30th Sep 2008 07:00
AIM: FML
Frontier Mining Ltd
Interim Results for the six months to 30 June 2008 and Operational Update
Frontier Mining Ltd ("Frontier" or "the Company"; AIM: FML), the mining exploration and development company with gold and copper properties in Kazakhstan, announces its unaudited interim results for the six months ended 30 June 2008.
Highlights:
Income of US$376,523 from sale of 402 ounces of gold and 3,300 ounces of silver
Extension of exploration period at Koskuduk, Baritovy, Beschoku, and Yubileiny
Approval of Naimanjal 2008/9 exploration work program
Appointment of a technical and financial advisory team to fast track the development of Benkala towards pre-feasibility
Post-Period End:
Total year-to-date income of US$787,074 from sale of 780 ounces of gold and 8,319 ounces of silver
Application for further exploration and pilot production at Koskuduk, Beschoku, Yubeleiny & Baitemir commenced
Licence transfer of the rights and obligations for the Benkala project to KazCopper LLP
Metallurgical test work indicates viability of heap leaching methods and SX-EW processing for the oxidized part of Benkala deposit
Three drill rigs mobilized to Benkala
Brian Savage, Chairman & CEO of Frontier, commented:
"Naimanjal has proved to be a more challenging project than anticipated as we referred to in the annual report. However, as the issues identified are not technical in nature, we are progressing the regulatory approvals for continued exploration and commercial production. We continue to strengthen our operating and exploration capabilities across our Naimanjal license commercial discovery areas. We remain convinced that Benkala is a company-transforming asset that will drive Frontier's valuation in the future. Recent metallurgical test work has been encouraging and, having mobilized three drill rigs to Benkala, drilling will commence shortly. We are delighted to have Coville as our joint venture partner in Benkala, given their extensive mining experience in Kazakhstan. We have a number of additional prospective assets in our portfolio, which are expected to contribute to the valuation of the Company longer term."
Notes to Editors
Frontier currently owns two licenses in Kazakhstan. They are the Naimanjal exploration and mining licence, held by FML Kazakhstan, and, 50% of U.S. Megatech BVI, which holds the Benkala, licence. FML Kazakhstan is a wholly owned subsidiary of Frontier Mining Ltd. Frontier has one producing gold mine, Naimanjal; one pre-feasibility stage gold project, Koskuduk; and the recently acquired 50% interest in the Benkala copper mine.
Frontier owns a 50% interest in KazCopper LLP, the joint venture Company that owns the Benkala copper-molybdenum-gold deposit located in northwestern Kazakhstan within the Urals gold/copper ore belt. A Competent Persons Report ("CPR") on the Benkala project completed by Wardell Armstrong International ("WAI") in March 2007 estimates 47.75 Mt at an average grade of 0.36% Cu for the oxide mineralization, and 873.75 Mt at an average grade of 0.30% Cu for the sulphide mineralisation, representing some 2.8 million tonnes of contained copper. A conceptual study team and advisory team have both been appointed to fast track the development of this project forward towards a pre- feasibility study, with a view to beginning production at the end of 2010.
For further information, please visit the website at www.frontiermining.com.
Enquiries:
|
Frontier Mining Ltd |
Brian Savage - Chairman & CEO |
+44 (0)20 7898 9019 |
|
Parkgreen Communications |
Louise Goodeve / Sue Scott |
+44 (0)20 7933 8780 |
|
Zimmerman Adams International |
Ray Zimmerman / Jonathan Evans |
+44 (0)20 7060 1760 |
Chairman's Statement
On behalf of Frontier's Board of Directors, I am pleased to present our unaudited interim results for the six months ending 30 June 2008 and to provide shareholders with an operational update. Whilst the accounts are unaudited, they have been reviewed and verified by local independent accountants. Revenue for the period continues to be offset against capitalized development costs reflecting the test status of Naimanjal pilot production.
