Orsu Metals Corporation
AIM : OSU
TSX : OSU

Orsu Metals Corporation

March 22, 2011 12:41 ET

Orsu Metals Corporation: Annual Results for the Year Ended December 31, 2010

LONDON, UNITED KINGDOM--(Marketwire - March 22, 2011) - Orsu Metals Corporation ("Orsu" or the "Company" or the "Group"), the dual listed (TSX:OSU)(AIM:OSU) London-based precious and base metals exploration and development company today reports its audited results for the year ended December 31, 2010.

A full Management's Discussion and Analysis of the results for the year ended December 31, 2010 ("MD&A") and Financial Statements ("Financials") will soon be available on the Company's profile on SEDAR (www.sedar.com) or on the Company's website (www.orsumetals.com). Copies of the MD&A and Financials can be also be obtained upon request to the Company Secretary.

All amounts are reported in United States Dollars unless otherwise indicated. Canadian Dollars are referred to herein as CAD$ and British Pounds Sterling are referred to as GBP.

The following information has been extracted from the MD&A and the Financials. Reference should be made to the complete text of the MD&A and the Financials.

2010 BUSINESS REVIEW

Orsu had a successful 2010 in which it achieved key strategic objectives on the exploration and development of its copper, gold and molybdenum exploration projects in Kyrgyzstan and Kazakhstan as well as raising further funding to maintain its interests in exploration and development of its mineral properties along with general corporate and capital working capital requirements. The key achievements for 2010 were the reporting of positive results from scoping studies on the Karchiga and Talas Projects as well as successfully raising net proceeds of $25.2 million from the Offering. 

The positive results of the Karchiga Scoping Study and the commencement of the Karchiga Definitive Feasibility Study have made the Karchiga Project the Company's most advanced exploration project to date. The strength of this project was further confirmed by the positive assay results announced by the Company in February 2011 from the 2010 infill drilling programme in the North East lode at the Karchiga Project, completed as part of the Karchiga Definitive Feasibility Study. The Company is currently awaiting the receipt of all necessary regulatory consents, including from the required authorities in Kazakhstan, in order to increase its ownership interest in the Karchiga Project to 94.75%. 

The Taldybulak Mineral Resource and Taldybulak Scoping Study announcements confirmed the strategic importance of the Talas Project to the Company's future growth As a next step, Gold Fields, the operator for the Talas Project, is planning a 5,500 metre infill drilling programme which, when completed, will form the basis for an updated mineral resource for Taldybulak. These works are expected to form a foundation for the decision to proceed with the prefeasibility study for the Taldybulak deposit.

As a positive sign of increased investor confidence in the Company's strategy and prospects, in April 2010 the Company was able to successfully raised net proceeds of $25.2 million from the Offering, which provided essential funding for the maintenance of the Company's interests in, and for the further exploration and the development of, the Company's mineral properties in Kazakhstan and Kyrgyzstan and for general corporate and working capital purposes. In addition, these funds may be used to pursue future growth opportunities (which may include acquiring one or more additional assets) if and when such opportunities arise. 

For the year ended December 31, 2010 the Company's net loss for continuing operations was $9.7 million, compared with a $10.6 million net loss for 2009. Exploration costs for 2010 were $2.9 million, compared with $1.6 million for 2009, reflecting the additional Karchiga Definitive Feasibility Study costs incurred during 2010. The Company also incurred $1 million of Talas Project costs (being Orsu's pro-rata share for 2010), such costs not having been incurred in previous years as Gold Fields was responsible for all exploration costs during the "First Phase" of the JV Agreement. The Company's general and administrative costs decreased by $1.5 million year-on-year (a 33% reduction), reflecting a $1 million reduction in staff costs and a $0.5 million reduction in legal and professional charges. 

Having successfully disposed of the poorly performing Varvarinskoye Project in 2009 together with its outstanding long-term debt and hedging obligations and having settled the Claim (inherited from the previous management) with no appeals or opt outs from class members. In relation to the Company's discontinued operations (the Varvarinskoye Project), the deferred consideration earnings of $2.7 million for 2010 are an important source of cash income, which the Company believes has a reasonable prospect of being supplemented in future years pursuant to the terms of the SPA (subject to the maximum amount receivable of $12 million) given current gold and copper metal price trends and market forecasts of future metal prices. There were no other income or expenditure items for discontinued operations during the year ended December 31, 2010.

Finally, the Company made significant progress on its planned conversion to IFRS from Canadian GAAP, effective January 1, 2011, which will be implemented for the first time when the Company reports it financial results as at March 31, 2011.

2010 HIGHLIGHTS

  • February 2010 – Gold Fields Limited, through its subsidiary Gold Fields Orogen Holding BVI Limited ("Gold Fields"), completed the "First Phase" of the Talas Project joint venture in the Kyrgyz Republic (the "Talas Joint Venture"), pursuant to which Gold Fields earned a 60% interest in the joint venture company, Kami Associates Limited (the "JV Company"), the Company's subsidiary and the 100% owner of Talas Copper Gold LLC ("TCG"), the registered owner of the Talas licence area, by funding exploration expenditures of CAD$10 million. Gold Fields subsequently notified the Company that it would not exercise the "Second Phase Option" to increase its interest in the JV Company from 60% to 70% through the funding of additional exploration expenditures. As a result, the "Earning Period" under the joint venture agreement dated December 3, 2008, as amended on August 14, 2009, between the Company, Gold Fields, Lero, TCG and the JV Company (the "JV Agreement") was concluded and the Company retained a 40% interest in the JV Company, subject to the terms and conditions of the JV Agreement.

