Bisichi Regulatory News (BISI)

19 Apr 2011 07:00

BISICHI MINING PLC Preliminary results forthe year ended 31 December 2010 DIFFICULT TRADING CONDITIONS IN SOUTH AFRICA RESULT IN A CHALLENGING YEAR

* Losses at Black Wattle arose from a strong SA Rand against the US Dollar, a

shortage of railway trucks for the export coal and generally lower coal prices * Prospects for 2011 in South Africa will benefit from: + Better stripping ratios + Higher yields from the washing plant + Significantly improved coal prices + Reduced dependency on rail transport + Cost cutting

* Property portfolio independently revalued to £12.1 million (2009: £11.9

million) * Cash reserves of £5.4 million and very little net debt

* New Black Empowerment Partner, Vunani Ltd, concluded purchase of 37.5% of

Black Wattle * Final Dividend proposed of 3p per share payable in shares or cash in addition to the interim dividend of 1p per share

For further information, please call:

Andrew Heller, Robert Corry or Garrett Casey, Bisichi Mining PLC 020 7415 5030

CHAIRMANS STATEMENT

2010 has been a very challenging year for your Company and particularly for itsdirect coal mining subsidiary in South Africa, Black Wattle, which operated ata loss during 2010.

The reasons for the loss are as follows:

* the strengthening of the SA Rand against the US Dollar; * a shortage of railway trucks at our coal loading siding; and * lower prices for our coal. To overcome the effect of the strong SA Rand, we increased production byexpanding our washing plant and buying in high quality coal. Our railway sidingwas also expanded and markets were found for this increased production.However, the shortage of railway trucks to deliver this coal to our customersmeant that during the second half of the year we built up unacceptable levelsof stock. In order to reduce these stock levels we had to stop buying in coal,which in turn had a material effect on our earnings. Despite this, theinvestments that we have made in 2010 in terms of mine expansion and newreserve acquisitions will reap substantial benefits in years to come.

At the 31 December 2010, Bisichi had very little net debt and cash balances of £5.4 million which can be used to expand Group activities.

By the second half of 2011 I believe that we will return to an acceptable level of profitability. The reasons for this are:

* the reserves that we are mining in 2011 have a lower average stripping

ratio than the reserves we mined in 2010;

* the washing plant yield is higher than the yield on the reserves that we

mined throughout 2010;

* coal prices have gone up significantly in all our markets - so far we have

seen an average increase in the export price in 2011 of 28% and an average

increase in the domestic price of 12% free on mine;

* the markets that we are now selling into are less reliant on rail

performance, although the supply of trains to our coal loading siding has

recently improved; and

* we are in the process of building up production and we have undertaken a

substantial and successful cost cutting programme.

As previously announced, Vunani Limited has concluded the purchase of a 37.5%shareholding in Black Wattle. Vunani Limited is a leading, publicly listed,black-owned and managed company and we are very pleased that they have joinedus as a partner in Black Wattle.

On the subject of health and safety, I am very pleased to report that Black Wattle had another very good year having made significant investment in this area over a number of years. A more detailed report on health and safety is included in the Mining Review.

Bisichi's UK property portfolio, managed by London and Associated PropertiesPLC, continues to perform well. It showed a small increase in externalvaluation at year end and - as in previous years when the mine hasunder-performed - the income from the property portfolio has underwritten manyof our costs and so provided the company with a stable financial cushion. Voidsin the portfolio have continued to remain low, even during the difficultretailing conditions that have been experienced over the last 18 months.As recently announced, Michael Stevens, who held the position of Group CompanySecretary for twenty five years, has retired. I would like to thank Michael onbehalf of the Board, for his extremely valuable contribution during the yearsof substantial growth for the company and to wish Michael a very enjoyableretirement.The Board paid an interim cash dividend of 1p during the year. The Directorsrecommend the payment of a final dividend of 3p (2009: 3p). The final dividendwill be payable on 8 August 2011 to shareholders registered at the close ofbusiness on 1 July 2011. It will be proposed that shareholders are given theopportunity of electing to receive all or part of the final dividend in theform of fully paid ordinary shares rather than cash.Although the company made a loss in 2010, the Board felt it was appropriate tomaintain the dividend but to pay it in a form that will give shareholders theopportunity to either take cash or to take new shares and receive the benefitof the investment we have made in the mine during the year, which will berealised in years to come. Your directors, and London & Associated PropertiesPLC have agreed to elect to take their full entitlement in new shares in lieuof cash, representing over 51% of the ordinary share capital of the company.

