16th Dec 2008 11:32
Trans-Siberian Gold plc
Asacha project and funding update
LONDON: 16 December 2008 - Trans-Siberian Gold plc ("TSG" or "the Company") (TSG.L) reported on 29 September 2008 that the proceeds of the placing undertaken in August 2008 would be sufficient for the Group's funding requirements until December 2008. The Company also reported that it intended to satisfy the requirement for additional funds before the Asacha mine is cash flow positive, then forecast at US$27 million, through debt finance from a Russian bank.
The total capital cost of the Asacha project prior to commencement of production is now estimated at US$101.6 million, net of US$10.4 million VAT recoveries, compared to the September 2008 estimate of US$106.7 million. The reduction includes savings in mine development through changes in construction and use of own labour (US$1.2 million), infrastructure (fuel storage, repair shop and sewage treatment US$1.2 million) and tailings storage through use of own equipment (US$800,000), also reflecting the assumption of a weaker Russian rouble (RUR27:US$1), and US$1.2 million additional VAT recoveries. The total project cost includes pre-commissioning mining costs of US$4.6 million, other pre-operating expenditure of US$24.4 million, "first fill" equipment spares and consumables of US$1 million and contingency of US$2.2 million.
Projected operating costs have also reduced through the assumption of a weaker Russian rouble and a reduction in corporate income tax to 20%. At a gold price of US$750/oz, Life of mine ("LOM") cash costs on an all equity basis on total gold production of 590,000 oz are forecast at US$193/oz, before taking account of a US$18/oz credit from silver production. Cash costs including all royalties and taxes (in total US$63 million, net of VAT recoveries) on an all equity basis are forecast at US$300/oz. Total costs on the same basis, after depreciation of all capital expenditure (including US$9.2 million post start up) and pre-start up mining and other operating expenditure, are forecast at US$492/oz.
The projected return of the Asacha project on an all equity basis at a gold price of US$750/oz is over 20%.
Actual expenditure on the project up to October 2008 amounted to US$76.1 million, net of US$3 million VAT recovered. The remaining costs prior to the commencement of production are estimated at US$25.5 million, net of further VAT recoveries of US$7.4 million, comprising:
|
US$ million |
||
|
Capital expenditure |
Mine and mining equipment and facilities |
3.4 |
|
Gold plant, site facilities and tailings storage (1st phase) |
9.9 |
|
|
Off-site power supply and other infrastructure |
9.1 |
|
|
Contingency |
2.2 |
|
|
Total capital |
24.6 |
|
|
Other costs |
Pre-production mining, spares and consumables and other operating costs |
8.3 |
|
32.9 |
||
|
Less VAT recoveries |
7.4 |
|
|
25.5 |
A further US$9.2 million of capital expenditure (including US$0.8 million contingency) will be incurred after the commencement of production on mine development and the second phase of tailings storage and solid waste landfill, previously estimated at US$10.1 million.
As a result of these savings the Group's requirement for additional funds prior to the commencement of production at Asacha has reduced to US$22 million.
In the last few months, the Company has had intensive discussions with a leading Russian bank regarding debt finance. While the bank has expressed its positive view of the project and has indicated its willingness to proceed further, it has been made clear that no new credit approvals will be obtained until early 2009. The Group's short term spending plans have therefore been revised to ensure that existing funds are sufficient until April 2009. Although this will inevitably have an impact on plant commissioning, TSG believes that first gold production by the end of 2009 remains feasible.
In light of the deteriorating conditions in the Russian credit market, there can be no assurance that TSG will obtain loan finance for the Asacha project. The Company is therefore discussing the Group's further funding requirements with other parties including UFG Asset Management. A further announcement will be made in due course.
Ends
Contacts:
TSG
Simon Olsen
Tel: +44 (0) 1223 265760
Seymour Pierce
Stuart Lane
Tel: +44 (0) 20 7107 8000
Related Shares:
TSG.L