BHR.L Regulatory News (BHR)

Beacon Hill Resources Plc / AIM: BHR / Sector: Mining

Beacon Hill Resources Plc ("Beacon Hill" or "the Company")

Interim Results for the period ended 30 June 2014

Beacon Hill Resources Plc, the AIM listed coking coal company, announces its financial results for the six month period ended 30 June 2014.

HIGHLIGHTS:

• Unadjusted loss in the period of US$ 9.96 million compared to the corresponding 2013 period loss of US$7.64 million - reduction in the first half loss compared to the corresponding 2013 period, when adjusted for rail operating leases and fair value of warrants issued.

· Reduction in cash utilised in operations by US$ 1.2 million to US$ 5.9 million when compared to the corresponding 2013 period of US$ 7.1 million, notwithstanding rail operating lease costs incurred during this period whilst none were incurred in the in the corresponding 2013 period.

• Further amendment agreement with Vitol SA related to the US$ 10 million senior debt facility to defer the principal amortization originally due in April 2014 of US$ 1.7 million to 30 September 2014 as well as accruing interest until 30 September 2014.

• Amendments to the Coal Offtake Agreement with respect to price discounts and to subordinate the repayment of the Global Minerals US$ 5 million coal prepayment to any new senior debt.

• Rolling Stock shipped and commissioned in Mozambique comprising five locomotives and 89 wagons, to be operated under a 10 year operating lease.

· Moatize coal loading site commissioned with JV Partner.

• Rolling stock Sub-lease agreed in principle and pending final approvals from the Government of Mozambique.

• Received US$ 20 million offer of project financing for the Minas Moatize Mine's washplant expansion project, subject to financial and legal due diligence, of which the financial due diligence has been completed and the preliminary legal due diligence report has been received.

• Sufficient working capital funding arranged to the end of 2014 with up to US$ 17 million working capital to be raised in support of senior debt and expansion project.

• Post period end, fundraising announced to raise up to £1.25m to provide sufficient working capital to the end of 2014.

• Target to complete expansion project funding (debt and equity) and restructuring of balance sheet by end of Q4 2014.

CHAIRMAN'S STATEMENT

During the first half of 2014 Beacon Hill made significant progress with the Minas Moatize coking coal project despite the very challenging pricing environment for coal. Notably, the Company shipped and commissioned five new locomotives and 89 purpose built wagons with a value of US$ 21 million which are to be leased on a 10 year basis as well commissioning the Moatize Mine's coal loading facility with its JV partner following 12 months of infrastructure development. The embedded value of the Company's bulk logistics chain has grown over the period and is the cornerstone of creating a competitive cost advantage to re-commence coking coal exports from Minas Moatize.

The Company also received a proposal for a US$ 20 million new senior debt funding facility for the washplant expansion project during March 2014, after submitting final due diligence reports together with concluding the EPC tender and form of contract for its construction early in the year.

Looking forward to H2 2014, the depressed market for coal prices globally has meant that the project will likely remain in care and maintenance until the construction of the expanded washplant has been completed with a key focus to re-enter production as a Tier One cost producer in late 2015/early 2016.

Therefore, with no anticipated production during H2 2014, focus of the Board and management will be solely on debt and equity expansion project funding, logistics and restructuring the existing debt on the balance sheet.

These H2 2014 objectives can be summarised as:

(i) conclude the rail sub lease to offset rail costs;

(ii) the completion of the new US$ 20 million senior debt facility to fund capex;

(iii) the restructuring of the US$ 25 million existing senior and sub-ordinated debt;

(iv) raising sufficient additional equity / working capital, expected to be upto US$ 17 million or as specified by the new senior debt lender; and

(v) to execute the EPC contract for the expansion project after completion of the above.

There are a significant number of hurdles to overcome, but we remain confident we have the correct team to do so and I look forward to updating shareholders in due course as our management team progress the H2 2014 objectives.

