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EMED Mining Public Limited19 February 2007 AIM: EMED 19 February 2007 2006 Annual Report and Financial Results for the Year Ended 31 December 2006 EMED Mining announces that its 2006 annual report and financial results for theyear ended 31 December 2006 has been mailed to shareholders, and is alsoavailable at www.emed-mining.com. Annual General Meeting EMED Mining's Annual General Meeting will be held at 9am on 15 March 2007 atHilton Hotel, Archbishop Macharios Avenue, Nicosia, Cyprus. Highlights for 2006 Slovakia • Discovered a significant gold deposit at Biely Vrch, with the firstfour drill holes all intercepting gold over their entire length up to 252 metresfrom surface, with gold grades increasing at depth. • Geological setting and the style of mineral alteration indicate aporphyry gold-copper system. • Follow-up drilling at Biely Vrch during 2007 is planned to comprise noless than 5,000m. • Drilling advanced prospects in the world-class Stiavnica-Hodrusamineral district. • Community relationships strengthened and a strategic alliance formedwith the owner of the Rozalia Gold Mine. Cyprus • Completed a Preliminary Feasibility Study on the Klirou DistrictCopper-Zinc Project. • Identified JORC-compliant Inferred Resources of 6.6 million tonnes at0.7% copper-equivalent. • Progressed discussions and relationships with local stakeholderssignificantly. • Targets to extend existing resources and discover new resources willbe drilled during 2007. • Further studies are planned to advance the Klirou District Copper-ZincProject towards potential development in 2008. Georgia • Confirmed Russian C2 and P1 Category Resources totalling 1.0 millionounces of gold at the Zopkhito Prospect. • Discovered a broad zone of gold-copper mineralisation at the IpariProspect. • The Upper Racha exploration and mining licence, the largest licence inGeorgia, was renewed to 2018. • Identified many gold prospects to be tested in the large Upper RachaLicence area. Corporate • EMED Mining's exploration interests in Turkey and Bulgaria were vendedinto KEFI Minerals. • KEFI Minerals was admitted to AIM in December 2006 with a marketcapitalisation of £2.7 million at the placing price. EMED Mining retains a 39%shareholding and first right to any project joint venture. • Assessment of more than 200 opportunities in many countries resultedin the acquisition of complementary exploration licences in Romania, Slovakiaand Turkey. • Net operating loss of £2.6 million (2005 £2.1 million) incurred afterexpensing all exploration expenditure and after minority interests for the 2006financial year. • Cash and listed shares of £2.7 million as at 31 December 2006,comprising cash £1.4 million and shares in KEFI minerals £1.3 million. • Market capitalisation of £10.4 million as at 31 December 2006. Enquiries EMED Mining Nabarro Wells Parkgreen CommunicationsHarry Anagnostaras-Adams Richard Swindells Clare Irvine+357 9945 7843 +44 20 7710 7400 +44 20 7851 7480www.emed-resources.com www.emed.tv References in this announcement to exploration results and potential have beenapproved for release by Mr Ron Cunneen, B.Sc. (Honours). Mr Cunneen is Head ofExploration for EMED Mining and has more than 20 years' relevant experience inthe field of activity concerned. He is a member of The Australian Institute ofGeoscientists ("AIG") and has consented to the inclusion of the material in theform and context in which it appears. The Managing Director's Statement and Financial Statements follow. Managing Director's Report Dear Shareholder EMED Mining continued to implement its strategy and made rapid progress during2006, our second year of operation. Key achievements were a significant golddiscovery at the Biely Vrch Prospect in Slovakia and the satisfactory completionof a preliminary feasibility study on the Klirou Copper-Zinc Project in Cyprus.It is the focus, commitment and loyalty of our team that has made this progresspossible and we are very fortunate to have such a high-quality team. The Company is developing a balanced portfolio of geographically diverseopportunities across a range of countries. The targeted belts host many pastcentres of mining and widespread areas of known mineralisation including anumber of styles of base metal and precious metal deposits, especiallyepithermal gold, porphyry copper-gold and volcanogenic hosted massive sulphides("VHMS") copper-gold. Our aim is to add value to our projects and create wealth for our stakeholdersthrough the cost-effective discovery or acquisition and subsequent developmentof mineral resources. Developing our "social licence to operate" at every stepof the way is crucial to turning our projects into profitable mining operations. We take our role as a corporate citizen very seriously as the Company works hardto achieve its aim of establishing the feasibility of two projects by the end of2007 and of advancing one project into development in 2008. Having our senior management team based in Cyprus, the centre of our region ofinterest, has worked well. This location enables the leadership team to betterunderstand this rapidly evolving region, travel frequently to our projects andpotential projects, as well as being able to spend time with our families whohave all relocated to Cyprus. In September 2006, shareholders approved changing our Company's name fromEastern Mediterranean Resources Public Limited to EMED Mining Public Limited.The name change reflects our progress towards becoming a mining company and thatour Company had generally become known simply as EMED. Rapid Progress - Discovery and Development EMED Mining's exploration is directed towards the profitable discovery,acquisition and development of mineral resources. In Slovakia, which the Company entered by applying to the regulatory authoritiesfor exploration licences, our first drilling program discovered gold fromsurface to over 250m depth at the Biely Vrch Prospect in the Detva Licence. Thissignificant discovery confirmed that utilising leading edge low-detectiongeochemical methods and modern geological modeling is appropriate for detectingthe targeted bulk-mineable epithermal gold or porphyry gold-coppermineralisation styles. In Cyprus, which the Company entered by acquiring a project from significantshareholder Oxiana Limited, the Klirou Copper-Zinc Project was identified as apotential "kick-starter" to help fund further exploration and development of theCompany. A resource of 6.6 million tonnes at 0.7% copper-equivalent has so farbeen identified. Our Preliminary Feasibility Study concluded that the projecthas an encouraging range of net present values at a copper price of $US2/lb anda zinc price of $US1.00/lb (LME spot prices on 8 February 2007 were $US2.37/lband $US1.38/lb, respectively). This conclusion justifies an expanded effort andthe next phase of the project is the Feasibility Study, which will be overseenby international project consultants AMC Consultants. During 2007 theFeasibility Study's aims are to expand the resources by intensified drillingprograms, complete detailed operating and environmental plans and to seekregulatory consent to development. We will simultaneously trigger deeperexploration for much larger targets in this prospective country. In Georgia, which the Company entered by a combination of acquiring a privateexploration company and making applications to the regulatory authorities forlicence upgrade, field work only commenced in May 2006. We sampled a largenumber of the gold prospects and identified many attractive andnever-before-tested gold targets evident from outcrop. We also verified theresources (Russian classification) at the Zopkhito Prospect of 1.0 millionounces of gold. The untested potential of the area clearly justifies systematicprospecting and EMED Mining has renewed its licence, the largest in Georgia,until 2018 as an exploration and mining licence. In Turkey, which has rapidly emerged as the mining powerhouse of the entireregion, we have formed 39%-owned KEFI Minerals Plc, which in December 2006 wasfloated on AIM, the London Stock Exchange's market for international high-growthcompanies. KEFI Minerals' business plan is designed to particularly suit itsmission in Turkey and its team has commenced field work under Managing DirectorJeff Rayner. People are Key EMED Mining's reconnaissance and prospecting activities are advancing throughoutSlovakia/ Europe, Cyprus/Middle East and the Georgia/Central Asia, pursuingspecific belts of mineralisation. Rapid exploration progress over such a largeregion is made possible by the diverse skills and talents of our multiculturalteam. The key to progressing projects in emerging countries is forming the rightrelationships and employing the right people. The global mining industry is experiencing a severe shortage of skilledprofessionals. EMED Mining is fortunate in having been able to attract andretain very experienced geoscientists and other mining industry professionals.Our culture provides the opportunity for employees to rapidly develop theirknowledge and potential by being part of a small team that is evaluatingnumerous opportunities. Our people are attracted by the region's untapped potential and EMED Mining'sculture combining the scientific approach of a major company with the "just doit" approach of a junior company. They are also well-incentivised to generatewealth for our shareholders. Our approach of combining international and local expertise has effectivelyestablished an organisation culture appropriate to the Group's area of interest.The core exploration team comprises five experienced managers based in Cypruswho support and work with colleagues and advisers, most of whom are based in therespective countries. The team combines local