Alhambra Resources Ltd. (TSX VENTURE:ALH)(PINK SHEETS:AHBRF)(FRANKFURT:A4Y)
("Alhambra" or the "Corporation"), an international gold explorer and producer,
announces its financial and operating results for the first quarter ended March
31, 2011. All amounts related to the financial results are expressed in
thousands of United States dollars unless otherwise indicated.
HIGHLIGHTS
-- Gold production was estimated at 2,318 ounces ("ozs")
-- Revenue from gold sales amounted to $2.5 million based on the sale of
1,770 ozs
-- Gold sales were lower than anticipated due to un-seasonally cold weather
in the first quarter of 2011 and the early freeze of the new pad built
during the final quarter of 2010
-- Cash operating costs were $631.19 per oz ("/oz") of gold sold
-- Stacked 110,740 tonnes ("t") of ore on the heaps at an average grade of
1.00 grams/tonne ("g/t")
-- The estimated recoverable gold in work in process ("WIP") as of March
31, 2011 was 37,171 ozs with an estimated carrying cost of $26.3 million
-- Mining operations at Saga Creek generated a net profit of $0.4 million
($0.00/basic share) and positive cash flow of $0.2 million ($0.00/basic
share)
-- The Corporation recorded net cash used in operating activities of $1.0
million ($0.01/share) and a net loss of $1.7 million ($0.02/share)
-- 3,864 metres of exploration drilling was completed
-- Exploration expenditures were $0.5 million
-- Various components of the 2011 exploration program were finalized
-- 2011 corporate objectives remain unchanged
FINANCIAL HIGHLIGHTS
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(in thousands of US$ except per share Three Months ended
amounts) March 31
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2011 2010
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Gross revenue $ 2,466 $ 2,124
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Net loss (1,686) (754)
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Per share (basic and diluted) (0.02) (0.01)
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Weighted average shares outstanding 104,020,851 88,710,746
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Shares outstanding at end of period 104,082,059 103,994,309
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For the first quarter of 2011, the Corporation recognized $2.5 million in
revenue from the sale of 1,770 ozs of gold at an average price of $1,392.46/oz.
This compares to $2.1 million in revenue from the sale of 1,892 ozs of gold at
an average price of $1,122.68/oz during the first quarter of 2010.
Mining operations at Saga Creek generated a net profit of $0.4 million and
positive cash flow of $0.2 million for the first quarter of 2011. The
Corporation recorded a net loss of $1.7 million ($0.02 per basic and diluted
share) for the first quarter of 2011. This compares to a net loss of $0.8
million ($0.01 per basic and diluted share) for the first quarter of 2010. Cash
flow used in operating activities for the first quarter of 2011 was $1.0 million
or $0.01 per share compared to cash flow generated from operating activities of
$0.0 million or $0.00 per share for the first quarter of 2010.
OPERATING HIGHLIGHTS
During the first quarter of 2011, the Corporation stacked a total of 110,740 t
(2010 - 117,536 t) of ore at an estimated average grade of 1.00 g/t (2010 - 0.78
g/t) of gold onto the pads. The estimated recoverable gold mined totaled 2,318
ozs (2010 - 1,925 ozs). The estimated recoverable gold classified as WIP was
37,171 ozs as of March 31, 2011. In addition, the Corporation mined 513,526 t
(2010 - 444,218 t) of waste during this same period.
OPERATING EXPENSES
The Corporation charges to WIP all costs associated with the production of gold,
(including direct costs incurred in the mining, leaching and resin stripping
processes ("process operating costs")), as well as depreciation of equipment
used in each process and depletion of mineral assets which is primarily the fair
value assigned to mineral assets at September 15, 2009. All process operating
costs and depletion and depreciation charged to WIP are expensed on the basis of
the quantity of gold sold as a percentage of total estimated recoverable
quantity of gold mined with the portion related to process operating costs being
expensed as the cost of sales and the portion relating to depletion and
depreciation being expensed as depletion and depreciation.
Cost of sales for the three months ended March 31, 2011 totaled $1.4 million or
$769.90/oz (2010 - $1.5 million or $803.24/oz of gold sold). Included in this
amount is $138.71/oz (2010 - $224.10/oz) related to the amortization of the
bump-up to fair value of the estimated cost of WIP on re-valuation at September
15, 2009. The higher cash operating costs in the first quarter of 2011 compared
to the first quarter of 2010 ($631.19/oz as compared to $579.14/oz) was
primarily the result of the Corporation only mining waste in March of 2011. The
Corporation's accounting policy is to not defer any waste stripping costs;
instead charge those costs to WIP as incurred believing that these costs will
average out over time.
In 2010 the Corporation recorded a liability related to the acquisition of
geological information from the government of Kazakhstan ("Historical Data").
