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Orsu Metals Corp (2)
Symbol OSU
Shares Issued 182,696,049
Close 2015-03-24 C$ 0.02
Market Cap C$ 3,653,921
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Orsu Metals loses $5.32-million (U.S.) in 2014

2015-03-27 12:56 ET - News Release

Dr. Sergey Kurzin reports

ORSU METALS CORPORATION ANNUAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2014 (AUDITED)

Orsu Metals Corp. has released its audited annual results for the year ended Dec. 31, 2014.

A full management's discussion and analysis of the results, and audited consolidated financial statements for the year ended Dec. 31, 2014, will soon be available on the company's profile on SEDAR and on the company's website. Copies of the MD&A and financials can also be obtained upon request from the company secretary.

The financials have been prepared in accordance with applicable international financial reporting standards, as issued by the International Accounting Standards Board.

All amounts are reported in United States dollars unless otherwise indicated. Canadian dollars and British pounds sterling are indicated as such.

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.

2014 highlights

In January and February, 2014, the company announced the expiry of an exclusivity agreement with David-Invest LLP, a Kyrgyz-registered company, and David Way Ltd., a Hong Kong-registered company, for the potential sale of the Akdjol-Tokhtazan project. This followed a previously announced and separate exclusivity agreement with David-Invest, which expired on Dec. 31, 2013.

In April, 2014, the company announced that it had entered into an exclusivity agreement with the potential buyers which expired on July 1, 2014, after receiving a $300,000 non-refundable deposit. Thereafter, in September, 2014, the company announced that it had received a further $100,000 non-refundable deposit and had entered into a new exclusivity agreement with the potential buyers with a view to the potential sale of the Akdjol-Tokhtazan project. Under the terms of the exclusivity agreement, announced in September, 2014, the potential buyers were granted the exclusive right to purchase the Akdjol-Tokhtazan project until Feb. 4, 2015, conditional upon the potential buyers making four further non-refundable deposit payments in the amount of $100,000 on or before each of Oct. 4, Nov. 4 and Dec. 4, 2014, and Jan. 4, 2015 (see below).

In August, 2014, the company announced that Kogodai JV LLP, an entity registered in Kazakhstan, had been granted the exploration licence for the Kogodai project. The exploration licence for the Kogodai project was transferred from SPK Ertis JSC, a Kazakh state-owned special enterprise company, to Kogodai JV in which the company's 63.75-per-cent-owned subsidiary, Orsu Metals Kazakhstan LLP, has a majority 80-per-cent interest and in which SPK Ertis has a 20-per-cent minority interest, giving Orsu an effective 51-per-cent interest in Kogodai JV. Under the terms of the exploration licence granted to Kogodai JV, the exploration licence is for a period of five years, which can be extended according to the legislation of Kazakhstan, and has a minimum financing obligation for exploration work at the Kogodai project of an aggregate of $3.75-million over five years which will be financed by the company.

In September, 2014, the company announced that it had suspended joint exploration work at the Balkhash project with Asem Tas-N LLC, a privately owned Kazakh-registered company and holder of a licence area in eastern Kazakhstan, which is host to a 30-kilometre-long Dzharyk-Taisogan cluster of copper-polymetallic occurrences. This followed a previous announcement in March, 2014, when the company entered into an exclusivity agreement with Asem Tas, ending in July but subsequently extended to September, 2014, and agreed to fully finance an exploration program for a total of $500,000 of expenditures. After an extensive assessment of the results of the exploration program financed by Orsu, the company determined not to exercise the option to purchase an interest in the Balkhash project on the terms set out in the exclusivity agreement announced in March, 2014. Based on the geological results and the geopolitical situation in the region, the company was unwilling to commit further funds toward the next stage of exploration in order to secure a further exclusivity period. The company has no residual financing obligation as a result of this decision.

In October, 2014, the company announced that pursuant to the terms of the exclusivity agreement in September, 2014, with the potential buyers, the company did not receive the first of the non-refundable deposit payments of $100,000 due on or before Oct. 4, 2014, and as a result, the exclusivity agreement with the potential buyers lapsed (see below).

