ALTYN PLC: Final Results

TIDMALTN

AltynGold Plc

("Altyn" or the "Company")

Results for the year ended 31 December 2020

AltynGold Plc (LSE:ALTN) an exploration and development company, is pleased to announce its results for the year ended 31 December 2020.

Highlights

Financial highlights

-- Turnover increased in the year to US$30m (2019: US$14.9m).

-- 16,535oz of gold sold (2019: 10,500oz), an increase of 57%.

-- Average gold price achieved (including silver), US$1,816oz, (2019: US$1,390oz).

-- The Company made a profit before tax of US$3.3m (2019: loss US$1.04m).

-- Adjusted EBITDA (Earnings before interest, tax, depreciation and amortisation) of US$13.5m (2019: US$3.3m).

-- The Company finalised the listing of the balance of the US$10m 9% bonds on the Astana International Exchange (AIX).

-- The balance of the facility with JSC Bank Center Credit of US$8m was drawn down during the year.

-- A share placing with JSC Freedom Finance raised US$1.5m in the year.

-- New facility taken out in December 2020 with Bank Center Credit of US$5.5m, (2.3bln Tenge), of this US$973,000 was drawn down before the year end.

Operational highlights

-- Gold poured 17,028oz, (2019: 10,537oz) a 61% increase year-on- year.

-- Mined gold grade 1.57g/t, (2019: 1.92g/t), decreased due to ore dilution - new equipment is now increasing to the target grade.

-- Operating cash cost US$800/oz, (2019: US$854/oz).

-- Gold recovery rate 80.44% (2019: 82.31%).

Underground development & exploration

-- Subsoil use contract at Sekisovskoye extended to July 2029.

-- Production of test ore at Teren-Sai, average grade 1.8g/t at 81% recovery.

-- Total 5,657 linear metres developed at Sekisovskoye.

-- Transport declines further developed, decline No.1 352 linear metres, decline No. 2 353 linear metres.

-- 750,000t of ore made accessible from declines 1 and 2.

-- Areas No.1, 2 and new Area 5 developed in Teren-Sai - drill holes and core samples extracted,

Annual General Meeting

The Annual General Meeting of the Company will be held at Langham Court Hotel, 31-35 Langham Street, London W1W 6BU, United Kingdom on Thursday 24 June 2021 at 11.00am. Due to the current COVID-19 situation if the timing location or other details change the Company will notify shareholders as appropriate.

The details of the resolutions are given in the Annual Report which will be available on the website in due course.

For further information please contact:

 
AltynGold Plc 
Rajinder Basra, CFO     +44 (0) 207 932 2456

AltynGold Plc (LSE: ALTN) is an exploration and development company, which listed on the main market segment of the London Stock Exchange in December 2014. To read more about AltynGold Plc please visit our website www.altyngold.uk

CHAIRMAN'S STATEMENT

This year has been very different for many reasons, the effects of the COVID-19 pandemic have been felt around the world, causing economic and social havoc. One year later the crisis is still ongoing, with governments, companies and individuals still facing uncertainty on how the pandemic will evolve and its aftermath.

From our perspective as a mining Company focused on mining operations in Kazakhstan, we have been insulated to a large extent from the fallout of the pandemic, as mining operations were a protected industry and the Company has been able to continue to operate throughout the pandemic. While cooperating with the authorities, the Company has quickly adapted its new operational working practices to ensure that the staff were able to continue working in a safe environment at the mine site, organising special shift patterns for production. Office workers at both the mine site and head office were largely able to work remotely, as the lock down has eased the staff were able to resume their duties at the offices during March 2021. The country is still organising measures to contain the transmission of COVID-19, and in April 2021 a limited lockdown was introduced in the country. The imposition of the most recent lockdown has not resulted in any issues in relation to the current operations of the Company.

Supply chains and the important sale of dore to the refinery were carefully monitored and potential issues resolved as soon as they arose.

Against this background the Company managed to grow, attracting funding from a range of sources and delivering on its capital investment plan. The resultant increase in production combined with the favorable gold price led to a substantially higher revenue stream.

While the gold price has increased given its hedge characteristic against the downturn in the global outlook for economies, a higher gold price level should be sustained by the expectation of increased inflation levels resulting from global monetary policies that are increasing the money supply, and a deteriorating fiscal outlook. With the production levels budgeted to increase, the management is upbeat about the Company's future growth outlook.

