CALGARY, ALBERTA--(Marketwire - May 31, 2011) - Alhambra Resources Ltd. (News - Market indicators)(PINK SHEETS:AHBRF)(FRANKFURT:A4Y) ("Alhambra" or the "Corporation"), an international gold explorer and producer, announces its financial and operating results for the first quarter ended March 31, 2011. All amounts related to the financial results are expressed in thousands of United States dollars unless otherwise indicated.

HIGHLIGHTS

• Gold production was estimated at 2,318 ounces ("ozs")
• Revenue from gold sales amounted to $2.5 million based on the sale of 1,770 ozs
• Gold sales were lower than anticipated due to un-seasonally cold weather in the first quarter of 2011 and the early freeze of the new pad built during the final quarter of 2010
• Cash operating costs were $631.19 per oz ("/oz") of gold sold
• Stacked 110,740 tonnes ("t") of ore on the heaps at an average grade of 1.00 grams/tonne ("g/t")
• The estimated recoverable gold in work in process ("WIP") as of March 31, 2011 was 37,171 ozs with an estimated carrying cost of $26.3 million
• Mining operations at Saga Creek generated a net profit of $0.4 million ($0.00/basic share) and positive cash flow of $0.2 million ($0.00/basic share)
• The Corporation recorded net cash used in operating activities of $1.0 million ($0.01/share) and a net loss of $1.7 million ($0.02/share)
• 3,864 metres of exploration drilling was completed
• Exploration expenditures were $0.5 million
• Various components of the 2011 exploration program were finalized
• 2011 corporate objectives remain unchanged

FINANCIAL HIGHLIGHTS

For the first quarter of 2011, the Corporation recognized $2.5 million in revenue from the sale of 1,770 ozs of gold at an average price of $1,392.46/oz. This compares to $2.1 million in revenue from the sale of 1,892 ozs of gold at an average price of $1,122.68/oz during the first quarter of 2010.

Mining operations at Saga Creek generated a net profit of $0.4 million and positive cash flow of $0.2 million for the first quarter of 2011. The Corporation recorded a net loss of $1.7 million ($0.02 per basic and diluted share) for the first quarter of 2011. This compares to a net loss of $0.8 million ($0.01 per basic and diluted share) for the first quarter of 2010. Cash flow used in operating activities for the first quarter of 2011 was $1.0 million or $0.01 per share compared to cash flow generated from operating activities of $0.0 million or $0.00 per share for the first quarter of 2010.

OPERATING HIGHLIGHTS

During the first quarter of 2011, the Corporation stacked a total of 110,740 t (2010 - 117,536 t) of ore at an estimated average grade of 1.00 g/t (2010 - 0.78 g/t) of gold onto the pads. The estimated recoverable gold mined totaled 2,318 ozs (2010 - 1,925 ozs). The estimated recoverable gold classified as WIP was 37,171 ozs as of March 31, 2011. In addition, the Corporation mined 513,526 t (2010 - 444,218 t) of waste during this same period.

OPERATING EXPENSES

The Corporation charges to WIP all costs associated with the production of gold, (including direct costs incurred in the mining, leaching and resin stripping processes ("process operating costs")), as well as depreciation of equipment used in each process and depletion of mineral assets which is primarily the fair value assigned to mineral assets at September 15, 2009. All process operating costs and depletion and depreciation charged to WIP are expensed on the basis of the quantity of gold sold as a percentage of total estimated recoverable quantity of gold mined with the portion related to process operating costs being expensed as the cost of sales and the portion relating to depletion and depreciation being expensed as depletion and depreciation.

Cost of sales for the three months ended March 31, 2011 totaled $1.4 million or $769.90/oz (2010 - $1.5 million or $803.24/oz of gold sold). Included in this amount is $138.71/oz (2010 - $224.10/oz) related to the amortization of the bump-up to fair value of the estimated cost of WIP on re-valuation at September 15, 2009. The higher cash operating costs in the first quarter of 2011 compared to the first quarter of 2010 ($631.19/oz as compared to $579.14/oz) was primarily the result of the Corporation only mining waste in March of 2011. The Corporation's accounting policy is to not defer any waste stripping costs; instead charge those costs to WIP as incurred believing that these costs will average out over time. 

