Alhambra Resources Ltd. - Financial and Operating Results for Second Quarter ending June 30, 2007



    CALGARY, Aug. 31 /CNW/ - Alhambra Resources Ltd. ("Alhambra" or the
"Corporation") announces its financial and operating results for the quarter
ended June 30, 2007. Effective May 1, 2006 the Company declared commercial
operations for accounting purposes. As a result, the financial statements for
the second quarter of 2007 have limited comparability to 2006. All amounts
related to the financial results are expressed in Canadian dollars unless
otherwise indicated.

    HIGHLIGHTS:

    
    -  Revenue from gold sales amounted to $3.5 million based on the sale of
       4,838 ounces
    -  Generated $0.6 million of cash flow and $0.1 million of net income
       from mining operations
    -  The Corporation recorded negative cash flow from operating activities
       of $0.1 million ($0.00/share) and a net loss of $1.1 million
       ($0.02/share)
    -  Received an updated National Instrument 43-101 resource and reserve
       technical report
    -  Debt free with $1.7 million of cash and cash equivalents
    -  Spent $1.9 million on capital expenditures of which $1.1 million was
       on exploration
    -  Operating costs to produce an ounce of gold were $372.93
    -  Completed 5,697 metres of drilling and 5,532 cubic metres of trenching
    -  Stacked 5,142 ounces of recoverable gold
    -  The recoverable gold in work in process as of June 30, 2007 was
       21,220 ounces
    

    OVERVIEW
    --------
    The equipment problems suffered during the first quarter of 2007 by the
Corporation's blasting contractor have been resolved. By the end of the second
quarter of 2007, the stacking of oxide ore ("ore") on a monthly basis was on
target to achieve the 2007 stacking schedule. The amount of ore stacked during
the second quarter of 2007 totaled 209,500 tonnes compared to 123,250 tonnes
stacked during the first quarter of 2007, up 70%.

    FINANCIAL HIGHLIGHTS
    --------------------

    

    (in C$ except per           Three Months ended          Six Months ended
    share amounts)                    June 30                   June 30
    -------------------------------------------------------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenue from gold
     sales                $ 3,529,337  $ 2,052,710  $ 6,138,312  $ 4,444,474
    -------------------------------------------------------------------------
    Net loss               (1,073,493)    (554,349)  (1,872,784)  (1,230,093)
    -------------------------------------------------------------------------
      Per share (basic
       and diluted)             (0.02)       (0.01)       (0.03)       (0.02)
    -------------------------------------------------------------------------
    Weighted average
     shares outstanding
      Basic and diluted    69,771,837   56,510,501   69,511,411   54,832,531
    -------------------------------------------------------------------------
    Shares outstanding
     at end of period      70,408,980   62,696,199   70,408,980   62,696,199
    -------------------------------------------------------------------------
    

    For the second quarter of 2007, the Corporation recorded a net loss of
$1.1 million, or $0.02 per basic and diluted share. This compares to a loss of
$0.6 million or $0.01 per basic and diluted share in 2006. Cash flow utilized
from operating activities for the quarter was $0.1 million or $0.00 per basic
and diluted share as compared to cash flow utilized in operating activities of
$0.2 million or $0.00 per basic and diluted share in 2006.
    Revenue from the sale of gold amounted to $3.5 million. This was realized
from the sale of 4,838 ounces ("ozs") of gold at an average price of $729.50
per ounce ("/oz"). The per oz operating cost to produce an ounce of gold for
this quarter was $372.93/oz sold, being 4% lower than the per oz operating
cost of $388.85 incurred during the first quarter of 2007. Alhambra continues
to be optimistic that its operating cost to produce an ounce of gold will
continue to be reduced as higher anticipated production levels are experienced
during the remainder of 2007.
    At June 30, 2007, the Company had $1.7 million in cash and cash
equivalents and remained debt free. The average rate of exchange for the C$
per US$1.00 was 1.0975 for the second quarter of 2007.

    OPERATIONS REVIEW
    -----------------
    During the second quarter of 2007, a total of 432,620 tonnes of waste was
mined and 209,500 tonnes of ore at a grade of 1.09 grams per tonne ("g/t") of
gold was stacked on the heap leach pads.
    Alhambra began the quarter with 20,916 ozs of recoverable gold in work in
progress and exited the quarter with 21,220 ozs after selling 4,838 ozs.
Production for the quarter (defined as gold sales plus or minus the change in
work in progress) totaled 5,142 ozs.
    For the six months ended June 30, 2007, the Company produced 8,428 ozs of
gold and sold 8,350 ozs of gold.

    RE

SOURCE AND RESERVE STUDY -------------------------- In the second quarter of 2007, The Corporation received a National Instrument 43-101 technical report entitled "Resources and Reserve Estimation Study on the Uzboy Gold Deposit, Akmola Oblast, Kazakhstan" (the "Updated Report") prepared by ACA Howe International Ltd. ("Howe") dated June 5, 2007 which updated the reserve estimate for the oxidized and transition portions and the resource estimate for the oxidized, transition and sulphide portions of the West and East zones of the Uzboy gold deposit. The Updated Report included all diamond drilling results from the Uzboy gold deposit up to December 31, 2006. These resource and reserve estimates updated the resource and reserve estimates contained in the feasibility study on the oxide portion of the Uzboy gold deposit dated June 30, 2006. The Updated Report and the feasibility study in their entirety were filed on Sedar at www.sedar.com on June 7, 2007 and July 18, 2006, respectively. The effective date for the reserve and resource statements in the Updated Report was December 31, 2006 and included the results of Alhambra's 2006 drilling program. In the Updated Report, Howe estimates that at a 0.20 g/t cutoff, the resources for the Uzboy gold deposit are 19,071,001 tonnes at an average grade of 1.08 g/t gold totaling 661,645 ozs of Measured mineral resource, 8,392,444 tonnes at an average grade of 0.87 g/t gold totaling 234,605 ozs of Indicated mineral resource and 22,512,850 tonnes at an average grade of 0.73 g/t gold totaling 528,827 ozs of Inferred mineral resource. In the Updated Report, Howe also reported 3,416,719 tonnes at a grade of 1.17g/t for a total of 128,405 ozs of gold in the Mineable Proven reserve category plus 631,035 tonnes at a grade of 0.82 g/t for a total of 16,636 ozs of gold in the Mineable Probable reserve category for the oxidized and transition portions of the Uzboy gold deposit. The recoverable gold contained in the Mineable Proven plus Probable reserve categories as estimated by Howe was 95,200 ozs as at December 31, 2006. EXPLORATION PROGRAM ------------------- The 2007 exploration program which commenced in mid January continued throughout the second quarter. The main focus of the 2007 exploration program is to continue delineation of the gold mineralization in the West and East zones of the Uzboy gold deposit and to diamond drill five other zones of gold mineralization including Kirtoge, Aygabak, Shirotnaia, Dombraly and the Central Zone of the Uzboy gold deposit. The 2007 exploration program consists of diamond drilling, reverse air blast circulation ("RAB") drilling and hydro-core lift ("KGK") drilling totaling 76,500 metres ("m") and 50,000 m(3) of trenching. A total of 5,697 m were drilled in the second quarter of 2007. This was comprised of 3,703 m of diamond drilling and 1,994 m of RAB drilling. In addition, a total of 5,532 m(3) of trenching was completed in the second quarter of 2007. Total exploration activities completed to the end of the second quarter of 2007 amounted to 12,113 m of drilling (6,880 m of diamond drilling and 5,233 m of RAB drilling) and 5,532 m(3) of trenching. Exploration activities are typically slower during the second quarter due to soft ground conditions caused by spring breakup. The main components of the exploration program conducted during the second quarter are highlighted below. 1. Uzboy Gold Deposit a) West Zone The Uzboy gold deposit is the main focus of the Corporation's 2007 exploration program. A total of 11 diamond drill holes (3,703 m) were completed in the West zone during the quarter. Six diamond drill holes were completed on Section 65, three drill holes were completed on Section 57 and one hole was completed on each of Section 39 and Section 45. The drill holes on Sections 39 and 45 were deep holes to test the continuity of the gold mineralization at depth below previously intersected intervals of gold mineralization. Diamond drilling was completed on Section 57 and Section 65 to test the strike extension of the gold mineralization intersected on Section 61 in 2006 and 2007. All holes completed in the second quarter intersected broad zones of intense shearing and alteration. Analytical results for these diamond drill holes are pending. During the quarter, 1,674 m of trenching was completed on the northwest side of the West zone to test the interpreted northeast strike extension of a new zone of oxide gold mineralization located in the pit by ongoing mining operations. All trenches bottomed in oxide material and analytical results for these trenches are pending. b) East Zone During the second quarter, the analytical results for the Reverse Air Blast circulation ("RAB") drilling completed in two areas surrounding the East zone of the Uzboy gold deposit during the first quarter 2007 were received. The first area drilled is located approximately 200 m north of the current mining operation. The RAB drilling in this area resulted in the discovery of two new zones of oxide gold mineralization that ranged from 125 to 175 m in length and from 10 to 40 m in width and are open along strike and