Arc Minerals Regulatory News (ARCM)

Ortac Resources Ltd / Epic: OTC / Market: AIM / Sector: Mining & Exploration

19 July 2012

Ortac Resources Ltd ('Ortac' or 'the Company')

Preliminary Results

Ortac Resources Ltd, the AIM listed exploration and development company focussed on natural resource projects in Europe, announces its preliminary results for the year ended 31 March 2012.

Financial Year Highlights

·; Completion of a Scoping Study at the Šturec gold and silver deposit has demonstrated highly attractive economic fundamentals;

·; Healthy cash position with approximately £7.2 million ($11.2 million) cash in bank to fund further exploration and development as well as providing the foundation to secure new opportunities without undue reliance on equity capital markets;

·; Evaluation of additional assets to expand the Company's natural resource portfolio;

·; Broadened corporate and operational presence in Slovakia with the appointment of Hugo Green as Chief Financial Officer and Owen Mihalop as Group Mining Engineer.

Post Year End Highlights

·; Upgraded the Šturec JORC Resource to 1.36Moz of gold equivalent up from 1.1Moz with over 1Moz in Measured and Indicated categories;

·; Management team strengthened by the appointment of Viktor Pomichal as Managing Director in Slovakia;

·; Financial position further cemented by £20 million ($31.2 million) equity financing facility ('EFF') with Darwin Strategic Limited.

Ortac CEO Vassilios Carellas said, "Ortac's most advanced asset, the Šturec deposit at its Slovak Precious Metals Project in Central Slovakia, has already demonstrated highly attractive economic fundamentals including a post tax Net Present Value of $309 million (post tax). The Company is also well funded, with approximately £7.2 million in cash and investments and an additional £20 million equity financing facility available to us. This is of vital importance during the current market uncertainty enabling Ortac to readily execute our development objectives.

"This is particularly important at present when the Board believes that the current share price and market capitalisation of £13 million does not reflect the true value of our mature assets, not withstanding the significant natural resource upside potential I am confident that we can deliver through further investment and development activity. Taking this all into account, I believe that Ortac represents a compelling investment opportunity and I look forward to enhancing value across our project portfolio in the year to come."

Chairman's Statement

Ortac has made solid progress during the year, achieving numerous corporate and operational milestones, which has translated into enhanced value across its portfolio of assets in Slovakia. Following the completion of key developmental landmarks, such as the Scoping Study at the Šturec Deposit of our Slovak Precious Metals Project, we are now well positioned to develop into a commercial producer.

The aforementioned Scoping Study, announced on 10 January 2012, yielded some highly encouraging results which underpinned the compelling economic fundamentals and value of this asset. The study demonstrated a post-tax Net Present Value of US$309 million, based on a metal price of $1,586 per ounce of gold equivalent. The Scoping Study projected a mine life of 11 years with targeted production of 86,000 ounces per annum.

Following the completion of the Scoping Study, the Company is now advancing the additional elements of its sustainable development plan, including the initiation of the Environmental and Social Impact Assessment ('ESIA') process at Šturec and the surrounding area. The first step in this process is the collection of environmental and social baseline data and the submission of a Preliminary Environmental Report, which forms the basis of our mining permit application. The ESIA is a crucial component in our development and strong progress is being made in this regard, as we look to build and maintain an open dialogue with all local stakeholders.

Core to this progress has been the valued and consistent input from the local community and authorities. Understandably they do not wish to have any activities that will in any way damage the nearby town of Kremnica, the health of locals or the value of local property and insist on the conservation of the rich local patrimony and biodiversity.

To facilitate this open dialogue, Ortac has embarked on a programme of communication with community members to work together to find and action the sustainable "win-win" solutions that the Šturec deposit can create. To implement this approach, Ortac continues to work with AstonEco management, with the intention of building its internal capacity to not only deliver an EU compliant, technical, economical and environmentally robust project in Slovakia but also partner with the community and local businesses in a way that addresses short, medium and long term sustainability needs.

