African Potash Regulatory News (AFPO)

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

23 December 2013

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 2013. Copies of the Annual Report and Accounts for the year ended 30 June 2013 will be posted to shareholders on 30 December 2013 and will also be available on the Company's website at www.africanpotash.com.

Highlights:

· Acquisition of an indirect 70% interest in the Lake Dinga Potash Project in the Republic of Congo - located in a widely recognised potash bearing region and surrounded by numerous world-class assets

· Inherent long term growth fundamentals and the increasing demand for potash from the agricultural sector underpin investment case

· Attractive investment opportunity demonstrated by A$190 million bid by Dingyi Group for Elemental Minerals Limited ('Elemental'), which is advancing the contiguous Sintoukola Potash Project

· Strong progress made in furthering geological understanding of Lake Dinga Potash Project - data sharing agreement signed with Elemental and common exploration consultants appointed

· Bolstered operational expertise of the board through appointment of Dr. Simon Dorling - Competent Person who helped develop and delineate Sintoukola Project from conceptual target to classified resource

· Focus for 2014 is to evaluate the resource potential of Lake Dinga Potash Project - commissioned Environmental and Social Impact Assessment ahead of drill programmes

African Potash CEO Edward Marlow said: "The Lake Dinga Potash Project was at the top of our list when establishing African Potash as an acquisition vehicle, due to the project's unique combination of all of the major attributes to make it a world-class development and production asset; high grade, suitable depth of mineralisation, supporting infrastructure and proximity to a port. Since acquiring Lake Dinga in early 2013, we have been focussed on demonstrating the value of this asset, leveraging the considerable exploration and seismic data available on the region, in addition to utilising the expertise of uniquely qualified consultants with extensive experience of operating in this area of the Republic of Congo.

"This region has been the focus of a great deal of international attention over recent years due to its status as one of the most strategic and highly economic potash destinations globally. Together with favourable long-term demand fundamentals for high quality potash projects, this region is playing host to increased corporate activity. 2011 saw the C$115 million acquisition of MagIndustries Corp., developers of the neighbouring Mengo Potash Project, by Chinese group Evergreen Industries, which was followed this year by Hong Kong based Dingyi Group Investment Limited's A$190 million bid for Elemental Minerals Limited, developers of the Sintoukola Potash Project, adjacent to Lake Dinga. As such we intend to commence exploration activities in the near term in order to prove up the significant inherent value of our Lake Dinga Project."

Chairman's Statement:

The Company has achieved numerous milestones during the year under review and the months since. The first development, formalised in January 2013, was the formal agreement to acquire an indirect 70% interest in La Société des Potasses et des Mines S.A. ('SPM'), which holds the exclusive right to conduct mining research activities for potash salts over the Lake Dinga license area. This area has long been the focus of our attention due to the combination of high grade sylvinite mineralisation at attractive depths, together with the extensive exploration and seismic data available from Société Nationale des Pétroles du Congo ('SNPC') and finally the established infrastructure in the area and its proximity to the port of Pointe-Noire, which is approximately 60km away. Together, these important fundamentals place this area of south-western Republic of Congo as a highly strategic region for potash production.

The potential of this area has been recognised by numerous other parties, and in recent years it has become one of the most exciting and prospective potash location in Africa. Our Lake Dinga project is surrounded by significant world-class potash development projects including the Sintoukola Potash deposit, owned by Elemental Minerals Limited ('Elemental'), and the Mengo Potash Project, owned by Evergreen Resources Holdings (BVI) Ltd following its acquisition of Mag Industries Corp. Elemental's Sintoukola Potash Project, which is contiguous to Lake Dinga, is probably the main value driver behind Hong Kong based Dingyi Group Investment Limited's current A$190m bid for Elemental. The stratigraphy of the high grade sylvinite and carnallitite mineralisation is thought to be very similar to the stratigraphy of our own project.

With this in mind, a primary objective during the period has been on furthering our understanding of the Lake Dinga project. A key component of this has been the signing of a joint historic data acquisition and sharing agreement with Elemental, leveraging of the considerable historic data that has been compiled, for the Congo basin. This information has allowed African Potash to evaluate further the areas it plans to focus future exploration activities on and generate drill targets at Lake Dinga. Furthermore, the appointment of CSA Global, the lead consultants, used on the neighbouring Sintoukola project, as exploration consultants for Lake Dinga provides a further dimension of understanding and expertise which will be invaluable during the year ahead.

