Final Results for the year ended 31 December 2012

Trans-Siberian Gold plc

Final results for the year ended 31 December 2012

Highlights

·; Asacha JORC resource update adds 321,000 oz. gold and 703,000 oz. silver, net of 2011 and 2012 production

·; JORC resource update includes 252,000 oz. gold and 395,000 oz. silver in Asacha's new Eastern zone

·; Asacha 2012 production 27,920 oz. gold, 35,924 oz. silver

·; Changes in mining methods, equipment and personnel to address Asacha dilution problem

·; $6.4 million debt converted to equity in February 2012

4 g/t cut-off

* 50oz of Ag = 1oz of Au equivalent

JORC = Australasian Joint Ore Reserves Committee.

Chairman's Statement

Trans-Siberian Gold plc ("TSG" or "the Company") reports that the Asacha mine's first full year of operation produced more than 27,500 oz. of gold and more than 35,000 oz. of silver. During the year the Asacha plant performed well, operating at close to its designed capacity of 12,500 tonnes per month in the second half of 2012 and achieving gold recoveries of more than 95% throughout the year. However several operational problems, principally dilution in the mine, caused lower than expected gold grades in the ore delivered to the plant. This resulted in lower gold production and higher per oz. gold production costs, with a consequent negative impact on the 2012 results.

A comprehensive technical mine audit highlighted several factors which had contributed to the dilution problem, including stoping methods, the blasting scheme, a lack of both appropriate equipment and experienced personnel. The audit concluded that the mining method prescribed in the design of the mine, long hole blasting, was not appropriate for some areas of fractured rock enclosing the main stoping zone planned for mining in 2012. On the basis of the mine auditor's recommendations, where practicable, some of the adjacent blocks were mined by shallow hole blasting which achieved better results in terms of dilution.

Mine performance in the third quarter was affected by the breakdown of some underground equipment. This reduced the amount of stoping ore which could be delivered to the plant, necessitating blending the mined ore with lower grade ore from the surface ore stockpile. Additional spare parts were purchased and new machines, including a new underground truck and underground loader were delivered to site in November and late December respectively. Additional equipment for the site laboratory increased its sample capacity to more than 100 assays per day.

The mine's management team was also strengthened by the recruitment of a technical director, two new underground mining engineers and a mining geologist. These appointments of experienced personnel, together with the new equipment, consolidated the steady improvement in the mine's performance during the fourth quarter, with ore grades delivered to the plant increased from 5.4 g/t in October to 7.2 g/t in December. 3,263 oz. of refined gold were produced in December.

In the first quarter of 2013, ore extraction (including stoping and mine development) amounted to 45,352 metric tonnes, the highest quarterly total to date. Mining activity is now focused on increasing the volume and quality of stoping ore, since the 4,100 metres of mine development in 2012 included the preparation of stoping areas to be mined in 2013.Plant throughput averaged 11,862 tonnes per month (95% of planned 12,500 tonnes). Plant performance continued to be affected by low ore grades, due to dilution.  

TSG is cautiously optimistic that ore dilution can be reduced further through planned adjustments in the mining methods, in particular, reducing the diameter of drill holes and the introduction of additional supports. Other measures under consideration include the use of less brisant explosives (i.e. explosives with less shattering effect). However fractured rock in the upper part of the orebody makes it likely that this problem will take time to resolveand the positive impact of changes in stoping methods will not be fully reflected in improved ore grades until ore from 2012's mine development which remains underground, and therefore subject to further dilution, can be moved to the surface and new mine development schemes are fully introduced.

With the aim to increase the Company's gold resources geological drilling amounting to approximately 11,200 metres was undertaken on the Eastern flank of the Asacha deposit, resulting in the addition of approximately 252,000 oz. gold, included in the updated JORC Resource table shown above. The update also showed a net increase of 119,300 oz. gold in the measured and indicated resources in Asacha's main zone. 

In April 2013 the federal authorities prescribed the implementation of two provisions of the Rodnikova licence by April 2014: the finalisation of the design documentation and the commencement of work at the deposit, failing which the authorities will consider the termination of the licence. The designing institute began work in 2012 and is expected to complete the design documentation in 2013. Although we are seeking to comply with these requirements it is unclear whether there is adequate time or available funding to do so. Therefore full provision has been recognised in respect of Rodnikova's $2.9 million exploration costs.