This Historical Data was acquired by a previous owner of the Saga Creek licenses
for a cost of $0.1 million. The indicative cost incurred by the Government of
Kazakhstan at that time was $15.8 million. Effective January 1, 2009 the
Government of Kazakhstan enacted legislation that required those companies that
had acquired the Historical Data to begin paying to the Government of Kazakhstan
the unpaid amounts beginning on January 1, 2009 in equal quarterly installments
over ten (10) years. International Financial Reporting Standards require that
because the liability is to be paid over a ten year period, the Corporation must
discount the obligation and record the discounted amount in the books of the
Corporation. The discount will be amortized to finance expenses on the income
statement over the life of the liability. The discounted liability associated
with the provision for Historical Data at March 31, 2011 is $14.1 million of
which $9.2 million has been recorded as non-current. A discount rate of 3.2% was
used to determine the amount of the liability. The undiscounted value of the
liability is $15.7 million.
While the Corporation has recorded the obligation in its financial statements,
it is the opinion of the Corporation that it is not liable for the liability as
the obligation is not recorded in the contract governing foreign investment
which details the Corporation's rights and obligations associated with its
licenses.
In late 2010, as the result of an audit of Saga Creek by the Kazakhstan tax
authorities, the Government of Kazakhstan assessed Saga Creek for liabilities
associated with the Historical Costs together with unpaid Mineral Extraction Tax
as well as disallowing certain income tax deductions. The Corporation filed a
claim in the Specialized Interdistrict Economical Court of the Akmola Oblast in
Kazakhstan seeking to have the decision of the tax authorities reversed together
with related interest and penalties. While Alhambra believes that its position
is defendable, there is a high risk that it will not be successful in the
Kazakhstan courts and as such continues to accrue the estimated negative effect
of the assessment. On May 13, 2011 the judge in charge of the case, largely but
not wholly, rejected the Corporation's claim, upholding the assessment. The
Corporation has not been able to obtain the reasons behind the decision however
believes that its case is still valid and plans to appeal this decision to the
next level of the court. Should the Corporation ultimately be successful, either
wholly or in part, in its appeal, the amounts accrued related to those
successful elements will be reversed at that time.
CAPITAL AND EXPLORATION PROGRAMS
In the first quarter of 2011, Alhambra spent $0.5 million in capital
expenditures on Saga Creek's mining projects of which more than 90% was spent on
exploration, the remainder on equipment, the details of which are described
below.
During the three months ended March 31, 2011, Alhambra completed 3,864 m of
exploration drilling which was concentrated on two of its three advanced
exploration projects, the Uzboy Gold Deposit ("Uzboy") and Shirotnaia. At Uzboy,
drilling was targeted at increasing the oxide and sulphide resources, while at
Shiortnaia a new exploration program was initiated aimed at drilling a
prospective area between the Main and Southern zones which is accessible only in
winter because of swampy ground conditions.
At the same time, interpretation of the 2010 results continued and the
development of the 2011 exploration program was initiated.
In addition, the second and third batches of samples totaling 12,448 samples
were shipped to the Kyrgyzstan laboratory. They included the following samples:
-- Uzboy - 3,927 core,
-- Dombraly - 4,115 core, reverse circulation ("RC") and rotary air-blast
("RAB"),
-- Shirotnaia - 2,554 RC,
-- Zhanatobe - 493 RAB,
-- Vasilkovskoe East - 186 soil and 62 rock chip,
-- North Balusty - 1,111 hydro-core lift ("KGK").
UZBOY GOLD DEPOSIT
A core drilling program continued at Uzboy, targeting both additional oxide
resources along the strike of the known ore bodies and sulphide resources at
deeper levels of the deposit. Fourteen core holes amounting to 2,757 m were
drilled in the first quarter of 2011. All the holes intercepted intervals of
strongly deformed, altered, silicified rock carrying sulphide mineralization.
Core from 21 holes was cut and sampled during this period. In total, 2,726
samples were taken and 3,927 samples were sent to the Kyrgyzstan laboratory for
analysis. Results from the assays of 323 samples from a 285 m deep hole at West
Uzboy were received and they are very encouraging. This hole returned several
mineralized intercepts with the most important being 9 m @ 3.34 g/t gold ("Au")
from 218.2 m and 28.1 m @ 0.96 g/t Au from 250.6 m including 10.0 m @ 1.67 g/t
Au from 250.6 m. This hole increases the southern mineralized zone in the West
Uzboy zone by more than 50 m along the dip.