experts with practitionersexperienced in discovery, development and mining from the well-establishednatural resources sector in Australasia. Whilst the Group's area of interest hasprofessionals with excellent geological expertise and hosts a significantmineral endowment, it currently lacks the modern mining expertise that isabundant in Australasia. We also have the support of other experts whocontribute to special projects. In order to operate effectively in our area of interest, a range of languages isnecessary. The EMED Mining team collectively is fluent is more than 15languages, including Arabic, Bulgarian, English, French, Georgia, Greek,Italian, Russian, Slovak and Turkish. More team members will be added during 2007 as the Company progresses beyondbeing purely an exploration company. This expansion will further complement thealready extensive experience of our Directors and Senior Management inexploration, development, financing and operation of natural resources projects. Unlocking The Region's Potential The collapse of the former Soviet Union and the integration of Eastern Europeancountries into the European Union has given EMED Mining an attractive entrypoint into countries with very little modern mining and exploration. There is political will in some of these countries for the development of themetal production industry and structural reforms are accelerating, thusproviding an improving exploration and mining environment. EMED Miningselectively invests its time and money based on its assessment of commercial andpolitical factors and the continuous monitoring thereof. Working in a range of countries in this region provides EMED Mining with greatinsight into the political transformations taking place. For example, a WorldBank report, published after EMED Mining acquired the largest mineralexploration licence in Georgia, elevated the country's annual ranking on the "ease of doing business" from 112 to 37 globally - ahead of both Italy and Spain. The statutory procedures for the granting of exploration licences are becomingincreasingly transparent. In the countries which EMED Mining has so farinvested, local attitudes, laws and regulations are providing more incentive forforeign expertise and capital to resurrect the metal production sector. Since EMED Mining entered the region two years ago, another thirty listedexploration and mining companies have done likewise - more than doubling thenumber of companies involved across the large number of countries in the region.However, EMED Mining is perhaps the only company employing the business modelof: - basing all leadership in the region; - building a portfolio across several countries; and - rapidly moving beyond exploration and into development planning. We see many advantages in being an early mover in these countries with anincreasingly positive environment for exploration and development in theminerals sector. Our efforts towards developing positive relations withcommunities, regulators, governments and non-government organisations have beenrewarded with open dialogue and, for the most part, strong support received. This highly prospective region is rapidly changing - the former Soviet Unioncountries are rapidly emerging from the inefficiencies of a state-ownedindustry, some countries are adjusting to recent or planned membership of theEuropean Union and some other countries are using unprecedented wealth from oiland gas revenues to trigger economic expansion. EMED Mining is pleased to be anearly mover in the revitalisation of the region's metal production industry. Andit is now international "conventional wisdom" that the world needs significantlymore metal production to meet the demands of economic development in manycountries, the largest of which are China and India. Effective Strategy Our regional strategy has not changed and the key components are to: - focus on demonstrably well-endowed areas and apply modern scientifictechniques; - use relationships in the region to provide a high level of technical,political and other expertise; - demonstrate a commitment to the region by being headquartered in Cyprusand establishing offices near the geographic centre of each prospect portfolio;and - integrate the practical experience gained in one of the world's leadingmetal-producing countries, Australia, with local expertise in each country whereEMED Mining is active. EMED Mining's diversified exploration portfolio affords the Company withvaluable flexibility and mitigates against excessive sovereign risk on anaggregate basis. Prospects are prioritised for consideration on the following basis: - a history of previous production or exploration; - the opportunity for the Group to apply the most up to date explorationtechniques; and - the potential to at least double the value of the Company in the initialstages of the project while pursuing "company-making" targets. The Company established quality exploration portfolios in three prospectiveregions within six months of listing on AIM in May 2005 and these projects wereprogressed over the course of 2006. Establishing strong networks with various types of people is crucial to becomingaware of opportunities and quickly filtering out those less attractive to ourCompany. Monitoring the activities of other explorers in the region is also veryhelpful. The Company's intranet represents a proprietary database which includescountry, competitor and project information along with policies and precedentswhich we regularly refine as part of our "continuous improvement" ethos. Our priority is to follow the prospective mineral belts through the region. Oncea prospective opportunity has been identified, then we assess the commercial andsovereign risks before investing further time and money. Our preference is to have clusters of tenements in a given region in order buildin-depth knowledge of a mineral district and to explore more cost effectively.We aim to rapidly identify, prioritise and assess targets in order to progresstargets for further work or relinquish the licences. In implementing this strategy, we considered more than 200 opportunities in manycountries during 2006. These evaluations culminated in acquiring new projects inthree countries - Romania, Slovakia and Turkey. All of these acquisitions arecomplementary to existing projects. EMED Mining has to date applied for licences covering over approximately5,000km2 in seven countries and has already relinquished approximately 1,000km2after initial evaluation. The Company currently holds licences coveringapproximately 4,000km2. Value Created by KEFI Minerals KEFI Minerals Plc was formed on 24 October 2006 for the purposes of holding EMEDMining's exploration interests in Turkey and Bulgaria with a view to creatingshareholder value through the discovery and exploitation of gold and copperdeposits in those countries. Turkey has recently emerged as a location of globalsignificance for metal production and now has now attracted investment from morethan 15 international exploration and mining companies, including many "majors".KEFI Minerals is designed to succeed in Turkey with a strong local managementteam and will in due course develop local ownership. KEFI Minerals' Artvin and Gumushane Projects in northeastern Turkey are locatedwithin a geologically favourable stratigraphy that is known to host a number ofsignificant VHMS and epithermal base metal and precious metal deposits. KEFI Minerals also owns an extensive exploration database which containsinformation about approximately 100 further prospective sites in Turkey. Thisdatabase provides a competitive advantage in identifying prospective areas forproject generation in Turkey. KEFI Minerals has already taken moves to expandits portfolio by implementing the insights gained by interrogating the databasewhich was built by a large team from Australia during the 1980's and 1990's. In southern Bulgaria, reconnaissance work in the Lehovo Project area hasidentified a structural corridor with a strike length of approximately eightkilometres with the potential for gold and base metal mineralisation. EMED Mining has agreed to provide technical and administrative systems andpersonnel to KEFI Minerals on a cost-recovery basis, thus enabling KEFI Mineralsto reduce overheads, to spend more on exploring Turkey and Bulgaria and, mostimportantly, to move rapidly into the field. KEFI Minerals commenced trading on AIM on 18 December 2006, following thesuccessful placing of 46.7 million shares at 3p to raise £1.4 million. KEFIMinerals had a market capitalisation of £2.7 million at the placing price onadmission to AIM. EMED Mining retains a 39% shareholding in KEFI Minerals and has the first rightto any joint ventures proposed by KEFI Minerals. Social Responsibility is Central Operating in a socially responsible manner is central to our business model.Effective communication with a range of stakeholders is essential to ensuringthat we fulfill these responsibilities. One initiative during 2006 was convening the regional conference "ResponsibleMining and Environmental Protection". Held in Nicosia, the conference wasjointly organised by the Cyprus Green Party and EMED Mining. This joint effortreflects the realization that better social outcomes are achieved if people worktogether in a transparent and collaborative manner, rather than in a secret andconfrontational manner. Government ministers and officials, representatives of regional and localenvironmental organizations, and mining executives assembled to focus on anagenda that aims to foster greater understanding of the nature and ramificationsof mineral resources exploration and development in the interests ofestablishing a new spirit of co-operation between historically opposing camps. Our aim is to realise the