African Potash Regulatory News (AFPO)

African Potash Limited / Index: AIM / Epic: AFPO / Sector: Mining

23 December 2014

African Potash Limited ('African Potash' or 'the Company')

Final Results

African Potash, the AIM listed company focussed on sub-Saharan potash assets, is pleased to announce its final results for the year ended 30 June 2014. Copies of the Annual Report and Accounts for the year ended 30 June 2014 will be posted to shareholders on 29 December 2014 and will also be available on the Company's website at www.africanpotash.com.

Highlights

· Focus on the Lac Dinga Project which is located in a renowned potash region, notable for high grade sylvinite (KCl) in the Republic of Congo

· Strategic potential of Lac Dinga further demonstrated through the completion of a maiden drilling campaign which intersected uniform potash mineralisation in three laterally continuous horizons

· Potash up to 20m thick with individual sample grades of up to 25% KCl

· Defined development plan to further advance Lac Dinga in 2015 with the aim of delineating a Mineral Resource suitable for exploitation

· Excellent infrastructure and proven team to support Project development

African Potash CEO Edward Marlow said, "Lac Dinga has the potential to combine significant sylvinite tonnage at attractive depths with solid infrastructure, proximity to a port, and relatively cheap energy, demonstrating its inherent strategic value. The Project is one of the last undeveloped, high value assets within the potash-rich Congolese basin, and we have made significant progress in unlocking its resource potential. With excellent drill results underpinning the success of our exploration programme we remain focussed on further advancing the Project in 2015 with the aim of delineating a Mineral Resources suitable for exploitation. This is an exciting time of development for the Company and I look forward to next year, and the opportunities that await us, with much enthusiasm."

Chairman's Statement:

This has been an important year for African Potash and I am delighted to report on the development that we have achieved to date in transforming our Lac Dinga Project in the Republic of Congo ('Lac Dinga' or the 'Project') into a large-scale exploration/development property. Our most notable accomplishments during this period include the commencement of a drilling programme at Lac Dinga and the resulting discovery of potash mineralisation, which firmly underpins the value of our Project, in line with our expectations, as a commercial potash asset.

Lac Dinga is located in a renowned potash region, notable for high grade sylvinite (KCl) mineralisation at commercially attractive depths. Local operators include the Sintoukola Potash deposit, owned by Elemental Minerals Limited ('Elemental'), which we are contiguous to, and the Mengo Potash Project, owned by Evergreen Resources Holdings (BVI) Ltd.

Our exploration efforts have focussed on identifying high grade sylvinite mineralisation characteristic of the Congo basin, and in August 2014 the Company commenced its maiden drilling programme. The location of these holes was based on the interpretation of approximately 415 line kilometres of 2D oil industry seismic data. Holes LDDH_001 and LDDH_002 were drilled to a collective depth of 994m. These were located over 10km apart near the margin of the basin, in the southern and central part of the Project, where a potash-bearing salt sequence was interpreted to be located at shallow depth and below a uniformly developed anhydrite layer at the top of the salt. I am delighted to report that both holes intersected uniform potash mineralisation in three laterally continuous and up to 20m thick potash horizons, with individual sample grades of up to 25% KCl (~15.8% K2O).

It is significant that the mineralisation is remarkably similar in grade despite the distance between the drill holes. This gives a valuable indication into the potential extent of the mineralisation within the licence area; of which about 250km2 is interpreted to be underlain by salt-bearing strata which occur, as proven through our drill programme, at depths of about 300m to 420m below surface. Significant further upside opportunity exists which we plan to target in the coming year with a view to delineating a maiden Mineral Resource.

The potash horizons comprise predominantly high grade carnallitite mineralisation, however mineralogical studies have demonstrated that the carnallite-bearing potash beds have undergone partial conversion to the higher grade potash mineral sylvinite. This is a significant outcome as it validates our exploration concept and justifies future exploration for high-grade sylvinite mineralisation which as mentioned, we will continue to target in 2015.