The African Potash team received a further injection of operational expertise through the appointment of Dr. Simon Dorling, an exploration and structural geologist who most recently helped develop and delineate the contiguous Sintoukola potash deposit from a conceptual target to a classified resource stage as the project's Competent Person. This recent experience, and his on-going position as Principal Consultant with CSA Global Pty Ltd, makes Simon almost uniquely qualified to assist in the onward development of the Lake Dinga project and we were delighted to welcome him to the team as a Non-Executive Director. Together with the historic data sharing agreement with Elemental and the deployment of CSA Global, I am confident that African Potash is ideally positioned to launch a successful exploration programme in 2014,

Financial Results

As a result of the acquisition of the Lake Dinga project, net assets have increased to $15.4m (2012: $8.1m). The acquisition also enabled the Group to reverse the impairment provision of $1.4m made in the prior year against the prefunding loan. Consequently the Group is reporting a reduced loss for the year of $0.2m (2012: $2.8m) and, at 30 June 2013, cash balances were $3.5m (2012:$ 8.2m).

Outlook

Potash has received a great deal of publicity over recent weeks, providing significant exposure for this important commodity, which is processed and used as an agricultural fertiliser. This publicity, whilst negatively impacting on some potash producers, has highlighted the market opportunity for emerging low-cost potash explorers and developers, a niche which we believe African Potash can capitalise on as we continue to advance the Lake Dinga project in the Republic of Congo.

With attractive long-term fundamentals underpinned by increasing demand for potash from the agricultural sector, we believe that the Lake Dinga Potash Project could be one of the few remaining undeveloped commercially attractive potash projects to be held by a junior resource company. With this in mind, our focus remains centred on proving up the resource potential of this asset, and in doing so, move Lake Dinga up the value curve. We have now commissioned an Environmental and Social Impact Assessment ahead of the commencement of drilling activities in 2014, although it will be necessary to raise additional capital prior to embarking on a significant commercial exploration programme. I look forward to reporting on the advancement of our exploration efforts in due course.

I would like to thank both our shareholders and our team for their support and look forward to providing updates on the Group's activities as we look to further our position as an emerging potash exploration and development company.

Jean-Pierre Conrad

Chairman

For further information visit www.africanpotash.com or contact the following:

CONDENSED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2013

All results relate to continuing activities

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2013

.

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 June 2013

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 2013. The auditors reported on those accounts: their report was (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying the reports 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 by 31 December 2013.

2. Critical accounting estimates and judgments

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

During the year, the group purchased a 70% interest in the Lake Dinga license which the board believes is highly prospective for commercial deposits of Potash. In order to develop the asset and issue a maiden resource statement, the Group will need to raise additional capital to fund a drilling program. Notwithstanding recent uncertainties in the global potash market, the board proposes a two stage process; a focused initial drilling programme to confirm proof of concept, to be followed by a larger scale 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 $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

The board has prepared forecasts for the Group covering the period to 31 December 2014

The directors are confident that the current cash held will enable the Group to pay debts as they fall due and to continue its operations for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

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

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 period, there is no dilutive effect of share options

The asset acquisition in the year comprises the Lac Dinga exploration licence in the Republic of Congo acquired by the Group through the acquisition of African Potash (Mauritius) Limited ("AFPM") (formerly Patagonia Capital Limited) which holds a 70% interest in La Societé des Potasses et des Mines SA ("SPM").

5. Share capital

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

Between incorporation and 23 September 2011, 40 million ordinary shares were issued for cash at a price of 0.1p per ordinary share and 35 million ordinary shares were issued for cash at a price of 2p per ordinary share.

On 30 September 2011, 83.7 million ordinary shares were issued for cash at a price of 5p per ordinary share.

On 4 November 2011, 40 million ordinary shares were issued for cash at a price of 5p per ordinary share.

On 22 February 2013, 27.9 million 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.

6. Acquisition of subsidiary

On 22 February 2013, the Group acquired 100% of AFPM which holds a 70% interest in the equity of SPM. The acquisition has been accounted for as an asset acquisition as it does not meet the definition of a business combination set out in IFRS3

AFPM is incorporated in Mauritius and is an intermediate holding entity. SPM is incorporated in the Republic of Congo and its principal activity is mineral exploration.

The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out below:

Consideration comprises

Deferred consideration is payable in two tranches:

· On commencement of commercial exploration activities, $0.8m is payable in cash and by the issue of new ordinary shares, the number of which is based on issuing the equivalent of $3.3m at a price of 10p per share. The fair value of this tranche of shares is $1.2m

· On issuing a maiden resource statement a further $4.3m is payable the issue of new ordinary shares, the number of which is based on issuing the equivalent of $4.3m at a price of 10p per share. The fair value of this tranche of shares is $1.6m

The equity element of deferred consideration is classified as shares to be issued. 

The fair value of the shares issued and to be issued as consideration was determined on the basis of the market value at the date of acquisition.

If the acquisition had been completed on the first day of the financial period, Group revenues for the period would have been $nil and the Group loss for the period would have remained at $0.2m.

The non-controlling interest relates to the interest held by the minority shareholders of SPM.

The amount due to parent company relates to prefunding costs and is eliminated on a group basis.