Financial Review

Gold production commenced at Asacha in September 2011. Revenue from the sale of 26,326 oz. of refined gold (2011: 6,539 oz.) and 32,964 oz. of refined silver (2011: 7,189 oz.) was $43.9 million and $976,000 respectively (2011: $11.7 million and $223,000). Average realised prices were $1,668 per oz. gold and $30 per oz. silver (2011: $1,790 per oz. gold and $31 per oz. silver). Cost of sales per oz. gold, net of the credit from silver sales revenue, was $1,275 (2011: $1,212). Cash cost per oz. gold including depletion, net of the silver credit and excluding royalty, was $858 (2011:$960).

The Group recorded an operating profit for the year of $681,000 (2011: $590,000), after recognising a $2.9 million impairment charge against Rodnikova's exploration and evaluation expenditure and crediting an exchange gain of $2.1 million (2011: $2.0 million). Administration expenses amounted to $838,000 in UK and $5.4 million in Russia (2011: $1.6 million and $4.2 million respectively), in aggregate $6.3 million (2011: $5.8 million). Russian administration costs included the write off of non-recoverable Value Added Tax (VAT) of $422,000 (2011: $926,000) and an inventory provision of $488,000 (2011: nil).

Finance income was $6,000 (2011: $12,000). Finance costs were $4.1 million (2011: $1.5 million), net of $nil (2011: $3.4 million) interest capitalised.

Total non-current assets decreased from $128.0 million to $110.6 million. Mining properties of $29.5 million (2011:$34.2 million) reflected $10.5 million additional mining and mine development, more than offset by depletion of $15.2 million. Property, plant and equipment decreased by $9.5 million to $75.4 million. Capitalised exploration and evaluation costs reduced from $2.9 million to $1.6 million, reflecting the impairment provision in respect of expenditure on the Rodnikova deposit, partially offset by exploration of the eastern zone at Asacha. 

Inventories at Asacha at 31 December 2012 comprised $4.1 million gold and silver in production (2011: $1.3 million), $12.4 million ore stocks (2011: $4.7 million) and $3.9 million fuel and other materials and supplies (2011: $4.5 million), in aggregate $20.4 million (2011: $10.5 million). Recoverable VAT at 31 December 2012 was $2.1 million (2011: $3.3 million) all of which is expected to be received during 2013.

Loans and borrowings at 31 December 2012 totalled $34.7 million (2011: $48.5 million), comprising $32.6 million (2011: $40.0 million) outstanding under two five year facilities, totalling $43.0 million, provided by Sberbank for the development of Asacha, $815,000 short term loan finance (2011: $8.2 million), including accrued interest, provided by TSG's major shareholders UFG Asset Management (UFG) and AngloGold Ashanti Limited (AGA) in June 2012 and $1,009,000 finance lease obligations (2011: $334,000).

Shareholder loans

In February 2012, 5,842,390 new TSG ordinary shares were issued to UFG and AGA in settlement of the Company's indebtedness, in aggregate $6.4 million including accrued interest, under various short term loan facilities provided by UFG and AGA in September 2011.The remaining $1.8 million was repaid to UFG and AGA in March and April 2012.

Asacha mine

A further $21.5 million of capital expenditure, including contingency of $3.6 million, will be incurred in 2013 and subsequent years, comprising:

At a gold price of $1,500/oz., Life of mine ("LOM") cash costs on an all equity basis on total expected gold production of 589,000 oz. are forecast at $347/oz., before taking account of a $51/oz. credit from silver production (assuming a silver price of $30/oz.). Cash costs including all royalties and taxes (in total $147.4 million, net of VAT recoveries) on an all equity basis are forecast at $597/oz. Total costs on the same basis, after depreciation of all capital expenditure (including $29.0 million post start up) and pre-start up mining and other operating expenditure, are forecast at $873/oz., giving a $627/oz. margin at a gold price of $1,500/oz.

At a gold price of $1,300/oz., cash costs including all royalties and taxes (in total $120.0 million, net of VAT recoveries) on an all equity basis are forecast at $551/oz. Total costs on the same basis, after depreciation of all capital expenditure and pre-start up operating expenditure, are forecast at $826/oz., giving a $474/oz. margin at a gold price of $1,300/oz.