Justin Farr-Jones

Chairman

CHIEF EXECUTIVE OFFICER'S REPORT

1 Safety

The Company is pleased to report during the period, January 2014 to June 2014, there was no lost time injuries or fatal injuries.

The following are the tracked safety statistics as at the end of the period, i.e. June 2014;

• Lost Time Injury Free Days = 473

• Fatal Free Man Shifts = 733,296

• Reportable Free Man Shifts = 405,483

 2 Environmental

The following statutory reports were submitted to the Mozambican government during H1 2014:

· Environmental Management Plan (EMP) for Minas Moatize Operations was submitted to MICOA (Ministry for Environment) in relation to open cut pit operations.

· Technical Health and Safety Plan for Minas Moatize Operations was submitted to MICOA (Ministry for Environment) in relation to open cut pit operations.

3 Operations

3.1 Production

The plant was placed on care and maintenance in November 2013 when coking coal prices fell significantly below the current cost of production ahead of the completion of the washplant expansion project. In the interim, the plant was maintained to prevent equipment deterioration and all pumps and drives were started on a weekly basis to ensure that they all remain in working order.

Production (tons) H1 2013 H1 2014

Run of Mine 153,520 -

Plant Feed 47,072 -

Saleable Coal 14,354 -

The screening of the thermal coal stockpile commenced during the period. The screening of the thermal coal on-stock was necessary in order to provide a Pea and Grain product to the domestic market. A total of 5,901 Tons was sold to customers during the period.

3.2 Wash Plant Upgrade (CHPP)

The Company is now focussed on pursuing the Phase 2B/2C implementation for Q4 2014, to deliver the required volume (3.2 million tons run of mine) that is expected to reduce unit production costs to that of a Tier One global hard coking coal producer. This should enable the Company to be competitive and cash generative at current coal prices. During the period, the Company awarded the tender for the expansion project to its chosen EPC contractor and commenced detailed negotiation of the EPC contract for the construction of the plant.

4 Logistics

4.1 Rail Loading Site

The Moatize coal loading site in the province of Moatize, jointly developed by Minas Moatize Limitada and its JV partner is now functional and its JV partner is taking loaded coal trains from the Moatize loading site to Beira port, for its own benefit.

The key terms of the co-development include:

· Utilisation of land jointly owned by Minas Moatize and JV Partner;

· Development for storing, loading and transporting of coal,

· Three storage sites - with one dedicated to MML;

· Facility for 42 wagons with dead ends for not-to-go rolling stock; and

· MML will pay JV Partner US$ 1.8 million for its share of the development costs. Final payment will be made by the Company upon completion of outstanding commissioning items.

4.2 Rolling Stock

4.2.1 Acceptance of Rolling Stock

During the overview period all the locomotives and rail wagons were constructed by Transnet Engineering and RRLGrindrod Locomotives respectively and Minas Moatize received delivery of five locomotives and 89 rail wagons (one rail wagon being damaged during discharging and is currently undergoing repair by Transnet). The diesel locomotives were transported to Mozambique during February 2014 via the existing rail networks in South Africa, Zimbabwe and Mozambique. The vessel with the rail wagons arrived in Beira at the beginning of March 2014 and all the rail wagons were all discharged on 7 March 2014. The rolling stock are currently stored in the Beira port secure area and post period end have been successfully cleared by Mozambique customs after payment of the relevant import duties.

The wagons have since been commissioned and signed off by CFM. Post period end MML has undertaken hot commissioning of the locomotives under full load between Moatize and Tete in conjunction with its prospective sub-lessee of the rolling stock.

4.2.2 Sub-Lease of Rolling Stock to Sub-Lessee

The expansion of the Phase 2B/2C washplant that is expected to move Minas Moatize to a Tier One asset necessitates the sub-leasing of the rolling stock for 12 months until the expansion of the wash plant has been completed. The main details of the proposed sub-lease agreement include:

· Leasing of all locomotives and rail wagons for an initial 12 months period;

· Trains (locomotives and rail wagons) used on the Sena Line in Mozambique; and

· Maintenance of the locomotives and rail wagons undertaken by the Company's approved contractors.

The Company has made an application to the Minister of Finance, Mozambique to obtain approval for the sub-lease arrangement. Upon receipt of the relevant approvals, the sub-lease agreement is expected to be entered into between the parties.

5 Market

5.1 Coking Coal

Prices are expected to remain subdued for the second half of 2014 as the market re-balances demand and supply. The Company expects premium low-volatile spot prices to average US$ 120/t July to December 2014.

Spot premium low-volatile prices averaged US$ 119.37/t fob Australia in H1 2014, which is 23% lower than the average of US$ 155.04/t in the same period last year. Coking coal prices have declined because of slowing economic growth in China that has weighed on steel demand and prices, while aggressive supply expansions have unbalanced the market. High cost producers have begun to announce closures and in particular higher cost US coking coal is expected to decline as a proportion of the total global seaborne market. The decision to remain in care and maintenance until the expansion project is completed in late 2015/early 2016 allows sufficient time for a meaningful recovery in prices and outlook which mitigates the potential effect of depressed prices on cashflow.

5.2 Coal Sales:

The sales of the thermal coal on inventory performed well during the period. There were a few challenges in Q1 2014 during the rainy season that made the screening process difficult. During June 2014, MML encountered loading problems due to local road closures for maintenance work and therefore a limited number of trucks were able to access the loading site. These maintenance works have now been completed and collections resumed as normal.

In total MML received Jan-Jun 2014 sales proceeds of US$ 331,000 at an average selling price of US$ 56/t.

The main customers are industrial cement and tobacco producers in Malawi and Mozambique. It is estimated that the Company will sell all of the coal still on stock by December 2014 or earlier.

6.0 Human Resources

6.1 Restructuring and Retrenchment Plan

Although no retrenchments were conducted during the period the mine followed the required protocol to allow for the retrenchment process to happen should it be deemed necessary.

Formal letters of notification from the mine were sent to the Regional Department of Labour, Department of Finance and the Department of Minerals as to their respective Ministries stating the following;

· That the mine was on care and maintenance due to the prevailing market conditions

· That the mine was in the process of raising capital in the market and securing loan facilities to fund the planned expansion of the plant and other areas

· That the mine would embark on phased retrenchments to increase productivity and reduce costs

7 Mining Contract

On 3 April 2013, MML, represented by Chief Executive Officer Rowan Karstel, and the Mozambican Government, represented by Her Excellency the Minister for Mineral Resources, Dra Esperanca Bias, signed a mining contract in Maputo.

The mining contract between Minas Moatize Limitada and the Mozambican Government was reviewed, approved and ratified by the Administrative Tribunal in June 2014 and is now part of the legal framework regulating the relationship between the two parties.

8 Arthur River

Metallurgy and market reports commissioned during 2013 indicates that the Tasmanian Magnesite deposit could supply quality magnesite products into an expanding caustic calcined magnesia ('CCM') market.

With the slow economic growth in Europe and a slowing production of steel in China, demand for magnesia has trended from dead-burned magnesia ('DBM') towards CCM products used in agriculture, environment, sorrel cements, pulp and paper and feedstock for higher grade magnesite products. Prices for medium to high grade CCM have remained stable throughout the 12 months to July 2014.

The Tasmania Magnesite Board is of the view that the project remains viable and in order to proceed to the next stage in the project of undertaking a pre- feasibility study, the Company needs to enter into an agreement with a potential offtake partner to underpin the study.

Tasmania Magnesite has secured a mining lease and has the political backing of both State and Federal Governments for the project. The project is also likely to attract government financial support given the very high unemployment in the region where the mining tenements are located.

