Interim Management Statement

RNS Number : 5493C

KazakhGold Group Ltd

16 November 2009

 



KazakhGold Group Limited (LSE: KZG)

Interim Management Statement

16 November, 2009

KazakhGold Group Limited ("KazakhGold" or the "Company") is today pleased to provide an update of the operations of KazakhGold and its subsidiaries (the "Group").  since the completion of the partial offer by Jenington International Inc. ("Jenington"), an indirect wholly-owned subsidiary of OJSC Polyus Gold ("Polyus Gold"), in August 2009.

Operational highlights: 

• 9 months 2009 gold production of 54.9 k oz (of gold in flotation concentrate)

• 9 months 2009 average gold price received of US$ 762.5 per ounce1, on sales of 52.2 k oz

• The poor condition of much of the Soviet-era sub-surface mine infrastructure has made it increasingly difficult to gain safe access to the high grade ore deposits. During the first 6 months of 2009, the Group achieved the following results:

  • Stable growth of production volumes - from 169.7 kg of gold in January to 215.3 kg in June, despite funding constraints of current operating activity.

  • Resumed production at heap leaching facilities at Aksu and Bestobe, which had ceased in the end of 2008 due to the crisis and lack of financing.

  • Ventilation shaft overhaul completed at Bestobe from the zero depth mark to 160 m horizon; shaft furniture overhaul and rewiring of the West shaft from the zero mark to 340 m horizon performed. Water treatment facilities and drinking water pipeline constructed and launched.

  • After several years of downtime, shaft №39-41 at Aksu was reconstructed and brought into production. Overhaul and maintenance works were performed at a number of operating and administrative facilities.

  • Oxygen plant construction was completed at Zholymbet in preparation for commissioning. Overhaul and maintenance works were performed at production workshops and the mill and mine site fence. 

Partial Offer

Following the partial offer in August 2009, KazakhGold became a 50.1%-owned subsidiary of Polyus Gold, the largest gold producer in Russia and the tenth largest gold producer globally. Representatives of Polyus Gold were subsequently elected to the Board of KazakhGold and have assumed management control. Polyus Gold continues to make progress on enhancing KazakhGold's internal controls and procedures and the development of its strategy. The Board believes that the operational and financial expertise of the Polyus team will help KazakhGold to ramp up production and continue further development of existing and prospective assets. The Company is currently evaluating the applicability of the tax regulation of the Republic of Kazakhstan to the partial offer. 

Publication of financial information

The new management has also initiated an extensive series of measures to improve the operations and internal systems and controls of the Company. As part of those measures, the Company is trying to recover and restore primary accounting and production documentation, in order to confirm the historical accounting records. This process is ongoing and, accordingly, the Company has decided not to publish interim financial statements for the first six months of 2009.  

Such publication is required by the terms of its U.S.$200,000,000 Senior Notes due 2013 (the "Senior Notes"). The Company has informed the Trustee of the Trust Deed for the Senior Notes of this breach, and, following completion of a 30 day 'grace period' on 20 November 2009, expects that the Trustee will inform the holders of the Senior Notes that an Event of Default has occurred. The Company cannot be certain that Noteholders holding at least 25% of the outstanding Senior Notes will not take enforcement action in respect of this Event of Default, upon which the Senior Notes, together with accrued interest, will become immediately due and payable.  The Company is considering all its options with respect to the Senior Notes.

For further information please contact:

Alexey V. Chernushkin, Director, capital markets and IR

Evguenia V.Buydina, IR manager

[phone]

[phone]

[e-mail]

Anton A. Arens, PR Director

[phone]

[phone]

[e-mail]

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1 KazakhGold sells flotation concentrate for further re-processing, which led to lower price per troy ounce of gold sold than price per troy ounce of refined gold sold.

 

END

 

 

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