Interim Results
KazakhGold Group Ltd
26 October 2007
For immediate release 26 October 2007
Half Year 2007 Results*
Business Highlights
• First half gold production of 81,531oz constrained by severe winter
conditions in Northern Kazakhstan
• Average gold price of US$611 achieved on sales, 21 per cent higher than H1
2006
• Preliminary JORC reclassification assessment of the Group's gold reserves
and resources at its three principal mines confirms a world class asset base
• Production expansion projects commenced at Aksu and Zholymbet (CIP
facilities) and construction of new heap leach facilities started at
Kaskabulakskoe and Akzhal
• 100 per cent of Romaltyn Limited consolidated, following the acquisition
of Oxus Gold plc's 50 per cent interest in the former joint venture
• Plant refurbishment commenced at the Romaltyn facility in Romania
• Executive Chairman appointed and based in Kazakhstan
• JPMorgan Cazenove appointed joint broker and financial advisor
• Further senior management appointments establish a highly experienced
international management team at Stepnogorsk.
*Unaudited - Six months to 30 June 2007
Results Summary
2007 2006
(Six months to 30 June) (Six months to 30 June)
Revenue (US$ '000) 41,273 31,578
Operating profit (US$ '000) 7,941 7,119
Profit before tax (US$ '000) 6,614 6,231
Cash (US$ '000) 140,669 32,456
Net assets (US$ '000) 800,043 686,714
Earnings per share (basic and diluted - US$) 0.08 0.06
Total ore extracted (tonnes) 2,396,424 2,244,518
Head grade (grammes/tonne) 1.54 1.92
Recovery rate (%) 68.9 68.8
Gold production (oz) 81,531 95,160
Commenting on the half year results, Executive Chairman, Dr Kanat Assaubayev
said:
'The first half of 2007 has been one of intense corporate activity, investment
in production expansion and the introduction of an experienced international
management team. These steps support the Group's aim of becoming a world-class
gold mining company and the leading gold producer in Eastern Europe and the CIS
countries.'
Further Information:
Aidar Assaubayev Sanzhar Assaubayev
Executive Vice Chairman General Manager, London Office
KazakhGold Group Limited KazakhGold Group Limited
Tel: +44 (0)20 7409 7413 Tel: +44 (0)20 7409 7413
www.kazakhgold.com
Ron Marshman/ John Greenhalgh
City of London PR Limited
Tel: +44 (0)20 7628 5518
Paste the following link into your web browser to download the PDF document
related to this announcement:
http://www.rns-pdf.londonstockexchange.com/rns/4893g_-2007-10-26.pdf
Chairman's Statement
The first half of 2007 has been one of intense corporate activity, investment in
production expansion and the introduction of an experienced international
management team, based at the Group's operating headquarters in Stepnogorsk,
Kazakhstan. These steps support the Group's aim of becoming a world-class gold
mining company and specifically the leading gold producer in Eastern Europe and
the CIS countries.
Results and Dividend
In the six months to 30 June 2007, the Group produced 81,531oz of gold and sold
67,588oz of gold (2006: 64,549oz), at an average price of US$611 per contained
ounce. This was 21 per cent above the average price achieved over the comparable
period in 2006. Production for the period was constrained by an especially cold
winter, which adversely impacted the processing of ore at our heap leaching
facilities.
In the six months to 30 June 2007, revenue was US$41.3 million, a 31 per cent
increase over the corresponding prior period (2006: US$31.58 million). Profit
before tax was US$6.6 million (2006: US$6.2 million). Earnings per share were
US$0.08 (2006: US$0.06). Net assets at 30 June 2007 were US$800.0 million (2006:
US$686.7 million). Cash generated from operating activities in the period was
US$37.3 million (2006: US$7.5 million cash absorbed by operating activities).
Cash held at 30 June 2007 was US$140.7 million (30 June 2006: US$32.5 million).
As previously announced, the Group does not propose the payment of shareholder
dividends until the plant modernisation programme is completed, and our
facilities reach their designed output capacity.
Acquisitions
While our primary focus is on the three principal mines in Northern Kazakhstan,
we will pursue opportunities to acquire gold assets where we can add real value.
Last year we made our first investment outside Kazakhstan, when we acquired the
Transgold plant and related assets in Romania, in a 50:50 joint venture with
Oxus Gold plc.
During the period we took the opportunity to acquire Oxus Gold plc's 50 per cent
shareholding in Romaltyn Limited, taking our ownership to 100 per cent. In
addition we acquired 100 per cent of Norox Mining Company Limited, which owns
66.67 per cent of the Talas Gold Mining Company in Kyrgyzstan. We also acquired
the right to an option relating to the Karakilise copper deposit licence in
Turkey, from a subsidiary of Oxus Gold plc.
Reserves and Resources
In January 2007, Wardell Armstrong International (WAI) completed its preliminary
JORC reconciliation study of the Group's Soviet classified reserves and
resources. The preliminary results confirm a world-class asset base, at our
three main mines, with significant potential for a resource classification
upgrade. It is KazakhGold's strategy to aggressively continue its exploration
and evaluation programmes to upgrade the classification of gold resources and
reserves.
Exploration
Drilling work during the period has focused on the Group's key production
deposits, to ensure mine expansion. In addition, drilling and trenching remains
ongoing at Akzhal, as part of the preliminary exploration programmes established
for our additional exploration areas in Kazakhstan.
A full review of all assets has been undertaken and an exploration programme
developed. This allows for further assessment of the requirements for additional
drilling facilities, a laboratory upgrade to manage the increased future
throughput, as well as the introduction of additional geological modelling
software and further staff.
Operations
The Group's accelerated investment plan is expected to raise our total
annualised ore processing capacity to over 14 million tonnes by 2011. As part of
this plan, we continued the expansion of our existing milling circuits,
incorporating secondary milling at Aksu and Zholymbet during the period. The
subsequent improvement of grind size is expected to enhance gold recovery rates,
improve the stability of our cash flow, and enable a significant reduction in
our average per ounce cash production costs.
Oxygen producing plants were ordered during the period, and their delivery to
the Aksu and Zholymbet CIP sites is expected during the final quarter of this
year. The oxygen plants are required for the oxygen shear reactors, which will
be introduced into the heap leach/CIP circuits. This will enable an improvement
in the reaction kinetics of the leach, which is expected to increase the
resulting gold recovery.
During the first half, orders were placed for the new mill and gravity
concentrator required for the Bestobe processing plant, to increase production.
Delivery of these items of equipment is expected before the end of 2007.
Refurbishment programmes have started at the underground mining operations at
our three principal mines. Work has also commenced on upgrading the operating
shafts and surface structures in preparation for the winter period. Upgrading of
the underground rolling stock has also begun, with the majority of equipment
expected to arrive before the year end. Significant underground capital
development continues to be carried out, in preparation for increased
production.
With regard to the surface open pit operations, the availability and utilisation
of the existing equipment is being focused on increasing the run-of-mine (ROM)
stockpiles, in preparation for the winter period.
At Kaskabulakskoe and Akzhal, in Eastern Kazakhstan, construction work began on
heap leach processing projects at each mine. Dry commissioning of the Akzhal
heap leach processing plant is expected to begin before the end of 2007,
enabling stacking, irrigation and ultimately gold production to begin during the
first half of 2008.
During the period we further enhanced the performance of the elution plants
installed in 2006. This will facilitate an increase in the efficiency of all our
processing plants operating with CIP technology.
Capital expenditure
In the first half capital expenditure was US$106.8 million (2006: US$22.6
million), including prepayments for construction contracts, a significant
increase on the previous period reflecting implementation of our accelerated
investment plan. This plan envisages a peak financing requirement of US$120
million, which is being funded from the proceeds of our US$200 million Eurobond
issue in 2006.
People
As previously announced, we reorganised the Board during the first half, in part
to reflect the need for the Chairman's role to include significant executive
duties in Kazakhstan. As a result, I became Executive Chairman of the Group.
During the period Darryl Norton joined our Board, from Oxus Gold plc, as Joint
Managing Director and Chief Operating Officer. In our operations, Stephen
Westhead and Geoff McLoughlin were appointed as Group Chief Geologist and Group
Chief Metallurgist respectively. Following the first half we have made five
further senior management appointments, to positions responsible for operations
and geology. We now have a strong international management team, based at our
operational headquarters in Stepnogorsk.
In what has been a period of intensive activity and change for the Group, I wish
to acknowledge, on behalf of the Board, the significant and ongoing contribution
of all employees. Their support has been fundamental to our achievements during
the period.
Corporate Broker
During the period the Group appointed JPMorgan Cazenove as joint broker and
financial advisor. Amongst other benefits, this firm's significant experience in
the mining sector is expected to help the Group broaden its investor base.
Outlook
The Group's accelerated investment plan is expected to enable a significant
increase in production from 2009. While this does mean a less dramatic increase
in gold production in 2007 and 2008, it will enable us to take full advantage of
our three principal mines and our other properties, which are being incorporated
within the scope of the investment plan. We expect the Group's gold production
for the full year to be ahead of the 218,164 ounces achieved last year, and
in-line with our accelerated investment plan.
After the first half we began exploration work at our Romaltyn property in
Romania. By the first half of 2008, we expect to commence production at the
mine. This will then build up to full production within approximately 12 months.
In recent weeks the gold price has risen to over US$750/oz, its highest level
since 1980. With gold remaining an attractive investment, especially in the face
of continuing instability in the global credit markets, we expect the price of
gold to remain firm, at least for the foreseeable future. The favourable market
conditions, together with our focus on increasing production of higher margin
gold while keeping our costs low, will have a positive benefit on our full year
results.
With a world-class asset base confirmed at our principal mines, a developing
portfolio of other gold properties and an experienced international management
team, based in Kazakhstan, the Group has a strong platform to support future
growth. The planned expansion and upgrading of our production and processing
facilities will help KazakhGold towards becoming a one million ounce per annum
gold producing company. Against this positive background, your Board remains
confident about the prospects for the Group both for the full year and beyond.
Consolidated income statement
Six months Six months Year ended
to 30 June to 30 June 31 Dec
2007 2006 2006
US$000 US$000 US$000
Note Unaudited Unaudited Audited
Revenue 4 41,273 31,578 109,433
Cost of sales (24,923) (14,269) (54,692)
Gross profit 16,350 17,309 54,741
Other operating income 991 430 2,877
Distribution expenses (156) (731) (4,148)
Administrative expenses (7,625) (8,193) (15,692)
Other operating expenses (1,619) (1,696) (4,700)
Operating profit 7,941 7,119 33,078
Financial income 1,243 1,154 3,860
Financial expense (2,570) (2,042) (5,660)
(1,327) (888) (1,800)
Profit before taxation 6,614 6,231 31,278
Taxation (2,703) (3,208) (12,420)
Profit for the period attributable to equity 3,911 3,023 18,858
shareholders
Basic earnings per share 5 US$0.08 US$0.06 US$0.40
Diluted earnings per share 5 US$0.08 US$0.06 US$0.40
All amounts relate to continuing operations.
Consolidated balance sheet
Note 30 June 30 June Year ended
2007 2006 Dec 2006
US$000 US$000 US$000
Unaudited Unaudited Audited
Non-current assets
Property, plant and equipment 6 133,638 62,876 85,316
Mining properties 7 893,396 858,517 809,592
Exploration and development costs 2,497 14,617 950
Intangible assets 8 92,128 1,231 857
Prepayments and other receivables 38,095 2,011 2
Long-term inventory and ore stockpile 6,058 - 7,549
1,165,812 939,252 904,266
Current assets
Inventories 32,910 22,247 21,571
Trade and other receivables 38,509 48,902 93,716
Other financial assets - 3,931 -
Cash and cash equivalents 140,669 32,456 204,752
212,088 107,536 320,039
Total assets 1,377,900 1,046,788 1,224,305
Equity and liabilities
Equity
Share capital 9 8 8
Share premium 170,544 97,429 97,658
Capital contributions 510,000 510,000 510,000
Translation reserve 61,186 75,425 27,408
Retained earnings 23,656 3,852 19,687
Equity attributable to shareholders of the parent 765,395 686,714 654,761
Minority interest 34,648 - -
Total equity 800,043 686,714 654,761
Non-current liabilities
Interest-bearing loans and borrowings 218,716 23,074 217,503
Other financial liabilities 17,432 1,471 3,022
Provisions 401 418 401
Deferred tax liabilities 297,226 305,196 293,155
533,775 330,159 514,081
Current liabilities
Interest-bearing loans and borrowings 6,699 - 1,564
Trade and other payables 35,908 23,385 48,211
Current tax payable 1,475 5,981 5,688
Other financial liabilities - 549 -
44,082 29,915 55,463
Total equity and liabilities 1,377,900 1,046,788 1,224,305
Consolidated cash flow statement
Six months Six Year ended
to 30 June months 31 Dec
2007 to 30 June 2006
US$000 2006
Unaudited US$000 US$000
Unaudited Audited
Cash flows from operating activities
Profit before tax for the period 6,614 6,231 31,278
Adjustments for:
Depreciation, depletion and amortisation 4,493 5,579 9,122
Foreign exchange difference 6,036 13,485 (296)
Financial expense 2,570 2,042 2,937
Financial income (1,243) - (3,860)
Loss on disposal of non-current assets 94 84 3,075
Provision against non-current financial asset - - 1,713
Equity-settled share-based payment expenses 58 115 115
Cash flows from operating activities before changes in 18,622 27,536 44,084
working capital and provisions
Decrease/(increase) in trade and other receivables 55,207 (33,019) (73,565)
Increase in inventories (10,445) (14,618) (13,611)
Decrease/(increase) in long-term inventory 1,784 - (5,567)
(Decrease)/increase in trade and other payables (12,990) 12,457 37,363
Taxation paid (14,889) - (1,810)
Increase/(decrease) in provisions - 177 (280)
Cash generated from/(absorbed by) operating activities 37,289 (7,467) (13,386)
Cash flows from investing activities
Additions to property, plant and equipment (17,030) (16,840) (39,770)
Additions to mining properties (49,732) (138) -
Additions of exploration and evaluation costs (1,547) (4,530) (540)
Additions into intangible assets (477) - -
Prepayments for construction contracts (36,150) - -
Proceeds from the disposal of non-current assets 1,434 838 1,349
Cash outflow on acquisition of assets (609) - -
Net cash flow from investing activities (104,111) (20,670) (38,961)
Cash flows from financing activities
Proceeds from the issue of senior loan notes - - 195,808
Redemption of promissory notes - (3,007) -
Repayment of borrowings - (21,630) (25,044)
Interest paid (2,570) (1,956) (2,715)
Interest received 1,243 - 3,860
Repayment of finance lease liabilities (3,690) (701) (2,697)
Receipt of bank loans 7,756 - -
Net cash flow from financing activities 2,739 (27,294) 169,212
Net (decrease)/increase in cash and cash equivalents (64,083) (55,431) 116,865
Cash and cash equivalents at the beginning of the period 204,752 87,887 87,887
Cash and cash equivalents at the end of the period 140,669 32,456 204,752
Statement of changes in equity for the Group
For the six month period ended 30 June 2007
Share Share Capital Translation Retained Total
Capital Premium Contributions Reserve Earnings
US$000 US$000 US$000 US$000 US$000 US$000
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Balance at 1 January 2007 8 97,658 510,000 27,408 19,687 654,761
Equity settled share-based payments - - - - 58 58
Foreign exchange on translation of - - - 33,778 - 33,778
foreign operations
Profit after tax for the period - - - - 3,911 3,911
Issue of shares 1 72,886 - - - 72,887