  • February 2010 – the Ontario Superior Court of Justice approved the terms of an agreement (the "Settlement Agreement") to settle the class action claim commenced against EMC and two of its officers in the Ontario Superior Court of Justice in June, 2008 (the "Claim") for CAD$2.2 million, to be shared equally between Orsu and its insurer. The settlement became effective on March 22, 2010 following the expiry of a 30-day appeal period with no appeals having been received by the Company. Individual class members had the right to opt out of the settlement during an opt-out period, which expired on June 7, 2010. No class members opted out and the settlement was finalised and, under the terms of the Settlement Agreement, the Claim was dismissed (see note "Class Action Claim" under "Risks and uncertainties" of the Company's MD&A).

  • March 2010 - Orsu announced updated National Instrument 43-101 ("NI 43-101") mineral resource estimates for the Karchiga Project and for the Taldybulak copper-gold-molybdenum porphyry deposit ("Taldybulak"), which is part of the Talas Project.

  • April 2010 – the Akdjol and Tokhtazan exploration licences, comprising the Akdjol-Tokhtazan Project, were extended by the Ministry of Natural Resources of the Kyrgyz Republic until December 31, 2012.

  • April 2010 – the Company completed a public offering of units of securities (the "Units"), pursuant to which the Company sold 112,000,000 Units at a price of CAD$0.25 per Unit for gross proceeds of CAD$28,000,000 (the "Offering"). Each Unit consisted of one common share of the Company (a "Common Share") and one-half of one common share purchase warrant, with each whole warrant being exercisable to acquire one Common Share at a price of CAD$0.50 for a period of two years. Canaccord Genuity Corp. (then called Canaccord Financial Limited) ("Canaccord") acted as sole manager and book runner for the Offering. The net proceeds of the Offering have been, and are expected to continue to be, used towards the maintenance of the Company's interests in, and for the further exploration and the development of, the Company's mineral properties in Kazakhstan and Kyrgyzstan and for general corporate and working capital purposes. In addition, these funds may be used to pursue future growth opportunities (which may include acquiring one or more additional assets), if and when such opportunities arise.

  • May 2010 – the Company entered into an agreement (the "Karchiga SPA") to acquire the remaining 26.1% interest in its indirect subsidiary Eildon Enterprises Limited ("Eildon"), which is the owner of a 94.75% interest in GRK MLD LLC ("GRK"), for cash consideration of $6,187,500 payable at the closing of the acquisition (the "Karchiga Acquisition"). The Karchiga Acquisition is subject to certain conditions, such as receipt of all necessary regulatory consents, including from the required authorities in Kazakhstan, which the Company has not yet received. Due to an ongoing reorganization within the government of Kazakhstan, the Company now anticipates completing the Karchiga Acquisition during the first half of 2011. Following the Karchiga Acquisition, the Company will indirectly own a 94.75% interest in GRK, the holder of the exploration and production contract, as amended, for the Karchiga Project.

  • May 2010 – Micon International Co Limited ("Micon") completed a preliminary assessment or scoping study for the Karchiga Project on behalf of the Company (the "Karchiga Scoping Study"). The base case scenario showed a discounted cash flow, over approximately 10 years, with a Net Present Value ("NPV") of approximately $138 million, after applying a discount rate of 10%, and an Internal Rate of Return ("IRR") of 40.5% based on a flat copper price of $3.00/lb. Please see "Operational Review – Karchiga Copper Project, Kazakhstan" of the Company's MD&A.

  • July 2010 – the Company received the results of metallurgical test work for Taldybulak. The Company believes the results of the tests indicate that a potentially sellable gold(Au)-copper(Cu)-molybdenum(Mo) concentrate grading 102g/t Au, 19%Cu and 1.30%Mo with respective recoveries of 85%, 88% and 89% can be produced from the Taldybulak sulphide ore material.

  • July 2010 - the Company received the results of cyanide leach test work for samples from the Tokhtazan Prospect at the Akdjol-Tokhtazan Project. Two samples, representing the Northern and Southern mineralised areas of the Tokhtazan deposit, were analyzed using the cyanide bottle roll leaching and percolation column tests. The NaCN bottle roll test resulted in an 83.7% recovery from a -2mm fraction over 72 hours. Column tests representing the Northern and Southern mineralised areas of the Tokhtazan deposit revealed recovery ranging from 85.2 to 90% over 32 days. The Company believes that these results confirm the principal amenability of the Tokhtazan ores to heap leaching extraction of gold.

  • September 2010 – Orsu commenced a definitive feasibility study for the Karchiga Project (the "Karchiga Definitive Feasibility Study") with a view to potentially starting construction in early 2012. The Company had previously appointed SRK Consulting (UK) Ltd ("SRK)" as the lead consultant in connection with the Karchiga Definitive Feasibility Study to prepare a feasibility study report in accordance with NI 43-101 standards. Wardell Armstrong International Limited ("WAI") was also engaged to prepare a Baseline Study and an Environmental and Social Impact Assessment study (the "ESIA"). Orsu also appointed Mr. Raymond Oates as Technical Director and made him responsible for the supervision of the Karchiga Definitive Feasibility Study and, thereafter, if warranted, the construction of a mine through to the commencement of production.

  • September 2010 – the Company reported an exploration update and assay results on five initial diamond drill holes at the Akdjol Prospect at the Akdjol-Tokhtazan Project. The Akdjol Prospect was identified by Orsu as the first ever Kyrgyz gold-silver epithermal prospect and has yielded very encouraging assay results, such as a vertical intercept of 14.2m @ 5.32 g/t Au and 59.51 g/t Ag, including 6.7m @ 8.69 g/t Au and 86.96 g/t Ag from diamond drilling (average grades of 3.84 g/t Au and 49.4 g/t Ag from the four reported drill holes).