Operations

The Slovak Precious Metals Project

The Company's most advanced asset is the Šturec Deposit, one of numerous targets located on its Slovak Precious Metals Project, located 17km west of central Slovakia's largest city, Banská Bystrica. The project area is easily accessed from the international airports at Vienna and Bratislava by driving northeast along the newly constructed highway between Bratislava and Banská Bystrica. The project comprises three licences: the 11.8km2 Kremnica Mining Licence, which hosts the Šturec Deposit; and the respective 63.2km2 and 36.9km2 Lutila and Vyhne Exploration Licences.

The Šturec Deposit has already demonstrated its potential to become an economic gold production asset following the completion of the Scoping Study in January 2012. The Scoping Study examined the mining, processing and infrastructure requirements of Šturec with four scenarios examined in detail, with the optimal case calculated at a price of US$1,586 per ounce of gold equivalent. 

The gold-silver mineralisation at Šturec is part of a low-sulphidation quartz-sericite-adularia epithermal-hydrothermal system hosted in Tertiary andesite volcanic flows and tuffs and lesser diorites and rhyolite dikes. It has been mined and explored since the 8th century with extensive modern exploration through drilling, adits and some open pit mining from the early 1960s.

The Šturec zone is continuously mineralised for 1,200m along strike, is typically 100 to 150m wide and extends to a known depth of at least 300m. The main part of the Šturec zone is the Schramen Vein, which is up to 100m wide along a 500m strike section and accounts for some 90% of the gold contained in the present Measured and Indicated Mineral Resources. It is a massive to sheeted quartz vein that strikes almost due north, generally dips steeply to the east, and thins to the north, south, and at depth. Some additional exploration is required to clarify the extent and continuity of hanging wall and footwall mineralisation in the Šturec zone.

An infill diamond drilling campaign totalling over 2,700m was undertaken at the project during 2011, resulting in, post period end, the updating of the Mineral Resource estimate by Snowden Mining Industry Consultants ('Snowden') for Šturec, which provided a total JORC Code (2004) compliant Mineral Resource of 1.36 Moz of gold equivalent up from 1.1Moz of gold equivalent. Significantly, the proportion of material classified in the Measured and Indicated categories increased by 75% to over 1.0Moz. It is also encouraging to note that the grade of the Measured and Indicated Resource in the new model has not been unduly lowered despite reporting at a lower cut-off grade.

The Snowden grade-tonnage estimate uses data from the sampling of adits, surface and underground diamond drill core, surface reverse circulation drilling and trench samples. The database was compiled and verified by Ortac. Snowden's checks indicate that the data is of sufficient quality to support the resource classifications applied. Multiple Indicator Kriging was used to estimate the gold and silver grades into a block model constrained by the Ortac geological interpretation. This model reflects the interpreted structure and geology. Search ellipses and ranges used in estimation reflect the spatial continuity and trends of the mineralisation in each of the mineralised domains.

Additional Assets

Ortac owns another nine exploration licences across Slovakia, two of which are adjacent and to the south of the Slovak Precious Metals Project, while the remaining seven are located in central and eastern Slovakia.

During the period, the Company commenced confirmatory drill programmes at two projects within our portfolio in Eastern Slovakia, Cejkov and Zlatá Bana. These confirmatory drill programmes mark the initial assessment of the Company's prospective precious and base metals licences in this area of Eastern Slovakia, which cover a combined area of 200 sq km.

Financials

In May 2012 we entered into a £20 million Equity Financing Facility ('EFF') with Darwin Strategic Limited ('Darwin'), a company majority owned by funds managed by the Henderson Volantis Capital Team ('Henderson Volantis'), a subsidiary of Henderson Global Investors ('HGI'), which holds a 11.06% interest in the Company. This financing facility offers a useful and cost effective source of equity funding, which we will use judiciously to maximise the value of existing and new opportunities with minimal dilution for shareholders.

As we are still in the development stage, in line with management expectations, we are reporting a pre-tax loss of £1.9m. We remain well funded, with a cash treasury of £7.2 million, in addition to a holding of 500,000 shares in Vatukoula Gold Mines Plc, which translates to a current market value of approximately £150,000.

Corporate

During the year the Company has further strengthened its senior management team with key appointments in Slovakia. 