In 2010 the Corporation recorded a liability related to the acquisition of geological information from the government of Kazakhstan ("Historical Data"). This Historical Data was acquired by a previous owner of the Saga Creek licenses for a cost of $0.1 million. The indicative cost incurred by the Government of Kazakhstan at that time was $15.8 million. Effective January 1, 2009 the Government of Kazakhstan enacted legislation that required those companies that had acquired the Historical Data to begin paying to the Government of Kazakhstan the unpaid amounts beginning on January 1, 2009 in equal quarterly installments over ten (10) years. International Financial Reporting Standards require that because the liability is to be paid over a ten year period, the Corporation must discount the obligation and record the discounted amount in the books of the Corporation. The discount will be amortized to finance expenses on the income statement over the life of the liability. The discounted liability associated with the provision for Historical Data at March 31, 2011 is $14.1 million of which $9.2 million has been recorded as non-current. A discount rate of 3.2% was used to determine the amount of the liability. The undiscounted value of the liability is $15.7 million. 

While the Corporation has recorded the obligation in its financial statements, it is the opinion of the Corporation that it is not liable for the liability as the obligation is not recorded in the contract governing foreign investment which details the Corporation's rights and obligations associated with its licenses. 

In late 2010, as the result of an audit of Saga Creek by the Kazakhstan tax authorities, the Government of Kazakhstan assessed Saga Creek for liabilities associated with the Historical Costs together with unpaid Mineral Extraction Tax as well as disallowing certain income tax deductions. The Corporation filed a claim in the Specialized Interdistrict Economical Court of the Akmola Oblast in Kazakhstan seeking to have the decision of the tax authorities reversed together with related interest and penalties. While Alhambra believes that its position is defendable, there is a high risk that it will not be successful in the Kazakhstan courts and as such continues to accrue the estimated negative effect of the assessment. On May 13, 2011 the judge in charge of the case, largely but not wholly, rejected the Corporation's claim, upholding the assessment. The Corporation has not been able to obtain the reasons behind the decision however believes that its case is still valid and plans to appeal this decision to the next level of the court. Should the Corporation ultimately be successful, either wholly or in part, in its appeal, the amounts accrued related to those successful elements will be reversed at that time.

CAPITAL AND EXPLORATION PROGRAMS

In the first quarter of 2011, Alhambra spent $0.5 million in capital expenditures on Saga Creek's mining projects of which more than 90% was spent on exploration, the remainder on equipment, the details of which are described below. 

During the three months ended March 31, 2011, Alhambra completed 3,864 m of exploration drilling which was concentrated on two of its three advanced exploration projects, the Uzboy Gold Deposit ("Uzboy") and Shirotnaia. At Uzboy, drilling was targeted at increasing the oxide and sulphide resources, while at Shiortnaia a new exploration program was initiated aimed at drilling a prospective area between the Main and Southern zones which is accessible only in winter because of swampy ground conditions.

At the same time, interpretation of the 2010 results continued and the development of the 2011 exploration program was initiated.

In addition, the second and third batches of samples totaling 12,448 samples were shipped to the Kyrgyzstan laboratory. They included the following samples:

• Uzboy – 3,927 core,
• Dombraly – 4,115 core, reverse circulation ("RC") and rotary air-blast ("RAB"),
• Shirotnaia - 2,554 RC,
• Zhanatobe – 493 RAB,
• Vasilkovskoe East – 186 soil and 62 rock chip,
• North Balusty - 1,111 hydro-core lift ("KGK").

UZBOY GOLD DEPOSIT

A core drilling program continued at Uzboy, targeting both additional oxide resources along the strike of the known ore bodies and sulphide resources at deeper levels of the deposit. Fourteen core holes amounting to 2,757 m were drilled in the first quarter of 2011. All the holes intercepted intervals of strongly deformed, altered, silicified rock carrying sulphide mineralization.

Core from 21 holes was cut and sampled during this period. In total, 2,726 samples were taken and 3,927 samples were sent to the Kyrgyzstan laboratory for analysis. Results from the assays of 323 samples from a 285 m deep hole at West Uzboy were received and they are very encouraging. This hole returned several mineralized intercepts with the most important being 9 m @ 3.34 g/t gold ("Au") from 218.2 m and 28.1 m @ 0.96 g/t Au from 250.6 m including 10.0 m @ 1.67 g/t Au from 250.6 m. This hole increases the southern mineralized zone in the West Uzboy zone by more than 50 m along the dip.

