Final Results

Trans-Siberian Gold plc

Final results for the year ended 31 December 2009

Highlights

·; Asacha expected to be in production in 1st quarter 2011

·; $25 million finance facility obtained for Asacha

·; $1.6 million raised in equity placing, $5.2 million debt converted to equity

Chairman's Statement

Trans-Siberian Gold plc ("TSG" or "the Company") entered 2009 amid the destructive consequences of the slowdown of the Russian economy and the global financial crisis. In these circumstances activity at the Asacha project in the first three quarters of 2009 was somewhat limited due to funding constraints. The Asacha investment programme was modified to focus resources on maintaining certain minimum economically/technically required activities in order to avoid damage to the site and to fulfil payment obligations.

In May 2009 UFG Asset Management (UFG), TSG's largest shareholder, agreed to provide the Company with bridging finance of up to $3 million, sufficient to support minimum construction activities. A short-term commissioning plan was modified to focus on major critical works in mine development, construction of the plant and tailings storage facility.

After intensive negotiations with several Russian banks regarding the provision of project finance to bring Asacha into production, a three-year $25 million loan facility was agreed with one of the banks with the first drawdown in October 2009. During the fourth quarter negotiations continued with the leading Russian bank, Sberbank, which had indicated more favourable terms regarding the period of the facility, interest rate and overall cost, with a potential interest saving, net of arrangement fees, of approximately $1 million. On 30 December 2009 the initial facility was refinanced with Sberbank as a five year facility.

Drawdown of the new loan facility allowed the restoration of pre-crisis activity levels at Asacha and provided the Company with the possibility to increase the pace of development. In 2009 mine development and preparation works, by-product extraction works and exploration works amounted to more than 1,006 metres and more than 10,650 m3 of mining. Ore mined in 2009 totalled 5,445 tonnes, with a total ore stockpile (including the adit ore and the ore mined in previous periods) of approximately 42,000 tonnes at the end of December 2009. In the first four months of 2010 a further 517 metres of, and more than 5,400 m3, of mine development has been completed, with an ore stockpile of more than 48,000 tonnes at the end of April 2010.

Underground activities included necessary wooden support installation, steel arching, and shotcreting. Electric cables were laid and pumping equipment and piping to deliver compressed air and water were installed. An underground emergency alarm system and high voltage mining equipment were also installed and two underground transformer substations were assembled.

The concrete foundations for the plant building (concrete plate and column foundations) were finished in October 2009 and work started on the equipment foundations concreting. In November 2009 assembly of the metal framework of the plant building commenced at a rapid pace, work continuing with two shifts employed. Earth works at the tailings storage facility site commenced in July 2009 and continued through the winter season, in spite of severe climatic conditions. Soil removal at the fuel storage facility site started in June 2009 and continued on the foundations for the mechanical repair shops and terracing of the fuel storage facility site.

The significant increase in the gold price since the onset of the global financial crisis is a very positive factor for TSG. Gold's unique role as a safe haven has been proved once again and the immense deficits with the attendant threats of global inflation should provide the gold price with substantial support.

As activity in the Russian economy has picked up, inflationary pressures have returned in the Kamchatka region, with substantial cost increases in the construction sector, particularly materials and fuel. The higher oil price is one of the factors behind a strengthening of the Russian rouble, affecting both projected capital and operating costs. Transportation costs are also significantly higher. These factors, coupled with the increased investment in equipment necessary in order to ensure that construction is completed at Asacha before the end of 2010 with plant commissioning and first gold production in the first quarter of 2011, have unfortunately led to a substantial increase in Asacha's projected pre-start up cost.

TSG is therefore seeking to raise an additional $12 million by the end of the third quarter of 2010 to ensure that the Group has adequate funds to bring Asacha into production in the first quarter of 2011. The intention is to secure further bank funding, possibly coupled with a small equity raising, and, while not underestimating what needs to be done, the Company has every reason to be encouraged by the relationship which has developed with Sberbank and by preliminary discussions with UFG.

Financial review

The Company is in the exploration and development phase of its gold projects in Russia. It therefore received no operating income from those projects during 2009.