extensive benefits of metal production for a range ofstakeholders. EMED Mining is committed to achieving development that providesenormous benefit today, without compromising the ability of future generationsto meet their own needs both environmentally and economically. Logical Funding EMED Mining has progressively expanded its capital and shareholder base as theCompany's projects have been successfully progressed. In order to pursue new developments and previously planned programs, shareplacements since incorporation two years ago have totalled £6 million, £3million in each of 2005 and 2006. Seed capital on "day one" was provided by myself and the other foundingDirectors and subsequent funding stages have seen the sequential introduction ofmining industry investors from Australia, the United Kingdom and, more recently,Western Europe. The next stage will see investors emerge from within thecountries in which we operate, as they become familiar with our activities andthe risk/ return profile of the portfolio. Our accounting policy is conservative. All expenditure is written off until theBoard decides to commence development of a project, from which point developmentcosts would be capitalized. If the green light is given during 2007 to developing the Klirou Copper-ZincProject, the funding is likely to comprise a combination of some form ofagreement with refiners/customers, banking finance, contribution by our 5%partner Hellenic Mining Company plus a relatively modest equity contribution.The project currently has a low up-front capital requirement of under £10million principally because EMED Mining has secured in-principle the use of anexisting plant and treatment site. Outlook for 2007 The Company has made significant progress in establishing its projects,strengthening its management and field teams and has rapidly overcome theexpected start-up difficulties. The Company's exciting portfolio of prospects on the books and the quality ofopportunities in the pipeline indicates that rapid progress will continue in theyear ahead. The strategic objectives for 2007 are to: - Establish large mineral resources in three diverse locations; - Expand the capital base to match the exploration portfolio as results andopportunitieswarrant; and - Achieve sufficient progress in Cyprus to trigger the Company's firstdevelopment in 2008 Harry Anagnostaras-Adams Managing Director 15 February 2007 REPORT OF THE BOARD OF DIRECTORS The Board of Directors presents its report for EMED Mining Public Limited(previously Eastern Mediterranean Resources Public Limited) ("EMED Mining") andits subsidiaries (the "Group") together with the financial statements of theGroup for the year ended 31 December 2006. Incorporation and Principal activity EMED was incorporated in Cyprus on 17 September 2004 as a private company withlimited liability under the Companies Law of Cyprus, Cap. 113 and was convertedto a public limited liability company on 26 January 2005. Its registered officeis at 1 Lambousa Street, Nicosia, Cyprus. The Company was listed on theAlternative Investment Market ("AIM") of the London Stock Exchange in May 2005.This followed the successful initial public offering of 28,155,555 shares at 8pto raise £2.25 million and seed capital raisings of £0.5 million in late 2004. The Company changed its name to, firstly, Mediterranean Minerals Public Limitedon 1 March 2005, subsequently Eastern Mediterranean Resources Public Limited on11 March 2005 and to EMED Mining Public Limited on 20 September 2006. The principal activity of the Group is to explore for and develop naturalresources, with a focus on base and precious metals in particular belts ofmineralization spanning through Europe, Middle East and Central Asia. Review of Operations The Company is developing a balanced portfolio of geographically diverseopportunities across a range of countries. The targeted belts host many pastcentres of mining and widespread areas of known mineralization including anumber of styles of base metal and precious metal deposits, especiallyepithermal gold, porphyry cooper-gold and volcanogenic hosted massive sulphides("VHMS") copper-gold. In Slovakia, the discovery of a gold deposit at Biely Vrch has been made. Thefirst four drill holes intercepted gold over their entire length up to 252metres from surface, with gold grades increasing at depth. Follow up drilling ofno less than 5,000 metres is scheduled for 2007. In Cyprus, a Preliminary Feasibility Study on the Klirou District Copper ZincProject has been completed and has identified resources of 6.6 million tones at0.7% copper equivalent. Targets that can potentially extend the resource will bedrilled in 2007 and further studies are planned to advance this project towardspotential development in 2008. Other much larger targets are also being drilltested. In Georgia, confirmed a Russian Resource of 1.0 million ounces of gold at theZopkhito and discovered a broad zone of gold-copper mineralisation at the IpariProspect. The Upper Racha exploration and mining licence, the largest mineralslicence in Georgia, was renewed to 2018 and many gold prospects in this licensearea have been identified for further testing. During the year EMED Mining's interests in Bulgaria and Turkey were vended intoKEFI Minerals plc. KEFI Minerals was admitted to AIM in December 2006 with amarket capitalisation of £2.7 million at the placing price. EMED Mining retainsa 39% shareholding and first right of refusal to any project joint venture. Results As at 31 December 2006, EMED Mining had net working capital of £1.419 million(2005: £0.887 million) and listed shares that had a market value of £1.3million. The company's market capitalisation was £10.4 million as at 31 December 2006. During the year 2006, EMED Mining has incurred exploration expenditure of £1.926million from continuing operations (2005: £0.965 million) and net operatingexpenditure of £0.384 million. (2005: £0.229 million). EMED Mining has taken a conservative approach in its accounting policy towardsexploration expenditure - all such expenditures are written off on acquisitionor when incurred pending Directors' decision to commence project development. This policy is a major factor in EMED Mining recording a net loss for the yearof £2.627 million (2005: £2.142 million) after minority interests. 2006 2005 £ 000's £000's - Goodwill on acquisition cost to EMED Mining of historical exploration costs of Eastern Mediterranean Minerals (Cyprus) Limited - 585- Exploration Expenditure 1,926 965- Net Operating Expenditure 384 229- Shareholder communications and ongoing listing costs 251 99- Options (share-based benefits) 186 108- Loss from discontinued operations 208 156- Gain on disposal of subsidiaries (328) -- Loss for the period 2,627 2,142 The Group's results for the year are set out on page 11. Share capital Authorised capital Under its Memorandum the Company fixed its share capital at 1,000 ordinaryshares of nominal value of CY£1 each. On 14 December 2004, the Company passed the following special resolutions: (a) That the authorized and issued share capital of the Company be expressed inSterling Pounds, so that the current authorized and issued share capital ofCY£1,000 which is divided into 1,000 shares of CY£1 each, will become GBP1,200divided into 1,200 shares of GBP1 each. (b) That the authorised share capital of the Company be increased from GBP1,200divided into 1,200 shares of GBP1 each, to GBP250,000 divided into 250,000shares of GBP1 each. (c) That the authorised share capital of the Company, of GBP250,000 divided into250,000 shares of GBP1 each, be subdivided into 100,000,000 shares of GBP0.0025each. On 20 September 2006 the Company passed the following special resolutions: (a) That the authorized share capital of the Company be increased fromGBP250,000 (divided into 100,000,000 shares of GBP 0.0025 each) by GBP250,000 bythe creation of 100,000,000 new ordinary shares of GBP0.0025 each, resulting toGBP500,000 divided into 200,000,000 shares of GBP0.0025 each. Issued capital Upon incorporation on 17 September 2004 the Company issued to the subscribers ofits Memorandum of Association 1,000 ordinary shares of CY£1 each at par. On 14 December 2004, the Company passed the following special resolutions: (a) That the issued share capital of the Company be expressed in SterlingPounds, so that the current issued share capital of CY£1,000 which is dividedinto 1,000 shares of CY£1 each, will become GBP1,200 divided into 1,200 sharesof GBP1 each. Future Developments The Company has made significant progress in establishing its projects,strengthening its management and field teams and has rapidly overcome theexpected start-up difficulties. The Company's exciting portfolio of prospects on the books and the quality ofopportunities in the pipeline indicate that rapid progress will continue in theyear ahead. The strategic objectives for 2007 are to: • Establish large mineral resources in three diverse locations; • Expand the capital base to match the exploration portfolio as resultsand opportunities warrant; and • Achieve sufficient progress in Cyprus to trigger the Company's firstdevelopment in 2008. Directors' responsibilities for the financial statements Cyprus company law requires the Directors to prepare financial statements foreach financial year which give a true and fair view of the state of affairs ofthe Company and of the Group and of the profit or loss of the Group for thatperiod. In preparing those financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; and • state whether applicable accounting standards have been followed, subject toany material departures disclosed and explained in the financial statements. The Directors are responsible for maintaining proper accounting records, forsafeguarding