22nd May 2007 14:30
Thistle Mining Inc.22 May 2007 THISTLE ANNOUNCES RESULTS FOR THE YEAR ENDING DECEMBER 31, 2006 Toronto May 22, 2007 - Thistle Mining Inc. (AIM: TMG ) Overview Thistle Mining Inc. ("Thistle" or the "Company") wishes to announce that theCompany's audited Consolidated Financial Statements and Managements Discussionand Analysis ("MD & A") for the twelve month period ended December 31, 2006which will also be filed on SEDAR today and can also be obtained from theCompany's website: www.thistlemining.com. All dollar references in thisannouncement are in US $. The financial information in this announcement hasbeen extracted from but does not constitute full statutory accounts. The AnnualReport and Financial Statements for the year ended December 31, 2006 will besent to shareholders shortly. The year to December 31, 2006, proved to be one of mixed fortunes for theCompany. Gold sold at President Steyn Gold Mine ("PSGM") was 16.6% less thanthat achieved in 2005, a disappointing outcome notwithstanding the full effectof the reduction in workforce undertaken in December 2005. Production wasadversely affected by a fall of ground at Number 1 Incline shaft andinfrastructure failures at Numbers 2 and 3 shafts. However, good progress wasmade during the year on laying down a strategic framework for the future. In May 2006 the Board approved a feasibility study for the Masbate project inthe Philippines and initiated a strategic process that led to the completion ofthe sale of the Masbate project to CGA Mining Limited ("CGA") (ASX: CGX) for acash and share transaction worth $51 million. The cash proceeds arising fromthis transaction has allowed Thistle to repay $26.7 million in debt owing to MCResources Limited ("MC") and Casten Holdings Limited ("Casten"), Thistle's majorcreditors and shareholders. In December 2006 an agreement to sell 15% of PSGM toa Black Economic Empowerment Group was concluded as a necessary step for PSGM toqualify for the grant of new order mining rights as provided for under SouthAfrican law. In January 2007 the feasibility study for PSGM's Golden Trianglewas completed and approved by the Board. The Board has also approved furtherstrategic initiatives in regard to PSGM to eliminate the risk associated withoperating a single relatively high cost gold operation. On March 29, 2007 following an unwillingness of Casten and MC to defer shortterm debt and interest due and payable on April 1, 2007 Thistle announced thatit was in financial hardship and suspended trading on the AIM market of theLondon Stock Exchange Plc ("AIM") pending satisfactory resolution of thismatter. On April 11, 2007 and May 1, 2007 binding agreements were entered intowith MC and Casten that offer the potential to strengthen the Company's balancesheet. Following this agreement the Board of Directors have requested arestoration of the Company's shares to trading on AIM and it is expected thatthe shares will be restored for trading on Tuesday May 22, 2007. During 2006 the Company benefited from a rising US $ gold price and a stableRand: US $ exchange rate and this together with contained operating costs at theSouth African operations, enabled PSGM to fund approximately $4.4 milliontowards the development costs of the Masbate project and Thistle's corporatecosts. Highlights for the year ending December 31, 2006 and subsequent events. 2006 H1 2005 H2 2005 Fresh Start Pre Fresh Fresh Start StartSales ( $ millions) 89.9 37.5 42.6Net earnings/(loss) ($ millions) (7.9) (14.4) (16.7)Earnings / (loss) Per share ($) (0.17) (6.23) (0.36)Cash from / (used in) operations($ millions) 4.8 (16.0) (5.7)Gold sold (000s ozs) 146 85 90Cash costs ($/oz) 541 562 479Total costs ($/oz) 577 583 572 • Cash flow generated by operations was $4.8 million for 2006, compared to$16 million used in the first half of 2005 and $5.7 million in the second halfof 2005 (post fresh start accounting). The improvement of 2006 relative to 2005reflects an increase in sales and a decrease in cost of sales. • Investment in property, plant and equipment, as well as additions tomining properties, increased in 2006 relative to the first and second half of2005. Total funds invested amounted to $12.2 million in 2006 and $4.5 million inthe first half of 2005 and $7.3 million in the second half of 2005. In 2006,$5.7 million was invested at PSGM and $6.5 million was invested in the Company'sMasbate project. • Following the improvement in operational cash flow and despite anincrease in investing activities, financing raised was less in 2006 than in2005. Casten and MC advanced $3.57 million in 2006 of which $0.33 million wasrepaid in June 2006. For the period January 7, 2005, to June 30, 2005 Casten andMC advanced $21.8 million in short-term funding, and advanced a further $12.6million to the Company for the period July 1, 2005, to December 31, 2005. • The consolidated net loss in accordance with Canadian GAAP for 2006 was$7.9 million, or $0.17 per share, compared to $14.4 million, or $6.23 per share,in the first half of 2005, and $16.7 million, or $0.36 per share in the secondhalf (post fresh start accounting). • PSGM's gold sold in 2006 was 146,302 ounces, a decrease of 16.6% comparedto 2005. The relative decrease in production arises from the fall of ground atPSGM's Number 1 Incline Shaft on February 18, 2006, the decision to stopunprofitable production from the Number 1A Ventilation Shaft in February 2006and depletion of the Big Bertha section. Production in the fourth quarter wasalso adversely affected by hoisting related problems at Number 2 shaft and acompressor motor failure at Number 