at depth. Gold values for the sample intervals from within these two zones ranged from 0.2 g/t to 4.39 g/t gold. The second area of RAB drilling is located immediately southeast of the current open pit mining operations. Three significant zones of oxide gold mineralization have been defined in this area and are interpreted to be an extension of the oxide gold mineralization previously outlined in the East Zone of the Uzboy gold deposit. The largest of the three zones measures 460 m long and is up to 140 m in width. The limits of the oxide gold mineralization in all three zones are open along strike and at depth. On several profiles, the oxide gold mineralization is open to the northwest. The gold values for the sample intervals within the three zones ranged from 0.2 g/t to 29.7 g/t. Diamond drilling of these zones is planned in the third quarter of 2007 to determine if the Inferred oxide mineral resource estimated by Howe in the Updated Report can be upgraded to either a Measured or Indicated oxide mineral resource. The Updated Report prepared by Howe estimated that approximately 186,000 ounces of gold (8.735 million tonnes at an average grade of 0.67 g/t) classified as an Inferred mineral resource is contained in the oxide portion of the East zone of the Uzboy gold deposit. Inferred mineral resources have a greater amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of the Inferred mineral resource will ever be upgraded to the Measured or Indicated mineral resource categories. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Metallurgical test work completed in the second quarter by SGS Lakefield Research Europe on two representative samples of the sulphide (Primary) gold mineralization from the West and East zones of the Uzboy gold deposit have yielded encouraging results. Gold recovery rates for the samples from the West zone were 88.6% and 91.8% and 90% and 94% for the East zone. These gold recovery rates were achieved by grinding the sulphide gold mineralization to minus 325 mesh and leaching for a period of 48 hours. The preliminary metallurgical test work shows that the sulphide gold mineralization in both the West and East zones of the Uzboy gold deposit exhibit similar leaching characteristics with respect to leach times and percentage gold recovery. Based on these similar leach characteristics, it appears that the gold mineralization from both zones could be treated in the same facility. Additional testing of representative samples of sulphide gold mineralization from both the West and East zones of the Uzboy Gold deposit is planned for the balance of 2007. The additional test work will provide data which will be used to design a preliminary process flow sheet for use in a Pre-Feasibility Study. c) Uzboy Extension During the second quarter the Corporation received analytical results for the 1,875 m of RAB drilling completed during the first quarter in the Uzboy Extension that returned several sporadic low gold values. Geophysical surveys (Induced Polarization/Resistivity ("IP") and total field magnetometer) are planned for this portion of the Uzboy extension in the third quarter of 2007. On completion of these surveys, all geochemical and geophysical data will be compiled and utilized in planning the next phase of exploration for the Uzboy Extension. 2. Aygabak Zone The Corporation commenced exploration of this zone during the second quarter completing 3,858 m of trenching and 1,994 m of RAB drilling. The trenching and RAB drilling activities on this zone are expected to be completed in the third quarter. The exploration is designed to test this target for gold and base metal mineralization located prior to 1991. Analytical results for the trenching and RAB drilling completed during the second quarter are pending. 3. Shirotnaia Zone The Shirotnaia zone is located 3 kms northeast of the Aksu and Quartzite Hills gold deposits. Although, the gold mineralization in these gold deposits is not necessarily indicative of the gold mineralization in the Shirotnaia zone, the geology and structures that hosts these two gold deposits are interpreted to extend northeast towards the Shirotnaia zone. During the first quarter 2007, 18 diamond drill holes totaling 2,117 m were completed over a strike length of 1,400 m to test the depth extent of the gold mineralization outlined by the 2005 and 2006 trenching programs. Seventeen drill holes intersected multiple intervals of significant gold mineralization (greater than 0.2 g/t in each hole). The mineralized intervals range in thickness from 2.0 to 73.0 m and extend from surface to a depth of 125 m on Section 28. The mineralized intervals in all 17 holes are open along strike and at depth. The gold mineralization is hosted in metasomatically (sericite-pyrite-quartz) altered dacite and andesite and is interpreted to be controlled by the northeast trending Aksuyski fault zone. The upper portions of the mineralized intervals are oxidized to an average depth of 25 m. Underlying the oxidized zone, the mineralized intervals are characterized by fine grained disseminated pyrite and pyrite veinlets (pyrite content ranges from 