Balance at 30 June 2007 9 170,544 510,000 61,186 23,656 765,395
For the six month period ended 30 June 2006
Share Share Capital Translation Retained Total
Capital Premium Contributions Reserve Earnings
US$000 US$000 US$000 US$000 US$000 US$000
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Balance at 1 January 2006 8 97,429 510,000 (41) 714 608,110
Equity settled share-based payments - - - - 115 115
Foreign exchange on translation of - - - 75,466 - 75,466
foreign operations
Profit after tax for the period - - - - 3,023 3,023
Balance at 30 June 2006 8 97,429 510,000 75,425 3,852 686,714
For the year ended 31 December 2006
Share Share Capital Translation Retained Total
Capital Premium Contributions Reserve Earnings
US$000 US$000 US$000 US$000 US$000 US$000
Audited Audited Audited Audited Audited Audited
Balance at 1 January 2006 8 97,429 510,000 (41) 714 608,110
Equity settled share-based payments - - - - 115 115
Foreign exchange on translation of - - - 27,449 - 27,449
foreign operations
Profit after tax for the period - - - - 18,858 18,858
Adjustment to share issue costs - 229 - - - 229
Balance at 31 December 2006 8 97,658 510,000 27,408 19,687 654,761
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital
over the nominal value of these shares net of share issue expenses.
Capital contributions represent the value of Romanshorn LC AG and its
subsidiaries, the beneficial ownership of which was acquired by the Company in
2005.
Exchange differences arising on translating the net assets and the results of
overseas operations to US dollars are recognised directly in the translation
reserve.
Retained earnings represent the cumulative profit/(loss) of the Group
attributable to the equity shareholders.
Notes forming part of the interim financial statements
1. Corporate information
KazakhGold Group Limited ('the Company') is a company incorporated in Jersey. The Company is centrally managed
and controlled in the United Kingdom and therefore resident in the United Kingdom for the purposes of United
Kingdom taxation liabilities.
2. Basis of preparation
These interim financial statements of the Company and its subsidiaries ('the Group') for the six months ended 30
June 2007 have been prepared on a basis consistent with the accounting policies set out in the Group's
consolidated annual financial statements for the year ended 31 December 2006. They have not been audited, do not
include all of the information required for full annual financial statements, and should be read in conjunction
with the Group's consolidated annual financial statements for the year ended 31 December 2006. The auditors'
report on those consolidated financial statements was unqualified and did not include references to any matters
to which the auditors drew attention by way of emphasis without qualifying their report. As permitted, the
Company has chosen not to adopt IAS34 'Interim Financial Reporting'.
The comparative figures presented are for the six months ended 30 June 2006 and the full year ended 31 December
2006. The Group's consolidated annual financial statements for the year ended 31 December 2006 were prepared
using the recognition and measurement principles of International Financial Reporting Standards (IFRSs and IFRIC
interpretations) as adopted by the European Union and also in accordance with the Companies (Jersey) Law 1991.
3. Significant accounting policies
a. Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies
of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed
a single entity. Intercompany transactions and balances between group companies are therefore eliminated in
full.
The consolidated financial statements incorporate the results of business combinations using the purchase method
other than disclosed below. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities
and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of
acquired operations are included in the consolidated income statement from the date on which control is
obtained.
On 26 September 2005 the Company acquired the entire share capital of Romanshorn LC AG. As the controlling party
of Romanshorn LC AG and KazakhGold Group Limited were the same, the acquisition has been accounted for as a
capital contribution with the assets and liabilities acquired initially recognised at fair value and a
corresponding increase to equity credited to the capital contributions reserve.