On behalf of the Board I would like to thank all of our staff for their hard work during the course of the year.

Michael Heller Chairman 15 April 2011

MINING REVIEW

As noted in the Chairman's statement, the challenging environment experiencedin the first half of 2010 by Black Wattle our direct mining subsidiary,continued into the second half of 2010. Although Black Wattle continued to mineopencast coal, buy-in coal was stopped and overall production was limited as aresult of a shortage of railway trucks in the second half of the year. Thistogether with the strong South African Rand and lower market priceshad amaterial effect onBlack Wattle's profitability.

As we continue into 2011, the effect of these factors has been mitigated by the significant improvement in market prices and the commencement of mining of higher quality opencast reserves.

Production

Although production through the washing plant increased in 2010, with total runof mine production of 1.46 million metric tonnes for the year (2009: 1.26million metric tonnes), overall monthly production through the washing plantdecreased from 135,000 metric tonnes in the first eight months of 2010 to94,000 metric tonnes in the last four months. As stated above, this decrease inproduction was a direct result of a shortage of railway trucks in the secondhalf of the year.

As noted in our previous annual report, Black Wattle's remaining opencast permissions were granted in February 2010. This represented an important landmark in the mine's development and, going forward, gives Black Wattle the ability to mine strategically and more flexibly its remaining reserves.

In addition to its existing reserves, Black Wattle has concluded an agreementto purchase run of mine coal from an opencast reserve of coal contiguous toBlack Wattle's existing opencast mine. The reserve, which is expected to makeup approximately half of Black Wattle's overall monthly production is made upof high quality run of mine coal with a lower average stripping ratio and ahigher yield than the reserves we mined in 2010.We are pleased to report that mining of this reserve commenced at the end oflast year and overall production is steadily being increased. Much of the newreserve comprises very low phosphorous coal, which we can sell at a premiuminto the domestic metallurgical industry and delivery of this coal is notreliant on the performance of the rail provider as the coal is supplied by

roadtransport.Markets

International coal prices remained relatively stable in 2010 in comparison tothe extreme volatility seen in the international coal market in 2009. Theaverage weekly price of Free on Board (FOB) Coal from Richards Bay CoalTerminal (API4) remained in a range of US$85.00 to US$95.00 per metric tonnefor the most of 2010. However, over the same period, the South African Randcontinued to appreciate by over 10% against the US Dollar. This is in additionto the 21% appreciation of the Rand experienced in 2009. In addition to thedownturn in the Rand denominated international coal price, domestic pricescontinued to decrease in 2010 resulting in a reduction in prices in all ourdomestic steam coal markets.Going forward into 2011, the international coal price has significantlyimproved with the price of FOB coal from Richards Bay Coal Terminal increasingto approximately US$120 per metric tonne at the time of writing this report. Inaddition, the domestic price has increased over 12% from the prices we achievedin 2010. Our ability to diversify our product will allow us to sell to marketswhich give the highest return and we look forward to taking advantage of thisas production from our new opencast reserve increases in 2011.

Shareholding

As noted in the Chairman's statement, we are very pleased to report that VunaniLimited has concluded the purchase of a 37.5% shareholding in Black Wattle. Weare proud of our longstanding commitment to Black Economic Empowerment in SouthAfrica and we see this transaction with Vunani as the first of many we will

dotogether in South Africa. Vunani Limited is a publicly listed, black ownedand managed company.

Health, Safety & Environment (HSE)

Black Wattle is committed to creating a safe and healthy working environmentfor its employees and the health and safety of our employees is of the utmostimportance. In addition to the required personnel appointments and assignmentof direct health and safety responsibilities on the mine, a system of HazardIdentification and Risk Assessments has been designed, implemented andmaintained at Black Wattle.

Health and Safety training is conducted on an ongoing basis. Supervisors and about 95 percent of employees to date have received training in hazard identification and risk assessment in their work areas.

A medical surveillance system is also in place which provides management with information used in determining measures to eliminate, control and minimise employee health risks and hazards and all Occupational Health hazards are monitored on an ongoing basis.