Operational Review
Naimanjal Complex
The Naimanjal Complex ("Naimanjal") is a highly mineralized commercial discovery covering an area of about 170 square kilometres, of which the existing Naimanjal mine represents only a small section. Naimanjal comprises 6 identified satellite prospects and more than 100 exploration targets.
On 22 September, 2008 the Regional Subsoil Usage office for the Karaganda oblast approved the Frontier Mining exploration work program for 2009. The program outlines the exploration program for the areas contiguous with the Naimanjal deposit and for Frontier's other outlying deposits in the area. We are optimistic that this will allow us to increase our reserves.
At a gold equivalent cut-off grade of 0.3 grams per tonne ("g/t") there are 3,502,393 tonnes of measured and indicated resource at an average grade of 0.73 g/t gold and 17.31 g/t silver containing 82,022 ounces of gold and 1,948,699 ounces of silver. In addition, the model indicates that there are 8,300,939 tonnes of inferred resources at an average grade of 0.64 g/t gold and 18.95 g/t silver containing 170,626 ounces of gold and 5,058,476 ounces of silver.
The Measured, Indicated, and Inferred resource at the Naimanjal deposit using a cut-off grade of 0.3 g/t gold totals 11,803,332 tonnes at an average grade of 0.67 g/t gold and 18.46 g/t silver containing 252,648 ounces of gold and 7,007,175 ounces of silver. See Table 1 and Table 2 below.
|
Table 1 Measured and Indicated Resource |
|||||||
|
Ore type |
Cut-off |
Tonnes |
Au (g/t) |
Ag (g/t) |
Au eq |
Au (oz) |
Ag (oz) |
|
Oxide |
0.3 |
2,435,633 |
0.67 |
12.83 |
0.81 |
52,466 |
1,004,684 |
|
Transition |
0.3 |
376,455 |
0.81 |
20.62 |
1.03 |
9,804 |
249,570 |
|
Sulfide |
0.3 |
690,305 |
0.89 |
31.29 |
1.22 |
19,752 |
694,445 |
|
Total |
0.3 |
0.73 |
17.31 |
0.91 |
|||
|
Table 2 Inferred Resource |
|||||||
|
Ore type |
Cut-off |
Tonnes |
Au (g/t) |
Ag (g/t) |
Au eq |
Au (oz) |
Ag (oz) |
|
Oxide |
0.3 |
4,339,907 |
0.53 |
12.88 |
0.67 |
73,952 |
1,797,162 |
|
Transition |
0.3 |
1,223,431 |
0.69 |
19.61 |
0.89 |
27,141 |
771,344 |
|
Sulfide |
0.3 |
2,737,601 |
0.79 |
28.29 |
1.07 |
69,533 |
2,489,970 |
|
Total |
0.3 |
0.64 |
18.95 |
0.84 |
|||
The Measured, Indicated, and Inferred resource at Naimanjal, using a cut-off grade of 0.3 g/t gold equivalent totals 11,803,332 tonnes at an average grade of 0.67 g/t gold and 18.46 g/t silver containing 252,648 ounces of gold and 7,007,175 ounces of sliver.
The Company also asked Behre Dolbear to calculate gold and silver resources using a cut-off grade of 0.50 g/t gold. At a cut-off grade of 0.5 grams per tonne ("g/t") there are 2,008,769 tonnes of Measured and Indicated resource at an average grade of 1.06 g/t gold and 23.07 g/t silver containing 68,617 ounces of gold and 1,489,828 ounces of silver. In addition, the model indicates that there are 4,645,044 tonnes of Inferred resource at an average grade of 0.90 g/t gold and 27.52 g/t silver containing 134,372 ounces of gold and 4,109,157 ounces of silver.
