2012 EXPLORATION DRILLING UPDATES
In 2012, Alhambra received the results of two initial independent National Instrument ("NI") 43-101 gold resource estimates for its 100% owned Dombraly gold deposit ("Dombraly") and Shirotnaia gold project ("Shirotnaia"), both being advanced exploration projects. The results, based on limited drilling data, were very encouraging.
During 2012 Alhambra completed 7,904 metres ("m") of exploration drilling, 5,140 m of core drilling and 2,764 m of reverse circulation ("RC") drilling. The core drilling was focused on two projects, the first being to delineate additional gold resources at Shirotnaia, and the second being Zhanatobe, one of the Corporation's early stage exploration projects. The RC drilling was focused on two projects, Shirotnaia, and the second being Zhusaly, another one of its early stage exploration projects. As well, soil sampling programs were completed at Zhusaly, Vasilkovskoe East and Dombraly East.
Two batches of core drill samples (totaling 5,146 samples) from Shirotnaia and Zhanatobe were sent to the Kyrgyzstan Stewart Group laboratory for assaying in 2012. However, as of December 31, 2012, there were 2,593 Shirotnaia assay results pending (2,586 core and 7 QA/QC core re-sampling) from the laboratory, and in addition, 6,755 samples (including 887 QA/QC samples) were being prepared for export as follows:
-- Shirotnaia - 2,871 (RC samples),-- Zhusaly - 386 (RC samples) and 650 (soil samples),-- Vasilkovskoe East - 959 (soil samples) and 2 (rock chip samples),-- Dombraly East - 1,887 (soil samples).
For the detailed 2012 exploration drilling results, see the Corporation's 2012 MD&A.
GOVERNMENT OF KAZAKHSTAN PRE-EMPTIVE RIGHT
Alhambra's original application to the relevant Kazakhstan authority (MINT) included a floor price for the issuance of common shares at $0.60 per share. Unfortunately, during the time period that MINT was considering the Corporation's application, the trading price of Alhambra's common shares dropped below that floor. The Corporation applied to MINT to have that floor price reduced to $0.20 per common share. The Corporation received the approval effective December 25, 2012 and it is effective until June 25, 2013. As provided for under Kazakhstan legislation, the Corporation has applied for an extension.
COMMERCIAL DISCOVERY BONUS
On February 22, 2012 Saga Creek was given notice by Kazakhstan tax authorities that it was required to pay a Commercial Discovery Bonus ("CDB") based on the approved commercial reserves for Uzboy. Payment was due on May 24, 2011. Saga Creek filed a notice of objection with the tax authorities on the basis that Clause 6.2 (b) of the Subsoil use contract explicitly defines that Saga Creek "pays a commercial discovery bonus at a zero rate" which in effect means that Saga Creek is not obliged to pay this CDB at all.
The tax authorities rejected Saga Creek's notice of objection. Saga Creek appealed that decision to the Akmola Court which rendered their decision on December 27, 2012. While the Akmola Court ruled that Saga Creek was liable to pay the CDB, it reduced the quantity of precious metal subject to the tax. The tax authorities appealed the decision of the Akmola Court. On March 12, 2013 the appeals court decided to uphold the decision of the Akmola Court.
As a result of the court decisions, the amount of the CDB due has been reduced by $0.6 million. In addition, the penalty and interest has been reduced by $0.4 million.