The Group recorded a loss from continuing operations for the year of $5.3 million (2008: $7.9 million), including $2.2 million exchange losses (2008: $3.6 million). Administration expenses amounted to $1.2 million in UK and $1.9 million in Russia (2008: $1.0 million and $3.3 million respectively), in aggregate $3.1 million (2008: $4.3 million).

Finance income was $104,000 (2008: $440,000). Finance costs were $187,000 (2008 $118,000). In 2008 the Group early adopted IAS23 (Revised) Borrowing Costs, which requires borrowing costs directly attributable to the acquisition, construction or production of qualifying assets to be capitalised. As a result of this change of accounting policy, there was a reduction of $177,000 (2008: $280,000) in finance costs charged in the Consolidated Statement of Comprehensive Income.

Total non-current assets increased from $75.9 million to $83.3 million. Property, plant and equipment increased by $10 million to $60.4 million, principally reflecting additional $1 million vehicles and $10.3 million assets under construction at Asacha. Capitalised exploration and evaluation expenditure increased from $17.1 million to $18.9 million.

Loans and borrowings at 31 December 2009 were $7.3m (2008: nil), comprising $3.3 million of the five year $25 million facility for the Asacha project and $4 million outstanding on facilities provided by UFG.

Both the May 2009 UFG loan and a second facility provided by UFG in December 2009 to facilitate the refinancing with Sberbank included an option, subject to the approval of TSG's shareholders, for UFG to convert the outstanding balances of its loans into TSG shares. The Company's other major shareholder, AngloGold Ashanti Limited (AGA) also agreed that, if the two UFG loans were so converted, it would subscribe for new TSG shares on a proportionate basis to UFG, with part of its subscription in consideration of the settlement of outstanding amounts due for the provision of technical services by AGA to TSG.

On 23 March 2010 the UFG loans, in aggregate $4,366,781 including accrued interest, and TSG's net indebtedness to AGA amounting to $842,352, were converted into TSG shares. Also on 23 March 2010 additional shares to a value of $1,636,956 were placed with AGA.

Asacha project costs

The total project cost until Asacha is cash flow positive is now estimated at $117.3 million, net of $14 million VAT recoveries. The total project cost includes pre-commissioning mining costs of $2.0 million, other pre-operating expenditure of $32.5 million, "first fill" equipment spares and consumables of $1.0 million and contingency of $1.3 million. A further $21.1 million of capital expenditure, including contingency of $3.5 million, will be incurred after the commencement of production, principally completion of the powerline, mine development and the second phase of tailings storage.

Pre-start up capital expenditure is $9.1 million more than the February 2010 forecast. In part this reflects increased expenditure on the process plant and facilities and completion of infrastructure and the first phase of tailings storage in 2010. Additional equipment purchases are necessary in order to ensure the completion of construction by the end of 2010 and plant commissioning in first quarter 2011. The increase also reflects the strengthening of the Russian rouble to a rate of $1:RUB29.5 (previously $1:RUB33) and cost increases due to local inflation in Kamchatka affecting the construction sector.

Although pre-production mining costs are expected to be $1.5 million less than previously projected, reflecting mine development progress already achieved, other pre-operating expenditure has increased by $2.5 million from the February 2010 estimate, largely due to inflation (in particular a substantial increase in fuel and transportation costs) and the stronger Russian rouble exchange rate. Expected VAT recoveries are $0.5 million lower than previously anticipated reflecting timing changes. Increased expenditure during the remainder of 2010 will not be reflected in higher VAT recoveries until after start up.

Actual expenditure on the project up to March 2010 amounted to $89.7 million, net of $6.7 million VAT recovered. The remaining costs prior to the commencement of production are estimated at $27.6 million, net of further VAT recoveries of $7.3 million, comprising:

Rodnikova

Under the licence as revised in 2006, the Company was required to complete the exploration programme of the licence area and to submit a geological report containing reserve calculations for approval by the state geological authorities before 31 December 2008 and to prepare and permit a feasibility study for the development of the deposit before 31 March 2010. A pre-feasibility study containing the required reserve calculations was submitted in December 2008. This was discussed by the State Expert Commission for Reserves in June 2009 and their comments and recommendations received in August 2009. The pre-feasibility study will be revised and resubmitted during 2010. It is anticipated that the final report on reserves will be submitted by the end of the third quarter of 2010, with approval expected in late 2010.