  • September 2010 – following a 22,013 meter drilling programme completed in 2008 and 2009, Orsu announced that Gold Fields reported an updated mineral resource estimate relating to Taldybulak, effective June 30, 2010, in its 2010 Annual Report (the "Taldybulak Mineral Resource") in accordance with the 2007 South African Code for the Reporting of Mineral Resources and Mineral Reserves (the "SAMREC Code"). Please see "Operational Review – Talas Copper-Gold-Molybdenum Project, Kyrgyzstan - Taldybulak Licence, Kyrgyzstan – 2010 Mineral Resource Estimates" of the Company's MD&A.

  • November 2010 – The Company announced the positive results of a scoping study for Taldybulak, completed by Mr. Rodney Smith (Bsc, MAusIMM, Principal Consultant - Metallurgy (and independent of Orsu) of Coffey Mining Pty Ltd (Perth, Australia) ("Coffey Mining") on behalf of the Talas Joint Venture in accordance with the SAMREC Code (the "Taldybulak Scoping Study"). The work performed in connection with the Taldybulak Scoping Study formed the basis for the pit-constrained Taldybulak Mineral Resource as reported by Gold Fields in September 2010.

  • December 2010 – the Company announced the completion of a 6,952 meter drilling program programme as part of the Karchiga Definitive Feasibility Study.

  • December 2010 – Mr. David John Rhodes was appointed as an additional non-executive director of the Company with immediate effect. Mr. Rhodes, aged 44, is currently the Managing Director of Endeavour Financial Limited and has experience in arranging and advising on natural resource project financing over a period of more than twenty five years.

  • Late December 2010 - WAI completed a NI 43-101 compliant report (the "NI 43-101 Taldybulak Scoping Study Report") on behalf of Orsu relating to the results contained in the Taldybulak Scoping Study.

POST YEAR END HIGHLIGHTS

  • January 2011 – the Company confirmed that, pursuant to the SPA, it had earned deferred consideration for 2010 of $2.7 million and, of this amount, had received $1.5 million, with the balance of $1.2 million being rolled over and added (with interest accruing at a rate of 2.8% per annum) to any payment earned by the Company for 2011.

  • February 2011 – the Company announced the assay results for its 2010 infill drilling programme in the North East lode at the Karchiga Project. Please see "Operational Review – Karchiga Copper Project, Kazakhstan" of the Company's MD&A.

OPERATIONAL REVIEW

The Company's principal and most advanced exploration project is the property comprising a 47.3km2 licence area in eastern Kazakhstan containing the Karchiga volcanogenic massive sulphide ("VMS") deposit (the "Karchiga Project"), which is part of the Rudny Altai polymetallic belt. The Company's other principal exploration asset is its property in northwest Kyrgyzstan, which is comprised of four licence areas within the Tien Shan gold belt of north western Kyrgyzstan: the Taldybulak, Barkol, Korgontash and Kentash licences (collectively, the "Talas Project"). Approximately 100km to the south west of the Talas Project is the Akdjol-Tokhtazan licence area comprising the Akdjol and Tokhtazan licences (the "Akdjol-Tokhtazan Project").

KARCHIGA COPPER PROJECT, KAZAKHSTAN

Licence Information

The Karchiga Project is the Company's most advanced project. The Karchiga Project is located in the extreme east of Kazakhstan, within 40km of the Chinese border. The deposit at the Karchiga Project is situated within the north west striking, mid-Palaeozoic, Rudny Altai VMS belt, the host of numerous world class copper bearing VMS deposits, including the Leninogorsk (also known as Ridder-Sokolnoye), Zyryanovskoye, and Maleevskoye deposits. The Rudny Altai is ranked in the top four VMS belts of the world.

Key achievements during 2010 and progress update for the Karchiga project

During 2010 the Company achieved the following key milestones

  • Karchiga Scoping Study;

  • Karchiga Feasibility Study and the associated exploration and drilling programme and,

  • Karchiga Acquisition agreement.

All of the above matters are discussed below.

Karchiga Scoping Study

In May 2010, the Company reported positive results of the scoping study completed by Micon at the request of Orsu, the "Karchiga Scoping Study". 

The results of the Karchiga Scoping Study based on a flat copper price of $3 /lb were:

  • A base case economic analysis, from a discounted cash flow over approximately 10 years at 10% per annum, gave a pre-tax Net Present Value ("NPV") of approximately $138 million;

  • A pre-tax Internal Rate of Return ("IRR) of 40.5%;

  • An initial capital investment cost of $100.16 million and,

  • An initial capital payback of just under 2 years.

The Karchiga Scoping Study is based on a NI 43-101 mineral resource estimate of the Karchiga Technical Report, reported on March 22, 2010 and prepared by WAI. Both the Karchiga Technical Report and the Karchiga Scoping Study (entitled "Preliminary Assessment of the Karchiga Copper Project, East Kazakhstan Region, Kazakhstan" and dated May 25, 2010) can be viewed under the Company's profile on SEDAR at www.sedar.com.

The Karchiga Scoping Study estimated that:

  • Including pit optimization, contemplates mining a total of 7,580,389 tonnes grading 1.94% copper, containing 146,778 tonnes of copper metal;

  • 86% of the tonnage totaling 6,487,556 tonnes with a grade of 1.97% copper is derived from Indicated mineral resources, and

  • 14% of the tonnage totaling 1,092,833 tonnes with a grade of 1.71% copper is derived from Inferred mineral resources;

  • The preliminary assessment forecasts a LOM average recovery of over 90%, resulting in a marketable concentrate with an average grade of 22% Cu containing 132,637 tonnes of copper;

  • At a nominal mining and processing rate of 750,000 tonnes per annum of mineralized feed, the project life is expected to exceed ten years. For the purposes of the Karchiga Scoping Study, all oxide material was considered to be waste and assigned no economic value.