Based on the results of the scoping study completed in 2012, Tasmania Magnesite remains an important asset with high potential for development.

9 Changara Exploration Project

The Changara Project is managed by Midwest 2001 Lda, where BHR Ventures Mauritius is the managing shareholder (80%) and Midwest Africa Lda holds the remaining interest.

Midwest 2001 Lda applied for the renewal of the exploration licence with the Mozambique Government and is waiting for final approval.

10 Magnesite/Pig Iron Project

 For the pig iron project the following activities were completed:

· Payment of surface tax

· Submission of the quarterly report to the DME

· Submission of formal tax paperwork

Once the restructuring of the balance sheet is completed more money will be allocated to the project.

11 Financial

11.1 Financial Results

For the six months under review, the Group generated revenue of US$ 331,000 (2013 full year: US$ 2.3 million) from the sale of coal in Southern Africa. The Group has reported a loss of US$ 9.6 million (2013: US$ 8.6 million) (2013 full year: US$ 19.2 million). The adjusted loss excluding rail operating lease costs of US$ 1.4 million and fair value of warrants of US$ 1.2 million is US$ 7.0 million.

 The difference in the reported loss can be ascribed largely to two cost drivers that were not prevalent last year and with prudent management will be non-recurring. The first being the costs associated with the operating lease of the locomotives and wagons of US$ 1.4 million (2013: US$ 0). In mitigation of these costs going forward management expects to complete the conditions precedent to enter a sub-lease shortly, the financial effects thereof will be that the operating lease costs from that point forward will be recovered until such time as the Phase 2B/2C expansion is commissioned, at which time the locomotives and wagons will be required in the operation.

The second relates to the fair value of the warrants issued in relation to the tranche 1 and 2 of the funding announced on 23 June 2014. The fair value of the warrants amounted to US$ 1.2 million (2013: US$ 0), and has been included within share based payment charges.

11.2 Funding

11.2.1 Restructuring

Following Board approval in Q4 2013, Management has acted to reduce the cash utilised in opertations by $1.2 million to US$ 5.9 million when compared to the corresponding 2013 period of US$ 7.1 million, notwithstanding rail operating lease costs being incurred this period whilst none were incurred in the in the corresponding 2013 period.

The major steps taken were as below:

• Reduced monthly cash burn to approximately US$ 500,000 on a normalised basis i.e. before the effects of the rolling stock, financing costs and professional fees incurred in terms of the recapitalisation.

• First phase redundancy of expatriates and Mozambique workers on mine.

• Suspended contracts with mining contractors and process engineers.

11.2.2 Senior Debt Facility US$ 20 million

In March 2014, Beacon Hill received a signed term sheet offer for a US$ 20 million debt facility from a leading development finance institution "DFI", South Africa, for the expansion of the Minas Moatize washplant to 3.2Mt per annum run of mine. The term sheet was issued after review of independent technical and legal due diligence reports.

The major highlights of the pre-due diligence term sheet are:

• Facility amount of US$ 20 million

• Tenor: 5 years and 6 months from drawdown

• Construction period: 12 months after first drawing date

• Interest to be capitalised for the first six months

• Interest Period: semi-annually in arrears

• Capital repayment: first payment 6 months after the construction period

• Interest rate: 6 month LIBOR + margin of 7.0%

The DFI successfully completed the financial due diligence for the facility in June 2014 and has, during the week ended 12 September 2014, received the preliminary legal due diligence report from their appointed legal counsel, which is currently being reviewed by the DFI. Post period end, and following completion of financial due diligence and legal diligence, the Company expects to raise equity (for mine working capital and corporate purposes) of up to US$ 17 million in support of the project facility over the first two years of the project. The Company is negotiating the timing and structure of this equity requirement and has commenced discussions with strategic investors regarding terms of investment. Management guidance remains for drawdown of the facility during Q4 2014, subject to the relevant Board and credit approvals and completion of the equity requirement to the lenders satisfaction.