SHIROTNAIA
At Shirotnaia, a new core drilling program was completed during the first
quarter of 2011, targeting new mineralized zones under a boggy surface where
drilling is possible only in winter. It included a total of six core holes
amounting to 1,107 m. Logging of the core from these holes demonstrated, in
addition to zones of intensive shearing and chlorite-sericite-pyrite
hydrothermal alteration, intervals of strong argillic alteration, silicification
and massive pyrite which, according to the Corporation's 2010 experience and the
petrologic study results, may indicate high gold mineralization. A total of
1,199 core samples were taken from these holes and will be shipped to the
Kyrgyzstan laboratory once an export permit has been obtained from the
Kazakhstan regulatory authorities.
In addition, a geochemical study was done based on the results of fire assay and
an Inductively Coupled Plasma ("ICP") analysis (suite of 34 elements) of the
samples taken from diamond drill holes DDH 32-02 and DDH 100-02 drilled in 2010.
The main conclusions made as a result of this study are that gold is mostly
concentrated at the latest stage of a long lived hydrothermal system that has
produced significant volumes of mineralization that probably has been preserved
un-eroded. This conclusion was later confirmed by the petrologic study of thin
and polished sections collected from the same holes and completed in April.
During the first quarter of 2011, a geological map of Shirotnaia was also
completed.
In April and May of 2011, Alhambra's exploration program continued at Uzboy and
Shirotnaia along with interpretation of new assay results.
UZBOY GOLD DEPOSIT
At Uzboy, a core drilling program targeting the deep sulfide mineralization was
completed. In total, five core holes amounting to 1,568 m were drilled. The last
holes confirmed the continuation to depth of previously established zones of
hydrothermal alterations, quartz veining and pyrite impregnation. The entire
core was sampled and 781 samples have been prepared for export. Some assay
results from the Uzboy shallow holes targeting the oxide mineralization were
received from the Kyrgyzstan laboratory in May, but more samples will have to be
sent and analyzed to be able to properly interpret the results.
SHIROTNAIA
All assay results from the Shirotnaia RC drilling program completed in 2010 were
received in April. In 34 of 43 holes drilled, numerous broad intervals of
anomalous gold concentrations (for +0.15 g/t) were intersected (see news Release
dated April 28, 2011). The best high-grade intercept was returned by hole RCS
60-02 and it was 16 m @ 1.23 g/t Au in oxide mineralization starting from the
surface. All intercepts expanded the area of gold mineralization defined by
previous core drilling, established a link between successful core holes drilled
in 2007 and 2010 and provided the Corporation with additional information
concerning the geometry of the mineralization. New analysis of the results of
the RC program, together with the entire data of the previous core, KGK and RAB
drilling programs, strongly suggest the presence of four high grade (generally +
1.0 g/t Au), almost parallel zones of gold mineralization. The strike length of
the four zones is about 1.8 kilometres ("kms") long and open at flanks. The
individual zones are usually 15 to 30 m wide but sometimes they form much wider
zones. Based on this new exploration model, a recommended drilling program was
developed for 2011 comprised of 45 core and 33 RC holes totaling approximately
5,770 m. The drilling of the core holes started in May 2011.
DOMBRALY
Interpretation of the Dombraly assay results outlined four new zones of gold
mineralization (see News Release dated May 19, 2011) - three parallel zones to
the south of the open pit and one to the north of the open pit. As a result, the
strike length of the mineralization on the southern side has been extended by
300 m as compared to the area previously explored by core holes. The width of
these mineralized zones is up to 7 m as most of them are represented by shallow
oxide mineralization where gold grades vary from 0.1 to 7.8 g/t. It is possible
that at least one of the zones could extend further to the south. From the
northern side of the open pit, a new blind (not outcropping on the surface) zone
of sulphide gold mineralization was established. The length of the zone is
estimated to be more than 100 m and open to the north. Its total width is from 9
to 14 m and along the dip the zone is traced up to 250 m. The gold grades vary
from 0.13 to 10.3 g/t.
ZHANATOBE
During this period, the new 2011 exploration program for Zhanatobe was
developed. The recommended program includes drilling approximately 11,830 m as
follows: 8,560 m of RAB drilling (856 holes), 720 m of core drilling (3 holes)
and 2,550 m of RC drilling (17 holes).
OBJECTIVES FOR 2011
Completion of the 2010 drilling program was pushed well into 2011. This combined
with export delays of more than 11,800 drill samples due to new export law and
procedures lead to significant delays in receiving drill assay results. The
assays for the 2010 drilling program are expected to be totally completed within
the second quarter of 2011.
Due to the late completion of the assaying and interpretation of the drill
samples, the updated Uzboy National Instrument ("NI") 43-101 compliant resource
report and Preliminary Economic Assessment (i.e. Scoping Study) Reports have
been delayed. Both reports will be completed as early as possible. The initial
NI 43-101 compliant resource reports for both Dombraly and Shirotnaia are still
anticipated to be completed by year-end 2011. Assay results will be released
when received and interpreted.