Hugo Green joined the senior management team of Ortac as our Chief Financial Officer in May 2011, leading the corporate team in our Bratislava office. His extensive experience across Central and Eastern Europe at Deloitte and PWC has well equipped him for this position and he continues to play a key role in increasing our corporate presence in Slovakia. 

Owen Mihalop joined the Ortac team in June 2011 as the Company's Group Mining Engineer. Owen, a Geologist and Chartered Engineer, has over 15 years broad based experience in the mining sector, most recently with Wardall Armstrong, and his extensive technical experience has proved invaluable in the completion of the Scoping Study and the onward development of our key assets.

More recently, in June 2012, Ortac appointed Viktor Pomichal as Managing Director in Slovakia. Viktor, a native Slovak with extensive experience in investment and development within Eastern Europe, has a strong in country and European-wide network, and will be a key driving force behind achieving strong investment strategy and results for Ortac in Slovakia.

Outlook

Ortac, amongst its AIM mining junior peers, is in a strong position to deliver and build value for its shareholders due to its robust financing position and mature Šturec Deposit, which has already demonstrated its potential to become an economic gold production asset. In addition to Šturec, the Company also has a significant investment potential across Slovakia through which there remains considerable upside.

This year is promising to be a transformational period for the Company, with in-depth engagement with the local community. We look forward to co-designing the Šturec project with the local stakeholders, and will be focussing our efforts in ensuring a project design that leads to sustainable development for the region.

The completion of some of the key Šturec development milestones is scheduled for this year, including the Pre-Feasibility Study. In tandem with this, work on the environmental studies and community engagement programmes, which are key aspects of the Bankable Feasibility Study, are progressing well and I look forward to providing further updates in this regard in due course.

In addition to our current portfolio, we also remain proactive in evaluating and appraising additional assets through which to add value. We are actively evaluating potential natural resource investment targets in Europe generally and Slovakia specifically. With a healthy cash treasury of approximately £7.2 million and a flexible £20 million equity financing facility, we are extremely well positioned to move quickly on exciting opportunities, with minimal dilution for shareholders.

I would like to take this opportunity to once again thank our valued shareholders for their continued support, and I look forward to providing further updates on Ortac's evolution into a gold production company in the near future.

Anthony Balme

Chairman

19 July 2012

FINANCIAL STATEMENTS

Group Statement of Comprehensive Income for the Year Ended 31 March 2012

Company Statement of Comprehensive Income for the Year Ended 31 March 2012

Group Balance Sheets as at 31 March 2012

Company Balance Sheet as at 31 March 2012

Group Cash Flow Statement for the Year Ended 31 March 2012

Company Cash Flow Statements for the Year Ended 31 March 2012

Included in the movement on loans to subsidiaries is a non cash item relating to the impairment of the Rio Paranaíba Iron Ore Project - see note 4 and 11 below.

Group Statement of Changes in Equity for the Year Ended 31 March 2012

Company Statement of Changes in Equity for the Year Ended 31 March 2012

NOTES TO THE FINANCIAL INFORMATION

1. Summary of Significant Accounting Policies

a. General Information and Authorisation of Financial Statements

The Company is registered in the British Virgin Islands under the BVI Business Companies Act 2004 with registered number 1396532. The Company's ordinary shares are traded on the AIM Market operated by the London Stock Exchange. The Group financial statements of Ortac Resources Ltd for the year ended 31 March 2012 were authorised for issue by the Board on 19 July 2012 and the Balance Sheets signed on the Board's behalf by Mr. Anthony Balme and Mr. Charles Wood.

b. Statement of Compliance with IFRS

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

In preparing these financial statements, certain Standards and Interpretations that are mandatory for the first time for the financial year beginning 1 April 2011 are not currently relevant to the Group, and hence have not been applied.

·; An amendment to IFRS 1 "First-time Adoption of International Financial Reporting Standards" relieves first-time adopters of IFRS's from providing the additional disclosures introduced in March 2009 by "Improving Disclosures about Financial Instruments" (Amendments to IFRS 7). This amendment was effective for periods beginning on or after 1 July 2010.

·; IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments" clarifies the treatment required when an entity renegotiates the terms of a financial liability with its creditor, and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. This interpretation was effective for periods beginning on or after 1 July 2010.

·; A revised version of IAS 24 "Related Party Disclosures" simplifies the disclosure requirements for government-related entities and clarified the definition of a related party. This revision was effective for periods beginning on or after 1 January 2011.

·; An amendment to IFRIC 14 "IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction", on prepayments of a minimum funding requirement, applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permitted such an entity to treat the benefit of such an early payment as an asset. This amendment was effective for periods beginning on or after 1 January 2011.

·; Amendments to IFRS 7 "Financial Instruments: Disclosures" are designed to help users of financial statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position. These amendments were effective for periods beginning on or after 1 January 2011 but are still subject to EU endorsement.

The Group has also not early adopted certain new standards/amendments that were not effective at the commencement of the present reporting period. The Directors' interpretation thereof and their effective dates are summarised below:

·; Amendments to IAS 1 "Presentation of Financial Statements" require items that may be reclassified to the profit or loss section of the Income Statement to be grouped together within other comprehensive income (OCI). The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements. These amendments are effective for periods beginning on or after 1 July 2012.

·; Amendments to IAS 19 "Employment Benefits" eliminate the option to defer the recognition of gains and losses, known as the "corridor method"; streamline the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhance the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans. These amendments are effective for periods beginning on or after 1 January 2013.

·; IAS 27 "Separate Financial Statements" replaces the current version of IAS 27 "Consolidated and Separate Financial Statements" as a result of the issue of IFRS 10 (see below). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; IAS 28 "Investments in Associates and Joint Ventures" replaces the current version of IAS 28 "Investments in Associates" as a result of the issue of IFRS 11 (see above). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; Amendments to IAS 32 "Financial Instruments: Presentation" add application guidance to address inconsistencies identified in applying some of the criteria when offsetting financial assets and financial liabilities. This includes clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement. These amendments are effective for periods beginning on or after 1 January 2014, subject to EU endorsement.

·; Amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards" replace references to a fixed date of 1 January 2004 with "the date of transition to IFRSs", thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs, and provide guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. These amendments are effective for periods beginning on or after 1 July 2011, subject to EU endorsement.

·; Amendments to IFRS 7 "Financial Instruments: Disclosures" require disclosure of information that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's financial position. These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; IFRS 9 "Financial Instruments" specifies how an entity should classify and measure financial assets, including some hybrid contracts, with the aim of improving and simplifying the approach to classification and measurement compared with IAS 39. This standard is effective for periods beginning on or after 1 January 2015, subject to EU endorsement.

·; Amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial Instruments: Disclosures" require entities to apply IFRS 9 for annual periods beginning on or after 1 January 2015 instead of on or after 1 January 2013. Early application continues to be permitted. The amendments also require additional disclosures on transition from IAS 39 "Financial Instruments: Recognition and Measurement" to IFRS 9. This is subject to EU endorsement.

·; Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure of Interests in Other Entities" clarify the IASB's intention when first issuing the transition guidance in IFRS 10, provide similar relief in IFRS 11 and IFRS 12 from the presentation or adjustment of comparative information for periods prior to the immediately preceding period, and provide additional transition relief by eliminating the requirement to present comparatives for the disclosures relating to unconsolidated structured entities for any period before the first annual period for which IFRS 12 is applied. These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; IFRS 10 "Consolidated Financial Statements" builds on existing principles by identifying the concept of control as the determining factor as to whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; IFRS 11 "Joint Arrangements" provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; IFRS 12 "Disclosure of Interests in Other Entities" is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; IFRS 13 "Fair Value Measurement" improves consistency and reduces complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS's. It does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

·; IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. This applies to annual periods beginning on or after 1 January 2013, subject to EU endorsement.