Ends

Contacts:

TSG

Simon Olsen +44 (0) 1480 811871

+44 (0) 7770 484965

Seymour Pierce

Mark Percy/David Foreman +44 (0) 20 7107 8000 Trans-Siberian Gold plc

Consolidated Statement of Financial Position

Trans-Siberian Gold plc

Consolidated Statement of Comprehensive Income

There are no recognised gains or losses other than those stated above Trans-Siberian Gold plc

Consolidated Statement of Cash Flows

Notes

1. Going concern

The Group has significant funding needs in order to finance the completion of the Asacha project, continue exploration at its properties and provide ongoing working capital.

The directors believe that, in addition to the Sberbank $25 million facility discussed in Note 4, further funding of $12 million is required to provide adequate financing for the Group until the Asacha mine is cash flow positive. It is currently the intention of the Board to satisfy that funding requirement through raising additional debt finance, or a combination of debt finance and equity, in the third quarter of 2010. The directors believe that the raising of additional finance will be successful. Management tightly control the level of committed expenditure to ensure that the Group has sufficient resources available to meet its liabilities as they fall due.

Notwithstanding the material uncertainty related to the raising of additional finance which may cast significant doubt on the Group's ability to continue as a going concern, based on the progress of the negotiations with potential providers of debt finance and discussions with potential investors, the directors believe that the necessary funds to provide adequate financing until the Asacha mine is cash flow positive can be raised as required and accordingly they are confident that the Group will continue as a going concern and have prepared the financial statements on that basis. The financial statements do not include the adjustments that would result if the Group was not able to continue as a going concern.

2. Exploration and evaluation costs

Movements on deferred exploration and evaluation expenditure at the Kamchatka properties, are as follows:

i Additions include capitalised PPE depreciation (see Note 3).

ii Expenditure written off represents an agreed reduction in the cost of technical consultancy services provided by AngloGold Ashanti Limited. 

In 2008 the Group early adopted IAS 23 (Amendment), Borrowing costs, which requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. Additions in 2009 include $231,145 (2008: $280,459) of interest capitalised. The cumulative amount of interest capitalised in exploration and evaluation costs is $1,561,829 (2008: $1,330,684).

Under the Asacha licence as revised in 2006, the Company's subsidiary ZAO Trevohnoye Zarevo (TZ) was required to bring the Asacha mine into operation at its projected capacity in accordance with the technical design at a rate of at least 1,000 kg of gold per annum by 31 December 2008. That requirement was partially fulfilled in 2008, with the commencement of mining activities and first ore extraction. In December 2008, the Kamchatka regional governmental commission noted the delay in mining but concluded that work to finalise construction should continue to put the gold plant into operation in 2009. Government authorities have since been kept advised of the development of the project and although it is expected that, due to funding constraints arising in 2008-09, construction at Asacha will now be completed by the end of 2010 with the plant commissioned during the first quarter of 2011, the Company believes that there will be no adverse consequences of the delay. Discussions in respect of any required amendments to the licence have already commenced with the appropriate authorities and it is expected that these will be concluded prior to plant commissioning.

3. Property, plant and equipment

i Assets under construction comprise $5,482,371 (2008: $4,575,780) in relation to the construction of an access road to Asacha; $43,448,977 (2008: $30,521,497) for building construction and infrastructure, and $5,489,326 (2008: $8,983,105) for plant and equipment at Asacha; and $0 (2008: $5,316) for infrastructure at Rodnikova.

ii $1,272,854 (2008: $1,076,023) of the depreciation charge related to property, plant and equipment used on exploration and evaluation projects or assets under construction and was capitalised in exploration and evaluation costs or property plant and equipment in accordance with the Group's accounting policy.