With its strong financial position and additional funding raised, the Company has also continued its exploration program at Teren-Sai. The test production run as reported in the RNS news release in 2021 yielded good results in terms of grade, and the expected low cash cost of production will have a positive impact on the results of the Company in the future.

In summary against the backdrop of uncertainty caused by the COVID-19 crisis the Company has managed to emerge in a much stronger position at the end of the year. It has secured its required level of funding, utilising it to good effect as demonstrated by the increased production levels. The Board has also been strengthened by the appointment of a new non-executive director Thomas Gallagher who will bring important qualities and experience to the team, and we welcome him to the Company.

I would like to conclude with a heartfelt thank you to all the staff from the top management and to those who only work on a part-time basis for their dedication to the Company and support in minimising the effect of the pandemic on our business.

Kanat Assaubayev

Chairman

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview

The Company has been able to implement its medium term plan, following successful rounds of financing completed in late 2019 and 2020. As such, a significant amount of underground plant and equipment (details below) has been purchased leading to a 98% increase in ore extraction in the year to 505,000t. Timely maintenance of the processing plant and the overhaul of other equipment allowed a swift increase in processed ore which grew 82% from 231,000t to 420,000t leading to a 61% increase in gold produced from 10,537oz to 17,028oz. With the introduction of more specialised drilling rigs in 2021, the Company is also targeting a lower level of dilution of extracted ore which should result in a noticeable improvement of grades in Q2 2021.

Due to careful planning and co-operation with the relevant authorities there was little impact on the operations of the Company from COVID-19. Indeed, the trend and momentum of production at Sekisovskoye continue to be very encouraging. These positive developments set the stage for the company to achieve its first major target of 850,000t ore extraction per annum.

The Company has also invested additional funds to expand the exploration program at Teren-Sai. The Teren-Sai area is large, covering in excess of 198km which the Company has split this into a number of areas. After initially concentrating on Area No.2 the Company has now expanded its exploration programs into Areas No. 1 and 5.

Commentary on results

Sekisovskoye underground mine

Plant and equipment

There was a significant investment in plant and machinery during 2020 and to date in 2021, these are summarised below:

-- Front-end loader ZL 50G

-- Dump truck 25t Chaicman

-- Material handling trucks CAT R1300 - 3 units

-- Underground haulers CAT AD30 - 3 units

-- Face drilling rig Atlas Copco T1D

-- Ring drilling rig Atlas Copco T1D

-- Exploration drilling rig Atlas Copco Diamec U4

-- Boomer T1D drilling rig with a capacity of 400m/month

-- Boomer T1D long-hole production drill

-- Diamec U4 Smart exploration drill rig

-- JSB Crawler with a capacity of 1.8cu.m

-- Korfmann AL18-2500 ventilator with a capacity of 100m3/s

-- Lupamit LKV 250 compressors, each compressor with a capacity of 45m3/min

-- 100 CFO flower heaters

The following was achieved with regards to the underground mine in the year:

-- There was a substantial development of tunneling amounting to 5,657 linear metres, including 353 metres on transport decline No 2 allowing access to 640,000 tons of reserves at levels +161, +164 and +178; and 352 metres on transport decline No 1 allowing access to 110,000 tons at levels +150 and +163.

-- With the purchase of heaters, compressors and a Korfman AL18-2500 ventilator, the company was able to complete necessary works on the main ventilation shaft required for the continuation of operations until 2029 in line with the mine plan.

-- Thanks to additional equipment, ore stockpiles were increased substantially at portal No 2, allowing for an increase in the daily ore production to 1,800t/day.

-- In addition to 48,000m3 of back and cavity filling, works are ongoing for the development of the general site including renovation and expansion of the offices and other amenities.

-- Ore mined at Sekisovskoye during 2020 was 506,000t (2019: 255,000t), with the new equipment on site this is budgeted to increase.

-- The average gold grade was 1.58g/t (2019: 1.76 g/t) in line with the Company budget. The average grade for the year was affected by lower grades during Q1 at 1.49g/t (1.43g/t budgeted) due to high level of developmental ore. The introduction of additional equipment in particular the Boomer T1D LHD drilling rigs has led to a steady improvement in grades to its current level of 1.75g/t. Further improvement expected in the future as more ore bodies become accessible.

Exploration -- Teren-Sai

The Teren-sai exploration program has been expanded and accelerated during 2020. The Company views the site as a very valuable asset that will add substantially to the production capacity of the Company once it is fully functional.