11.2.4 Amendment to Vitol Senior Debt Facility

In May 2014, Beacon Hill signed an amendment agreement to the current Vitol Senior Debt Facility of US$ 10 million whereby payment of the current portion loan of US$ 1.7 million was extended to on or earlier than 30 July 2014 (from April 2014). Also, payment of interest on the Senior Debt was amended to quarterly accrued interest instead to cash payments of interest. On 12 August 2014 the Company entered a further Vitol amendment agreement which extended the terms of repayment to 30 September 2014.

Post period end, the Company has also commenced negotiations with Vitol regarding a restructuring of the Vitol debt to accommodate the new senior debt facility required for the expansion project. Whilst Vitol remains supportive of the Company and management to secure the required new funding, in the event that the Company does obtain sufficient funding, or reach agreement with Vitol or Vitol does not further extend the amendment agreement, the Company would likely to be at risk of default of its obligations under the current Senior debt facility. Therefore restructuring of the Vitol debt remains of critical importance to the Group financial outlook.

11.2.5 Amended off take agreement

To facilitate approval of the new US$20 million senior debt facility, Beacon Hill entered into successful negotiations with its coal off-taker, Global Minerals ('GM'), to make certain amendments to the Coal Offtake Agreement with respect to price discounts and to subordinate the repayment to any new senior debt. In return Beacon Hill has provided a performance guarantee for its wholly owned subsidiary BHR Coal (Mauritius) Limited, whereby the GM deposit of US$ 5 million paid by GM in 2011, if not repaid via six coal shipments prior to 31 December 2016, shall be repaid by Beacon Hill in cash or a corresponding value in Beacon Hill shares at that time. Additionally, Beacon Hill has the right, but not the obligation, to re-purchase the offtake agreement at any time for the US$ 5 million (the prepayment by GM) plus accrued interest since the date of the coal prepayment. The Board is pleased to announce the amended Offtake Agreement was executed and submitted in support of the proposed US$ 20 million senior debt facility during this period under review.

11.2. 6 Share Placement for Working Capital

In June 2014, Beacon Hill entered into conditional subscription agreements to place up to 600,000,000 ordinary shares in the Company (the "Placing Shares") at a price of 0.25 pence per Placing Share to raise approximately £1.25 million (the "Placing") to certain institutional investors arranged by and including Novum Securities Limited ("Novum") (together the "Investors"). £745,000 of the total funds raised was used to refinance final settlement of all amounts outstanding from the Company to Darwin Strategic Limited ("Darwin") with the balance to be used for working capital purposes.

Post period end, during September 2014, as announced on 15 September 2014, Beacon Hill entered into further conditional subscription agreements to place up to 1,250,000,000 ordinary shares in the Company (the "Placing Shares") at a price of 0.10 pence per Placing Share to raise approximately £1.25 million (the "Placing") to certain institutional investors arranged by and including Novum Securities Limited ("Novum") (together the "Investors"). The net proceeds of circa US$ 1.9 million in addition to the circa US$ 1.6 million of existing cash is required to provide adequate working capital to the end of Q4 of the calendar year, being the final target date for drawdown of the expansion project financing.

Rowan Karstel

Chief Executive Officer

19 September 2014

NOTES TO THE INTERIM RESULTS

 for the period ended 30 June 2014

1. Accounting policies

Basis of preparation

These interim financial statements have been prepared using recognition and measurement principles of IFRS as adopted for use in the European Union using accounting policies that are expected to be applied in the annual financial statements for the year ended 31 December 2014.

The IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group and therefore the accounting policies applied are consistent with those disclosed in the annual financial statements for the year ended 31 December 2013.

