GobiMin Announces First Quarter 2011 Results


(Expressed in United States dollars except where otherwise indicated)

TORONTO, June 22, 2011 /CNW/ - GobiMin Inc. (the "Company" or "GobiMin") reports its financial and operating results for the first quarter of 2011.  The unaudited interim consolidated financial statements along with management's discussion and analysis have been filed with SEDAR (www.sedar.com) and are also available at the website of the Company (www.gobimin.com).

Financial Highlights

          3 months ended
March 31,
12 months ended
December 31,
3 months ended
March 31,
Cash and cash equivalents and time deposit           $25 million $37 million $53 million
Cash and cash equivalents and time deposit per share(1)           $0.39 $0.57 $0.78
Working capital           $49.7 million $51.1 million $58.6 million
Total assets           $117.2 million $119.1 million $89.1 million
Net losses           ($0.8 million) ($3.6 million) ($1.2 million)
LBITDA (1)           ($0.7 million) ($4.8 million) ($1.2 million)
Basic and diluted losses per share           ($0.012) ($0.053) ($0.018)
LBITDA per share(1)           ($0.011) ($0.071) ($0.017)

(1)      As non-IFRS measurements, LBITDA, LBITDA per share and Cash and cash equivalents and time deposit per share do not comply with IFRS and, therefore, the amounts presented in the above table may not be comparable to similar data presented by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Business Summary and Development

(a)     Gold Project in Xinjiang

In 2009, the Company, through a wholly owned subsidiary, formed a joint venture company, namely Xinjiang Tongyuan Minerals Ltd. ("Tongyuan"), with Xinjiang Baodi Mining Company ("Baodi") and a subsidiary of Brigade No. 2 of Xinjiang Bureau of Geology and Mineral Resources ("Brigade No. 2") to develop and operate the Sawayaerdun Gold Project in Xinjiang, China. GobiMin owns a 70% equity interest in Tongyuan while Baodi and Brigade No. 2 each own a 15% interest. Tongyuan has obtained the related mining license.

The Sawayaerdun Gold Project is located 200 km northwest of the city of Kashi, western Xinjiang, China and lies within the Tian Shan Gold Belt, which is one of the most promising gold belts in China. Gold mineralization is contained within fine-grained clastic metasedimentary rocks of Devonian age. The portion of Zone IV with most drilling works done appears to be the thickest portion of the zone and therefore may represent a flexure or dilation zone within the F3 fault that contains Zone IV.

According to the NI 43-101 technical report prepared by Wardrop a Tetra Tech Company in March 2011 (which can be viewed at www.sedar.com), at a lower grade threshold of 0.5 grams/tonne gold, Zone IV is estimated to contain Indicated resources of about 34 million tonnes with an average grade of 1.3 grams/tonne gold (about 1,380,000 oz gold) and Inferred resources of about 13.5 million tonnes with an average grade of approximately 1.0 grams/tonne gold (about 424,800 oz gold).

In March 2011, there was a casualty reported at the site of the Gold Project due to an avalanche.  The Company has extended its sincere condolences and set aside an amount of compensation for the family of the deceased despite the fact that its responsibility was not engaged.  In order to avoid accidents in the future development and operation stages, the management has laid down additional stringent safety rules that should be followed by all staff at the site.

Due to the difficult working condition in winter, the Company has started the exploration works in April 2011 and completed the main exploration works include further drilling of 154 m and the adit work of 125 m in the Zone IV.  In order to catch up the planned schedule, the Company plans to have further drilling of approximately 8,000 to 10,000 meters in the Zone IV and carry out the floatation and metallurgical testing in 2011.

(b)     Coal Project in Xinjiang

GobiMin owns an indirect equity interest of 24.49% in the Balikun Coal Project in Xinjiang, China and participates in its management and operations.  GobiMin and its partner jointly have a controlling interest in the project through Xinjiang Ruide Mining Limited. According to a NI 43-101 Mineral Resource estimate prepared by Scott Wilson Ltd. in February 2010, the Balikun Coal Project hosts 38 million tonnes of coal in Measured Resources and 50 million tonnes in Indicated Resources. The construction works necessary to facilitate the future mining operation are in progress.

Considering the delays in getting the approval from National Development & Reform Commission on the Balikun Coal Project, the Company is reviewing alternatives to dispose of its interest in the Coal Project during the year 2011.

(c)     Silver Operation

GobiMin holds an equity interest of 49% in China Precision Material Limited ("China Precision") which engages in metal trading and processing, predominantly in silver. All positions are hedged and China Precision is not exposed to market price movements. In order to increase the vertical spectrum of the silver business, China Precision has developed a downstream silver business by establishing a small processing workshop in Hong Kong in August 2010 for processing the silver and refining the lower grade silver into bars and granules with 99.99% purity for sale to industrial customers. To increase product variety and profit contribution, GobiMin will continue to source and explore new potential business opportunities in this sector.

The Company has made advances to China Precision from time to time solely to finance its silver inventory, depending on economic and market conditions. As at March 31, 2011, amounts due from China Precision to the Company amounted to $23.9 million, which was used to finance the purchase of approximately 17.6 tonnes of silver by China Precision. During the period from April 1, 2011 to the date hereof, China Precision sold 27.6 tonnes of silver.  As at June 22, 2011, China Precision has a silver stock of 12.4 tonnes with a market value of $14.2 million and the amount due to GobiMin has been reduced to $10 million.

For the quarter ended March 31, 2011, the Company recorded an equity gain of $101,045 (for the year ended December 31, 2010: $97,289) from its investment in China Precision.

(d)     Base Metal Exploration Projects in Xinjiang

(i)     Four Exploration Joint Ventures

GobiMin currently owns equity interests in four exploration joint ventures in Xinjiang, China for nickel, copper, gold, lead and zinc.  GobiMin has been exploring several copper projects which show good indications of copper mineralization. Some exploration licenses were relinquished by not applying for renewal or sold to third parties due to not having good prospect. GobiMin will continue to conduct pre-survey and exploration to identify potential mineralization through these exploration joint ventures.

(ii)     Yanxi Copper Property

GobiMin formerly owned a 40% indirect equity interest in another joint venture, Xinjiang Tongxing Minerals Limited ("Tongxing"), which is engaged in exploration and development of the Yanxi Copper Property in Xinjiang, China.  The Company entered into a Share Transfer Agreement on July 14, 2010 regarding the disposal of 80% of its equity interest in Tongxing. The transaction was completed on July 22, 2010 and GobiMin has received all the cash consideration and the first lot of convertible bonds. GobiMin currently retains an 8% indirect unlisted equity interest in the Yanxi Copper Property.

The Company has entered into a supplemental agreement with the buyer on December 30, 2010 to extend the deadline for obtaining the mining license of the Yanxi Copper Property (the "Yanxi Mining Licence") from December 31, 2010 to August 31, 2011.  According to the supplemental agreement, the consideration to be received upon obtaining the Yanxi Mining Licence is reduced by HKD21,000,000 to HKD259,000,000 due to the construction of a railway across the Yanxi Copper Property that has a negative impact on the minable quantity.  The amount of HKD21,000,000 will be deducted from the second and final lot of convertible bonds (the "Non-delivered CB").  In addition to applying for Yanxi Mining Licence, the Company will also be responsible for applying for a mining licence (the "New Mining Licence") for an area which is adjacent to the Yanxi Copper Property (the "New Area").  The New Mining Licence should be obtained on or before June 30, 2014.  The Company will be entitled to receive the Non-delivered CB and an additional consideration in cash based on the resource estimate of the New Area, subject to a maximum of HKD106,000,000, of which 50% will be paid upon the Company providing the resources estimate report and the remaining 50% will be used to settle the licensing fee of the New Area, with the balance paid to the Company upon obtaining the New Mining Licence. The final and total consideration for the disposal of the 80% indirect equity interest in Tongxing will accordingly be capped to HKD365,000,000. Based on the reduced consideration of $33.4 million (HKD259,000,000), the Company shall have an estimated deferred gain of $5.7 million for its disposal of the 32% equity interest in Tongxing, netting off the amount payable for the mining license fee, tax, stamp duty and related payments of $26.8 million.

(e)     Normal Course Issuer Bid

On January 4, 2011, GobiMin announced to renew its normal course issuer bid to repurchase up to an additional 3,294,541 common shares for a further year.  The normal course issuer bid will expire on January 31, 2012. During the quarter ended March 31, 2011, a total of 925,500 common shares were repurchased at an aggregate cost of $771,776 (CAD766,842). For the period from April 1, 2011 to June 22, 2011, a total of 1,968,000 common shares were repurchased at an aggregate cost of $1,605,002 (CAD1,594,740).  All shares repurchased were returned to treasury for cancellation.  A copy of the related Notice of Intention to Make a Normal Course Issuer Bid shall be provided to shareholders upon receipt of written request to the Company at its registered office.

Under the 2011 normal course issuer bid program, a total of 2,893,500 common shares were repurchased at an average price of CAD0.81 up to June 22, 2011.  The management believes that the repurchase by the Company of its own shares can maximize shareholder value and is in the best interest of the Company and its shareholders.

(f)     Working capital

As at March 31, 2011, the Company has a working capital of $49.7 million (December 31, 2010: $51.1 million), after netting off its current liabilities of $33.5 million (December 31, 2010: $33.9 million).

Apart from the $25 million in cash and cash equivalents, the $23.9 million amount due from China Precision also constitutes a highly liquid asset. As at the date hereof, such outstanding amount was reduced to $10 million with the difference of $13.9 million having been repaid to the Company and recorded as cash inflow to the Company.

In addition, the Company owns the convertible bonds of $14.2 million (HKD110,000,000) issued by China Daye Non-Ferrous Metals Mining Limited ("China Daye") as partial payment of the consideration for the disposal of the 32% equity interest in the Yanxi Copper Property and another lot of convertible bonds $11.4 million (HKD89,000,000) are receivable upon obtaining the mining licence of the Yanxi Copper Property.  According to the terms of the convertible bonds, the Company has the right to convert the bonds into ordinary shares of China Daye at any time up to July 22, 2012, or if not converted, to have its principal amount together with interest repaid on July 22, 2012.  The received convertible bond was recorded as non-current asset while the convertible bond receivable was recorded as current asset, both of which would be liquidated into cash and cash equivalents at the discretion of the management subject to the market conditions.

Other than financing the silver stocking of China Precision and the construction costs of the Sawayaerdun Gold Project, there is no significant cash outflow expected for the remainder of the fiscal year. The working capital is sufficient to support the growth in the existing projectsand operations.

Certain statements contained in this press release constitute forward-looking information. Such statements are based on the current expectations of management of GobiMin. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those projected in the forward-looking information.  The reader should not place undue reliance on the forward-looking information included in this press release given that (i) actual results could differ materially from a conclusion, forecast or projection in the forward-looking information, and (ii) certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information could prove to be inaccurate.  These statements speak only as of the date they are made, and GobiMin assumes no obligation to revise such statements as a result of any event, circumstance or otherwise, except in accordance with law.       

"Neither TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release."

To receive GobiMin press releases by email, send a message to info@gobimin.com and specify "GobiMin press releases" on the subject line


SOURCE GobiMin Inc.

For further information:

Felipe Tan, Chief Executive Officer
Tel: (852) 3586-6500
Email: felipe@gobimin.com

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GobiMin Inc.

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