·; "Annual Improvements 2009 - 2011 Cycle" sets out amendments to various IFRSs and provides a vehicle for making non-urgent but necessary amendments to IFRSs:

An amendment to IFRS 1 "First-time Adoption of International Financial Reporting Standards" clarifies whether an entity may apply IFRS 1:

(a) if the entity meets the criteria for applying IFRS 1 and has applied IFRS 1 in a previous reporting period; or

(b) if the entity meets the criteria for applying IFRS 1 and has applied IFRSs in a previous reporting period when IFRS 1 did not exist.

The amendment also addresses the transitional provisions for borrowing costs relating to qualifying assets for which the commencement date for capitalisation was before the date of transition to IFRSs.

An amendment to IAS 1 "Presentation of Financial Statements" clarifies the requirements for providing comparative information:

(a) for the opening statement of financial position when an entity changes accounting policies, or makes retrospective restatements or reclassifications; and

(b) when an entity provides financial statements beyond the minimum comparative information requirements.

An amendment to IAS 16 "Property, Plant and Equipment" addresses a perceived inconsistency in the classification requirements for servicing equipment.

An amendment to IAS 32 "Financial Instruments: Presentation" addresses perceived inconsistencies between IAS 12 "Income Taxes" and IAS 32 with regard to recognising the consequences of income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction.

An amendment to IAS 34 "Interim Financial Reporting" clarifies the requirements on segment information for total assets and liabilities for each reportable segment.

These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group or Company, except for additional disclosures when the relevant Standards come into effect.

Subject to the above, the principal accounting policies adopted by the Group and Company are set out below.

c. Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis, except for the measurement to available-for-sale financial assets at fair value as described in the accounting policies below, and on a going concern basis.

The financial information is presented in Pounds Sterling (£) and all values are rounded to the nearest thousand Pounds Sterling (£ 000's) unless otherwise stated.

d. Basis of Consolidation

The consolidated financial information incorporates the results of the Company and its subsidiaries (the "Group") using the acquisition method. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. In the consolidated Balance Sheet, the acquiree's identifiable assets and liabilities are initially recognised at their fair values at the acquisition date. The results of acquired or disposed operations are included in the consolidated Statement of Comprehensive Income from the date on which control is obtained, or up to the date of disposal. Inter-company transactions and balances between Group companies are eliminated in full.

e. Business combinations

The acquisition of subsidiaries in a business combination is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 "Non Current Assets Held for Sale and Discontinued Operations", which are recognised and measured at fair value less costs to sell.

Where there is a difference between the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities and the cost of the business combination, any excess cost is recognised in the Balance Sheet as goodwill and any excess net fair value is recognised immediately in the Income Statement as negative goodwill on acquisition of subsidiary.

The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

f. Contingent consideration

Contingent consideration is charged to the profit and loss in the period in which it is recognised as payable. See note 22 below.

g. Revenue

The Group had no revenue during the periods.

h. Foreign currencies

The Group's functional currency is Pounds Sterling. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. As at the reporting date, the assets and liabilities of these subsidiaries are translated into the presentation currency of Ortac Resources Limited, which is Pounds Sterling, at the rate of exchange ruling at the reporting date and their Income Statements are translated at the average exchange rate for the year. The exchange differences arising on the translation are taken directly to a separate component of equity.

All other exchange differences are taken to the profit or loss with the exception of differences on foreign currency borrowings, which, to the extent that they are used to finance or provide a hedge against foreign equity investments, are taken directly to reserves to the extent of the exchange difference arising on the net investment in these enterprises.

i. Exploration and Development Costs

Exploration and development costs are carried forward in respect of areas of interest where the consolidated entity's rights to tenure are current and where these costs are expected to be recouped through successful development and exploration, or by sale. Alternatively, these costs are carried forward while active and significant operations are continuing in relation to the areas of interest and it is too early to make reasonable assessment of the existence or otherwise of economically recoverable reserves. When the area of interest is abandoned, exploration and evaluation costs previously capitalised are written off to the profit or loss .

In accordance with the full cost method, costs incurred by the Company on behalf of its subsidiaries and associated with mining development and investment are capitalised on a project-by-project basis pending determination of the feasibility of the project. Costs incurred include appropriate technical and administrative expenses but not general overheads. If a mining development project is successful, the related expenditures will be written-off over the estimated life of the commercial ore reserves on a unit of production basis. Impairment reviews will be carried out regularly by the Directors of the Company. Where a project is abandoned, or is considered to be of no further commercial value, the related costs will be written off.