These interim consolidated financial statements do not include all disclosures that would be required in a complete set of financial statements and should be read in conjunction with the 2013 Annual Report. The financial information for the half years ended 30 June 2014 and 30 June 2013 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2013 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2013 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statements for 2013 was unqualified, but did draw attention to potential risks that may cast doubt on the Groups ability to continue as a going concern by way of emphasis of matter. The Independent Auditors' Report did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

2. Going Concern

At 30 June 2014 the Group had US$ 3.9 million of cash and cash equivalents. The financial close of the recapitalisation of the balance sheet is expected to occur during November 2014 and will encompass a combination of fresh equity, new senior debt facilities and restructuring of existing debt. Due to certain circumstances beyond the control of Beacon Hill the senior debt approval decision has been delayed but is still expected during September 2014, with final credit approval expected during October 2014, subject to implementation of the rolling stock sub-lease and any other financial conditions imposed by the new senior lender. The delay in the senior debt funding necessitated the need for the Board to raise additional working capital to ensure it remains adequately capitalised pending financial close of the restructuring of the balance sheet. Accordingly the board entered into a conditional subscription agreement as announced on 15 September 2014, to place up to 1,250,000 ordinary shares in the Group at a price of 0.10 pence, thereby raising net proceeds of approximately US$ 1.9 million of cash, which in addition to circa $1.6m of existing cash should provide adequate working capital to the end of the fourth quarter of this calendar year, being the final target date for drawdown of the expansion project financing.

The Board of Beacon Hill remains committed to achieve drawdown of the expansion project funding facility during Q4 2014 however shareholders should note there is no certainly that such debt shall be forthcoming or any re-financing will be successful. As a consequence there is material uncertainly regarding the Group's ability to raise further additional finance, which may cast doubt over the Group's ability to continue as a going concern. Further, the Group may be unable to realise its asserts and discharge its liabilities in the normal course of business. The interim consolidated finacials do not include any adjustments that would result if the group was unable to continue as a going concern.

3. Loss per share

The calculation of loss per ordinary share is based on a loss attributable to equity holders of the parent company of US$ 9,962,000) (June 2013: US$ 7,639,000) and on 1,754,205,742 (June 2013: 1,347,472,913) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

Included in the loss is an amount of US$ 1.2 million (2013:US$ 0) being the fair value on issue of the warrants attached to the placing of the new ordinary shares, which has been included within share based payment charge.

Furthermore, included in the loss is an amount of US$ 1.4 million (2013:US$ 0) being directly relating to the operating lease of the locomotives and wagons. Management expects to complete the conditions precedent to enter a sub-lease shortly, the financial effect thereof will be that operating lease costs from that point forward will be recovered until such time as the Phase 2B / 2C expansion is commissioned, at which time the locomotives and wagons will be required in the operations.

4. Dividends

The directors do not recommend the payment of a dividend.

5. Trade and other receivables

Included within other receivables is US$ 4.3 million (June 2013:US$6 million) of prepaid contractor costs. As part of the March 2013 share placing two major contractors subscribed for shares at the placing price in relation to services to be performed.

6. Other loans

The total value of other loans remains unchanged from 31 December 2013 and 30 June 2013 at $10 million. Due to the timing of the repayments at 30 June 2014 some $4.1 million is classified as due within one year.

7. Share capital and share premium

In the current period 755,799,232 0.25p shares were issued as a result of loan note conversions, share placings and share option exercise. These issues took place at a share price between 1.04p and 0.25p and resulted in the creation of share premium of US$ 1.1 million.

INDEPENDENT REVIEW REPORT TO BEACON HILL RESOURCES PLC

Introduction

We have been engaged by the company to review the interim set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 which comprises the consolidated income statements, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and the related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Emphasis of matter - Going concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in Note 2 to the financial statements concerning the Company's ability to continue as a going concern. Further funds will be required to finance the Company's planned work programme. While the Directors are confident of being able to acquire the finance necessary to meet both capital and administrative obligation and liabilities as they fall due, a significant uncertainty exists given that sufficient facilities are not currently in place.

These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

London

United Kingdom

23rd September 2014

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

**ENDS**