Mining properties
b.
Once a decision is made to proceed with the development of a mining project, exploration and evaluation
expenditure other than that on buildings, machinery and equipment is capitalised under non-current assets as
mining properties, together with any amount transferred from exploration and development. Mining properties are
amortised over the estimated life of the reserves on a 'unit of production' basis.
c. Borrowing costs
Borrowing costs directly attributable to the construction of assets that necessarily take a substantial period
of time to prepare for their intended use are added to the cost of those assets, until such time as the assets
are substantially ready for their intended use.
All other borrowing costs are recognised in income in the period in which they are incurred.
d. Foreign exchange
On consolidation, the results of overseas operations are translated into US dollars, the presentational
currency of the Group, at rates approximating to those ruling when the transaction took place. All assets and
liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Goodwill and
fair value adjustments arising on the acquisition of an overseas entity are treated as assets and liabilities
of the overseas entity and translated at the rate ruling at the balance sheet date. The functional currency of
JSC Kazakhaltyn MMC (the main operating company of the Group) is Kazakh Tenge. Exchange differences arising on
translating the opening net assets at the opening rate and the results of overseas operations at the actual
rate are recognised directly in equity (the 'translation reserve').
4. Revenue
The Group operates in one segment, the mining and production of gold in Kazakhstan. The revenues from this
segment are analysed as follows:
Six months Six months Year ended
To 30 June to 30 June 31 Dec
2007 2006 2006
US$000 US$000 US$000
Unaudited Unaudited Audited
By product
Cathodic products 34,254 28,654 101,827
Free gold 4,200 1,514 4,696
Flotation and gravitational concentrate 1,601 1,173 2,355
Quartzite ore 1,218 237 555
41,273 31,578 109,433
By destination market
Kyrgyzstan - 17,733 17,856
Kazakhstan 2,018 8,624 8,685
Switzerland 13,239 3,812 15,893
Russia 2,820 1,409 2,909
United Arab Emirates 23,196 - 64,090
41,273 31,578 109,433
5. Earnings per share
The calculation of basic earnings per share is based upon the net profit after tax attributable to the
ordinary shareholders of US$3,911,000 (2006: US$3,023,000) and a weighted average number of shares in
issue, for the period 1 January 2007 to 30 June 2007 of 48,103,472 (2006: 47,100,000).
Six months Year ended
Six months to 30 June 31 Dec
to 30 June 2006 2006
2007 Unaudited Audited
Unaudited
Earnings per share US$0.08 US$0.06 US$0.40
The numerator for the calculation of the basic earnings per share is the profit after tax of US$3,911,000
(2006: US$3,023,000). The denominator for the calculation of the basic earnings per share is 48,103,472
(2006: 47,100,000).
Diluted earnings per share US$0.08 US$0.06 US$0.40
The numerator for the calculation of the diluted earnings per share is the profit after tax of
US$3,911,000 (2006: US$3,023,000). The denominator for the calculation of the diluted earnings per share
is 48,117,781 (2006: 47,139,025).