Events after the reporting date

By the end of the first quarter of 2013, $15 million of the $43 million facilities provided by Sberbank for the development of Asacha had been repaid. Scheduled repayments in the remaining nine months of 2013 and the first half of 2014 amount to $15.5 million and $12.5 million respectively. During the first half of 2013 discussions took place with Sberbank in respect of a restructuring of these facilities or the provision of an additional facility, either of which would have the effect of extending the facility repayments over a longer period into 2015. These discussions are continuing and a further announcement will be made in due course.

Ends

Contacts:

TSG +44 (0) 1480 811871

Simon Olsen +44 (0) 7770 484965

Trans-Siberian Gold plc

Consolidated Statement of Financial Position

Trans-Siberian Gold plc

Consolidated Statement of Comprehensive Income

Trans-Siberian Gold plc

Consolidated Statement of Cash Flows

Notes

1. Going concern

The Group's operations are cash generative but the repayment of $32.5m of bank borrowings, which is due in 2013 and 2014, cannot be funded from the cash generated from operations and existing working capital. The Directors are currently in advanced negotiations with the Group's bankers to refinance the existing bank debt. The Directors are confident that an agreement can be reached and therefore consider it appropriate to prepare the financial statements on a going concern basis. Should the Group be unable to refinance the bank debt it may be unable to realise its assets and discharge its liabilities in the normal course of business.

These conditions indicate the existence of a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

2. Mining properties

Mining properties assets relate to the Asachinskoye (Asacha) mining licence held by the Company's subsidiary ZAO Trevozhnoye Zarevo (TZ).

i Transfers from Deferred exploration and evaluation costs represent assets brought into use on the commencement of production.

Under the Licencing Agreement as revised in 2006, 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 funding constraints arising in 2008-09 delayed completion of construction at Asacha until the middle of 2011 with gold production commencing in September 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 in 2013.

3. Property, plant and equipment

i Assets under construction comprise $1,239,426 (2011: $798,727) for building construction and infrastructure at Asacha, $69,366 (2011: $1,023,727) for plant and equipment at Asacha and $197,361 (2011: $nil) for plant and equipment at Rodnikova.

ii $314,328 (2011: $2,636,164) 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.

iii The net carrying amount of property, plant and equipment includes the following amounts in respect of assets held under finance leases

4. Deferred exploration and evaluation costs

Deferred exploration and evaluation expenditure relates to the "Asacha East" zone, a separate orebody within the Asacha mineral rights licence discussed in Note 2, and the Rodnikova mining licence, also held by the Company's subsidiary ZAO Trevozhnoye Zarevo (TZ).

i Additions include capitalised PPE depreciation.

ii Transfers to mining properties represent assets brought into use upon the commencement of production, see Note 2.

Under the Licencing Agreement as revised in 2006, TZ 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. The comments and recommendations of the State Expert Commission for Reserves were received in August 2009. During 2010 the geologic report and the pre-feasibility study were completely revised taking into account the latest geologic exploration results. The final report on Rodnikova's Mineral Reserves and the pre-feasibility study were submitted to the authorities in March 2011. The Mineral Reserves report was approved by the Kamchatka authorities in April 2011. The Russian State Commission for Reserves approved the expert opinion on the Report on Reserves and Pre-feasibility study of the Rodnikova deposit on 28 October 2011, with a recommendation for underground mining.

Following an inspection in 2012, the Federal Service for Supervision of Natural Resources Management prescribed the implementation of two provisions of the Rodnikova licence by April 2014, first the finalisation of the design documentation, secondly the commencement of work at the deposit, failing which the federal authorities will consider the termination of the licence. The designing institute began work in 2012 and is expected to complete the design documentation in 2013. Although TZ is seeking to comply with these requirements it is unclear whether there is adequate time or available funding to do so. Therefore full provision has been recognised in respect of Rodnikova's deferred exploration and evaluation costs.

5. Deferred tax

Deferred income tax at 31 December relates to the following:

6. Borrowings

Movement in borrowings is analysed as follows:

In 2009 and 2010 ZAO Trevozhnoye Zarevo (TZ) arranged two loan facilities for the Asacha project, in total $43 million, with the Russian bank Sberbank. Repayments under the initial five year $25 million facility, which bears an annual interest rate of 10.5%, commenced in November 2011 with the second instalment, due in March 2012, prepaid in December 2011. Repayments under the second, $18 million, facility which also bears an annual interest rate of 10.5%, commenced in September 2012.