Karchiga Feasibility Study and associated exploration and drilling programme programme

Following the positive results of the Karchiga Scoping Study in September 2010, SRK were commissioned to undertake a detailed feasibility study, the Karchiga Feasibility Study with an expected date for completion of September 2011. As part of the Karchiga Feasibility Study, WAI were commissioned to prepare a Baseline Study and ESIA. In addition, other international and Kazakh companies have also being engaged to carry out additional necessary studies which will form part of the Karchiga Feasibility Study.

In order to satisfy the requirements for the Karchiga Feasibility Study, it was necessary for the Company to perform an additional drilling programme which included in-fill resource drilling (aiming to convert Inferred mineral resources into Indicated mineral resources in the North East lode of the Karchiga deposit), geotechnical drilling for open pit design, metallurgical sample drilling and hydrological drilling for monitoring holes and pumping wells.

The drilling programme consisted of 72 holes totalling 6,952 meters and was completed by November 30, 2010. The results of this drilling are currently being evaluated to provide the parameters required to update the geological resource and commence a full mine design required for the completion of the Feasibility Study and local Project.

Two key issues which SRK will investigate as part of the Karchiga Feasibility Study will be the use of high quality Chinese equipment in order to minimise the project capital costs and potential off-takers for the copper concentrate in both the People's Republic of China and the Republic of Kazakhstan. The Karchiga Project is favourably located approximately 220 km south east of the regional centre, Ust-Kamenogorsk, where Glencore International AG has commissioned its new smelter and approximately 40 km from the Chinese border to the east. The nearest copper mining operation in China at the Ashele VMS deposit, containing 1Mt of copper, is located approximately 85 km east-southeast from the Karchiga deposit.

The remaining milestones for the Karchiga Project are expected to be:

  • Q1 2011 – finalisation of the metallurgical flow sheet;
  • Q2 2011 – updated NI 43-101 mineral resource, incorporating 2010 drilling results;
  • Q2 2011 – start of detailed mine design;
  • Q3 2011 – completion of the locally commissioned Kazakh Feasibility Study and submission for approval;
  • Q4 2011 – review of the Karchiga Project financing options;
  • October 2011 – completion of the Karchiga Feasibility Study;
  • Q1 2012 – approval of the Kazakh Feasibility Study;
  • Early 2012 – start of construction.

Karchiga Acquisition agreement

On May 20, 2010 the Company entered into the Karchiga Acquisition agreement, which is subject to certain conditions, such as receipt of all necessary regulatory consents, including from the required authorities in Kazakhstan. Due to an ongoing reorganization within the government of Kazakhstan, the Company now anticipates completing the Karchiga Acquisition during the first half of 2011. Following the Karchiga Acquisition, the Company will indirectly own a 94.75% interest in the Karchiga Project.

TALAS COPPER-GOLD-MOLYBDENUM PROJECT, KYRGYZSTAN

Licence information

The Talas Project is the Company's material property in Kyrgyzstan, and includes the Taldybulak, Kentash, Barkol and Korgontash licences. The Taldybulak deposit is the main focus of exploration activity within the Taldybulak licence area that covers an area of 42km2. The Kentash licence is situated immediately east of Taldybulak and covers an area of 46km2. The Korgontash licence which covers an area of 66km2 is located approximately 25km east of Taldybulak. The Barkol licence is located immediately west of the Taldybulak license and covers an area of 223km2.

Key achievements during 2010 and progress update for the Talas copper-gold-molybdenum project

During 2010 the Company achieved the following key milestones:

  • Joint Venture with Gold Fields;
  • 2010 Taldybulak scoping study and,
  • 2010 exploration programme.

Joint Venture with Gold Fields

In January 2010, Gold Fields earned a 60% interest in the JV Company which is the direct holder of TCG, the registered owner of the licenses within the Talas Project having achieved funding of exploration expenditure of CAD$10 million on the Talas Project. The Company retained a 40% interest in the Talas JV Company.

Under the terms of the JV Agreement, the Company and Gold Fields are required to fund on a pro-rata basis further project expenditures required to continue exploration activities, complete a feasibility study and complete the project development in accordance with programmes and budgets prepared by Gold Fields. Dilution provisions apply under the terms of the JV Agreement if either party decides not to contribute to expenditures in accordance with its pro-rata share.

Pursuant to the JV Agreement Gold Fields is the project operator for the Talas Project.

2010 Taldybulak Scoping Study

In September 2010, the Company reported that Gold Fields had reported a Taldybulak Mineral Resource (effective June 30, 2010) in its 2010 Annual Report in accordance with the SAMREC Code.

Within the Taldybulak Mineral Resource Gold Fields reported the following results:

  • The updated Taldybulak Mineral Resource consists of an indicated resource of 127 Mt, comprising 2.6 Moz gold at 0.64 g/t, 477 Million lb copper at 0.17%, and 29.4 Mlb molybdenum at 0.01%, and

  • an inferred resource of 296 Mt, comprised of 3.71 Moz gold at 0.4 g/t, 1,098 Mlb copper at 0.17%, and 69.2 Mlb molybdenum at 0.01%.

In November 2010, Orsu announced the positive results of the Taldybulak Scoping Study prepared by Coffey Mining in accordance with the SAMREC Code based on the Taldybulak Mineral Resource. Orsu subsequently engaged WAI to convert the results of the Taldybulak Scoping Study to NI 43-101 standards and, as a result, WAI completed the NI 43-101 Taldybulak Scoping Study Report entitled "Updated Technical Report on the Taldybulak Property held by Orsu Metals Corporation, Kyrgyzstan", dated December 24, 2010 a copy of which can be viewed under the Company's profile on SEDAR at www.sedar.com.