In area No.2 the Company continued pneumatic drilling conducting 16 profiles for verification analysis against existing data. Additional drilling was also carried out to fully delineate the extent and boundaries of the ore body resulting in 14 completed drill holes and 4,183m drilled meterage.

 
Mining results ore extraction 
                         2020     2019 
Ore mined          T     506,050  255,134 
Gold grade         g/t   1.57     1.92 
S ilver grade      g/t   1.08     1.37 
Contained gold     oz    25,555   15,760 
Contained silver   oz    17,525   11,239 
 
 
Mining results processing 
                         2020     2019 
Crushing            T    421,040  239,046 
Mining              T    420,256  230,966 
G old grade         g/t  1.58     1.76 
Silver grade        g/t  1.13     1.37 
Gold recovery       %    80.44    82.31 
S ilver recovery    %    72.81    69.88 
Contained gold      oz   21,355   12,981 
C ontained silver   oz   15,253   9,819 
Gold Poured         oz   17,028   10,537 
Silver poured       oz   11,180   6,760 
 
 
Projected capital expenditure - Sekisovskoye 
                                      Total   2021   2022 
                                       US$m    US$m   US$m 
Prospect drilling                     1.7     0.9    0.8 
Underground development               6.8     4.5    2.3 
Infrastructure                        0.1     --     0.1 
Ore handling facilities               3.7     3.4    0.3 
Process plant incremental expansion   3.4     2.6    0.8 
Total                                 15.7    11.4   4.3

In order to build up a reliable profile of the site, verification results are being constantly mapped against existing data. During 2020 the Company successfully processed the first batch of test ore amounting to 1,794t, resulting in an average grade of 1.8g/t and a recovery rate of 81%. These were very encouraging results and a significant step in moving forward with the project. It is expected that the initial extraction of ore will be via open pit workings, with the use of some of the existing open pit equipment which has been mothballed at Sekisovskoye, and further equipment being purchased as necessary. The ore extracted is expected to be processed by a separate plant to be built at Teren-Sai, thus avoiding transport costs to Sekisovskoye and keeping the unit cost of production at a reasonable level.

In addition to Area No.2 exploration work was expanded to Area No.1 and new zone identified as Area No.5. In Area No.1, 13 prospective drilling profiles were conducted, the analysis of the results was encouraging and further core drilling is to be undertaken in 2021. In relation to Area No. 5, the meterage drilled was 3,886m with 17 drill holes which identified 11 ore intersections. Sampled grades over four of the holes ranged from 1.4g/t to 2.4g/t and further work is planned in this area in 2021.

The Company also commenced topographic work over 50km2 to gain a better understanding of the site and the potential to develop the area, the work will be completed during 2021.

Capital requirements

The capex requirements for the next two years are detailed in the table below. The budgeted plans foresee the Company expanding ore extraction and production to 850,000t to per annum for Sekisovskoye, and the development of its prospective resource at Teren-Sai. The Company is constantly reviewing and refining its plans to adapt to changing circumstances.

Longer term plan

The long term plan still consists in operating the Sekisovskoye Mine at 850kt annual capacity for three years then ramping up production to 2Mtpa over a six year period. The initial target is an important milestone and with the purchase of the new equipment this is now progressing as planned. The longer term plan involves obtaining further funding and the Board is constantly looking at the best way to finance the business going forward. In this regard, the Company has recently appointed Renaissance Capital to operate as a Corporate Broker as well as produce independent research on the Company in order to increase its profile with potential investors. In order to achieve the longer term goal outlined, the Company has estimated that it will require an initial funding of US$40m-US$50m to attain 1Mpta target. Further funding will be required for the secondary 2Mpta target.

Mining operations at Teren- Sai are planned to run in parallel to Sekisovskoye development and will initially include surface mining at Area No.2 before moving underground at a later stage. It is envisaged that at the initial costs of open pit operations can be kept low by making use of the existing equipment as far as possible. The significant expenditure relates to the planned Teren-Sai processing plant which will be a conventional carbon-in-leach ("CIL") gold recovery plant, similar to the existing one at the neighbouring Sekisovskoye Mine.