In November, 2014, the company announced that it had entered into a new exclusivity agreement with the potential buyers for the sale of the Akdjol-Tokhtazan project, following the lapse of the previous exclusivity agreement in October, 2014. Pursuant to the terms of the Akdjol-Tokhtazan exclusivity agreement, the potential buyers were granted the exclusive right to acquire the Akdjol-Tokhtazan project until April 7, 2015, for a gross consideration of $5-million less the previous non-refundable deposits totalling $400,000 paid in 2014 by the potential buyers, conditional upon the potential buyers continuing to finance the costs of maintaining the Akdjol-Tokhtazan project licences.

In December, 2014, the company announced the results of a 457-metre drilling program at the Kogodai project for mineralized intercepts at 0.3-per-cent-cut-off copper.

Postyear-end highlights

In January, 2015, the company announced that Christopher Power, the company's technical director, would leave the company by mutual consent on April 30, 2015.

In March, 2015, the company announced that pursuant to a review of a mandate announced on July 31, 2012, by UniCredit Bank Austria AG and Barclays Bank PLC, the company was notified by UniCredit and Barclays that the mandate had formally lapsed with immediate effect in accordance with their internal policies and protocols. The company had appointed UniCredit and Barclays as co-ordinating mandated lead arrangers under the mandate to use commercially reasonable efforts to arrange a project finance facility of up to $90-million to finance the company's Karchiga project in Kazakhstan. UniCredit expressed a willingness to maintain contact with the company in relation to potentially participating in any future financing of the Karchiga project, without any formal commitment on its part. Any new mandate with UniCredit and/or any other potential participants would be subject to new approvals being obtained at the relevant time, and any final financing would be similarly dependent upon commercially acceptable terms being agreed and upon all necessary approvals being obtained. Barclays is no longer active in the market, as a result of having withdrawn from base metal trading as part of a refocus of its commodities business in 2014.

Executive chairman's statement

"The economic environment during 2014 continued to be a challenging environment in which to secure financing for the development of exploration assets, as providers of equity and debt finance remained cautious of investing in the natural resources sector, especially junior mining companies, or focused on alternative investment opportunities, which also adversely affected the company's share price. The impact of this was that the company continued to be unable to secure the financing package required for its most advanced project, the Karchiga project, and as a result, the formal mandate with Barclays and UniCredit to secure debt finance for up to $90-million lapsed. In addition, since the second half of 2014, global oil prices have dropped by 50 per cent which began to have an adverse impact on copper prices since the start of 2015. However, against a backdrop of global macroeconomic and geopolitical factors outside of the company's control, I and the management team of Orsu believe that the long-term financial outlook for copper prices remains encouraging, as demand for copper begins to outstrip supply, and with the current portfolio of projects, the company will be in a good position to benefit from this.

"Within the context of the economic climate, during 2014, the company was able to continue to fund its exploration activities, and remains in a strong position to develop new and existing exploration licences. It achieved this by focusing on three objectives, which were to acquire and develop new exploration licences of potential in Kazakhstan, continuing to try to secure the necessary financing required for the Karchiga project, and to consolidate and to try to improve the company's cash financial position, through the potential disposal of its Akdjol-Tokhtazan project and the continued reduction of the company's cost base.

"I am pleased to report that in August, 2014, the company completed the transfer of the exploration licence for the Kogodai project to its subsidiary Kogodai JV LLP. I and the management team of Orsu believe that, subject to the results of planned exploration being positive, the Kogodai project licence area should complement the Karchiga project. Although immature from an exploration point of view, the results of the 2014 work program and historical exploration work at the Kogodai project have identified promising mineralized intervals with development potential, which warrants further exploration during 2015.

"In relation to the Karchiga project, whilst it is disappointing that the formal mandate with Barclays and UniCredit has as now lapsed, I and the management team of Orsu remain committed to securing a solution for the Karchiga project. During 2014, the project continued to attract interest, and although no solutions have yet been found, I and the management team of Orsu continue to seek to secure financing for the project and to also look in parallel at alternative options to progress the project. The company is continuing to have ongoing discussions with UniCredit to secure a new financing agreement on an informal basis for the construction of a mine and processing facilities, as well as discussions with other providers of debt and equity finance, in order to progress the development of the Karchiga project.

"In September, 2014, after an extensive assessment of the results of a drilling program, the company decided to discontinue further work at the Balkhash project. Based on the geological results, the company was unwilling to commit further funds towards the next stage of exploration or to exercise its option to purchase a stake in this venture.

"A key financial objective, initiated in 2013 and continued during 2014, was to achieve a significant reduction in overall expenditures, which was especially important given there was no significant cash income during 2014. I am pleased report that the company achieved an overall reduction in year-on-year losses of $500,000 based on a loss of $5.3-million for 2014 compared to a loss of $5.8-million for 2013. In addition, the company achieved an overall year-on-year savings in cash expenditures of approximately $3-million used for administration and exploration expenditures, as set out in the audited consolidated financial statements.

"The company's cash balance as at the end of 2014 was $7.6-million. As a result of steps taking during 2013 and 2014 to preserve the company's cash assets, with a strong team of directors and management, Orsu continues to be in a strong cash position to meet its administrative and exploration obligations, and also be able to continue looking to acquire new exploration licences.

"With regard to the company's remaining asset in Kyrgyzstan, the Akdjol-Tokhtazan project, during 2014, the company received a total of $400,000 by way of non-refundable deposits from the potential buyers and subsequently entered into the Akdjol-Tokhtazan exclusivity agreement in November, 2014, including an option to purchase the project for $5-million. Against the backdrop of recent historic and ongoing political uncertainty in Kyrgyzstan, and with a limited pool of potentially interested parties, the company believes that the ongoing discussions with the potential buyers continues to represent the best possibility for an eventual sale of the Akdjol-Tokhtazan project.

"Over all, whilst it was disappointing that in 2014, despite continuing efforts, the company was not able to secure the full finance package for the development of the Karchiga project or conclude the sale of its Akdjol-Tokhtazan project, it did, however, succeed in expanding its project portfolio with the addition of the Kogodai project exploration licence and reduced its underlying core cost base, enabling it to commence exploration at the Kogodai project. I and the board of directors of the company remain committed to the long-term commercial potential of the company's projects and to securing the financing required for the Karchiga project, as well as continuing to look at potential new exploration properties when suitable opportunities arise and if resources permit.

"I would like to thank the staff and management of Orsu for their continued dedication and hard work, and to extend our thanks on behalf of the board to shareholders for their continued support, as we look forward to the remainder of 2015."

Dr. Sergey V. Kurzin, executive chairman

March 27, 2015

Financial results for the year ended Dec. 31, 2014

For the year ended Dec. 31, 2014, the company reported a net loss of $5.3-million, compared with a net loss of $5.8-million for the year ended Dec. 31, 2013.

In August, 2014, the transfer of the exploration licence for the Kogodai project to the company's newly formed subsidiary in Kazakhstan, Kogodai JV, was completed, and the company paid $152,700 as an initial contribution to the charter capital of Kogodai JV. The company had previously made cash payments in 2012 and 2013 for a total of $42,000 paid to the relevant authorities, previously expensed by the company, in relation to a subscription bonus due under the terms of the exploration licence, thereby the initial cash investment made by the company totalled $194,700. For the year ended Dec. 31, 2014, the company incurred $200,000 of exploration expenditures in relation to the Kogodai project which was mainly financed from the initial cash contribution of $152,700.

In November, 2014, the company entered into the Akdjol-Tokhtazan exclusivity agreement and had received during 2014 non-refundable deposits in total of $400,000 from the potential buyers which it recorded as a deferred income liability of $400,000 as at Dec. 31, 2014.

In September, 2014, the company announced that it had suspended joint exploration work with Asem Tas at the Balkhash project. In the year ended Dec. 31, 2014, the company incurred exploration expenditures at the Balkhash project of $700,000. The company incurred cumulative exploration expenditures from the fourth quarter of 2012 to Sept. 30, 2014, of approximately $3-million in relation to the Balkhash project. The company had no further financing obligations for the Balkhash project as at Dec. 31, 2014.