The recoverability of deferred mining costs and mining interests is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of reserves and future profitable production or proceeds from the disposition of recoverable reserves.

j. Significant Accounting Judgements, Estimates and Assumptions

Critical Accounting Estimates and Judgements

The preparation of financial statements using accounting policies consistent with IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of income and expenses. The preparation of financial statements also requires the Directors to exercise judgment in the process of applying the accounting policies. Changes in estimates, assumptions and judgements can have a significant impact on the financial statements.

Critical accounting estimates

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively from the period in which the estimates are revised. The following are the key estimate and assumption uncertainties that have a significant risk of resulting in a material adjustment within the next financial year:

i) Impairment of non-financial assets

Exploration and evaluation costs have a carrying value at 31 March 2012 of £10,024,000 (2011: £ 9,700,000). Management tests annually whether exploration projects have future economic value in accordance with the accounting policy stated in note t below). Each exploration project is subject to an annual review. When there are indications that an asset may be impaired, the Group is required to estimate the asset's recoverable amount. Recoverable amount is the greater of value in use and fair value less costs to sell.

Determining the value in use requires the Group to estimate expected future cash flows associated with the assets and a suitable discount rate in order to calculate present value.

Further information as to the impairment review carried out by the Directors can be found in notes 4 and 11.

If this proves to be incorrect and the projects do not have any value the exploration and evaluation costs will be written off.

ii) Stock-based compensation

The Directors are required to make certain estimates when determining the fair value of share options awards, and the number of awards that are expected to vest. These estimates affect the amount recognized as stock based compensation in the profit or loss in respect of share based payments. The assumptions made have been described in more detail in note v below.

Were the actual number of options that vest to differ by 10% from management's estimates the overall option charge would increase/decrease by £ 5,000.

iii) Contingent consideration

As referred to in note 22, the contingent consideration arrangement requires Ortac Resources PLC to pay vendor royalties of up to US$3,750,000 (£2,345,612 at 31 March 2012) in either shares or cash-being $15 per ounce on the first 250,000 ounces of gold equivalent (gold plus silver) resource defined as proven and probable reserve in the bankable feasibility study. This will become payable within 60 days of all required permits being obtained to allow commercial production at the Kremnica property.

The fair value of this potential consideration has been determined on the basis that the Directors are confident that the resource threshold referred to above will be exceeded, and in which case the carrying value is the maximum vendor royalties payable, as translated at year end US$/UK Sterling exchange rates.

The Directors estimate that the carrying value of contingent consideration would be £71,131 lower or £71,131 higher if US$ exchange rates were to change by 5% from their year end rates.

k. Finance Revenue

Finance revenue consists of Bank interest which is recognised as accruing on a straight line basis, over the period of the deposit.

l. Cash and Cash Equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above,

m. Trade and Other Receivables

Trade receivables, which generally have 15-day terms, are recognised and carried at original value. The Directors are of the view that such items are collectible and no provisions are required.

n. Investments

Investments in subsidiary undertakings are stated at cost less any provision for impairment in value, prior to their elimination on consolidation.

o. Financial Instruments

The Group's financial instruments are classified as loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and comprise trade and other receivables and cash and cash equivalents (see separate accounting policies for these items).

Available-for-sale financial assets are non-derivatives that are not included in any other category, and comprise current asset investments. They are initially recognised at fair value plus transaction costs, and are subsequently carried at fair value with changes in fair value being recognised in other comprehensive income.

The Group has overseas subsidiaries in the Slovak Republic whose expenses are denominated in Euros. Market price risk is inherent in the Group's activities and is accepted as such.

There is no material difference between the book value and fair value of the Company's financial instruments.

p. Available for sale investment reserve.