The Measured, Indicated, and Inferred resource at the Naimanjal deposit using a cut-off grade of 0.5 g/t gold totals 6,653,813 tonnes at an average grade of 0.95 g/t gold and 26.17 g/t silver containing 202,989 ounces of gold and 6,134,872 ounces of silver. See Table 3 and Table 4 below.
|
Table 3 Measured and Indicated Resource |
|||||||
|
Ore type |
Cut-off |
Tonnes |
Au (g/t) |
Ag (g/t) |
Au eq |
Au (oz) |
Ag (oz) |
|
Oxide |
0.5 |
1,253,947 |
1.03 |
16.78 |
1.21 |
41,525 |
676,491 |
|
Transition |
0.5 |
239,919 |
1.13 |
25.82 |
1.40 |
8,716 |
199,164 |
|
Sulfide |
0.5 |
514,903 |
1.11 |
37.10 |
1.50 |
18,376 |
614,172 |
|
Total |
0.5 |
1.06 |
23.07 |
1.31 |
|||
|
Table 4 Inferred Resource |
|||||||
|
Ore type |
Cut-off |
Tonnes |
Au (g/t) |
Ag (g/t) |
Au eq |
Au (oz) |
Ag (oz) |
|
Oxide |
0.5 |
1,894,303 |
0.82 |
20.30 |
1.03 |
49,941 |
1,236,336 |
|
Transition |
0.5 |
730,114 |
0.94 |
27.43 |
1.23 |
22,065 |
643,884 |
|
Sulfide |
0.5 |
2,020,627 |
0.96 |
34.31 |
1.31 |
62,366 |
2,228,937 |
|
Total |
0.5 |
0.90 |
27.52 |
1.19 |
|||
The gold equivalent grades discussed above were derived by converting silver grades to gold equivalent by dividing them by a factor of 92.5. This factor is derived from gold and silver metallurgical recoveries of 74% and 40% respectively and gold and silver prices of US $600 per ounce and US $12 per ounce, respectively.
Koskuduk
At least three zones of mineralization are present at our gold prospect at Koskuduk. The first is a gold-dominant oxide mineralization occurring from surface to depth of approximately 50 metres, where minor zinc and lead may be present. Positive silver grades are also closely associated with the presence of lead. Secondly, there is a higher-grade gold-silver-lead-zinc and less lead mineralization associated with discreet veins and feeder zones. These zones are generally narrow (ly, there is a relatively thick (>10 metres) lower grade gold-silver-lead-zinc and lesser lead mineralization occurring as disseminated stratigraphically controlled bodies associated with some tuff horizons. All these mineralization types are attractive and management has confidence in the potential of this project.
The Ministry of Energy and Mineral Resources of the Republic of Kazakhstan ("MEMR") has extended the exploration period for the appraisal of commercial discoveries at Koskuduk by a further two years.
We have received preliminary approval for test mining of up to 100,000 tonnes of ore at Koskuduk. This will facilitate additional metallurgical test work on bulk samples from these three main zones of mineralization to determine leaching characteristics and identify potential processing options. Plans for these tests are being developed for implementation in 2009.
Beschoku
Beschoku is the most promising copper prospect in the 20-kilometre Copper Trend. It is a high grade gold-copper breccia pipe complex with a variably developed oxide zone that is within the same structural corridor as Yubileiny.
The MEMR has also extended the exploration period for the appraisal of commercial discoveries at Beschoku for two more years.
We have received preliminary approval for test mining up to 100,000 tonnes of ore at Beschoku. This will facilitate additional metallurgical test work on bulk samples to determine leaching characteristics of both gold and copper. The results will be used to determine potential processes to recover both the gold and copper. Plans for these tests are being developed for implementation in 2009.
Benkala
The Benkala Project, a porphyry copper project, is situated in north-western Kazakhstan in the Urals' gold/copper ore belt, north east of Aktobe Oblast and 100km south east of the town of Zhitikara, an area close to the Russian border with a long history of mining operations. Benkala is in an attractive position for mine development given that it already contains developed infrastructure, including a main line railway, an all weather highway and excellent power supply to the site.