3 shaft. The problems at Number 2 shaftrelate to movement in the shaft and shaft sub incline arising from thecommencement of limited mining of the Number 2 shaft pillar. • Compared to the prior year, PSGM's share of unit cash cost increased by4% to $541 per ounce of gold and the unit total costs decreased by 0.2% to $577per ounce of gold. The increase in cash costs per ounce occurred despite themarginal depreciation of the South African rand against the U.S. dollar and thelower labour complement due to a 16.6% decrease in ounces of gold sold. Cashcost per ounce sold is not a recognized measure under Canadian GAAP. Areconciliation to the cost of sales per ounce is included under South AfricanOperations in the MD & A. • The Company realized an average price of $603 per ounce of gold in 2006,slightly lower than the average spot price of $604 during the year. This isapproximately $160 per ounce higher than that realized in 2005. • The focus on quality of mining as opposed to emphasis on volume hasresulted in an increase in yields from underground over the year. The yield for2006 before the treatment of low grade surface material averaged 5.70g/tonnecompared to 5.43 g/tonne for 2005. For the first, second, third and fourthquarters of 2006, the yield before the treatment of low grade surface tons was5.92, 6.26, 5.57 and 5.10 g/tonne respectively. With the treatment of low gradesurface material the yield was 5.92, 5.85, 5.06 and 4.49 g/tonne respectively. • PSGM's gross proven and probable mineral reserves at December 31, 2006,were 13% lower than stated reserves at December 31, 2005. PSGM's estimatedproven and probable mineral reserves as at December 31, 2006 were 1.98 millionounces of gold (refer to the mineral reserve and mineral resource tables in theMD & A and in the Company's press release dated January 31, 2007 for furtherdetails). • On January 31, 2007, the Company and CGA entered into a Sale and PurchaseAgreement ("SPA") for the sale to a wholly-owned subsidiary of CGA (the "Purchaser") of 100% of Thistle's shareholding in Philippine Gold Ltd ("PGO"), awholly-owned subsidiary of the Company, and its other interests in the Masbategold project. The transaction closed on March 19, 2007. Under the terms of thetransaction, the consideration payable for the sale and purchase of the Sharesand Assets was, in aggregate, US$51 million of which $30 million represented acash consideration and US$21 million being payable in ordinary shares of CGA. Atthe agreed issue price Thistle received 40,985,538 CGA shares which represent anapproximate 25.4% interest in CGA. As the book value of Thistle's investment inPGO and loans advanced by Thistle to PGO as at December 31, 2006 amounted toUS$9.9 million and US$25.1 million respectively, the transaction was accretiveto Thistle shareholders. • On March 20, 2007, the Company paid $26.7 million to MC and Casten as partpayment of short term debt owing. Following this payment, the amount ofprinciple, interest and withholding taxes outstanding on April 1, 2007 amountedto $54.2 million. • Pursuant to the Sale and Purchase Agreement, Thistle has provided anumber of warranties to Central Asia Gold Limited (the "Purchaser") and CGA andwill remain subject to possible Purchaser Claims (as defined therein) for aminimum period of 12 months. Although no claims or actions related to the saleof the interest in the Masbate Project have been received, CGA and the Purchaserhave reserved their rights in connection with the Sale and Purchase Agreementand the events leading up to the completion of the sale. The Company believes that it has a good defense against possible claims thatmight be made in this regard. Should proceedings be instituted against theCompany and this interpretation prove not to be the case, the matter could havea material adverse effect on the Company. • On March 29, 2007 following an unwillingness of Casten and MC to defershort term debt and interest due and payable on April 1, 2007 in terms of theMemorandum of Agreements entered into on March 28, 2006 and the realization thatPSGM would not be able to generate sufficient free cash flows to allow Thistleto meet its financial obligations, Thistle announced that it was in financialhardship and suspended trading on the AIM market of the London Stock ExchangePlc pending satisfactory resolution of this matter. • On April 11, 2007, Thistle entered into a non-binding memorandum ofagreement with its major creditors, MC and Casten, on the restructuring of debtowing to them (the "Plan"). The execution of the Plan contemplates two privateplacements to be supported by MC and Casten and is conditional on the transferof Thistle's ownership interest in CGA to MC and Casten. Full details relatingto the Plan are included in the Company's press release dated April 11, 2007 andare included in the MD & A. • On May 11, 2007, Thistle entered into a debt standstill agreement ("Standstill Agreement") with MC and Casten pursuant to which MC and Casten agreed(amongst other matters) that should CGA's consent to the transfer of Thistle'sownership interest in CGA to MC and Casten not be obtained by August 11, 2007,the Plan will lapse and MC and Casten will continue to defer repayment ofinterest and principal on the loans they have advanced to Thistle until the endof May 2008. Should such consent be obtained by August 11, 2007, the Plan willproceed and will be implemented. In particular circumstances, the StandstillAgreement will be of no force and effect. These relate mainly to economiccircumstances of Thistle, a material adverse change in the financial position orprospects