SHIROTNAIA

At Shirotnaia, a new core drilling program was completed during the first quarter of 2011, targeting new mineralized zones under a boggy surface where drilling is possible only in winter. It included a total of six core holes amounting to 1,107 m. Logging of the core from these holes demonstrated, in addition to zones of intensive shearing and chlorite-sericite-pyrite hydrothermal alteration, intervals of strong argillic alteration, silicification and massive pyrite which, according to the Corporation's 2010 experience and the petrologic study results, may indicate high gold mineralization. A total of 1,199 core samples were taken from these holes and will be shipped to the Kyrgyzstan laboratory once an export permit has been obtained from the Kazakhstan regulatory authorities.

In addition, a geochemical study was done based on the results of fire assay and an Inductively Coupled Plasma ("ICP") analysis (suite of 34 elements) of the samples taken from diamond drill holes DDH 32-02 and DDH 100-02 drilled in 2010. The main conclusions made as a result of this study are that gold is mostly concentrated at the latest stage of a long lived hydrothermal system that has produced significant volumes of mineralization that probably has been preserved un-eroded. This conclusion was later confirmed by the petrologic study of thin and polished sections collected from the same holes and completed in April. During the first quarter of 2011, a geological map of Shirotnaia was also completed.

In April and May of 2011, Alhambra's exploration program continued at Uzboy and Shirotnaia along with interpretation of new assay results.

UZBOY GOLD DEPOSIT

At Uzboy, a core drilling program targeting the deep sulfide mineralization was completed. In total, five core holes amounting to 1,568 m were drilled. The last holes confirmed the continuation to depth of previously established zones of hydrothermal alterations, quartz veining and pyrite impregnation. The entire core was sampled and 781 samples have been prepared for export. Some assay results from the Uzboy shallow holes targeting the oxide mineralization were received from the Kyrgyzstan laboratory in May, but more samples will have to be sent and analyzed to be able to properly interpret the results.

SHIROTNAIA

All assay results from the Shirotnaia RC drilling program completed in 2010 were received in April. In 34 of 43 holes drilled, numerous broad intervals of anomalous gold concentrations (for +0.15 g/t) were intersected (see news Release dated April 28, 2011). The best high-grade intercept was returned by hole RCS 60-02 and it was 16 m @ 1.23 g/t Au in oxide mineralization starting from the surface. All intercepts expanded the area of gold mineralization defined by previous core drilling, established a link between successful core holes drilled in 2007 and 2010 and provided the Corporation with additional information concerning the geometry of the mineralization. New analysis of the results of the RC program, together with the entire data of the previous core, KGK and RAB drilling programs, strongly suggest the presence of four high grade (generally + 1.0 g/t Au), almost parallel zones of gold mineralization. The strike length of the four zones is about 1.8 kilometres ("kms") long and open at flanks. The individual zones are usually 15 to 30 m wide but sometimes they form much wider zones. Based on this new exploration model, a recommended drilling program was developed for 2011 comprised of 45 core and 33 RC holes totaling approximately 5,770 m. The drilling of the core holes started in May 2011.

DOMBRALY

Interpretation of the Dombraly assay results outlined four new zones of gold mineralization (see News Release dated May 19, 2011) – three parallel zones to the south of the open pit and one to the north of the open pit. As a result, the strike length of the mineralization on the southern side has been extended by 300 m as compared to the area previously explored by core holes. The width of these mineralized zones is up to 7 m as most of them are represented by shallow oxide mineralization where gold grades vary from 0.1 to 7.8 g/t. It is possible that at least one of the zones could extend further to the south. From the northern side of the open pit, a new blind (not outcropping on the surface) zone of sulphide gold mineralization was established. The length of the zone is estimated to be more than 100 m and open to the north. Its total width is from 9 to 14 m and along the dip the zone is traced up to 250 m. The gold grades vary from 0.13 to 10.3 g/t.