The property was discovered in 1968. Between 1976 and 1980, 70 holes totalling 21,800 metres were drilled, with depths of up to 700 metres and with core recovery between 70% and 75%. Metallurgical test work was conducted between 1973 and 1979 and determined that that the oxide ores were amenable to heap leaching using sulphuric acid as well as flotation.
A Competent Person Report ("CPR") on the Benkala Project completed by Wardell Armstrong International ("WAI") in March 2007 estimates 47.75 Mt at an average grade of 0.36% Cu for the oxide mineralisation, and 873.75 Mt at an average grade of 0.30% Cu for the sulphide mineralisation.
All rights and obligations relating to the project have been transferred from U.S. Megatech, Inc, a New York corporation and wholly owned subsidiary of U.S. Megatech BVI, to the Kazakhstan based legal entity KazCopper LLP. KazCopper LLP is also a wholly owned subsidiary of US Megatech BVI, which in turn is a 50/50 Joint Venture between Frontier and Coville.
This licence transfer of the rights and obligations in the Benkala project was recognized by the MEMR in the form of Addendum 1 to contract #2482 dated 15 November 2007, which governs exploration and mining of the Benkala deposit in the Aktobe Oblast.
KazCopper LLP now has the necessary title and regulatory approvals for the project, allowing it to begin an advanced confirmation drilling program in preparation for the JORC reserves and resource pre-feasibility development stage of the project.
KazCopper LLP has mobilized three drill rigs to site, equipped with Boart Longyear equipment and have commenced confirmation drilling. A field camp for 30 people has also been deployed. It is intended that by the end of 2008, up to 5,000 metres will have been drilled at Benkala, with a further 15,000 metres scheduled for 2009.
Recently conducted preliminary technological studies on samples obtained during verification drilling, indicate the viability of heap leaching methods and SX-EW processing on oxidized ores from Benkala. The results included up to 65.3% copper extraction over a period of 70 days. To increase technological indicators and to clarify process variables, the Institute has recommended continued studies on larger samples of ore, which has been preliminarily agreed.
Financial Results
In the 6 month period ended 30 June 2008, we received income of US $376,523 from the sale of 402 ounces of gold and 3,300 ounces of silver, compared to 2007 first half revenues of US $569,447 from the sale of 816 ounces of gold and 5,585 ounces of silver. The reduction in income compared with the same period last year was due primarily to regulatory delays. Year to date we have sold 780 ounces of gold and 8,319 ounces of silver, generating income of US $737,074.
Nevertheless, we have managed to contain losses for the period to US $1.4 million, a level similar to those in the first half of 2007.
The increase in total assets in the balance sheet to US $52 million (2007: US $26 million) reflects the acquisition of a 50% ownership in Benkala at the end of 2007. This figure compares favourably with total liabilities of US $17 million as at 30 June 2008.
Outlook
Once the regulatory issues are resolved, Naimanjal's production will meet management expectations. The disappointing results to date are not technical in nature and we therefore hope to resolve all issues shortly. We are confident of additional potential at Koskuduk and Beschoku and look forward to implementing bulk metallurgical tests at both projects in 2009 to determine future development plans. Whilst Naimanjal is an important near-term value driver for Frontier, we remain convinced that Benkala is a company-transforming asset. Recently announced recovery rates of up to 65.3% of copper in oxidized ore over 70 days are very promising for the potential development of a low capital cost heap leach and SX-EW processing operation. We look forward to the results of the current drilling and anticipate further confirmation of the existing resource.