the assets of the Group and for taking reasonable steps for theprevention and detection of fraud and other irregularities. Legislation in theCyprus governing the preparation and dissemination of the financial statementsmay differ from legislation in other jurisdictions. Subsequent Events No events have arisen since the end of the financial year that havesignificantly affected the operations of the Group. Auditors The auditors, MOORE STEPHENS STYLIANOU & CO, have expressed their willingness tocontinue in office and a resolution giving authority to the Board of Directorsto fix their remuneration will be proposed at the Annual General Meeting. By Order of the Board Inter Jura CY (Services) Limited, Secretary Nicosia, Cyprus, 15 February 2007 INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF EMED MINING PUBLIC LIMITED (PREVIOUSLY EASTERN MEDITERRANEAN RESOURCES PUBLIC LIMITED Report on the Financial Statements We have audited the financial statements EMED Mining Public Limited (previouslyEastern Mediterranean Resources Public Limited) (the Company) and itssubsidiaries (the Group) on pages 29 to 51 which comprise the consolidatedbalance sheet as at 31 December 2006, and the consolidated income statement,consolidated statement of changes in equity and consolidated cash flow statementfor the year then ended, and a summary of significant accounting policies andother explanatory notes. Board of Directors' Responsibility for the Financial Statements The Company's Board of Directors is responsible for the preparation and fairpresentation of these financial statements in accordance with InternationalFinancial Reporting Standards as adopted by the European Union (EU) andInternational Financial Reporting Standards as issued by the InternationalAccounting Standards Board (IASB) and the requirements of the Cyprus CompaniesLaw, Cap 113. This responsibility includes: designing, implementing andmaintaining internal control relevant to the preparation and fair presentationof financial statements that are free from material misstatement, whether due tofraud or error; selecting and applying appropriate accounting policies; andmaking accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements basedon our audit. This report is made solely to the Company's members, as a body, inaccordance with Section 156 of the Companies Law, Cap. 113. Our audit work hasbeen undertaken so that we might state to the Company's members those matters weare required to state to them in an auditor's report and for no other purpose.To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company and the Company's members as abody, for our audit work, for this report, or for the opinions we have formed.We conducted our audit in accordance with International Standards on Auditing.Those Standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance whether the financialstatements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditor's judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the Board of Directors, as wellas evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair viewof the financial position of the Group as of 31 December 2006, and of itsfinancial performance and its cash flows for the year then ended in accordancewith International Financial Reporting Standards as adopted by the EU andInternational Financial Reporting Standards as issued by the IASB and therequirements of the Cyprus Companies Law, Cap 113. Without qualifying our opinion we draw attention to the fact that the financialstatements have been prepared on a going concern basis. This basis may not beappropriate because its validity depends principally on the discovery ofeconomically viable mineral deposits and the availability of subsequent fundingto extract the resource or alternatively the availability of funding to extendthe Group's exploration activities. The financial information does not includeany adjustment that would arise from a failure to complete either option.Details of the circumstances relating to this fundamental uncertainty aredescribed in the accounting policies. Our opinion is not qualified in thisrespect. Report on Other Legal Requirements Pursuant to the requirements of the Companies Law, Cap. 113, we report thefollowing: • We have obtained all the information and explanations we considered necessary for the purposes of our audit. • In our opinion, proper books of account have been kept by the Company. • The Group's financial statements are in agreement with the books of account. • In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Law, Cap. 113, in the manner so required. • In our opinion, the information given in the report of the Board of Directors on pages 2 to 8 is consistent with the financial statements. MOORE STEPHENS STYLIANOU & CONicosia, Cyprus, 15 February 2007 CERTIFIED PUBLIC ACCOUNTANTS - CY CONSOLIDATED STATEMENT OF OPERATIONS Year ended 31 December 2006 17/09/04- 31/12 /05 2006 Note GBP'000 GBP'000 Revenue - -Exploration costs (1,926) (964)Gross loss (1,926) (964)Administration expenses (806) (513)Amortisation of goodwill - (585)Share of results of associates (31) -Operating loss 4 (2,763) (2,062)Gain on disposal of subsidiaries 328 -Finance income 6 8 23Finance costs 7 (21) (13)Loss before tax (2,448) (2,052)Tax 8 (1) (1)Net loss for the year from continuing operations (2,449) (2,053)Discontinued operations:Loss for the year from discontinued operations (208) (156)Net loss for the year (2,657) (2,209)Attributable to:Equity holders of the parent (2,627) (2,142)Minority interest (30) (67)Net loss for the period (2,657) (2,209) Loss per share (pence) 9 (2.87) (3.91) BALANCE SHEET31 December 2006 The The Company The Group Company The Group 2005 2006 2006 2005 Note GBP'000 GBP'000 GBP'000 GBP'000ASSETSNon-current assetsProperty, plant and equipment 10 52 43 41 38Goodwill 11 71 - - -Investments in subsidiaries 12 - 645 - 648Investments in associates 13 793 430 - - 916 1,118 41 686Current assetsTrade and other receivables 14 536 3,169 46 1,187Cash at bank and in hand 15 1,207 1,135 971 911 1,743 4,304 1,017 2,098Total assets 2,659 5,422 1,058 2,784 EQUITY AND LIABILITIESCapital and reservesShare capital 16 232 232 141 141Share premium 16 6,261 6,261 2,886 2,886Share options reserves 17 294 294 108 108Accumulated losses (4,400) (1,689) (2,142) (479)Total equity attributable to equity holdersof the parent 2,387 5,098 993 2,656 Minority interest (52) - (65) -Total equity 2,335 5,098 928 2,656 Current liabilitiesTrade and other payables 18 324 324 130 128 324 324 130 128Total equity and liabilities 2,659 5,422 1,058 2,784 On 15 February 2007, the Board of Directors of EMED MINING PUBLIC LIMITED(previously EASTERN MEDITERRANEAN RESOURCES PUBLIC LIMITED) authorised thesefinancial statements for issue. ....................................Director CONSOLIDATED STATEMENT OF CHANGES IN EQUITYYear ended 31 December 2006 Share Share Share Accumulated Equity Exchange Total capital premium options losses reserve Difference reserve reserve GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Net loss for the period - - - (2,209) - - (2,209) Minority interest - - - 67 - - 67 Issue of share capital 141 3,351 - - - 3,492 Listing and issue costs - (465) - - - - (465) Recognition of share-based payments - - 108 - - - 108 At 31Dec. 2005/1 Jan. 2006 141 2,886 108 (2,142) - - 993 Net loss for the year - - - (2,657) - - (2,657) Minority interest - - - 30 - - 30 Issue of share capital 91 3,589 - - - - 3,680 Share issue costs - (214) - - - - (214) Recognition of share based - - 186 - - - 186 payments Share of equity adjustments in associates - - - - 394 - 394 Exchange difference on translation of subsidiaries - - - - - (25) (25) At 31 December 2006 232 6,261 294 (4,769) 394 (25) 2,387 CONSOLIDATED CASH FLOW STATEMENTYear ended 31 December 2006 17/09/04- 31/12/ 05 2006 Note GBP'000 GBP'000CASH FLOWS FROM OPERATING ACTIVITIESLoss before tax (2,448) (2,209)Adjustments for:Depreciation of property, plant and equipment 10 17 8Amortisation of goodwill 11 - 585Share-based benefits 17 186 108Acquisition of data with settlement in shares 408 100Profit on disposal of subsidiaries (328) -Interest income 6 (8) (10)Exchange difference on translation of subsidiaries (82) -Operating loss before working capital changes (2,255) (1,418)Changes in working capital:Trade and other receivables (490) (24)Trade and other payables 216 118Cash flows used in operations (2,529) (1,324)Tax paid (1) (1)Net cash used in operating activities (2,530) (1,325) CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment 10 (28) (46)Acquisition of subsidiaries 19 (114) 5Acquisition of associate (130) -Disposal of subsidiaries (28)Interest received 8 10Net cash used in investing activities (292) (31) CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of share capital 3,272 2,792Listing and issue costs (214) (465)Net cash from financing activities 3,058 2,327Net increase in cash and cash equivalents 236 971 Cash and cash equivalents:At beginning of the period 15 971 -At end of the period 15 1,207 971 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYear ended 31 December 2006 1. Incorporation and principal activities Country of incorporation EMED Mining Public Limited (Previously Eastern Mediterranean Resources PublicLimited) (the "Company") was incorporated in Cyprus on 17 September 2004 as aprivate company with limited liability under the Companies Law, Cap. 113 and wasconverted to a public limited liability company at 26 January 2005. Itsregistered office is at , 1 Lambousa Street, Nicosia, Cyprus. The Company waslisted on the Alternative Investment Market ("AIM") of the London Stock Exchangein May 2005. The Company changed its name to, firstly, Mediterranean Minerals Public Limitedon 1 March 2005 subsequently, to Eastern Mediterranean Resources Public Limitedon 11 March 2005 and on 20 September 2006 to EMED Mining Public Limited. Principal activities The principal activity of the Company and its subsidiaries ("the Group") is toexplore for and develop natural resources, with a focus on base and preciousmetals in the regions of Central and Eastern Europe, Western Asia and the MiddleEast. 2. Accounting policies The principal accounting policies adopted in the preparation of these financialstatements are set out below. These policies have been consistently appliedthroughout the period presented in these financial statements unless otherwisestated. Basis of preparation The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) and the provisions of theCompanies Law of Cyprus, Cap. 113. The financial statements have been preparedunder the historical cost convention and on the basis of the principleaccounting policies set out below. These policies are consistent with thoseadopted for the preparation of the Group's financial statements for the yearended 31 December 2005 except as stated below: Adoption of new and revised International Financial Reporting Standards (IFRS)and Interpretations by the International Financial Reporting InterpretationsCommittee (IFRIC): During the year the Company has adopted the new and revised IFRS's that arerelevant to its operations and are applicable for periods beginning on or after1 January 2006. This adoption had not a material effect on the Company'saccounting policies. The revised International Accounting Standards (IAS) and the new InternationalFinancial Reporting Standards (IFRS) that were applicable in the year ended 31December 2006 are the following: • IAS 1 (revised) "Presentation of Financial Statements - Additional Disclosures on Equity" • IAS 19 (revised) "Employee Benefits" • IAS 21 (revised) "The effects of Changes in Foreign Exchange Rates - Translation of Foreign Operation" • IAS 39 and IFRS 4 (revised) "Financial Instruments: Recognition and Measurement" and "Insurance Contracts" • IFRS 1 (revised) "First time adoption of International Financial Reporting Standards" in relation to IFRS 6 "Exploration for and Evaluation of Mineral Resources" • IFRS 6 (issue 2004) "Exploration for and Evaluation of Mineral Resources" • IFRIC 4 "Determining whether an Arrangement contains a Lease" • IFRIC 5 "Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds" • IFRIC 6 "Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment" Additionally, at the date of approval of these consolidated financialstatements, the following IFRS's and IFRIC's have been issued but were not yeteffective: • IFRIC 7 "Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies" (effective for annual periods beginning on or after 1 March 2006) • IFRIC 8 "Scope of IFRS 2" (effective for annual periods beginning on or after 1 May 2006) • IFRIC 9 "Reassessment of Embedded Derivative" (effective for annual periods beginning on or after 1 June 2006) • IFRIC 10 "Interim Financial Reporting and Impairment" (effective for annual periods beginning on or after 1 November 2006) • IFRIC 11 "IFRS2- Group and Treasury Share Transactions" (effective for annual periods beginning on or after 1 March 2007) • IFRIC 12 "Service Concession Arrangements" (effective for annual periods beginning on or after • 1 January 2008) • IFRS 8 "Operating Segments" (effective for annual periods beginning on or after 1 January 2009) The Board of Directors expects that the adoption of the above standards in thefuture periods will not have a material effect on the Company and the Group'sfinancial statements. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities (including special purpose entities) controlled by theCompany (its subsidiaries). Control is achieved where the Company has the powerto govern the financial and operating policies of an entity so as to obtainbenefits from its activities. The financial statements of all the Group companies are prepared using uniformaccounting policies. All inter-company transactions and balances between Groupcompanies have been eliminated during consolidation. Business combinations The acquisition of subsidiaries is accounted for using the purchase method. Thecost of the acquisition is measured at the aggregate of the fair values, at thedate of exchange, of assets given, liabilities incurred or assumed, and equityinstruments issued by the Group in exchange for control of the acquiree, plusany costs directly attributable to the business combination. The acquiree'sidentifiable assets, liabilities and contingent liabilities that meet theconditions for recognition under IFRS 3 are recognised at their fair values atthe acquisition date, except for non-current assets (or disposal groups) thatare classified as held for sale in accordance with IFRS 5 Non-Current AssetsHeld for Sale and Discontinued Operations, which are recognised and measured atfair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measuredat cost, being the excess of the cost of the business combination over theGroup's interest in the net fair value of the identifiable assets, liabilitiesand contingent liabilities recognised. If, after reassessment, the Group'sinterest in the net fair value of the acquiree's identifiable assets,liabilities and contingent liabilities exceeds the cost of the businesscombination, the excess is recognised immediately in profit or loss. The interest of minority shareholders in the acquiree is initially measured atthe minority's proportion of the net fair value of the assets, liabilities andcontingent liabilities recognised. Associates Associates are all entities over which the Group has significant influence butnot control, generally accompanying a shareholding of between 20% and 50% of thevoting rights. Investments in associates are initially recognized at cost and are accounted forby the equity method of accounting. Finance costs Interest expense and other borrowing costs are charged to the income statementas incurred. Foreign currency translation(1) Measurement currency The financial statements are prepared in sterling pounds (the measurement currency), which is the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Group.(2) Foreign currency translation Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.(3) Foreign operations On consolidation, the assets and liabilities of the consolidated entity's overseas operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised in the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign operation. Tax Current tax liabilities and assets for the current and prior periods aremeasured at the amount expected to be paid to or recovered from the taxationauthorities using the tax rates and laws that have been enacted or substantivelyenacted by the balance sheet date. Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements. Currently enacted tax rates areused in the determination of deferred tax. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. Going concern The Directors have formed a judgment at the time of approving the financialstatements that there is a reasonable expectation that the company has adequateresources to continue in operational existence for the foreseeable future. The financial information has been prepared on the going concern basis, thevalidity of which depends principally on the discovery of economically viablemineral deposits and the availability of subsequent funding to extract theresource or alternatively the availability of funding to extend the Company'sexploration activities. The financial information does not include anyadjustment that would arise from a failure to complete either option. Acquisitions of assets All assets acquired, including property, plant and equipment other than goodwilland intangibles, are initially recorded at their cost of acquisition at the dateof acquisition, being the fair value of the consideration provided plusincidental costs directly attributable to the acquisition. When equity instruments are issued as consideration, their market price at thedate of acquisition is used as fair value, except where the notional price atwhich they could be placed in the market is a better indication of fair value.Transaction costs arising on the issue of equity instruments are recogniseddirectly in equity subject to the extent of proceeds received, otherwiseexpensed. Property, plant and equipment Property, plant and equipment are stated at historical cost less depreciation. Depreciation is calculated on the straight-line method to write off the cost ofeach asset to their residual values over their estimated useful life. The annualdepreciation rates used are as follows: Motor vehicles 20%Furniture, fixtures and office equipment 10%-20% The assets residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. Where the carrying amount of an asset is greater than its estimated recoverableamount, it is written down immediately to its recoverable amount. Expenditure for repairs and maintenance of property, plant and equipment ischarged to the income statement of the year in which they were incurred. Thecost of major renovations and other subsequent expenditure are included in thecarrying amount of the asset when it is probable that future economic benefitsin excess of the originally assessed standard of performance of the existingasset will flow to the Group. Major renovations are depreciated over theremaining useful life of the related asset. Gains and losses on disposal of property, plant and equipment are determined bycomparing proceeds with carrying amount and are included in profit fromoperations. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair valueof the Group's share of the net identifiable assets of the acquired undertakingat the date of acquisition. Goodwill on acquisition of subsidiaries is includedin "intangible assets". Goodwill on acquisitions of associates is included in "investments in associates". Goodwill is tested annually for impairment and carried at cost less accumulatedimpairment losses. Gains and losses on the disposal of an undertaking includethe carrying amount of goodwill relating to the undertaking sold. Goodwill isallocated to cash generating units for the purpose of impairment testing. Any excess of the interest in the net fair value of acquiree's identifiableassets, liabilities and contingent liabilities over cost is recognizedimmediately in the profit and loss. Subsidiary companies Investments in subsidiary companies are stated at cost less provision forimpairment in value, which is recognised as an expense in the period in whichthe impairment is identified. Associates Associates are all entities over which the Group has significant influence butnot control, generally accompanying a shareholding of between 20% and 50% of thevoting rights. Investments in associated undertakings are stated at cost lessprovision for permanent diminution in value, which is recognised as an expensein the period in which the diminution is identified. Impairment of assets Assets that have an indefinite useful life are not subject to amortization andare tested annually for impairment. Assets that are subject to depreciation oramortization are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. Animpairment loss is recognized for the amount by which the asset's carryingamount exceeds its recoverable amount. The recoverable amount is the higher ofan asset's fair value less costs to sell and value in use. For the purposes ofassessing impairment, assets are grouped at the lowest levels for which thereare separately identifiable cash flows (cash-generating units). Share capital Ordinary shares are classified as equity. Exploration costs Initially the Group adopted a policy of capitalizing development costs and thecosts of exploration tenements, application for exploration tenements andaccumulated technical data and knowledge from previous exploration activity,where it was anticipated that these costs would be recovered. In October 2005,the Group adopted a conservative approach to exploration expenditure and writesthese expenditure off to profit and loss as and when incurred. In 2006, the Group adopted the provisions of IFRS6 "Exploration for andEvaluation of Mineral Resources". The Group's stage of operations as at the yearend and as at the date of approval of these financial statements have not yetmet the criteria for capitalization of exploration costs. Share-based compensation benefits IFRS 2 Share-based Payment requires the recognition of equity-settled share-based payments at fair value at the date of grant and the recognition ofliabilities for cash-settled share-based payments at the current fair value ateach balance sheet date. For 2006, the impact of share-based payments is a net charge to income ofGBP185,470 (share based payment expense of GBP185,470). At 31 December 2006, theequity reserve recognized for share based payments amounted to GBP293,643. For 2005, the impact of share-based payments is a net charge to income ofGBP108,170 (share-based payment expense of GBP108,170). At 31 December 2005, theequity reserve recognised for share-based payments amounted to GBP108,170. Use and revision of accounting estimates The preparation of the financial report requires the making of estimations andassumptions that affect the recognised amounts of assets, liabilities, revenuesand expenses and the disclosure of contingent liabilities. The estimates andassociated assumptions are based on historical experience and various otherfactors that are believed to be reasonable under the circumstances, the resultsof which form the basis of making the judgements about carrying values of assetsand liabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current andfuture periods. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprisecash at bank and in hand. 3. Financial risk management Financial risk factors The Group is exposed to interest rate risk, liquidity risk and currency riskarising from the financial instruments it holds. The risk management policiesemployed by the Group to manage these risks are discussed below: Interest rate risk Interest rate risk is the risk that the value of financial instruments willfluctuate due to changes in market interest rates. The Group is exposed tointerest rate risk in relation to its bank deposits. The Group's managementmonitors the interest rate fluctuations on a continuous basis and actsaccordingly. Liquidity risk Liquidity risk is the risk that arises when the maturity of assets andliabilities does not match. An unmatched position potentially enhancesprofitability, but can also increase the risk of losses. The Group hasprocedures with the object of minimising such losses such as maintainingsufficient cash and other highly liquid current assets and by having availablean adequate amount of committed credit facilities. Currency risk Currency risk is the risk that the value of financial instruments will fluctuatedue to changes in foreign exchange rates. Currency risk arises when futurecommercial transactions and recognised assets and liabilities are denominated ina currency that is not the Group's measurement currency. The Group is exposed toforeign exchange risk arising from various currency exposures primarily withrespect to the US Dollar and the Euro. The Group's management monitors theexchange rate fluctuations on a continuous basis and acts accordingly. Fair value estimation The fair values of the Group's financial assets and liabilities approximatetheir carrying amounts at the balance sheet date. 4. Operating loss 17/09/04- 2006 31/12/05 GBP'000 GBP'000Operating loss is stated after charging the following items:Amortisation of goodwill (Note 11) - 585Depreciation of property, plant and equipment (Note 10) 17 8Share-based employee benefits 186 108Auditors' remuneration 33 13 5. Business and geographical segments Business segments The Group has only one distinct business segment, being that of mineralexploration. Geographical segments The Group's exploration activities are located in Cyprus, Georgia, Greece, andSlovakia, , and its administration and management is based in Cyprus. Discontinued Operations Cyprus Georgia Greece Slovakia Armenia Turkey Bulgaria Total2006 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000Operating loss (1,698) (574) (83) (369) (9) (166) (42) (2,941)Financial income 7 1 - - - - - 8Financial costs (21) - - - - - - (21) (1,712) (573) (83) (369) (9) (166) (42) (2,954)Share of resultsfrom associates (31)Gain on disposal ofsubsidiaries 328Net loss for theyear (2,657) Total assets 2,143 22 41 19 - - - 2,225Total liabilities (324) (22) - - - - - (346)Depreciation offixed assets 15 2 - - - - - 17 2005Operating loss (1,558) (166) (25) (247) - (43) (113) (2,152)Financial income 23 - - - - - 23Financial costs (13) - - - - - - (13)Net loss for the (1,548) (166) (25) (247) - (43) (113) (2,142)period Total assets 998 3 8 4 - 5 41 122Total liabilities (130) - - - - - (130)Depreciation offixed assets 22 - - - - - - 22 6. Finance income 17/09/04- 2006 31/12/05 GBP'000 GBP'000Interest income 8 10Net foreign exchange transaction gains - 13 8 23 7. Finance costsSundry finance expenses 11 13Net foreign exchange transaction loss 10 - 21 13 8. TaxCurrent tax:Defence contribution - current year 1 1Total charge for the period 1 1 The tax on the Group's results before tax differs from the theoretical amountthat would arise using the applicable tax rates as follows: 17/09/04- 2006 31/12/05 GBP'000 GBP'000 Loss before tax (2,448) (2,209) Tax calculated at the applicable tax rates (419) (221)Tax effect of expenses not deductible for tax purposes 46 60Tax effect of tax loss for the year 275 161Tax effect of tax loss deferred over the next five years 98 -Defence contribution current year 1 1Tax charge 1 1 Due to tax losses sustained in the period, no tax liability arises on the Group.Under current legislation, tax losses may be carried forward and be set offagainst taxable income of the following years. As at 31 December 2006, thebalance of tax losses which is available for offset against future taxableprofits amounts to GBP3,312,129 (2005: GBP2,583,458). Cyprus Georgia Greece Slovakia Armenia Compensation TotalTax year GBP GBP GBP GBP GBP GBP GBPLosses b/f 845,109 - - - - - 845,1092005 1,474,814 - - 263,535 - - 1,738,3492006 172,010 176,101 9,517 369,252 1,791 - 728,671 2,491,933 176,101 9,517 632,787 1,791 - 3,312,129 Cyprus The corporation tax rate is 10%. Under certain conditions interest may besubject to defence contribution at the rate of 10%. In such cases 50% of thesame interest will be exempt from corporation tax, thus having an effective taxrate burden of approximately 15%. In certain cases, dividends received fromabroad may be subject to defence contribution at the rate of 15%. Caucasus The corporation tax rate is 20%. Due to tax losses sustained in the period, notax liability arises in the Company. Under current legislation, tax losses maybe carried forward and be set off against taxable income in the following fiveyears. Georgia The corporation tax rate is 20%. Due to tax losses sustained in the period, notax liability arises in the Company. Under current legislation, tax losses maybe carried forward and be set off against taxable income in the following fiveyears. Per local tax legislation, geological and associated administrativeexpenses are deferred for tax purposes over a period of 5 years. Therefore,there is a deferred expense of GBP588,502 (USD1,152,375) is available foroffsetting in future periods. Greece The corporation tax rate is 29%. Due to tax losses sustained in the period, notax liability arises in the Company. Under current legislation, tax losses maybe carried forward and be set off against taxable income in the following fiveyears. Slovakia The corporation tax rate is 19%. Due to tax losses sustained in the period, notax liability arises in the Company. Under current legislation, tax losses maybe carried forward and be set off against taxable income in the following years. 9. Loss per share The calculation of the basic and diluted earnings per share attributable to theordinary equity holders of the parent is based on the following data: 17/09/04- 2006 31/12/05 GBP'000 GBP'000Net loss attributable to equity shareholders from continuing operations (2,449) (2,053)Net loss attributable to equity shareholders from continuing anddiscontinued operations (2,657) (2,209) Number of ordinary shares for the purposes of basic earnings per share 92,727 56,556Effect of dilutive potential ordinary shares: Share options 18,261 12,790Number of ordinary shares for the purposes of diluted earnings per share 110,988 69,346 Earnings per share:From continuing operationsBasic losses per share (pence) (2.64) (3.63)Diluted losses per share N/A N/A From continuing and discontinued operationsBasic losses per share (pence) (2.87) (3.91)Diluted losses per share (pence) N/A N/A 10. Property, plant and equipment Furniture, fixtures and office equipment Plant and Motor machinery vehicles Total 2006 2006The Group GBP'000 GBP'000 GBP'000 GBP'000CostAt 1 January 2006 1 31 31 63Additions - 16 12 28At 31 December 2006 1 47 43 91DepreciationAt 1 January 2006 1 13 8 22Charge for the year - 7 10 17At 31 December 2006 1 20 18 39Net book amountAt 31 December 2006 - 27 25 522005-CostAdditions - 22 24 46Acquired on acquisition of subsidiary 1 9 7 17At 31 December 2005 1 31 31 63 DepreciationCharge for the period - 5 3 8On acquisition of subsidiary 1 8 5 14At 31 December 2005 1 13 8 22Net book amountAt 31 December 2005 - 18 23 41 Furniture, fixtures and Motor office equipment Total vehicles 2005 2006The Company GBP'000 GBP'000 GBP'000CostAt 1 January 2006 22 24 46Additions 11 7 18At 31 December 2006 33 31 64DepreciationAt 1 January 2006 5 3 8Charge for the year 6 7 13At 31 December 2006 11 10 21Net book amountAt 31 December 2006 22 21 432005-CostAdditions 22 24 46At 31 December 2005 22 24 46DepreciationCharge for the period 5 3 8At 31 December 2005 5 3 8Net book amountAt 31 December 2005 17 21 38 The above fixed assets are located in Cyprus and Georgia. 11. Intangible assets 2006 Goodwill TotalCost GBP'000 GBP'000On 1 January 2006 585 585Additions 71 71At 31 December 2006 656 656AmortisationOn 1 January 2006 585 585Amortisation for the year (Note 4) - -At 31 December 2006 585 656Closing net book amount 71 712005 CostOn 17 September 2004 - -Additions 585 585At 31 December 2005 585 585AmortisationOn 17 September 2004 - -Amortisation for the period 585 585At 31 December 2005 585 585Closing net book amount - - 12. Investment in subsidiaries 2006 2005The Company GBP'000 GBP'000Opening amount at cost 648 -Additions (Disposals) (3) 648 Closing amount at cost 645 648 Date of acquisition/ Effective incorporation Country of proportion of incorporation shares heldCompanies namesEastern Mediterranean Minerals (Cyprus) Ltd 28 Feb 2005 Cyprus 95%Eastern Mediterranean Resources (Caucasus) Ltd 11 Nov 2005 Georgia 100%Georgian Mineral Development Company Ltd 27 Dec 2005/ 11 Feb Georgia 100% 2006Eastern Mediterranean Resources A.E (Greece) 21 June 2005 Greece 100%Eastern Mediterranean Resources (Slovakia) S.R.O. 10 July 2005 Slovakia 100%Tredington Ventures Ltd 28 February 2005 Cyprus 95%Winchcombe Ventures Ltd 28 February 2005 Cyprus 95%Eastern Mediterranean Resources Armenia LLC 26 May 2006 Armenia 100%Eastern Mediterranean Resources Romania SRL 21 March 2006 Romania 100% On 11 February 2006 the wholly owned subsidiary, Eastern Mediterranean Resources(Caucasus) Ltd, acquired an additional 20% of Georgian Mineral DevelopmentCompany Ltd reaching to a shareholding of 100% in the subsidiary Company (Note15) Eastern Mediterranean Resources Romania SRL and Eastern Mediterranean ResourcesArmenia LLC have been incorporated by EMED on 21 March 2006 and 26 May 2006respectively. 13. Investment in associates 2006 2005The Group GBP'000 GBP'000At 1 January - -Additions at cost 430 -Share of results (31) -Share of equity adjustment 394 -Closing amount based on equity accounting 793 -The Company At 1 January - -Additions 430 -Closing amount at cost 430 - Country of incorporation Effective proportionCompany name Date of incorporation of shares heldKefi Minerals Public Plc 24 October 2006 United Kingtom 39% 2006 2005Amounts relating to associates GBP'000 GBP'000Total assets 1,746 -Total liabilities (604) - 1,142 - Loss for the period (289) - 14. Trade and other receivablesThe Group Receivables from associates 291 -Other receivables 157 -Deposits and prepayments 9 5VAT 79 41 536 46 The CompanyReceivables from own subsidiaries (Note 17) 2,654 1,160Receivables from associates 291 -Other receivables 157 -Deposits and prepayments 8 5VAT 59 22 3,169 1,187 15. Cash and cash equivalentsThe GroupCash at bank and in hand 1,207 971The CompanyCash at bank and in hand 1,135 911 16. Share capital Share Capital Share premium Number of shares GBP'000 GBP'000 Total '000 GBP'000AuthorisedOrdinary shares of GBP0.0025 each 200,000 500 - 500 Issued and fully paidIssued at par 8,000 20 - 20Issued at GBP0.050 10,400 26 494 520 Purchase of 95% interest in EMM (Cyprus) LtdIssued at GBP0.050 4,000 10 190 200Issued at GBP0.080 5,000 13 387 400 Placing to AIM 28,156 70 2,182 2,252 Write off cost of share issue and admission toAIM - - (465) (465)Issued at GBP0.10 1,000 2 98 100At 31 December 2005/1 January 2006 56,556 141 2,886 3,027 Issued 7 March 2006 at GBP 0.125 12,000 30 1,470 1,500Issued 7 March 2006 at GBP 0.125For database purchase 1,889 5 232 237Issued 28 June 2006 at GBP 0.125for database purchase 1,152 3 141 144Issued 2 November 2006 at GBP 0.085 20,850 52 1,720 1,772Issued 6 November 2006 at GBP 0.0975 forpurchase of license option 280 1 26 27Share issue costs - - (214) (214)At 31 December 2006 92,727 232 6,261 6,493 Authorised capital Under its Memorandum the Company fixed its share capital at 1,000 ordinaryshares of nominal value of CY£1 each. On 14 December 2004, the Company passed the following special resolutions: (a) That the authorized and issued share capital of the Company be expressed inSterling Pounds, so that the current authorized and issued share capital ofCY£1,000 which is divided into 1,000 shares of CY£1 each, will become GBP1,200divided into 1,200 shares of GBP1 each. (b) That the authorised share capital of the Company be increased from GBP1,200divided into 1,200 shares of GBP1 each, to GBP250,000 divided into 250,000shares of GBP1 each. (c) That the authorised share capital of the Company, of GBP250,000 divided into250,000 shares of GBP1 each, be subdivided into 100,000,000 shares of GBP0.0025each. On 20 September 2006 the Company passed the following special resolutions: (a) That the authorized share capital of the Company be increased fromGBP250,000 divided into 100,000,000 shares of GBP 0.0025 each, by GBP250,000 bythe creation of 100,000,000 new ordinary shares of GBP0.0025 each, resulting toGBP500,000 divided into 200,000,000 shares of GBP0.0025 each. Issued capital Upon incorporation on 17 September 2004 the Company issued to the subscribers ofits Memorandum of Association 1,000 ordinary shares of CY£1 each at par. On 14 December 2004, the Company passed the following special resolutions: (a) That the issued share capital of the Company be expressed in SterlingPounds, so that the current issued share capital of CY£1,000 which is dividedinto 1,000 shares of CY£1 each, will become GBP1,200 divided into 1,200 sharesof GBP1 each. (b) That the issued share capital of the Company, of GBP1,200 divided into 1,200shares of GBP1 each, be subdivided into 480,000 shares of GBP0.0025 each. On 20 December 2004, the Company passed the following special resolution: (a) That the issued share capital of the Company be increased from GBP1,200 toGBP11,200 divided to 4,480,000 shares of GBP0.0025 each by the issue of4,000,000 additional shares. On 25 January 2005, the Company passed the following special resolution: (a) That the issued share capital of the Company be increased from GBP11,200 toGBP18,000 divided to 7,200.000 shares of GBP0.0025 each by the issue of2,720,000 additional shares. On 28 February 2005 the Company passed the following special resolution:- (a) That the issued share capital of the Company be increased from GBP18,000 toGBP28,000 divided to 11,200.000 shares of GBP0.0025 each by the issue of4,000,000 additional shares at the price of GBP0.05. Upon the issue an amountof GBP190,000 was credited to the Company's share premium reserve. On 18 March 2005 the Company passed the following special resolution:- (a) That the issued share capital of the Company be increased from GBP28,000 toGBP56,000 divided to 22,400,000 shares of GBP0.0025 each by the issue of 800,000shares at par and 10,400,000 shares at GBP0.05. Upon the issue an amount ofGBP494,000 was credited to the Company's share premium reserve. On admission of the Company to AIM on 9 May 2005, 28,155,555 shares were issuedat the price of GBP0.08. Upon the issue an amount of GBP2,182,055 was creditedto the Company's share premium reserve. On admission of the Company to AIM on 9 May 2005, 5,000,000 shares were issuedto Oxiana Europe Ltd at the price of GBP0.08 as part of the consideration dueunder the agreement to acquire EMM. Upon the issue an amount of GBP387,500 wascredited to the Company's share premium reserve. On 1st August 2005 it was resolved that 1,000,000 shares of GBP 0.0025 be issuedat the price of GBP 0.10. Upon the issue an amount of GBP 97,500 was creditedto the Company's share premium reserve. On 7 March 2006 12,000,000 shares of GBP 0.0025 were issued at a price of GBP0.125. Upon the issue anamount of GBP 1,470,000 was credited to the company's share premium reserve. On 7 March 2006 1,889,000 shares of GBP 0.0025 were issued at a price of GBP0.125. Upn the issue an amount of GBP232,000 was credited to the Company's sharepremium reserve. On 28 June 2006 1,152,000 shares of GBP 0.0025 were issued at a price of GBP0.125. Upon the issue an amount of GBP 141,000 was credited to the Company'sshare premium reserve. On 2 November 2006 20,850,000 shares of GBP 0.0025 were issued at a price of GBP0.085. Upon the issue an amount of GBP 1,720,000 was credited to the Company'sshare premium reserve. On 6 November 2006 280,000 shares at GBP 0.0025 were issued at a price of GBP0.0975. Upon the issue an amount of GBP 26,000 was credited to the Company'sshare premium reserve. 17. Share option plan Details of share options outstanding as at 31 December 2006: Grant date Expiry date Exercise price Number of shares GBP 000's9 May 2005 9 May 2011 0.08 11,38111 August 2005 11 August 2011 0.10 70028 April 2006 28 April 2012 0.135 4,03028 June 2006 28 June 2012 0.135 1508 September 2006 8 September 2012 0.09 1,0008 September 2006 8 September 2012 0.11 1,000 18,261 The options expire six years after grant date and are exercisable at theexercise price in whole or in part no more than one third after one year fromthe grant date, two thirds after two years from the grant date and the balanceafter three years from the grant date. Number of shares 000'sOutstanding options at 1 January 2006: 12,790- granted 6,680- cancelled (1,209)- exercised - 18,261 The Company has a share option scheme for employees and other parties of theGroup. The options expire six years after grant date and are exercisable at theexercise price in whole or in part no more than one third after one year fromthe grant date, two thirds after two years from the grant date and the balanceafter three years from the grant date. The option agreements contain provisions adjusting the exercise price in certaincircumstances including the allotment of fully paid Ordinary Shares by way of acapitalisation of the Company's reserves, a sub division or consolidation of theOrdinary Shares, a reduction of share capital and offers or invitations (whetherby way of rights issue or otherwise) to the holders of Ordinary Shares. The estimated fair values of the options were calculated using the Black Scholesoption pricing model. The inputs into the model and the results are as follows: 8 Sept. 8 Sept. 28 June 2006 28 April 11 August 9 May 2005 2006 2006 2006 2005 Weighted average share price 9p 9p 9.50p 9.50p 8.88p 8.75pWeighted average exercise price 11p 9p 13.5p 13.5p 8.00 8.00pExpected volatility 46% 46% 37% 37% 20% 15%Expected life 6 yrs 6 yrs 6 yrs 6 yrs 6 yrs 6 yrsRisk free rate 4.9% 4.9% 4.8% 4.7% 4.4% 4.4%Expected dividend yield nil nil nil nil nil nilDiscount factor 20% 20% 20% 20% 20% 20%Estimated fair value 5.51p 5.86p 3.30p 3.25p 3.18p 2.50p Expected volatility was determined by calculating the historical volatility ofthe Company's share price over the period post AIM admission trading. 18. Trade and other payables 2006 2005The Group GBP'000 GBP'000Trade payables 307 128Accruals 39 2 346 130 The CompanyTrade payables 306 128Accruals 17 - 324 128 19. Acquisition of subsidiaries 2006 On 11 February 2006, the wholly owned subsidiary Eastern Mediterranean Resources(Caucasus) Ltd acquired an additional 20% of the issued share capital ofGeorgian Mineral Development Company Ltd incorporated in Georgia, reaching to100% shareholding. The principal activity of the acquired company is theexploration for mineral deposits, evaluation thereof and marketing theresources. The consideration for the acquisition was 1,000 shares with a valueof USD50,000 (£27,459). Details of net assets acquired and goodwill are as follows: Purchase consideration GBP'000Shares in the capital of the purchaser 1 Total Purchase consideration 27Fair Value of liabilities acquired 44Goodwill on acquisition 71 The fair value of the assets and liabilities arising from the acquisition are asfollows: GBP'000Bank and cash balances 3Equipment -Related company balances (223)Other payablesTotal fair values (220) Fair value of liabilities acquired (20%) (44)Goodwill 71Purchase price 27Consideration in cash 27 2005 On 28 February 2005, the Company acquired 95% of the issued share capital ofEastern Mediterranean Minerals (Cyprus) Ltd incorporated in Cyprus. Theprincipal activity of the acquired company is the exploration for mineraldeposits, evaluation thereof and marketing the resources. The consideration forthe acquisition was 9,000,000 shares with a value of £600,000. Details of net assets acquired and goodwill are as follows: 2005Purchase consideration GBP'000Shares in the capital of the purchaser 600 Total Purchase consideration 600Fair Value of assets acquired (15)Goodwill on acquisition 585 The fair value of the assets and liabilities arising from the acquisition are asfollows: 2005 GBP'000Bank and cash balances 5Equipment 3Intangible assets -Other receivables 20Related company balances (11)Other payables (1)Total fair values 16 Fair value of assets acquired (95%) 15Goodwill 585Purchase price 600Cash taken over (5)Consideration in shares (600)Net cash on acquisition (5) In the financial statements issued for admission purposes the fair value ofintangible assets was estimated at GBP616,104. Subsequently, due to the changeof accounting policy of writing-off exploration costs, the fair value of theintangible assets acquired was reassessed to Nil. This indicated an impairmentof goodwill, and therefore goodwill was subsequently written-off. 20. Discontinued operations During the year, the Group subsidiaries in Turkey and Bulgaria were consideredto be best served by the establishment of a separately listed associate company.Accordingly, EMED Mining formed Kefi Minerals Plc (Kefi) on 24 October 2006 as aUK-registered holding company for the purposes of holding its interests inTurkey and Bulgaria. On 8 November 2006, EMED Mining entered into an agreement to dispose of EasternMediterranean Resources (Bulgaria) EOOD and Dogu Akdeniz Mineralli Ltd, and onthe same date control passed to Kefi Minerals Plc. Consideration was in the formof shares in Kefi. This issue of shares was also partly in satisfaction ofindebtedness due to EMED Mining. In December 2006, Kefi was admitted to AIM. EMED Mining retained a 39%shareholding at the year end. The consolidated net assets of Bulgaria and Turkey at the date of disposal andat 31 December 2005 were as follows: 8 November 2006 31 December 2005 GBP'000 GBP'000Cash at bank and in hand (6) (12)Payable to EMED Mining 370 167Total fair values 364 155Consideration in shares 300Profit before assignment of debt 664Assignment of debt (336)Gain on disposal of subsidiaries 328 The effect of discontinued operations on segment results is disclosed in note 5. 21. Related party transactions The following transactions were carried out with related parties: 21.1 Compensation of key management personnel The total remuneration of the Directors and other key management personnel wasas follows: 17/09/04- 2006 31/12/05 GBP'000 GBP'000Directors' fees 225 119Share-based benefits to directors 89 68Other key management personnel fees 400 263Share-based benefits to other key management personnel 37 34 751 484 Share-based benefits The directors and key management personnel have been granted on 9 May and 12August 2005 and on 28 April 2006 ordinary share options that expire six yearsafter grant date and are exercisable at the exercise price in whole or in partno more than one third after one year from the grant date, two thirds after twoyears from the grant date and the balance after three years from the grant date.No options have been exercised during the period from grant date to 31 December2006. 21.2 Purchases geological survey data 17/09/04- 2006 31/12/05 GBP'000 GBP'000Data acquisition 117 100 117 100 In 2006, the Company purchased data from a key management officer. Thetransaction was made on commercial terms and conditions and it was settled inshares. In 2005, the Company purchased data from a company related to a director of asubsidiary company. The transaction was made on commercial terms and conditionsand it was settled in shares. 22. Contingent liabilities As part of the acquisition cost of a 95% share in Eastern Mediterranean Minerals(Cyprus) Limited, an additional contingent consideration of GBP600,000 will bepaid by the Company one month after the date on which Eastern MediterraneanMinerals (Cyprus) Limited first receives revenue of GBP1,000,000 from or inrespect of specific exploration tenements. 23. Capital commitments The Group has undertaken commitments for exploration in Georgia amounting toUS$1 million (approximately GBP 500,000) over 2006 and 2007, in order to satisfythe terms of the license grant . The Group's exploration costs in 2006 and thebudget for 2007 exceed this amount. The Group has also undertaken capital commitment for exploration in Slovakiaamounting to SKK12,000,000 (approximately GBP 270,000) over 2006 to 2009. TheGroup's exploration costs in 2006 and the budget for the following years exceedthe amount of this capital commitment. 24. Post balance sheet events There were no material post balance sheet events, which have a bearing on theunderstanding of the financial statements. This information is provided by RNS The company news service from the London Stock Exchange
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