This reserve is used to record the fair value movements in available for sale investments.

q. Share-based payments reserve

This reserve is used to record the value of share-based payments provided to employees and Directors as part of their remuneration and provided to consultants and advisors hired by the Group from time to time as part of the consideration paid.

r. Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and the retranslation of monetary items forming part of the net investment in those subsidiaries.

s. Property, Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is provided on all tangible assets to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:

·; Property- 20% or straight line over the period of the lease- which ever is the lesser;

·; Plant and Equipment - between 5% and 25%

All assets are subject to annual impairment reviews.

t. Impairment of Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount.

An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use. This is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, and the asset's value in use cannot be estimated to be close to its fair value. In such cases, the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, it is considered impaired and is written down to its recoverable amount.

In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset, unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

u. Trade and Other Payables

Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

v. Share-based payment transactions

The Group provides benefits to senior personnel, consultants and advisors of the Group in the form of share-based payments, whereby such parties render services in exchange for shares or rights over shares (equity-settled transactions).

The cost of these equity-settled transactions with such parties is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Ortac Resources Limited (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant party become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:

(i) the extent to which the vesting period has expired and

(ii) the Group's best estimate of the number of equity instruments that will ultimately vest.

No adjustment is made for the likelihood of market performance conditions being met, as the effect of these conditions is included in the determination of fair value at grant date. The charge to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 9).

w. Operating leases

Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are charged to profit on loss on a straight-line basis over the period of the respective leases.

x. Earnings per share

Basic earnings per share is calculated as total comprehensive income for the period attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share are calculated as total comprehensive income for the period attributable to members of the parent, adjusted for:

·; Costs of servicing equity (other than dividends) and preference share dividends;

·; The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

·; Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

2. Revenue and Segmental Analysis

Segment information has been determined based on the information reviewed by the Board, being the Group's chief operating decision-maker, for the purposes of allocating resources and assessing performance. No revenue is currently being generated.

Head office activities are mainly administrative in nature and are located in the UK/BVI whilst the activities in Slovakia relate to exploration and evaluation work.

The Group also previously had exploration and evaluation work in Brazil but this has been discontinued and as reported in the Group's Interim Financial Statements for the six month period to 30th September 2011, and also referred to in Note 4 below, a full impairment provision was raised against this project.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

3. Expenses by nature

Auditor's remuneration for audit services above includes £3,000 (2011: £7,500) relating to the audit of the subsidiary companies.

4. Impairment

As previously reported, Ortac retains a 77% interest in the Rio Paranaíba Iron Ore Project in Brazil, through its subsidiary company, Paranaíba Minerals Ltd and the intention was to seek further external funding to develop and derisk the asset.

As reported in the Group's Unaudited Interim Financial Statements for the six months to 30 September 2011, having exhaustively pursued available avenues to implement the above strategy, the Directors concluded that given market conditions and redefined focus it was not appropriate to invest more funds in this venture, and that it was prudent to impair this asset by £596,000. Paranaíba Minerals Ltd is now in the process of being dissolved. See Note 11 below.

5. Employee Information

The average number of persons employed in the Group, including executive Directors, was:

6. Taxation

The taxation charge on the Group's loss before taxation differs from the theoretical amount that would arise using the weighted average tax rate applicable to the losses of the consolidated entities as follows:

No taxation has been provided due to losses in the year.

The weighted average applicable tax rate of 11% used is a combination of the 26% standard rate of corporation tax in the UK, 19% Slovak corporation tax and 0% BVI corporation tax.

There are tax losses in the group of £3.2m (2011: £2.6m) which are carried forward for relief in future periods. The deferred tax asset of £668k (2011: £529k) has not been provided in respect of these losses as there is presently insufficient evidence of the timing of suitable future profits against which they can be recovered.

Factors that may affect future tax charges:

A gradual reduction in the UK rate from 28% to 24% was announced in June 2010. The Finance (No. 2) Act 2010 enacted on 27 July 2010 included legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. A further 1% reduction was announced in the 2011 Budget with the effect that the corporation tax rate will decrease to 26% from 1 April 2011 and to 25% from 1 April 2012. This was included in the Finance Act 2011 which received Royal Assent on 19 July 2011.

