines will be 250 m apart with the planned distance between holes being 150 m along the SW line (scissor holes) and 75 m along the NE line (fence holes).
Zhanatobe
The assay results from the Zhanatobe diamond drilling program were received late in the quarter and were being interpreted. The drilling program included nine holes totaling 1,449 m. The assay results will be released once interpreted.
Capital Expenditure Activity Subsequent to September 30, 2012
Shirotnaia
Assay results for eight of 18 diamond drill holes completed were interpreted and released. They were very encouraging. Diamond drilling intersected higher-grade gold mineralization (+1.0 grams per tonne gold ("g/t Au")) over core intervals ranging from 6.4 m to 135.6 m (down-hole). These higher-grade intervals define a core gold mineralization zone interpreted to be at least 1,200 m long enveloped by an aureole of lower grade (less than 1.0 g/t) gold mineralization with dimensions of 1,800 m by 750 m which remains open in three directions and at depth. These assay results included one of the best drill holes to date on the project which entered strong mineralization from surface and returned an interval of 135.6 m averaging 1.12 g/t Au. Seven of the holes returned intercepts with gold grades greater than 1.0 g/t Au and in four of the holes these grade intervals have core lengths greater than 6.0 m. Thirty eight mineralized intervals (of variable widths) with gold grades of greater than 0.2 g/t Au were intersected in the eight holes assayed. The best mineralization intersected included: 1.12 g/t Au over 135.6 m, 1.47 g/t Au over 27.4 m, 1.73 g/t over 17.5 m and 1.56 g/t Au over 18.2 m.
OUTLOOK
Currently, Alhambra's focus is on financing. With the receipt of MINT's approval on September 11, 2012 of the Corporation's application requesting the pre-approval of possible future equity financings, one of the hurdles related to financing has been overcome. Alhambra previously announced that it had negotiated and executed a non-binding financing term sheet complying with the financing terms approved by MINT. The due diligence is progressing toward the completion of the financing which, if and when completed, will allow the Corporation to proceed with its objective to accelerate exploration and development activities in Kazakhstan.
Alhambra's exploration focus will continue to be its advanced exploration targets (including Uzboy, Shirotnaia and Dombraly) as well as the seven other early stage projects. Production development will focus on advancing Uzboy through Pre-Feasibility and Feasibility Studies and to assess the other advanced targets for production potential and follow-up as appropriate with Pre-Feasibility assessments.
BOARD OF DIRECTOR CHANGES
During the third quarter of 2012, two Alhambra directors Mr. Mike Hriskevich and Mr. Mr. Clarence K. Wagenaar, retired. Appointed as their replacements were Mr. John I. Huhs and Mr. Robin M. Merrifield.
Mr. John I. Huhs, fluent in Russian, is a lawyer and graduated with honours from both the Stanford Graduate School of Business and Stanford Law School. He is a retired Senior Partner and Special Counsel of Dewey & LeBoeuf, and chaired the Firm's International Practice for almost two decades and founded the Firm's practice in the former Soviet Union, including the Moscow and Almaty (Kazakhstan) offices. Mr. Huhs has over 40 years of experience in energy, mining, aerospace, hi-tech (including intellectual property) and manufacturing. He has focused on negotiations, concluding and implementing hundreds of international mergers and acquisitions, production sharing agreements, joint operating agreements, financings, joint ventures and other complex transactions worldwide. He lived in the Republic of China from 1954 to 1957.
Mr. Merrifield, a chartered accountant, has over 30 years of experience in the international mining industry of South Africa, North America and in a number of Central Asian countries including Kazakhstan, Kyrgyzstan, Armenia, Georgia and Tajikistan. Mr. Merrifield has gained his experience both in the corporate offices and on operating sites of a number of major international mining companies focused mainly on the uranium, gold and copper/nickel businesses. Mr. Merrifield is a Director of a number of junior exploration mining companies. He currently continues to assist Uranium One Inc. in regard to their Kazakhstan operations as a senior staff consultant. He previously served as its CFO for four years. Prior to this position Mr. Merrifield was an international consultant focused on financial and general management and was the Vice President, Finance of the Kumtor Gold Company located in Bishkek, Kyrgyzstan from 1997 to 2001.
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 authority (MINT). 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 MINT to have pre-approved, any shares that may be issued upon conversion of outstanding warrants and options as well as requested that MINT 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 MINT. On September 11, 2012 the Corporation received MINT's approval. This approval is effective for six months. Under Kazakhstan legislation the Corporation can apply to have the effective date extended a further six months.
Alhambra's original application included a floor price for the issuance of common shares of $0.60 per share. Unfortunately, during the time period that MINT was considering the Corporation's application, the trading price of Alhambra's common share dropped below that floor. The Corporation has applied to MINT to have that floor price reduced. The Corporation is waiting for MINT's response on this request. While the Corporation is currently negotiating a potential financing that's in compliance with the terms approved by MINT, this price reduction should provide additional financing opportunities.
UNAUDITED FINANCIAL STATEMENTS AND MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A")
The Corporation's third 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:
--------------------------------------------------------------------------
Measured (M) Indicated (I)
--------------------------------------------------------------------------
Project Grade Grade
--------------------------------------------------------------------------
Tonnes (g/t) Ounces Tonnes (g/t) Ounces
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Uzboy (1) 14,317,200 1.52 700,000 7,009,500 1.22 275,500
--------------------------------------------------------------------------
Dombraly (2) - - 559,000 1.22 22,000
--------------------------------------------------------------------------
Shirotnaia (3) - - 2,900,000 0.76 71,000
--------------------------------------------------------------------------
TOTAL 14,317,200 1.52 700,000 10,468,500 1.09 368,500
--------------------------------------------------------------------------
----------------------------------------------------------------------------
M + I Inferred
----------------------------------------------------------------------------
Project Grade Grade
----------------------------------------------------------------------------
Tonnes (g/t) Ounces Tonnes (g/t) Ounces
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Uzboy (1) 21,326,700 1.42 975,500 11,258,200 1.17 421,700
----------------------------------------------------------------------------
Dombraly (2) 559,000 1.22 22,000 9,317,000 1.01 301,000
----------------------------------------------------------------------------
Shirotnaia (3) 2,900,000 0.76 71,000 34,577,000 0.58 645,000
----------------------------------------------------------------------------
TOTAL 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, completing a financing, availability of capital to fund drilling programs, initiating the Uzboy pre-feasibility and feasibility studies, 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, completing a financing, availability of capital to fund drilling programs, initiating the Uzboy pre-feasibility and feasibility studies; 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