The NI 43-101 Taldybulak Scoping Study Report yielded the following positive results based on a gold price of $1,150 / oz, copper price of $3/lb and molybdenum price of $15 /lb:

  • A pre-tax NPV of $815 million at a discounted rate of 7.5%;

  • Corresponding pre-tax IRR of 24.7%;

  • Life of mine of 17 years;

  • Capital investment of $516 million and

  • Payback of 6 years.

The Taldybulak Scoping Study incorporated key design features which included:

  • An envisaged open pit mine for a total of 254 million tonnnes of ore with a life of mine of 17 years;

  • An associated 15 million tonnes per annum processing facility;

  • An estimated average annual production of 242,000 oz of gold, 26,000 tonnes of copper and 900 tonnes of molybdenum;

  • A gold grade of 0.52 g/t with a recovery of 3.4 million oz;

  • A copper grade of 0.18% with a recovery of

  • The preliminary assessment forecasts a LOM average recovery of over 90%, resulting in a marketable concentrate with an average grade of 22% Cu containing 132,637t of copper;

The Taldybulak Scoping Study and the NI 43-101 Taldybulak Scoping Study reports are preliminary estimates of the technical and economic viability of Taldybulak and do not contemplate the full spectrum of engineering.

2010 Exploration Programme

For the Talas Project, Orsu and Gold Fields approved a 2010 exploration programme and expenditure budget of $2.45 million. As per the terms of the JV Agreement, the Company funded its 40% pro rata share of approximately $979,000. The majority of the license expenditures are incurred in connection with environmental, social, metallurgical and resource studies, as well as ground magnetic survey at the Taldybulak license.

Gold Fields, the operator for the Talas Project, is planning an infill drilling in the western area of the Taldybulak deposit with 5,500m of HQ size diamond drilling. Upon completion of the 5,500 m drilling programme, the Company expects to update a mineral resource for Taldybulak. These works are expected to form a foundation for the decision to proceed with the prefeasibility study for the Taldybulak deposit.

AKDJOL-TOKHTAZAN PROJECT, KYRGYZSTAN

Licence Information

The Akdjol-Tokhtazan Project contains the Akdjol (108km2) and Tokhtazan (4km2) exploration licences, located in the Jebel-Abad Oblast, western Kyrgyzstan, both of which are held by Oriel in Kyrgyzstan LLC in which the Company holds a 100% interest.

2010 progress update of the Akdol-Tokhtazan Project

From 2009 through 2010 the Company focused on scout exploration activity on the Akdol Prospect, within the Akdol license area, which included grab samples, 14 trenches, and five diamond drill holes.

The results from the scout exploration activity were reported in September 2010 reported and included:

  • a vertical intercept of 14.2m @ 5.32 g/t Au and 59.51 g/t Ag, including 6.7m @ 8.69 g/t Au and 86.96 g/t Ag from diamond drilling (average grades of 3.84 g/t Au and 49.4 g/t Ag from the four reported drill holes);

  • 784m of trenching revealing up to 36m of mineralised intercepts above 0.5g/t cutoff, and confirming a strike length of at least 700m (14 trenches); and

  • Grab sample assays ranging between 1g/t and 119g/t Au and 7.7 g/t and 500g/t Ag.

From the results of the activity the Company identified the Akdjol Prospect the first ever Kyrgyz gold-silver epithermal prospect.

As part of the 2010 exploration programme the Company also completed 42.35 km of DDIP and 66.075 km of ground magnetics at the Akdjol and adjacent prospects. At Tokhtazan, ground magnetics covered 37.5 km. The analysis of these drilling results and their integration with the results of the geophysical survey will form the basis for the 2011 exploration programme.

FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2010

For the year ended December 31, 2010 the Company recorded a loss of $4.6 million made up of a loss from continuing operations of $9.7 million, offset by deferred consideration income of $5.1 million.

The loss for 2010 from continuing operations of $9.7 million, reflected administrative costs of $4.5 million, exploration costs of $2.9 million and a stock-based compensation charge of $1.8 million , the Company's share of the Talas Joint Venture losses of $1.0 million, partially offset by net foreign exchange gains of $0.4 million and by net interest income of $0.1 million.

The Company's administrative costs of $4.5 million consisted of corporate and overseas office staff and overhead costs and corporate legal, professional and audit charges.

Exploration costs for the year ended December 31, 2010 of $2.9 million were primarily due to $2.3 million for the funding of the Karchiga Project due to the commencement of the Karchiga Definitive Feasibility Study and associated drilling work and $0.6 million exploration expenditure for the Akdjol-Tokhtazan Project.

The 2010 stock-based compensation charge of $1.8 million consists of a $0.4 million charge for options which had fully vested by December 31, 2010 and a $1.4 million allocated charge for 13,800,000 options that were granted between April and December 2010 which will vest between October 2010 and December 2012.

For the year ended December 31, 2010 the Company expensed $1.0 million relating to its 40% pro-rata share of the Talas Joint Venture. For the same period in 2009, the Talas Joint Venture had been fully funded by Gold Fields and, for this reason, had no impact on the results of the Company for that period.

Foreign exchange gains were $0.4 million for the year ended December 31, 2010. This was primarily due to a $0.6 million exchange gain on the re-translation of future income tax liabilities on the Company's mineral properties as at December 31, 2010 and partially offset by foreign exchange losses by the re-translation of the Offering proceeds and currency conversions.