1% to 7%) and quartz-carbonate veining. The preliminary interpretation of the diamond drilling results is that the gold mineralization intersected (minimum strike length of 300 m) in the southwest part of the zone is the strike extension of the gold mineralization (approximately 320 m long) located in the northeast part of the zone. These two areas of gold mineralization are separated by a distance of 710 m. Trenching completed over this 710 m long section of the Shirotnaia zone has intersected significant intervals of gold mineralization. The mineralization in the northeast portion of the zone is the most significant intersected to date with respect to average gold grade and width of mineralization. DDH C-282 completed in this area was terminated in significant gold mineralization at a depth of 142.8 m with the last sample in this hole yielding a gold grade of 1.33 g/t. Representative samples of the oxide gold mineralization have been submitted for bottle roll and column leach tests to determine the amenability of the oxide gold mineralization to leaching using cyanidization. The results of the bottle roll and column leach tests are expected during the third quarter of 2007. Further exploration of this zone includes a combination of diamond, RAB and Hydro-core lift ("KGK") drilling planned for later in 2007 when drier ground conditions are expected. 4. Mamay Zone The analytical results for 17 diamond drill holes completed over a strike length of 720 m to test the down dip extension of a large zone of gold-silver mineralization outlined in 2005 and 2006 by surface trenching programs were received in the second quarter of 2007. This zone is characterized by a very limited zone of oxidation that extends to an average depth of 12 m below surface. Distinct zones of low grade gold-silver (up to 37.5 m wide) and low grade copper-lead-zinc-gold-silver mineralization (up to 6.5 m wide) occur in a broad zone of pyritic, sheared and brecciated altered andesite. The precious and base metal potential of Mamay is supported by the combination of the gold-silver and copper-lead-zinc-gold-silver mineralization, the geology and the kilometer strike length of this prospective target. The next phase of exploration planned for this zone consists of ground geophysical surveys (IP and total field magnetometer) to be completed in 2008. CAPITAL EXPENDITURES -------------------- Expenditures on mining assets for the three months ended June 30, 2007 totaled $1.9 million. Of this total, $1.1 million was spent as part of the $5.5 million exploration program planned for 2007. An additional $0.8 million was spent on machinery and equipment both at the new resin stripping plant and the Uzboy mine site. MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A") and FINANCIAL RESULTS ----------------------------------------------------------------- A full MD&A and Financial Report of the Second Quarter of 2007 is available on the Corporation's website, can be obtained on application from the Company and is available under the Corporation's profile on SEDAR at www.sedar.com. Elmer B. Stewart, MSc. P. Geol., President of Alhambra, is the Corporation's nominated Qualified Person responsible for monitoring the supervision and quality control of the programs completed within the Uzboy Project. Mr. Stewart has reviewed and verified the technical information contained in this news release. Alhambra is a Canadian based gold exploration and production corporation celebrating its sixth year of operations in the Republic of Kazakhstan. It is engaged in the exploration and production of gold properties from its 100% owned Uzboy Project. Alhambra shares trade in Canada on The TSX Venture Exchange under the symbol ALH and in Germany on the Frankfurt Open Market under the symbol A4Y. The Company's website can be accessed at www.alhambraresources.com The TSX Venture Exchange Inc. has neither approved nor disapproved the information contained herein. This news release contains forward - looking information including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations and potential mineral recovery processes. Forward - looking information includes disclosure regarding possible future events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action, and therefore, involves inherent risks and uncertainties. For any forward looking information given, management has assumed that the analytical results it has received are reliable, and has applied geological interpretation methodologies which are consistent with industry standards. Although management has a reasonable basis for the conclusions drawn, actual results may differ materially from those currently anticipated in such statements. For such statements, we claim the safe harbor for future.

For further information:

For further information: Elmer B. Stewart, President & Chief Operating
Officer, (403) 228-2855; Ihor P. Wasylkiw, Chief Information Officer, (403)
508-4953; Jim Clarke, Investor Relations, (888) 290-1335 (Toll Free)

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ALHAMBRA RESOURCES LTD.

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