Subsequently in 2012, the UK government announced a further reduction in the corporation tax rate to 24% from 1 April 2012 and further annual reductions of 1% reducing the rate to 22% as from 1 April 2014. The decrease to 24% was substantively enacted on 26 March 2012 under Provisional Collection of Taxes Act 1968) and has therefore been reflected in the unrecognised deferred tax asset of £1.3m. The directors estimate the further reduction would reduce the unrecognised deferred tax asset by £27K once the 22% rate is enacted.

No changes are foreseen to the future tax rates in the Slovak Republic or BVI.

7. Dividends

No dividends were paid or are proposed.

8. Directors' Remuneration

No pension benefits are provided for any Director.

9. Loss per Share

The calculation of loss per share is based on the loss after taxation divided by the weighted average number of share in issue during the year.

As inclusion of the potential Ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive. As such, diluted and basic loss per share are the same.

10. Finance Revenue

11. Intangible Assets

As referred to in Note 4 above, an impairment provision of £596,000 was made against the Rio Paranaíba Iron Ore Project, Brazil being the carrying value of the asset as at 31 March 2011, plus additional expenses incurred in connection with this asset during the six months to 30 September 2011.

At 31 March 2012, the Directors have carried out a further impairment review and concluded that no further impairment is currently required.

Exploration projects carried out by the subsidiaries are at an early stage of development and can be split into two categories:

1. Based upon existing resource estimates:- an SRK Consulting scoping study confirmed the economic feasibility of the Šturec project; which based upon a metals price of US$1,200 per ounce and a discount rate of 8% gave an NPV of nearly US$ 140 million. Gold prices at present are approximately US$ 1,600 per ounce and the view of the Directors is that they are unlikely to materially change in the near future (indeed, there is a body of market commentators who see the present price as being low). At current metals price, the project has an NPV in excess of US$ 300 million (post tax). Key assumptions used in calculation, are pit size, gold prices and discount rate, with sensitivity analysis indicating a viable project to a discount rate of 17%, or a gold price of US$ 900 per ounce.

Since the above was announced a recently updated Snowdens resource study was released which reports a nearly 24% increase in the Total Mineral Resource, classified in accordance with the JORC Code (2004), from 1.1Moz Au Eq to 1.36Moz Au Eq.

As regards the status of the mining license -which is held by Kremnica Gold Mining- it expires on 30 June 2014. This date can however, be further extended by beginning a mining operation before that date. An application for trial surface mining that would satisfy these requirements and allows for additional metallurgical test work, has already been lodged with the Slovak Authorities. The Directors are also advised that a trial underground operation would equally satisfy the terms of the license extension.

2. For other projects, no JORC or non-JORC compliant resource estimates are available to enable value in use calculations to be prepared and given that these projects are at an early stage, the Directors have decided to expense the exploration costs incurred during the year in connection with these projects.

Following their assessment the Directors concluded that no further impairment of exploration and evaluation assets was necessary during the year ended 31 March 2012.

12. Tangible Assets

Depreciation charges for the year ended 31 March 2012 of £30,000 (2011: £13,000) have been charged to "administrative expenses".

13. Investment in Subsidiaries

During the year an impairment was made in respect of the Group's holding in Paranaíba Minerals Ltd, which company is now in the process of being dissolved.

At 31 March 2012, the Company held 100% of the share capital of the following wholly owned subsidiary companies:

* Wholly owned subsidiary of Ortac Resources plc

** In the process of being dissolved.

14. Available for Sale Investments

Available for sale investments comprise the United Kingdom listed equity securities in Vatukoula Gold Mines plc.

15. Inventories

16. Trade and Other Receivables

Current trade and other receivables are all due within one year. The fair value of receivables is the same as their carrying values as stated above.

Loans due from subsidiaries are interest free and have no fixed repayment date.

The carrying amounts of the Group and Company's current and non current trade and other receivables are denominated in the following currencies:

Other receivables do not contain any impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

17. Trade and Other Payables

The carrying values are considered to be a reasonable approximation of the fair value and are considered by the Directors as payable within one year.

18. Share Capital

Total share options in issue

During the year ended 31 March 2012, the Company granted 60,000,000 options over ordinary shares (2011: 130,000,000).

As at 31 March 2011, the unexercised options in issue were: