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Oxus Gold returns to net profit in fortune-turning 2009, shares soar

Uzbekistan focused gold miner Oxus Gold (LON:OXS) reported on its progress at its 50% owned Amantaytau Goldfields project in Uzbekistan - the company’s sole activity after recent divestments - during a “turning point” 2009, which also marked its return to net profit and new equity funding to finance its operations.

The company said 2009 marked a turning point after it secured equity and debt financing of US$185 million, enabling it to construct its first underground mine at the 50% owned Amantaytau Goldfields JV (joint venture) in Uzbekistan as well as expand existing open pit heap leach operations and undertake a “very substantial” exploration programme within the AGF licence area.

Shares in Oxus Gold rallied 20% on the report.

Oxus is currently discussing the finalization of a foreign investment agreement with the Uzbek government, which will enable it to commence the construction of the underground mine, currently expected to take 18 months from the first drawdown of funds. The government holds the remaining 50% of the project.

During 2009, AGF has refined and sold most of the 18.2 tonnes of stockpiled silver doré that had accumulated at the mine. The rest was refined and sold in Q1 2010.

Oxus and AGF have also undertaken a comprehensive review of the 24 Moz of gold potential identified within the AGF licence area. Oxus has drawn up a five year US$22 million exploration programme to increase AGF’s JORC classified proven and probable gold reserves from the current 2.4 Moz (Million ounces) to 7 Moz. The US$2.5 million budgeted for this year will be financed from existing cash resources.

The company has a production target of 0.3 Moz of gold per annum.

Meanwhile, mining at the Nukrakon (formerly Vysokovoltnoye) heap leach silver-gold mine has recommenced at a reduced rate of 35,000 tonnes per month pending the approval to mine Sarybatyr and further exploration work on the surrounding oxide deposits.

On a pretax basis, the group slashed its loss in the full-year to $5.84 million from a loss of $54.39 million for the previous year, while its operating profit before exceptional items rose to US$10.96 million from US2.7 million.  It swung to a net profit after exceptional items of US$1.02 million from a loss of US$610,000 a year earlier.

Revenues amounted to US$13.26 million, representing 50% of the proceeds from the sale of gold and silver from refined dore bars by AGF. Administrative costs rose from US$8.6 million to US$9.7 million and restructuring costs fell from US$10 million to US$2.6 million.

The company pledged to proceed with cost reduction and maintain an optimal cash position, while awaiting first drawdown on the US$185 million financing from the CITIC Group consortium, announced in January 2010.

At 31 December 2009, AGF's proven and probable ore reserves stood at 339,000 ounces gold and 4.513 Moz silver in oxide ores, 2.097 Moz gold and 77,000 ounces silver in sulphide ores for a total 2.436 Moz gold and 4.591 Moz silver. Measured and indicated mineral resources amounted to 4.745 Moz gold and 34.863 Moz silver, while inferred mineral resources stood at 2.533 Moz gold and 15.706 Moz silver.

Fairfax issued a note on Oxus following the release of the results, saying that Oxus’ fortunes turned in 2009 and the company was now on track to return to “more normal operation” after mining was restarted and the business was “all but funded” for its major expansion.

“The group is now poised to start its major expansion and funding for the ordering of long lead time items and for the early start of some development activity may be accelerated by the development of new cash flow from the restarted operations,” commented Fairfax.