Brian Savage, Chairman
29 September 2008
Frontier Mining Ltd
Interim Summarised Financial Statements
|
CONSOLIDATED INCOME STATEMENT |
||||||
|
For the six month period ended June 30, 2008 (unaudited) |
||||||
|
US$'s |
June 30, |
June 30, |
December 31, |
|||
|
2008 |
2007 |
2007 |
||||
|
Revenue |
- |
569,447 |
- |
|||
|
Cost of sales |
- |
(358,380) |
- |
|||
|
Gross profit |
|
211,067 |
- |
|||
|
Selling, general and administrative expenses |
1,462,826 |
1,418,509 |
3,526,071 |
|||
|
Write-off of exploration and evaluation assets |
- |
- |
695,056 |
|||
|
Operating loss |
1,462,826 |
1,207,442 |
4,221,127 |
|||
|
Finance costs |
43,881 |
88,540 |
||||
|
Other income |
(37,683) |
(37,314) |
||||
|
Foreign exchange loss |
(5,353) |
2,388 |
41,920 |
|||
|
Loss before taxation |
(43,036) |
1,253,711 |
4,314,273 |
|||
|
Taxation |
- |
- |
(60,199) |
|||
|
Loss for the period |
1,419,790 |
1,253,711 |
4,254,074 |
|||
Frontier Mining Ltd
Interim Summarised Financial Statements
|
CONSOLIDATED BALANCE SHEET |
||||||
|
AS OF JUNE 30, 2008 (unaudited) |
||||||
|
US$'s |
June 30, |
June 30, |
December 31, |
|||
|
2008 |
2007 |
2007 |
||||
|
Assets |
||||||
|
Non-current assets |
||||||
|
Exploration and evaluation assets |
35,125,012 |
5,727,753 |
32,220,409 |
|||
|
Mine development costs |
6,241,675 |
4,222,762 |
6,213,086 |
|||
|
Property, plant and equipment |
6,838,051 |
9,594,636 |
6,922,788 |
|||
|
Intangible assets |
30,106 |
36,043 |
||||
|
Value added tax receivable |
847,692 |
760,983 |
797,707 |
|||
|
Restricted cash |
112,000 |
112,000 |
112,000 |
|||
|
Deferred tax asset |
1,112,038 |
1,100,856 |
1,112,038 |
|||
|
Total non-current assets |
50,306,574 |
21,518,990 |
47,414,071 |
|||
|
Current assets |
||||||
|
Inventories |
598,893 |
3,648,714 |
422,463 |
|||
|
Trade accounts receivables |
26,453 |
27,944 |
41,762 |
|||
|
Value added tax receivable |
- |
541,607 |
- |
|||
|
Prepaid expenses |
159,830 |
136,585 |
||||
|
Other receivables |
79,560 |
39,738 |
||||
|
Cash and cash equivalents |
382,516 |
383,253 |
2,473,952 |
|||
|
Total current assets |
1,247,252 |
4,601,518 |
3,114,500 |
|||
|
Total assets |
51,553,826 |
26,120,508 |
50,528,571 |
|||
|
Shareholders' equity and liabilities |
||||||
|
Share capital |
2,181,201 |
1,325,816 |
2,181,201 |
|||
|
Additional paid-in-capital |
51,824,776 |
36,440,425 |
51,824,776 |
|||
|
Option premium on convertible notes |
425,185 |
425,185 |
||||
|
Equity settled employee benefits reserve |
232,925 |
232,925 |
||||
|
Accumulated losses |
(19,995,740) |
(15,526,570) |
(18,575,950) |
|||
|
Total shareholders equity |
34,668,347 |
22,239,671 |
36,088,137 |
|||
|
Non-current liabilities |
||||||
|
Site restoration provision |
624,423 |
59,477 |
624,423 |
|||
|
Due to Government of the Republic of Kazakhstan |
708,135 |
731,774 |
708,135 |
|||
|
Due to US Trade and Development Agency |
340,000 |
340,000 |
||||
|
Borrowings |
2,112,963 |
1,962,963 |
||||
|
Deferred tax liability |
182,222 |
182,222 |
||||
|
Total non-current liabilities |
3,967,743 |
791,251 |
3,817,743 |
|||
|
Current liabilities |
||||||
|
Trade accounts payable |
184,371 |
399,816 |
117,456 |
|||
|
Debt to the US Trade Development Agency |
- |
340,000 |
- |
|||
|
Borrowings |
7,129,630 |
7,129,630 |
||||
|
Due to Government of the Republic of Kazakhstan |
64,120 |
64,120 |
||||
|
Other current liabilities |
5,539,616 |
2,349,770 |
3,311,485 |
|||
|
Total current liabilities |
12,917,737 |
3,089,586 |
10,622,691 |
|||
|
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES |
51,553,827 |
26,120,508 |
50,528,571 |
|||
|
0 |
- |
- |
||||
Frontier Mining Ltd
Interim Summarised Financial Statements
|
CONSOLIDATED STATEMENT OF CASH FLOWS |
||||||
|
For the six month period ended June 30, 2008 (unaudited) |
||||||
|
US$'s |
June 30, |
June 30, |
December 31, |
|||
|
2008 |
2007 |
2007 |
||||
|
Operating Activites |
||||||
|
Loss for the period |
(1,419,790) |
(1,253,711) |
(4,254,074) |
|||
|
Adjustments for non cash flow items: |
||||||
|
Income tax benefit recognised in profit or loss |
- |
(60,199) |
||||
|
Depreciation of property and equipment |
84,736 |
25,863 |
1,490,973 |
|||
|
Amortization of intangible assets |
5,937 |
7,436 |
||||
|
Equity settled employee benefit reserve |
- |
232,925 |
||||
|
Foreign Exchange loss/(gain) |
(5,353) |
41,920 |
||||
|
Loss from disposal of property and equipment |
- |
- |
||||
|
Finance costs |
- |
88,540 |
||||
|
Operating cash flows before movement in working capital |
(1,334,470) |
(1,227,848) |
(2,452,479) |
|||
|
Increase in value added tax receivable |
- |
(4,824) |
- |
|||
|
Decrease/(increase) in inventory |
(176,430) |
(664,345) |
61,695 |
|||
|
Decrease/(increase) in trade accounts receivable |
15,309 |
558,460 |
544,642 |
|||
|
(Increase)/decrease in prepaid expenses |
(23,245) |
- |
(1,707) |
|||
|
(Increase)/decrease in other receivable |
(39,822) |
(380,628) |
(13,637) |
|||
|
(Decrease)/increase in accounts payable |
66,915 |
(559,904) |
(842,264) |
|||
|
Increase/(decrease) in other current liabilities |
2,378,131 |
1,613,950 |
2,738,038 |
|||
|
Net cash provided by/(used in) operating activities |
886,388 |
(665,139) |
34,288 |
|||
|
Investing Activites |
||||||
|
Increase in exploration and evaluation assets |
(2,904,603) |
(204,671) |
(4,601,647) |
|||
|
Increase in mine development assets |
(221,021) |
(1,413,839) |
||||
|
Cash proceeds from test production sales |
192,432 |
2,353,016 |
||||
|
Bernkala acquisition costs |
- |
(1,032,715) |
||||
|
Purchase of property and equipment |
- |
(55,919) |
||||
|
Purchase of intangible assets |
- |
|||||
|
Net cash used in investing activities |
(2,933,192) |
(204,671) |
(4,751,104) |
|||
|
Financing Activities |
||||||
|
Proceeds from share placement |
- |
7,400,000 |
||||
|
Cost of share placement |
- |
(1,216,454) |
||||
|
Increase in value added tax receivable |
(49,985) |
(41,548) |
||||
|
Net cash flows from financing activites |
(49,985) |
- |
6,141,998 |
|||
|
Net increase/(decrease) in cash and cash equivalents |
(2,096,789) |
(869,810) |
1,425,182 |
|||
|
Effects of exchange rate changes on the balance of cash held in foreign currencies |
5,353 |
(204,293) |
||||
|
Cash and cash equivalents at the beginning of year |
2,473,952 |
1,253,063 |
1,253,063 |
|||
|
Cash and cash equivalents at the end of year |
382,516 |
383,253 |
2,473,952 |
|||
|
- |
- |
- |
Related Shares:
FML.L