of Thistle or its subsidiaries or any material legal claims being madeagainst Thistle or its subsidiaries. . • The Company needs to proceed with further strategic initiatives toeliminate the risk associated with operating a single relatively high cost goldoperation. These initiatives include but are not limited to the combination ormerger of PSGM with another gold mining entity. The Board is of the opinion thatthe combination or merger of PSGM with a suitable partner has the potential tocreate more shareholder value than operating the mine on a stand-alone basis.The Company is in the process of finalising arrangements with a South Africanbased investment banker to act as its financial advisor in this process. Outlook for PSGM for 2007 Gold production from PSGM in 2007 is anticipated to be approximately 140,000 oz,at a cash cost and total cost of $575 to $580 per oz and $605 to $610 per ozrespectively assuming an exchange rate of 7.30 South African rand per US $. Atan exchange rate of 7.00 South African rand per US $ the cash cost is forecastto be $600 to $605 per oz. The forecast is, however, subject to uncertaintywhich could cause actual production to differ materially. Major risks includefailure of infrastructure, market prices, seismic activity, fires and labourunrest. Capital expenditures at PSGM is anticipated to be approximately $11.7 million in2007 assuming an exchange rate of 7.30 South African rand per US $. Majorinvestments include $3.6 million in development and $3.1 million onrefurbishment of infrastructure at Number 3 shaft. At forecast gold prices it isanticipated that cash from operations will be sufficient to fund this capitalexpenditure. This news release contains forward-looking statements with the meaning ofapplicable securities laws including amongst others, statements made or impliedunder the headings "Overview" , " Highlights for the year ending December 31,2006 and subsequent events " and " Outlook for PSGM for 2007 " above relatingto the Company's objectives, strategies to achieve these objectives, future cashflow and financing requirements, and similar statements concerning anticipatedfuture events, results, circumstances, performance or expectations that are nothistorical facts. Such forward-looking statements reflect the Company's currentbeliefs and are based on information currently available to management. Thesestatements are not guarantees of future performance and are based on theCompany's estimates and assumptions that are subject to risk and uncertaintiesinherent in the business of the Company including those discussed in theCompany's materials filed with the Canadian securities regulatory authoritiesfrom time to time, which could cause the actual results and performance of theCompany to differ materially from the forward-looking statements contained inthis news release. Those risks and uncertainties include, among other things,risks related to: the mining industry (including operational risks inexploration development and production; delays or changes in plans with respectto exploration or development projects or capital expenditures; theuncertainties involved in the discovery and delineation of mineral deposits,resources or reserves; the uncertainty of mineral resource and mineral reserveestimates and the ability to economically exploit mineral resources and mineralreserves; the uncertainty of estimates and projections in relation toproduction, costs and expenses; the uncertainty surrounding the ability of theCompany to obtain all permits, consents and authorizations required for itsoperations and activities; competition for the acquisition, exploration anddevelopment of mineral interests; and health and safety and environmentalrisks), the risk of gold and other commodity price and foreign exchange ratefluctuations; the ability of the Company to fund the capital and operatingexpenses necessary to achieve the business objectives of the Company; theuncertainty associated with commercial negotiations and negotiating with foreigngovernments; the risks associated with international business activities; thedependence on key personnel; the ability to access capital markets; theindebtedness of the Company; and labour relations matters. Material factors orassumptions that were applied in drawing a conclusion or making an estimate setout in the forward-looking statements include that the general economy remainsstable, the demand and price of gold continues to increase and the Rand remainsstrong against the US$. It is also assumed that there will be no majordisruptions in production including failure of infrastructure, seismic activity,underground fires and labour unrest. The Company cautions that this list offactors is not exhaustive. Although the forward-looking statements contained inthis news release are based upon what the Company believes are reasonableassumptions, there can be no assurance that actual results will be consistentwith these forward-looking statements. All forward-looking statements in thisnews release are qualified by these cautionary statements. These forward-lookingstatements are made as of the date hereof and the Company, except as required byapplicable law, assumes no obligation to update or revise them to reflect newinformation or the occurrence of future events or circumstances. For further information, contact: Andy Graetz, Chief Financial Officer + 27 82 929 5562 or email [email protected] Gerry Beaney, Grant Thornton Corporate Finance at +44 (0) 207 383 5100 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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