6. Property, plant and equipment
Freehold Freehold Assets under Machinery Vehicles Other Total
Buildings Construction and
Land Equipment
Group US$000 US$000 US$000 US$000 US$000 US$000 US$000
Cost
Balance at 1 January 2007 265 55,902 11,663 16,856 7,814 628 93,128
Additions 10 177 6,178 12,282 595 515 19,757
Acquisitions of assets - - - 30,504 - - 30,504
Transfers from assets under - 234 866 (1,385) 282 3 -
construction
Transfer to inventory - - - (876) - (18) (894)
Disposals (7) (705) (67) (655) (74) (44) (1,552)
Effect of movements in foreign 11 2,383 504 321 173 31 3,423
exchange
Balance at 30 June 2007 279 57,991 19,144 57,047 8,790 1,115 144,366
Depreciation and impairment
Balance at 1 January 2007 - 3,429 - 3,074 1,226 83 7,812
Depreciation charge for the year - 617 - 1,249 546 42 2,454
Disposals - (19) - (2) (2) (1) (24)
Effect of movements in foreign - 95 - 345 37 9 486
exchange
Balance at 30 June 2007 - 4,122 - 4,666 1,807 133 10,728
Net book value
At 31 December 2006 265 52,473 11,663 13,782 6,588 545 85,316
At 30 June 2007 279 53,869 19,144 52,381 6,983 982 133,638
7. Mining properties US$000
Cost
Balance at 1 January 2007 814,832
Additions 49,732
Exchange adjustments 36,361
Balance at 30 June 2007 900,925
Depletion and impairment
Balance at 1 January 2007 (5,240)
Exchange adjustments (250)
Depletion charge for the year (2,039)
Balance at 30 June 2007 (7,529)
Net book value
At 30 June 2007 893,396
At 1 January 2007 809,592
8. Intangibles
Included within intangible assets as at 30 June 2007 is an amount of US$90,794,000 in respect of
negotiation rights relating to the Jerooy project that was acquired In the period (see Note 9 for further
details).
9. Acquisitions
On 26 April 2007 the Company announced that it had signed a 'Sale and Purchase Agreement' with Oxus Gold plc for
the acquisition of Norox Mining Limited, the 50 per cent share of the Romaltyn Limited joint venture company in
Romania not owned by the Group and certain other assets.
Norox Mining Limited owns 66.7 per cent of Talas Gold Mining Company, which owns the Jeeroy project in
Kyrgyzstan. The Jeeroy project primarily consists of production plant and the ability to negotiate with the
Kyrgyz government for the resumption of the project and the renewal of the lapsed mining licences. Should these
negotiations prove successful, a further sum of up to US$80m will be payable to Oxus Gold plc on the grant of the
appropriate mining and operational licences to the Group by the Kyrgyz government.
The provisional details of the fair values of the identifiable assets and liabilities acquired are as follows:
Book Fair value Fair
value adjustment value
US$'000 US$'000 US$'000
Property plant and equipment (a) 22,375 8,129 30,504
Negotiation rights (b) - 90,794 90,794
Deferred mining property expenditure (c) 15,960 (15,960) -
Other financial assets - 164 164
Net current liabilities (687) - (687)
Non current liabilities (d) - (12,631) (12,631)
37,648 70,496 108,144
Less minority interest (33.3% of Talas Gold (34,648)
Mining Company)
Net identifiable assets acquired 73,496
Consideration:
Shares issued (e) 72,887
Acquisition costs 609
73,496
Deferred taxation has not been provided on the acquisition of the assets as the transaction was not deemed to be a
business combination, in accordance with IFRS3 'Business Combinations'. This transaction has been accounted for as
an asset purchase.
(a) The fair values of the Jeeroy property plant and equipment were fair valued by the directors, having
regard to reports by independent experts which resulted in a fair value adjustment of US$7,190,000. The
balance of the fair value adjustment of US$939,000 relates to the property, plant and equipment in
Romania.
(b) No identifiable goodwill has arisen in respect of this transaction. The surplus of value of the
consideration over the separable net assets and liabilities acquired has been attributed to negotiation
rights in respect of the Jeeroy mining licence. There is no guarantee that the necessary licences will be
granted. Should these licences not be reinstated, then this balance will be written down to net realisable
value.
(c) Due to the circumstances relating to the Jeeroy licence, the directors have fair valued the deferred
mining property expenditure in relation to the Jeeroy licence at US$nil.
(d) The fair value adjustment of US$12,631,000 to non current liabilities relates to additional potential
liabilities identified during due diligence carried out prior to the acquisition.
(e) On 10 May 2007 the Company issued 3,541,666 new ordinary shares of £0.0001 each at a price of US$20.58 per
share for a total consideration of US$72,887,000.
-End-
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