In October 2010 and April 2011 UFG Asset Management (UFG), a related party by virtue of its then 54.3% holding in the shares of the Company, provided TSG with two long term loan facilities, each of $2 million, on commercial terms. In April 2011 AngloGold Ashanti Limited (AGA), also a related party by virtue of its then 30.7% holding in the shares of the Company, agreed to provide TSG with a long term loan facility of $2.3 million on commercial terms. Each of the three loan facility agreements included an option for the lender, subject to the requisite 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 8 November 2011, as discussed in Note 7, the above three loan facilities, in aggregate $6,802,279 including accrued interest, were converted into TSG ordinary shares.

In September 2011 UFG provided TSG with four short term loan facilities amounting to $5 million on commercial terms, each with the same conversion option as their previous loans, exercisable prior to scheduled repayment 180 days after drawdown. On 23 September 2011 AGA agreed to provide a short term loan facility of $3 million on commercial terms, with the same conversion option as the UFG loans, exercisable prior to scheduled repayment 180 days after drawdown.

In February 2012, as discussed in Note 7, three of the short term loan facilities provided by UFG and part of the short term facility provided by AGA, in aggregate $6,445,099 including accrued interest, were converted into TSG ordinary shares. The fourth UFG facility and the remaining part of the AGA facility were repaid in March 2012 and April 2012 respectively.

In June 2012 UFG and AGA agreed to provide additional short term facilities, in aggregate $781,000, on commercial terms. In September 2012 the terms of the two facilities were extended to 1 March 2013, the revised facility agreements each including the same conversion option as the previous loan facilities provided by UFG and AGA. In January 2013, as discussed in Note 10, the two facilities were increased to an aggregate $891,000 and their terms were further extended to 30 September 2013.

In consideration of a loan facility provided by UFG in 2009, 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 2011 or 2012 or after the reporting date.

.

7. Share capital and premium

All shares are ordinary shares with a par value of 10 pence.

On 8 November 2011, 4,541,313 ordinary shares were issued to UFG Asset Management (UFG) and AngloGold Ashanti Limited (AGA) in settlement of the Company's indebtedness, in aggregate $6,802,279 including accrued interest. 2,938,890 ordinary shares were issued to UFG, at 93.4 pence per share, and 1,602,423 ordinary shares were issued to AGA, at 93.6 pence per share, in consideration of the conversion of the outstanding amounts of three loan facilities as discussed in Note 6. and 33.

In February 2012, 5,842,390 ordinary shares were issued to UFG and AGA in settlement of the Company's indebtedness, in aggregate $6,445,099 including accrued interest. 3,738,665 ordinary shares were issued to UFG, 2,808,151 ordinary shares on 1 February 2012 at 69.94 pence per share and 930,514 ordinary shares on 3 February 2012 at 69.98 pence per share, and 2,103,725 ordinary shares to AGA, 1,578,620 ordinary shares on 1 February 2012 at 69.98 pence per share and 525,105 ordinary shares on 3 February 2012 at 69.75 pence per share, in consideration of the conversion of the outstanding amounts of four loan facilities as discussed in Note 6.

8. Revenue

9. Cost of sales

10. Events after the reporting date

By the end of the first quarter of 2013, $15 million of the $43 million facilities provided by Sberbank for the development of Asacha had been repaid. Scheduled repayments in the remaining nine months of 2013 and the first half of 2014 amount to $15.5 million and $12.5 million respectively. During the first half of 2013 discussions took place with Sberbank in respect of a restructuring of these facilities or the provision of an additional facility, either of which would have the effect of extending the facility repayments over a longer period into 2015. These discussions are continuing. In conjunction with its major shareholders, the Company is also considering other options to reduce the impact of its existing loan repayment schedule.

On 21 January 2013 TSG's major shareholder AngloGold Ashanti Limited (AGA) agreed to increase its $281,000 short term facility to $321,000 and to extend the facility's repayment date to 30 September 2013. On 29 January 2013 TSG's other major shareholder UFG Asset Management (UFG) agreed to increase its $500,000 short term facility to $570,000 and to extend the repayment date to 30 September 2013.

11. 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 2012 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 financial information for the year ended 31 December 2011 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.