4. Borrowings

On 19 October 2009 ZAO Trevozhnoye Zarevo (TZ) began to draw down a three year $25 million loan facility for the Asacha project from a Russian bank at an annual interest rate of 14.5%. This initial borrowing was refinanced with a five year facility from Sberbank on 30 December 2009 at an annual interest rate of 11.75%. Repayments are scheduled to commence in December 2011.

On 29 May 2009 UFG Asset Management (UFG) provided TSG with a loan facility of $3 million on commercial terms, repayable in two equal tranches, the first on the earlier of the first anniversary of the commencement of gold production at Asacha and 30 September 2011, and the second on the earlier of the second anniversary of the commencement of gold production at Asacha and 30 September 2012.

On 2 December 2009 UFG agreed to provide a second loan facility of $3.5 million on commercial terms, all or part of which could be repaid without penalty at any time before the scheduled repayment in two tranches on the same dates as the facility agreed in May 2009, in order to facilitate the refinancing of TZ's $25 million loan facility discussed above. TSG drew down the $3.5 million on 8 December 2009 and, following completion of the refinancing of TZ's facility, repaid $2.5 million to UFG on 30 December 2009.

Each of the facility agreements included an option for UFG, subject to the approval of TSG's shareholders, to convert any part of the outstanding loan into TSG shares at a price equivalent to the volume weighted average price of TSG's shares for the period of 60 business days prior to notice of such conversion. On 25 February 2010 UFG served notice of its option to convert the outstanding amounts of both facilities. On 23 March 2010 the loans, in aggregate $4,366,781 including accrued interest, were converted into TSG shares.

In consideration of the May 2009 facility, the Company also agreed, subject to obtaining the necessary shareholder approvals, to issue warrants to subscribe for additional TSG shares to UFG on terms to be agreed and considered as fair and reasonable by the Company's Board (excluding those directors connected to UFG) after consultation with TSG's Nominated Adviser. No warrants were issued in 2009 or after the reporting date.

5. Share capital and premium

On 23 March 2010 14,756,339 ordinary shares were issued at 30.8 pence in a placing for cash as described in Note 6.

On 18 August 2008 the Company's shareholders approved an increase in the Company's authorised share capital of 50,000,000 ordinary shares to 150,000,000 ordinary shares. On 18 August 2008 26,507,899 ordinary shares were issued at 25.5 pence per share for a total cash consideration, before issuing costs, of £6.8 million ($12,595,003) to entities associated with UFG Asset Management (UFG), two Directors and other shareholders. Also on 18 August 2008 17,241,183 ordinary shares were issued, also at 25.5 pence per share, to UFG and AngloGold Ashanti Limited in consideration of the conversion of the Company's debt facilities, in aggregate US$8,192,002 including accrued interest. 

6. Events after the reporting date

On 23 March 2010 3,533,534 ordinary shares were issued at 30.8 pence per share for a total cash consideration, before issuing costs, of £1.1 million ($1,636,956) to AngloGold Ashanti Limited (AGA).

Also on 23 March 2010 11,222,805 ordinary shares were issued, also at 30.8 pence per share, to UFG Asset Management (UFG) and to AGA in settlement of the Company's indebtedness, in aggregate $5,209,133 including accrued interest. 9,408,002 shares were issued to UFG in consideration of the conversion of the outstanding amounts of two loan facilities as discussed in note 4. 1,814,803 ordinary shares were issued to AGA in settlement of technical consultancy services provided by AGA.

7. Basis of accounting and presentation of financial information

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. However this announcement does not in itself contain sufficient information to comply with IFRS.

The financial information does not constitute the Group's statutory financial statements as defined in section 434 of the Companies Act 2006 but is derived from those accounts. The financial information for the year ended 31 December 2009 has been extracted from the audited accounts of Trans-Siberian Gold plc which will be delivered to the Registrar of Companies in due course. The auditors reported on those accounts and their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The audit report for the year ended 31 December 2009 did contain an emphasis of matter in respect of going concern to which the auditors drew attention without qualifying their report. The financial information for the year ended 31 December 2008 has been extracted from the audited accounts of Trans-Siberian Gold plc which have been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The audit report for the year ended 31 December 2008 did contain an emphasis of matter in respect of going concern to which the auditors drew attention without qualifying their report.