ZHANATOBE

During this period, the new 2011 exploration program for Zhanatobe was developed. The recommended program includes drilling approximately 11,830 m as follows: 8,560 m of RAB drilling (856 holes), 720 m of core drilling (3 holes) and 2,550 m of RC drilling (17 holes).

OBJECTIVES FOR 2011

Completion of the 2010 drilling program was pushed well into 2011. This combined with export delays of more than 11,800 drill samples due to new export law and procedures lead to significant delays in receiving drill assay results. The assays for the 2010 drilling program are expected to be totally completed within the second quarter of 2011.

Due to the late completion of the assaying and interpretation of the drill samples, the updated Uzboy National Instrument ("NI") 43-101 compliant resource report and Preliminary Economic Assessment (i.e. Scoping Study) Reports have been delayed. Both reports will be completed as early as possible. The initial NI 43-101 compliant resource reports for both Dombraly and Shirotnaia are still anticipated to be completed by year-end 2011. Assay results will be released when received and interpreted. 

During 2011, Alhambra is planning to significantly accelerate the development of its advanced exploration projects of Uzboy, Shirotnaia and Dombraly. The Corporation also anticipates advancing numerous early stage exploration projects and assessing a number of other gold targets of anticipated high potential over its vast mineral license area.

Alhambra anticipates implementing a development and exploration program of up to $7.5 million, subject to sufficient cash flow and suitable financing. The main focus will continue to be on Uzboy, Dombraly and Shirotnaia with continuing resource development drilling and production development assessments, including metallurgical and gold recovery tests.

Alhambra will continue to position itself for continued growth and to create growing wealth for its shareholders through the ongoing exploitation of its vast exploration and development license.

It is also the goal of Alhambra to complete a listing on an Asian stock exchange. The rationale behind the Corporation's desire for such a listing is that, while it is an expensive and time consuming exercise, it is believed that such a listing will provide Alhambra with increased market liquidity and give the Corporation access to significant financial resources in an area of the world that the Corporation believes has a significant interest in precious metal investments combined with an interest in and understanding of investing in Kazakhstan.

UNAUDITED FINANCIAL STATEMENTS AND MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A")

The Corporation's first quarter 2011 financial statements and MD&A are available on the Corporation's website, can be obtained on application from the Corporation and are available under the Corporation's profile on SEDAR at www.sedar.com.

ABOUT ALHAMBRA

Alhambra is a Canadian based international exploration and gold production corporation celebrating its eighth year of operations in the Republic of Kazakhstan. Alhambra holds exploration and exploitation rights to a 2.4 million acre (9,800 km²), 100% owned, license called the Uzboy Project, located in the Northern Kazakhstan Metallogenic Province which hosts numerous world-class gold deposits. Over 100 mineral targets, including 5 advanced exploration plays are contained within the Uzboy Project.

Alhambra common shares trade in Canada on The TSX Venture Exchange under the symbol ALH, in the United States on the Over-The-Counter Market under the symbol AHBRF and in Germany on the Frankfurt Open Market under the symbol A4Y. The Corporation's website can be accessed at www.alhambraresources.com.

Elmer B. Stewart, MSc. P. Geol., a technical consultant, is the Corporation's nominated Qualified Person. Mr. Stewart has reviewed the technical information contained in this news release.

Forward-Looking Statements

Certain statements contained in this news release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, completing the 2010 assays within the second quarter of 2010, availability of capital to fund the anticipated 2011 projects, completing a listing on an Asian stock exchange, and other factors and events described in this news release should be viewed as forward-looking statements to the extent that they involve estimates thereof. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans, "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and should be viewed as "forward-looking statements". Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and other factors include, among others, ability to complete the 2010 assays within the second quarter of 2010, availability of capital to fund exploration and production development projects, ability to complete a listing on an Asian stock exchange; political, social and other risks inherent in carrying on business in a foreign jurisdiction and such other business risks as discussed herein and other publicly filed disclosure documents. Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.

Forward looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Corporation undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law.

This news release contains forward-looking statements based on assumptions, uncertainties and management's best estimates of future events. When used herein, words such as "intended" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on assumptions by and information available to the Corporation. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Actual results may differ materially from those currently anticipated. The forward-looking statements contained herein are expressly qualified by this cautionary statement.