Various systems to enhance the current HSE strategy have been introduced as follows:

* In order to improve hazard identification before the commencing of tasks,

mini risk assessment booklets have been distributed to all mine employees

and long term contractors on the mine. * A Job Safety Analysis form has been introduced to ensure effective identification of hazards in the workplace. * In order to improve the current reporting practice of incidents on the mine, initial reporting of incidents booklets were handed out to all employees and contractors.

* In order to capture and record investigation findings from incidents, an

incident recording sheet was introduced to line management and contractors.

* Hazard Identification and Risk Assessment training was given to all levels

of employees, line management, Head of Departments, contractor

representatives and contractor employees.

* In order to control jobs effectively over weekends that require additional

risk assessments to safely perform tasks, a weekend work register was

introduced on the mine.

HSE performance in 2010:

* Black Wattle had a 64 percent reduction in the Lost Time Injury Frequency

Rate compared to 2009. * No new cases of Occupational Diseases Certified were recorded.

* Zero cases for the Compensation for Occupational Diseases were submitted.

* Zero machines operating at Black Wattle exceeded the regulatory noise

level.

Environment Management Programme

Under the terms of the mine's Environmental Management Programme approved bythe Department of Mineral Resource ("DMR"), Black Wattle undertakes a host ofenvironmental protection activities to ensure that the approved EnvironmentalManagement Plan is fully implemented. In addition to these routine activities,Black Wattle regularly carries out environmental monitoring activities on andaround the mine, including evaluation of ground water quality, air quality,noise and lighting levels, ground vibrations, air blast monitoring, andassessment of visual impacts.

Black Wattle Colliery has improved its water management tremendously by erecting a new pollution control dam as well as upgrading existing dams in consultation with the Department of Water Affairs and Forestry.

Black Wattle Colliery Social and Labour Plan (SLP) progress

Black Wattle Colliery is committed to true transformation and empowerment within the company as well as poverty eradication within the surrounding and labour providing communities.

Black Wattle is committed to providing opportunities for the sustainable socio-economic development of the company's stakeholders:

* Employees and their families, through Skills Development, Education Development, Human Resource Development, Empowerment and Progression Programmes. * Surrounding and Labour sending communities, through Local Economic

Development, Rural and Community Development, Housing and Living Condition,

Enterprise Development and Procurement programmes.

* Empowerment partners, through Broad-Based Black Economic Empowerment

(BBBEE) and Joint Ventures with Historically Disadvantaged South African

(HDSA) new mining entrants and enterprises. * The Company, through ongoing consultation with stakeholders to develop strong company-employee relationships, strong company-community relationships and strong company-HDSA enterprise relationships.

The key focus areas in terms of the detailed SLP programmes were updated as follows:

* New implementation action plans, projects, targets and budgets were established through regular workshops with all stakeholders. * A comprehensive desktop socio-economic assessment was undertaken on

baseline data of the Steve Tshwete Local Municipality (STLM) and Nkangala

District Municipality (NDM). * The current Black Wattle Colliery Local Economic Development (LED) programmes were upgraded, and new LED projects were selected in consultation with the key stakeholders from the STLM.

* An appropriate forum was established on the mine and a process initiated

for the consultation, empowerment and participation of the employee

representatives in the Black Wattle Colliery SLP process.

Procurement

In compliance with the Mining Charter and the Mineral and Petroleum ResourceDevelopment Act, Black Wattle has implemented a BEE-focussed procurement policywhich strongly encourages our suppliers to establish and maintain BEEcredentials. At present, BEE companies provide approximately 52 percent ofBlack Wattle's equipment and services. We closely monitor our monthlyexpenditure and welcome potential BEE suppliers to compete for equipment andservice contracts at Black Wattle. Black Wattle also sells much of its coalproducts to empowered companies as evidenced by our long term sales agreementwith a BEE company for the purchase of our discard product which is then soldto Eskom, the national power utility.

Employment Equity

Black Wattle is committed to achieving the goals of the Employment Equity Act and is pleased to report the following:

* Black Wattle Colliery has exceeded the 10 percent women in management and

core mining target. * Black Wattle Colliery has achieved 15 percent women in middle to top management. * Black Wattle Colliery has achieved 15.1 percent women in core mining. * 86.2 percent of the women at Black Wattle Colliery are HDSA females. * Black Wattle Colliery has achieved a 40 percent participation level of HDSA's in overall management.