In respect of the Company's cash flows, cash and cash equivalents as at December 31, 2010 were $19.6 million compared to $3.4 million as at December 31, 2009, representing an increase of $16.2 million. The increase was due primarily to the receipt of the net proceeds of the Offering of $25.2 million and royalty income in respect of the Company's investment in the Tasbulat Oil Corporation of $0.2 million, offset by Orsu's pro-rata funding for the Talas Project of $1 million, exploration expenditure of $2.8 million and corporate expenditure of $5.4 million.

Financial position as at December 31, 2010

As at December 31, 2010 the Company held net assets of $47.3 million, compared with $24.8 million as at December 31, 2009, representing an increase of $22.5 million, due mainly to a $16.2 million increase in cash and cash and the recording of the $5.1 million Varvarinskoye deferred consideration receivable asset

As at December 31, 2009 the Company held a 100% interest in the Talas Project and had included the carrying value of the Talas Project exploration properties of $10.2 million within its "Exploration Properties" assets. As at December 31, 2010, the Company derecognized the previously consolidated assets and liabilities and recorded its equity interest in the Talas Joint Venture at fair value. A summary of the carrying value of the Company's equity investment in the Talas Joint Venture as at December 31, 2010 (net of a $3.1 million future income tax adjustment to the fair value of equity investment as at January 1, 2010) is set out below:

    $000s
     
Fair value of equity investment as at January 1, 2010   10,240
Funding provided by the Company during the year   951
Less: Company's 40% share of operating losses for the year   (970)
Fair value of equity investment as at December 31, 2010   10,221

Liquidity and capital resources

As at December 31, 2010 the Company's main source of liquidity was unrestricted cash of $19.6 million, compared with $3.4 million as at December 31, 2009 with consolidated working capital of $21.5 million which, in the Company's view, is sufficient to satisfy its working capital needs for, as a minimum, the next twelve months.

The Company's working capital needs include the maintenance of the Company's interests in, and the further exploration and the development of, the Company's mineral properties in Kazakhstan and Kyrgyzstan (minimum licence expenditure obligations of approximately $1.7 million for 2011), the completion of the Karchiga Definitive Feasibility Study (budgeted expenditures of approximately $2.5 million for 2011), the completion of the Karchiga Acquisition (cash purchase price of approximately $6.2 million), the funding of general corporate expenses (budgeted expenditures of approximately $4.6 million for 2011) and the contribution towards the pursuit of future growth opportunities (which may include acquiring one or more additional assets), if and when such opportunities arise.

While the Company's present liquidity has improved due to the completion by the Company of the Offering, the advancement, exploration and development of the Company's properties, including continuing exploration and development projects, and the construction of mining facilities and commencement of mining operations, if any, will require substantial additional financing in the future.

Deferred consideration

As at December 31, 2010 the Company recognised a deferred consideration receivable of $5.1 million of which the full amount has been included as income within the net loss as reported in the Company's financial statements for the year. The deferred consideration receivable asset of $5.1 million represents the net present value of the Company's estimated future deferred consideration earnings, based upon the Company's forecast of future gold and copper metal prices and adjusted for counterparty credit risk. The Company's forecast gold price range was from $1,067 per ounce to $1,285 per ounce and forecast copper price range was from $6,292 per tonne to $8,318 per tonne.

CONVERGENCE WITH INTERNATIONAL FINANCIAL REPORTING

From January 1, 2011 the Company will be adopting the International Financial Reporting Standards ("IFRS") for the preparation of its financial statements. The conversion to IFRS will be applicable to the Company's reporting no later than in the first quarter of 2011, with restatement of comparative information presented. In preparation for this during 2010 the Company designed and implemented a conversion plan outlined as follows:

IFRS conversion progress

As at December 31, 2010 the Company had completed the planning and scoping phase and the detailed assessment phase of its IFRS conversion plan, enabling the Company to identify the key differences between Canadian GAAP and IFRS that could potentially impact the Company's financial statements. The key areas of impact are:

  1. First time adoption of IFRS – potential differences between the current disclosures in the Company's financial statements prepared under Canadian GAAP to IFRS and significant exemptions the Company has elected for upon adoption of IFRS;

  2. Detailed assessment of high impact areas – where potentially a significant amount of implementation effort and complexity may be required by the Company and there may be a significant impact on the financial statements (in particular share purchase warrants awards, share options granted and income taxes) and,

  3. Assessment of potentially low impact areas - where potentially the amount of implementation effort and complexity may not be significant and there may only be minor impact on the financial statements.

Operations implementation phase

The Company plans to proceed with the operations implementation phase of the conversion plan during the remainder of 2011, which will require:

  • completion of the 2010 annual and interim consolidated financial statement IFRS comparatives; and,
  • preparation of Q1 2010 consolidated financial statements under IFRS which will include three balance sheets: the transitional balance sheet, the prior year-end balance sheet and the first quarter-end balance sheet.

Post implementation and ongoing review

Post implementation, the Company expects that it will:

  • consider the impact of the transition to IFRS on its internal control processes, information technology controls, tax and other areas; and
  • have the transitional balance sheet included and audited within the Q1 2011 interim IFRS consolidated financial statements.
Consolidated Statements of Operations for the years ended December 31, 2010 and 2009
(Prepared in accordance with Canadian GAAP)
   
  2010 2009
  $000 $000
(Expenses) / income    
General and administrative (4,578) (5,946)
Exploration (2,907) (1,617)
Stock-based compensation (1,785) (2,013)
Company's share of Talas Joint Venture losses (970) -
Interest expense (1) (54)
Interest income 117 19
Foreign exchange gains 410 124
Termination costs - (98)
Class action settlement - (1,027)
     
Loss from operating activities (9,714) (10,612)
     
Deferred consideration income 5,092 -
     
Net operating loss from the discontinued operations - (51,160)
     