Importantly, the Lac Dinga region is supported by cheap energy and good infrastructure, including proximal access to the port of Pointe-Noire, which is approximately 50 km away. This stands us in good stead as we look to advance the Project, and will positively impact capital expenditure and operating expenditure for the Project.

Financial Review

The Company is reporting a loss for the year of $1m compared with a loss of $0.2m in the prior year, which had benefitted from the write back of an impairment provision of $1.4m. Net Assets have increased to $16.1m (2013: $15.4m) and at 30 June 2014, cash balances were $2.2m (2013: $3.5m).

Outlook

With strong foundations in place from which to advance the Project, I am confident that 2015 will be one of significant opportunity for Lac Dinga. Planning is currently underway for the Company's 2015 exploration campaign; this will be based upon the excellent results received from the recently completed drill programme and reconnaissance work. It is our intention that future exploration, the extent of which will be dependent on the availability of future funding, will lead to the delineation of a Mineral Resource suitable for exploitation. This will represent a significant step in further unlocking the Project's high value potash assets and we look forward to providing investors with timely updates on this in due course. In the wider context, I believe the long-term outlook for potash remains strong and the strategic importance of potash as a commodity is clearly evident, particularly in light of global food production requirements. Consequently, with forecast low operational costs, proximal access to a deep water port, and excellent, high grade potash potential, the Lac Dinga Project has considerable strategic value.

Jean-Pierre Conrad

Chairman

22 December 2014

UNAUDITED CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2014

All results relate to continuing activities.

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2014

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2014

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 June 2014

Non cash transactions

The principal non cash transactions relate to shares issued in settlement of:

1. General Information

African Potash Limited is incorporated and domiciled in Guernsey. The nature of the Company's operations and its principal activities are set out in the Chairman's Statement.

The presentational currency of the Company is US Dollars as this reflects the Company's business activities in the resource exploration sector in sub-Saharan Africa and therefore the Company's financial position and financial performance.

Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted by the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRSs nor constitute statutory financial statements.

The financial information is based on the statutory accounts for the financial year ended 30 June 2014. The auditors reported on those accounts: their report was (i) unqualified, (ii) included an emphasis of matter in relation to going concern without qualifying their report, and (iii) did not contain statements where the auditor is required to report by exception.

The Company's Annual Report, will be available on the Company's website on 29 December 2014.

2. Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS as adopted in the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

Intangible exploration and evaluation assets

In February 2013, the group purchased a 70% interest in the Lake Dinga licence which the board believes is highly prospective for commercial deposits of Potash. Since the year end, the Group has conducted a successful proof of concept drilling campaign confirming laterally extensive potash mineralisation which is characteristic of the Congolese coastal basin and further underpins the Project's potential to host significant potash deposits. In order to develop the asset and issue a maiden resource statement, the Group will need to raise additional capital to fund a comprehensive drilling programme to support a resource estimate. The board remains confident that the highly prospective nature of the asset will enable them to raise the additional capital to fund these programmes. Accordingly there are no indications of impairment and the asset is carried at cost, grossed up for the 30% non controlling interest.

The valuation of intangible exploration and evaluation assets is dependent upon the discovery of economically recoverable deposits which in turn is dependent upon the future potash prices, capital expenditures and environmental and regulatory restrictions.

Management's critical judgements in determining the value of assets, liabilities and equity within the financial statements relate to the valuation of intangible exploration and evaluation assets of $14.5m (2013: $13.1m) and the going concern assumptions.

The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Estimates and judgements are continually evaluated. Revisions to accounting estimates are recognised in the period in which the estimates are revised or in future periods if applicable.

Going concern

As indicated above, current cash resources and available facilities are not sufficient to enable the Group to complete a full evaluation of the Lac Dinga project. The board will not commit to a major exploration programme without raising sufficient finance to fund the planned expenditure.