During 2011, Alhambra is planning to significantly accelerate the development of
its advanced exploration projects of Uzboy, Shirotnaia and Dombraly. The
Corporation also anticipates advancing numerous early stage exploration projects
and assessing a number of other gold targets of anticipated high potential over
its vast mineral license area.
Alhambra anticipates implementing a development and exploration program of up to
$7.5 million, subject to sufficient cash flow and suitable financing. The main
focus will continue to be on Uzboy, Dombraly and Shirotnaia with continuing
resource development drilling and production development assessments, including
metallurgical and gold recovery tests.
Alhambra will continue to position itself for continued growth and to create
growing wealth for its shareholders through the ongoing exploitation of its vast
exploration and development license.
It is also the goal of Alhambra to complete a listing on an Asian stock
exchange. The rationale behind the Corporation's desire for such a listing is
that, while it is an expensive and time consuming exercise, it is believed that
such a listing will provide Alhambra with increased market liquidity and give
the Corporation access to significant financial resources in an area of the
world that the Corporation believes has a significant interest in precious metal
investments combined with an interest in and understanding of investing in
Kazakhstan.
UNAUDITED FINANCIAL STATEMENTS AND MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A")
The Corporation's first quarter 2011 financial statements and MD&A are available
on the Corporation's website, can be obtained on application from the
Corporation and are available under the Corporation's profile on SEDAR at
www.sedar.com.
ABOUT ALHAMBRA
Alhambra is a Canadian based international exploration and gold production
corporation celebrating its eighth year of operations in the Republic of
Kazakhstan. Alhambra holds exploration and exploitation rights to a 2.4 million
acre (9,800 km2), 100% owned, license called the Uzboy Project, located in the
Northern Kazakhstan Metallogenic Province which hosts numerous world-class gold
deposits. Over 100 mineral targets, including 5 advanced exploration plays are
contained within the Uzboy Project.
Alhambra common shares trade in Canada on The TSX Venture Exchange under the
symbol ALH, in the United States on the Over-The-Counter Market under the symbol
AHBRF and in Germany on the Frankfurt Open Market under the symbol A4Y. The
Corporation's website can be accessed at www.alhambraresources.com.
Elmer B. Stewart, MSc. P. Geol., a technical consultant, is the Corporation's
nominated Qualified Person. Mr. Stewart has reviewed the technical information
contained in this news release.
Forward-Looking Statements
Certain statements contained in this news release constitute "forward-looking
statements" as such term is used in applicable Canadian and US securities laws.
These statements relate to analyses and other information that are based on
forecasts of future results, estimates of amounts not yet determinable and
assumptions of management. In particular, completing the 2010 assays within the
second quarter of 2010, availability of capital to fund the anticipated 2011
projects, completing a listing on an Asian stock exchange, and other factors and
events described in this news release should be viewed as forward-looking
statements to the extent that they involve estimates thereof. Any statements
that express or involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as "expects" or
"does not expect", "is expected", "anticipates" or "does not anticipate",
"plans, "estimates" or "intends", or stating that certain actions, events or
results "may", "could", "would", "might" or "will" be taken, occur or be
achieved) are not statements of historical fact and should be viewed as
"forward-looking statements". Such forward looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Corporation to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks and other factors
include, among others, ability to complete the 2010 assays within the second
quarter of 2010, availability of capital to fund exploration and production
development projects, ability to complete a listing on an Asian stock exchange;
political, social and other risks inherent in carrying on business in a foreign
jurisdiction and such other business risks as discussed herein and other
publicly filed disclosure documents. Although the Corporation has attempted to
identify important factors that could cause actual actions, events or results to
differ materially from those described in forward-looking statements, there may
be other factors that cause actions, events or results not to be as anticipated,
estimated or intended. There can be no assurance that such statements will prove
to be accurate as actual results and future events could vary or differ
materially from those anticipated in such statements. Accordingly, readers
should not place undue reliance on forward-looking statements contained in this
news release.
Forward looking statements are made based on management's beliefs, estimates and
opinions on the date the statements are made and the Corporation undertakes no
obligation to update forward-looking statements and if these beliefs, estimates
and opinions or other circumstances should change, except as required by
applicable law.
This news release contains forward-looking statements based on assumptions,
uncertainties and management's best estimates of future events. When used
herein, words such as "intended" and similar expressions are intended to
identify forward-looking statements. Forward-looking statements are based on
assumptions by and information available to the Corporation. Investors are
cautioned that such forward-looking statements involve risks and uncertainties.
Actual results may differ materially from those currently anticipated. The
forward-looking statements contained herein are expressly qualified by this
cautionary statement.
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