Net gain from the disposal of the discontinued operations - 160,812
     
Net (loss)/ income and comprehensive (loss)/ income for the year (4,622) 99,040
     
Deficit - Beginning of year (408,984) (508,024)
     
Deficit - End of year (413,606) (408,984)
     
(Loss)/ income per common share    
Loss per common share from continuing operations $(0.08) $(0.23)
Income/ (loss) per common share from discontinued operations $0.04 $(1.12)
Net (loss)/ income per common share $(0.04) $2.17
     
Weighted average number of common shares    
Basic and diluted (in thousands) 125,170 45,696
     
 
 
Consolidated Balance Sheets as at December 31, 2010 and 2009
(Prepared in accordance with Canadian GAAP)
    2010
$000
2009
$000
       
Assets      
       
Current assets      
Cash and cash equivalents   19,596 3,386
Current deferred consideration receivable   1,500 -
Prepaid and other receivables   1,217 1,860
       
    22,313 5,246
       
Long-term deferred consideration receivable   3,592 -
       
Exploration properties   14,191 27,198
       
Office, furniture and equipment   449 1,078
       
Equity investment in Talas Joint Venture   10,221 -
Other assets   392 643
       
    51,158 34,165
       
Liabilities      
Current liabilities      
Accounts payable and accrued liabilities   792 2,455
Future income tax   3,094 6,877
       
    3,886 9,332
       
Shareholders' Equity      
Share capital   380,145 361,440
Share purchase warrants   24,133 48,650
Share purchase options   5,904 12,550
Contributed surplus   50,696 11,177
Deficit   (413,606) (408,984)
       
    47,272 24,833
       
    51,158 34,165
 
 
Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009
(Prepared in accordance with Canadian GAAP)
    2010 2009
    $000 $000
Cash flows from operating activities      
Net loss for the year from operating activities   (9,714) (10,612)
Items not affecting cash:      
  Company share of Talas Joint Venture losses   970 -
  Depreciation   148 248
  Stock-based compensation   1,785 2,013
  Fixed assets retirement   10 -
  Unrealized foreign exchange (gains)   (570) (79)
    (7,371) (8,430)
Change in non-cash working capital      
  Increase in accounts receivable and other assets   (119) (485)
  Decrease in accounts payable and accrued liabilities   (784) (196)
       
    (903) (681)
       
Cash flows used by the operating activities of the continuing operations   (8,274) (9,111)
       
Cash flows from investing activities      
  Expenditures on property, plant and equipment   (50) (293)
  Proceeds from net investment in residual oil and gas interests   241 480
  Funding of investment in Talas Joint Venture   (951) -
       
Cash flows (used by)/ from the investing activities of the continuing operations   (760) 187
       
Cash flows from financing activities      
  Gross proceeds of share issue   27,646 -
  Share issue costs   (2,402) -
Cash flows from the financing activities of the continuing operations   25,244 -
Net cash flows from / (used by) the continuing operations   16,210 (8,924)
       
Cash flows from discontinued operations      
Net proceeds from disposal of Varvarinskoye Project   - 5,072
Cash flows from the activities of discontinued operations   - 1,038
    - 6,110
Increase/ (decrease) in cash and cash equivalents   16,210 (2,814)
       
Cash and cash equivalents - Beginning of year   3,386 6,200
       
Cash and cash equivalents - End of year   19,596 3,386
       

FORWARD-LOOKING INFORMATION

This press release contains or refers to forward-looking information. All information, other than information regarding historical fact that addresses activities, events or developments that the Company believes, expects or anticipates will or may occur in the future is forward-looking information. Such forward-looking information includes, without limitation: the continued and future maintenance, exploration and development of the Company's properties, including the proposed work programs, anticipated milestones and the timing related thereto; development and operational plans and objectives; the Company's ability to satisfy its future expenditure obligations on mineral properties in which it has an interest; mineral resource estimates and the Company's expectations with respect to updates and upgrades thereto; estimated project economics, cash flow, costs and sources of funding; the completion of the Karchiga Acquisition and the timing related thereto; the estimated LOM, NPV and IRR for, and forecasts relating to tonnages and amounts to be mined from, and average recoveries and grades at, the Karchiga Project and/or Taldybulak as well as the other forecasts, estimates and expectations relating to the Karchiga Scoping Study, NI 43-101 Taldybulak Scoping Study Report and Taldybulak Scoping Study set out in the "Operational Review" section of the Company's MD&A; future prices and trends relating to copper, gold and molybdenum; the Company's expectations regarding its receipt of further test results relating to drilling at the Karchiga Project, the completion of the Karchiga Feasibility Study and the start and completion of construction and production at the Karchiga Project and the timing related to same; the Company's belief that the results from the test and assay work conducted at the Akdjol-Tokhtazan Project confirm, respectively, the principal amenability of the Tokhtazan ores to heap leaching extraction of gold and encouraging results generally; the future political and legal regime in Kyrgyzstan; the regulatory environment in Kazakhstan relating to the mining industry; the expected use of the net proceeds from the Offering; the Company's expectations and beliefs with respect to the waiver of the State's pre-emptive right with respect to the Karchiga Project and the initial placements of the Common Shares being covered thereby; the Company's plans with respect to the conversion to IFRS and the adoption and/or implementation of changes to accounting policies and the impact of same on the Company's financial statements; the Company's beliefs with respect to the amount and receipt of deferred consideration that may be payable to the Company by Polymetal in connection with the Varvarinskoye Project Disposition; the significance of any individual claims by non-Ontario residents with respect to the Claim; and the Company's future growth (including new opportunities and acquisitions) and its ability to raise new funding.