The Board has prepared forecasts for the Group covering the period to 31 December 2015.

The directors are confident that with the current cash and at least a further $1m remaining to be drawn under the facility with Bergen Opportunity Fund, LP ("Bergen"), there will be sufficient cash resources to enable the Group to pay debts as they fall due and to continue its operations for the foreseeable future and thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

As set out in note 18 the Company has the right to at any time to terminate the Bergen facility. Should the share price fall below 1.5p, then Bergen, under certain circumstances, have the right to postpone a draw down by up to 60 days and, should the share price not recover to above 1.5p, Bergen may, by notice to the Company, immediately terminate the facility.

3. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Due to the loss incurred during the year, there is no dilutive effect of share options.

The asset comprises the Lac Dinga exploration licence in the Republic of Congo held by La Societé des Potasses et des Mines SA ("SPM") in which the Group has a 70% interest.

5. Share capital

The Company has one class of ordinary share which carries no right to fixed income.

On 22 February 2013, 27,883,062 ordinary shares were issued at 3.6p per share as part of the initial consideration for the acquisition of AFPM with a fair value of $1.5m.

On 12 May 2014, 53,762,073 were issued at 1.9p for cash to fund the Phase 1 drilling and exploration programme.

On 12 May 2014 4,648,447 were issued at 1.9p under the terms of the management agreement with Hedgestone Advisory (Pty) Ltd to lead and facilitate the infrastructure and logistics operations supporting the drilling programme.

6. Post balance sheet events

On 8 August 2014 the company announced that it had entered into a convertible securities issuance deed (the "Deed") with Bergen Opportunity Fund, LP ("Bergen"), an institutional investment fund managed by Bergen Asset Management, LLC, a New York asset management firm, in connection with an issuance by the Company of zero coupon convertible securities having a nominal amount of up to US$3,750,000 (the "Convertible Securities").

The Convertible Securities will (subject to the satisfaction of certain conditions) be issued in four tranches and the Company will make an announcement of the issue of each Convertible Security. The initial Convertible Security issued on 14 August 2014 had a nominal value of US$830,000 and a purchase price of $750,000. Each of the three subsequent tranches of Convertible Securities will be issued 90 days after the date of issuance of the previous Convertible Security and have a nominal value of between US$500,000 and US$1,000,000.

The Convertible Securities will have a term ending on 7 February 2017.

African Potash will have the right to repurchase the Convertible Securities for cash at 105% of their nominal value (and without a fee or penalty) within a certain redemption period. The Company will additionally have the right to terminate the Agreement at any time and not to issue the remaining Convertible Securities on payment of a modest termination fee.

The Convertible Securities will (subject to the satisfaction of certain conditions) be convertible into ordinary shares of African Potash (the "Shares"), in whole or in part, at the option of Bergen. The Company will make an announcement each time any Convertible Securities are converted in whole or in part and will specify in such announcement the relevant conversion price, which will be the lower of (a) 91% of the average of five daily volume-weighted average prices ("VWAPs") of the Shares on AIM during a specified period preceding the relevant conversion and (b) 140% of the average of the daily VWAPs of the Shares for the 20 consecutive trading days preceding the date of execution of the Deed.

Bergen has agreed to certain limitations on its ability to dispose of the Shares following a conversion of the Convertible Securities. Additionally, Bergen has agreed to limitations on its ability to convert the Convertible Securities, including a limit on how much of the Convertible Securities can be converted in a particular time period. Further, the Investor will not, and has agreed not to, and to cause its affiliates not to, short-sell the Shares.

If the daily VWAPs per Share fall below 1.5p for any two consecutive trading days during the term of this Deed, Bergen may, by notice to the Company, postpone a subsequent tranche by up to 60 calendar days. If during this period the VWAP does not recover to be above 1.5p for 10 consecutive days, then Bergen may, by notice to the Company, immediately terminate this Deed.