FINANCIAL PERFORMANCE

Key performance indicators (KPIs)

 
Annual gold sales (oz) 
16,535oz 
2020   16,535 
2019   10,500 
2018   14,990 
 
 
Annual gold poured (oz) 
17,028oz 
2020   17,028 
2019   10,537 
2018   15,282 
 
 
Reveune (US$m) 
US$30m 
2020   30.0 
2019   14.9 
2018   19.4 
 
 
Operating cash cost of production (US$oz) 
US$800oz 
2020   800 
2019   854 
2018   865 
 
 
Adjusted EBITDA (US$m) 
US$13.5m 
2020   13.5 
2019   3.3 
2018   0.9 
 
 
Net assets (US$m) 
US$35.3m 
2020   35.3 
2019   33.3 
2018   34.9

The Company raised significant funds in the year, mainly bank borrowings and a bond placement on the Astana International Exchange. The raised funds have mainly been used for the purchase of new underground equipment, infrastructure and capital development at Sekisovskoye, exploration drilling at Teren-Sai and funding expanded working capital requirements.

In terms of output, the investment in the new equipment and the refurbishment of plant and machinery has had a direct and immediate effect on production levels in the year. Gold poured has increased by 61.6% from the prior year to 17,028oz the highest it has been for a number of years. Budgeted levels in the forthcoming periods are set to increase further as the full effect of the investments made flow through.

During 2020, the Company sold 16,535oz of gold (2019: 10,500oz). The average price achieved per oz in 2020 was US$1,816 (2019: US$1,390) a significant uplift from the prior year. While consensus analysts' forecasts expect the gold price to remain in the region of US$1,800 the Company conservatively uses a lower price of gold in its forward modelling. Further, the outlook for the business is expected to remain positive given the anticipation of dollar strength against the local currency in which a significant level of expenses are payable.

There were no changes to the sales off-take agreement currently in place with the Kazakh national refinery, which continues to take all of the Company's output. As in the prior year, sales are translated at the spot US$ market rate at the point the gold is sold.

The total cash cost of production, which includes administrative costs but excludes depreciation and provisions, amounted to US$970/oz, (2019: S$1,104oz). The operating cash cost excluding administrative costs amounted to US$800/oz (2019: US$854/oz). The cash cost of production is expected to fall in future periods with expanded economies of scale and improved grades. The administrative costs are being closely monitored and there has only been a small increase from the prior year, which is expected to be maintained in future periods.

The Group has reported a net profit of US$3.3m before tax (2019: loss US$1.04m) with a gross profit of US$11.9m (2019: US$2.5m), this was after a one off charge in the year relating to a share based payment of US$2.4m in connection with share options issued. While the increase in gold price of 30% had a positive effect, the principal driving factor for the increase in profitability was the 57% increase in output. The adjusted EBITDA increased to US$13.5m (2019: US$3.3m) after adjusting for depreciation of US$3.9m (2019: US$3.4m), and the share based payment noted above. The operating profit as a consequence rose to US$7.2m (2019: US$0.0 Statement by the directors in performance of their statutory duties in accordance with s172 (1) Companies Act 2006.25m). Net profit has been reduced by the effect of the borrowing costs which increased from US$1.2m to US$2.3m. The effect of foreign exchange losses in the subsidiaries also had the effect of decreasing profits, in 2020 this is US$1.5m (2019:US$116,000 gain), principally as a result of the revaluation of the borrowings.

Management are keenly aware that funding should be on the most attractive terms and are exploring new avenues to achieve this.

Cash at year-end was US$7.2m (2019: US$1.9m), the increase was driven by fund raising, including the issue of shares for a consideration of US$1.5m in the year. Current resources are sufficient to meet the current working capital requirements and purchase of capital equipment in the current budget. In December 2020 the Company agreed additional bank facilities with Bank Center Credit of US$5.5m, of this amount US$1.9m is available to fund working capital and the balance will be used for investment into new machinery. Of this facility US$1.0m was drawn down in December 2020.

The main financing commitments during the year were payment of interest on the bonds and repayment of principal and interest on the bank borrowings, in total these amounted to US$4.1m in 2020 (2019: US$1.4m).

The consolidated net assets of the Group are US$35.3m (2019: US$33.3m).

During the year the Company operated successfully through the restrictions and lock downs as stipulated by the Kazakh authorities and is pleased to confirm it safely guarded the wellbeing of its staff. The Government imposed a number of lockdowns beginning in March 2020 ranging from a full national lockdown and containment of the major cities to less stringent limited ones that are currently operating. The Company experienced minimal operational disruption from the COVID-19 pandemic that commenced in 2020 and expects operations to continue uninterrupted.

CONSOLIDATED INCOME STATEMENT