During the year ended Dec. 31, 2014, capitalized development expenditure in relation to the Karchiga project amounted to $200,000.

The net loss of $5.3-million for the year ended Dec. 31, 2014, consisted of: administrative costs of $3.2-million, legal and professional costs of $500,000, exploration costs of $900,000, a net foreign exchange loss of $200,000, a net loss of $100,000 in relation to the disposal group asset held for sale, and a writedown of $500,000 in relation to deferred finance costs. These losses were partially offset by an unrealized derivative gain in relation to share warrant liabilities of $100,000.

As at Dec. 31, 2014, the company had net assets of $21.5-million ($26.4-million as at Dec. 31, 2013), of which $7.6-million comprised cash and cash equivalents ($11.3-million as at Dec. 31, 2013).

Liquidity and capital resources

As at Dec. 31, 2014, the company's main source of liquidity was unrestricted cash and cash equivalents of $7.6-million, compared with $11.3-million as at Dec. 31, 2013.

The company's working capital needs as at Dec. 31, 2014, included the financing for its exploration and development activities, including its future expenditure obligations for the Kogodai project, its corporate and administrative expenditure requirements, and potential contributions toward project finance, if and when arranged, in relation to the Karchiga project, as deemed appropriate. The company expects to finance its working capital requirements for 2015, other than as set out herein for the Karchiga project, and be able to contribute toward the pursuit of future growth opportunities (which may include acquiring one or more additional assets), if and when such opportunities arise, from its unrestricted cash of $7.6-million as at Dec. 31, 2014, and potential net proceeds, if any, from the sale of the Akdjol-Tokhtazan project.

During the year ended Dec. 31, 2014, the net cash used by the company's operating expenditures was $3.7-million, compared with a net cash inflow of $1.5-million for the year ended Dec. 31, 2013 (set out in the consolidated financial statements as at Dec. 31, 2014). The minimum working capital the company estimates for the year is set out in an attached table.

          ESTIMATED WORKING CAPITAL REQUIREMENTS FOR 2015 ($000)

Estimated corporate and administrative expenditure (1)                $3,005
Estimated expenditure for the Kogodai project (2)                        875
Total                                                                  3,880

Notes:
(1) Includes office expenditure at the Karchiga project. In estimating the
    forecast expenditures, the company has applied an average 2015 British-
    pound-sterling-to-dollar exchange rate of 1.5285 for its United Kingdom
    corporate expenditures and an average 2015 exchange rate for Kazakh 
    tenge to dollar of 182.35 for local office expenditure at the Karchiga
    project.
(2) The total exploration expenditure obligation (measured from the date of
    the transfer of the licence) is $3.75-million over five years. The
    company will finance the Kogodai project in U.S. dollar currency.

        CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS
                 (Prepared in accordance with IFRS; $000)
                                                             2014      2013 
Operating (expenses)
Administration                                            $(3,214)  $(3,396)
Legal and professional                                       (471)     (796)
Exploration                                                  (928)   (1,580)
Stock-based compensation                                        -        (6)
Foreign exchange (losses)/gains                              (238)       88 
Net (loss)/income from disposal of group asset held for
sale                                                          (92)       53 
Deferred finance costs written off                           (515)        - 
                                                           (5,458)   (5,637)
Unrealized gain on share warrant liability                    114       280 
(Loss) on derivative receivable                                 -      (506)
Net of finance income less finance expense                     23        77 
Net (loss) for the year before income tax                  (5,321)   (5,786)
Tax charge for the year                                         -         - 
Net (loss) and comprehensive (loss) for the year           (5,321)   (5,786)
Net (loss) attributable to
Owners of the parent                                       (5,153)   (5,733)
Non-controlling interest                                     (168)      (53)
                                                           (5,321)   (5,786)
(Loss) per share ($)
Basic                                                      $(0.03)   $(0.03)
Diluted                                                    $(0.03)   $(0.03)

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