Thistle Mining 3Q Cash Flow $1.7 Million Vs $1.6 Million

Thistle Mining 3Q Cash Flow $1.7 Million Vs $1.6 Million

Thistle Mining announced Friday a cash flow generated by operations was $1.7 million in the third quarter compared to cash flow used in operations of $1.6 million in the third quarter of 2005. The improvement reflects an increase in sales. Cash flow generated by operations was $2.9 million for the first nine months compared to cash flow used in operations of $ 16.0 million for the first six months of 2005 and $1.6 million in the third quarter of 2005.

The company said that investment in property, plant and equipment, as well as additions to mining properties, increased in the third quarter of 2006 relative to the third quarter of 2005. Total funds invested amounted to $3.6 million in the third quarter of 2006 and $3.2 million in the third quarter of 2005.

In the third quarter of 2006, $2.2 million was invested at President Steyn Gold Mines (Free State) (Pty) Ltd. (“PSGM”) principally on underground mine development and $1.4 million was invested in the Company’s Masbate gold project. The total invested in property, plant and equipment as well as additions to mining properties for the first nine months of 2006 increased to $7.4 million compared to $4.6 million in the first six months for 2005 and $3.2 in the third quarter of 2005.

Following the improvement in operational cash flow no additional financing was raised in the third quarter of 2006. Additional funding of $0.7million was raised for the first nine months of 2006 compared to $22.8 million raised in the first six months of 2005 and a further $5.0 million raised in the third quarter of 2005.

The consolidated net profit in accordance with Canadian GAAP for the third quarter of 2006 was $0.7 million. The consolidated net loss in accordance with Canadian GAAP for the first nine months 2006 was $4.2 million, or $0.09 per share compared to $14.4 million, or $6.23 per share, in the first six months of 2005 and a net loss of $9.9 million, or $0.22 per share in the third quarter of 2005. The basic and diluted net loss per share for periods prior to Jun. 30, 2005 has been adjusted in respect of the consolidation of 200 shares for 1 on Jun. 30, 2005.

The company said that gold sold in the third quarter of 2006 was 40,912 oz, a decrease of 17% compared to the same period in 2005. Gold sold in the first nine months of 2006 was 112,301 oz a decrease of 17% compared to the same period in 2005. The relative decrease in production arises from the fall of ground at PSGM’s Number 1 Incline Shaft on February 18, 2006, the decision to stop unprofitable production from the Number 1A Ventilation Shaft in February 2006 and production problems experienced at the Big Bertha section. The

Compared to the third quarter of 2005, PSGM’s unit cash costs increased by 10.7% to $518 per ounce of gold and total costs decreased by 2.0% to $542 per ounce of gold. It should be noted that Cash cost per ounce sold is not a recognized measure under Canadian GAAP and therefore a reconciliation to the cost of sales per ounce is included under South African Operations.

The increase in unit cash costs follows the relative decrease in quarter on quarter production by 17% and the impact of total labour costs increases of 12.7% which trend was offset by a weaker ZAR:US$ exchange rate. Compared to the first nine months of 2005, PSGM’s unit cash costs increased by 0.4% to $530 and total costs decreased by 0.9% to $567 per ounce of gold, respectively.

The Company realized an average spot price of $618 per ounce of gold in the third quarter of 2006, slightly lower than the average spot price of $620 for the third quarter of 2006. The price realized is $179 per ounce higher than that realized in the third quarter of 2005. For the first nine months of 2006, the Company realised an average spot price of $600 per ounce which is $168 higher than that realised in the corresponding period in 2005.

The yield for the third quarter of 2006 averaged 5.06 g/tonne compared to an average of 5.86 g/tonne in the third quarter of 2005 and 5.43 g/tonne and 4.56 g/tonne for calendar years 2005 and 2004 respectively. If low grade surface material is excluded, the yield from underground sources amounted to 5.57 g/ tonne for the third quarter.

Forecast gold sold at PSGM for 2006 has been revised downwards from the previous forecast from 157,500 oz to approximately 147,800 oz. Cash costs for 2006 are forecast to be $530 to $535 per ounce, and total costs are expected to be in the range of $565 to $570 per ounce.

The company said that a shareholders agreement is in the process of being concluded with Lefa La Gauta Pty Ltd (“Lefa La Gauta”), a majority shareholder in a black economic empowerment (“BEE”) consortium to acquire an initial 15% equity stake in PSGM. The proposed transaction price is not expected to have a material impact on the financial condition of the Company as it recognises inter group debt between PSGM and Thistle of $134 million as at September 30. A shareholders agreement will need to be concluded before the transaction becomes binding. In accordance with South African legislation, the transfer of equity to a BEE group is a necessary step for the purpose of qualifying for the grant of new order mining rights.

The South African government has now outlined the terms of the Mineral and Petroleum Royalty Bill (“Royalty Bill”) to be implemented with effect from May 1, 2009. It is now proposed that the South African gold mining industry will pay 1.5% of its revenues to the South African National Treasury some 1.5% lower than in the first draft of the legislation. Marginal mining companies, defined as producers whose cash operating costs exceeded cash income would receive up to a 75% reduction in the royalty rates. The South African government now proposes to table the bill in Parliament early in 2007 after reviewing any further industry comments and consultations.

The search for a strategic partner for the Company’s Masbate project is progressing rapidly. The company is engaged with a potential partner that may lead to a mutually satisfactory outcome. There can however be no assurance that these discussions will result in a transaction. Macquarie Securities (Asia) Pte Limited as financial advisor to the Company is assisting in this process. The combination or merger of Philippine Gold Ltd (PGO) with a suitable partner has the potential to create more shareholder value than developing the project on a stand-alone basis. The desire is that any transaction be accretive to both parties in that it will create critical mass and unlock synergies resulting in an uplift in shareholder value.

The company said that detailed engineering design work on developing the Masbate project is continuing. During September PGO committed itself to the purchase of suitably sized second hand milling equipment for $2.8 million of which $0.6 million had been paid in the third quarter of 2006. By doing so PGO is not exposed to the long lead times relating to the procurement of new milling equipment which has increased from some 50 weeks to 90 weeks. On July 25, PGO and its Philippine subsidiaries jointly and severally mandated BNP Paribas to arrange and underwrite the project finance for the Masbate project on an exclusive basis. Project financing terms are currently under discussion. There can however be no assurance that BNP Paribas and PGO will conclude a project financing arrangement.

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