The forward-looking information in this press release reflects the current expectations, assumptions or beliefs of the Company based on information currently available to the Company. With respect to forward-looking information contained in this press release, the Company has made assumptions regarding, among other things, the Company's ability to generate sufficient funds from capital markets to meet its future expected obligations and planned activities, the Company's business (including the continued exploration and development of its properties and the methods to be employed with respect to same), the estimation of mineral resources (as set out in the "Operational Review" section of the company's MD&A), the parameters and assumptions employed in the Karchiga Scoping Study, NI 43-101 Taldybulak Scoping Study Report and the Taldybulak Scoping Study, the economy and the mineral exploration industry in general, the political environments and the regulatory frameworks in Kazakhstan and Kyrgyzstan with respect to, among other things, the mining industry generally, royalties, taxes, environmental matters and the Company's ability to obtain, maintain, renew and/or extend required permits, licences, authorisations and/or approvals from the appropriate regulatory authorities (including with respect to (i) the State's waiver of its pre-emptive right relating to the Karchiga Project and
(ii) that the Company and or/the counterparties to the sale and purchase agreement governing the Karchiga Acquisition (the "Karchiga SPA") will satisfy or obtain a waiver of any conditions imposed by applicable regulatory authorities necessary in order to complete the Karchiga Acquisition), that the waiver granted by the Competent Authority covers any pre-emptive right that the Competent Authority has in respect of any previous placements, the satisfaction or waiver, as applicable, of the conditions precedent to the completion of the Karchiga Acquisition by the Company or the counterparties to the Karchiga SPA, future capital costs and cash flow discounts, anticipated mining and processing rates, the treatment of oxide materials as waste with respect to the Karchiga Project, the Company's ability to continue to obtain qualified staff and equipment in a timely and cost-efficient manner and to engage international and Kazakh companies to carry out additional studies for the Karchiga Feasibility Study and to obtain Kazakh Feasibility Study approval, the treatment of the Varvarinskoye Project as discontinued operations, assumptions relating to the Company's critical accounting policies, that the Company has identified all of the key issues to be investigated in connection with the Karchiga Feasibility Study, and has also assumed that no unusual geological or technical problems occur, and that equipment works as anticipated, no material adverse change in the price of copper, gold or molybdenum occurs and no significant events occur outside of the Company's normal course of business.

Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realised or substantially realised, there can be no assurance that they will have the expected consequences to, or effects on, the Company. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: risks normally incidental to exploration and development of mineral properties; uncertainties in the interpretation of results from drilling and metallurgical test work; the possibility that future exploration, development or mining results will not be consistent with expectations; uncertainty of mineral resources estimates; uncertainty of capital and operating costs, production and economic returns; uncertainties relating to the estimates and assumptions used, and risks in the methodologies employed, in the Karchiga Scoping Study, the NI 43-101 Taldybulak Scoping Study Report and/or the Taldybulak Scoping Study and that the completion of additional work on the Karchiga Project and/or Taldybulak, as the case may be, could result in changes to the estimates contained in the Karchiga Scoping Study, the NI 43-101 Taldybulak Scoping Study Report and/or the Taldybulak Scoping Study, as applicable; the Company's inability to obtain, maintain, renew and/or extend required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities and other risks relating to the regulatory frameworks in Kazakhstan and Kyrgyzstan (including the failure to obtain the State's waiver of its pre-emptive right relating to the Karchiga Project);
adverse changes in the political environments in Kazakhstan and Kyrgyzstan and the laws governing the Company, its subsidiaries and their respective business activities; a failure or delay in the satisfaction, or receipt of a waiver, as applicable, of any conditions imposed by applicable regulatory authorities in order to proceed with the completion of the Karchiga Acquisition and/or under the Karchiga SPA or the failure to complete the Karchiga Acquisition for any other reason; capital and operating costs varying significantly from estimates; inflation; changes in exchange and interest rates; adverse changes in commodity prices; the inability of the Company to obtain required financing; adverse changes with respect to the Talas Joint Venture; adverse general market conditions; lack of availability at a reasonable cost or at all, of equipment or labour; inability to attract and retain key management and personnel; the possibility of non-resident class members commencing individual claims in connection with the Claim; the Company's inability to delineate additional mineral resources and delineate mineral reserves; reductions in, or no, future cash flows at Varvarinskoye; and future unforeseen liabilities and other factors including, but not limited to, those listed under the "Risk and Uncertainties" section in the Company's MD&A.

Any mineral resource figures referred to in this press release are estimates and no assurances can be given that the indicated levels of minerals will be produced. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While the Company believes that the mineral resource estimates in respect of its properties are well established, by their nature mineral resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. If such mineral resource estimates are inaccurate or are reduced in the future, this could have a material adverse impact on the Company. Due to the uncertainty that may be attached to inferred mineral resources, it cannot be assumed that all or any part of an inferred mineral resource will be upgraded to an indicated or measured mineral resource as a result of continued exploration. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The Karchiga Scoping Study, the NI 43-101 Taldybulak Scoping Study Report and/or the Taldybulak Scoping Study are preliminary in nature, and include inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the conclusions of the Karchiga Scoping Study, the NI 43-101 Taldybulak Scoping Study Report and/or the Taldybulak Scoping Study will be realized.

Any forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

Contact Information

  • Orsu Metals Corporation
    Petro Mychalkiw
    CFO
    +44 (0) 20 7518 3999
    or
    Orsu Metals Corporation
    Tania Tchedaeva
    Company Secretary
    +44 (0) 20 7518 3999
    www.orsumetals.com
    or
    Canaccord Genuity Limited
    Ryan Cohen/ Andrew Chubb
    +44 (0) 20 7050 6500
    or
    Vanguard Shareholder Solutions
    +1 604 608 0824