Prospects

Black Wattle is a fully operational opencast mine with strong management,existing infrastructure and markets in place. Along with the expansion of thewashing plant and upgrade of the railway siding, various cost cutting andoperational programmes have been undertaken at Black Wattle in order to ensuremaximum productivity; yield and profitability. As a result, the group is in astrong position to take advantage of the improvement in market prices and theincreased production.

Going forward, I am confident that 2011 should be a successful year for our South African operations.

Andrew HellerManaging Director15 April 2011Consolidated income statementfor the year ended 31 December 2010 2010 2010 2010 2009 Notes Trading Revaluations Total £'000 £'000 £'000 £'000 Group revenue 1 32,824 - 32,824 29,016 Operating costs 2 (34,864) - (34,864) (24,616) Operating (loss)/profit 1 (2,040) - (2,040) 4,400before fair value adjustments Increase in value of 3 - 245 245 67investment properties Gains on held for trading - 90 90 425investments

Operating (loss)/profit 1 (2,040) 335 (1,705) 4,892

Share of profit in joint 13 - 61 61 101ventures (Loss)/profit before (2,040) 396 (1,644) 4,993interest and taxation Interest receivable 174 - 174 226 Interest payable 6 (343) - (343) (216) (Loss)/profit before tax 4 (2,209) 396 (1,813) 5,003 Taxation 7 540 (13) 527 (1,330) (Loss)/profit for the year (1,669) 383 (1,286) 3,673 Attributable to: (1,595) 383 (1,212) 3,673 Equity holders of the company Non-controlling interest 26 (74) - (74) -

(Loss)/profit for the year (1,669) 383 (1,286) 3,673

(Loss)/earnings per share - 9 (15.26)p 3.66p (11.60)p 35.14pbasic

(Loss)/earnings per share - 9 (15.26)p 3.66p (11.60)p 34.35p diluted

Trading income reflects all the trading activity on mining and property operations. Revaluation income reflects the revaluation of investment properties and other assets within the group and any proportion of these amounts within Joint Ventures. The total column represents the consolidated income statement presented in accordance with IAS 1.

Consolidated statement of comprehensive incomefor the year ended 31 December 2010 2010 2009 £'000 £'000 (Loss)/profit for the year (1,286) 3,673 Other comprehensive income:

Exchange differences on translation of 747 530foreign operations Taxation - - Other comprehensive income for the year net (539) 4,203of tax Total comprehensive income for the year net (539) 4,203

of tax Attributable to: Equity shareholders (459) 4,203 Non-controlling interest (80) - (539) 4,203

Company Registration No. 112155

Consolidated balance sheetat 31 December 2010 2010 2009 Notes £'000 £'000 Assets Non-current assets

Value of investment properties 10 12,110 11,865

Fair value of head lease 30 233 246 12,343 12,111 Mining reserves, plant and 11 9,615 8,057equipment

Investments in joint ventures 12 3,607 3,259

Other investments 12 150 496 Total non-current assets 25,715 23,923 Current assets Inventories 15 705 1,139

Trade and other receivables 16 4,719 2,060 Corporation tax recoverable 115 19 Held for trading investments 17 605 510

Cash and cash equivalents 5,399 6,609 Total current assets 11,543 10,337 Total assets 37,258 34,260 Liabilities Current liabilities Borrowings 19 (1,759) (4,593) Trade and other payables 18 (7,865) (5,571) Current tax liabilities (362) (260) Total current liabilities (9,986) (10,424) Non-current liabilities Borrowings 19 (5,326) (533)

Provision for rehabilitation 20 (1,025) (772)

Finance lease liabilities 30 (233) (246) Deferred tax liabilities 22 (2,340) (2,985)

Total non-current liabilities (8,924) (4,536)

Total liabilities (18,910) (14,960) Net assets 18,348 19,300 Equity Share capital 23 1,045 1,045 Translation reserve 68 (685) Other reserves 24 485 480 Retained earnings 16,356 18,460

Total equity attributable to equity 17,954 19,300

shareholders Non-controlling interest 26 394 - Total equity 18,348 19,300

These financial statements were approved and authorised for issue by the board of directors on15 April 2011 and signed on its behalf by:

A R Heller G J CaseyDirector Director

Consolidated statement of changes in shareholders' equity for the year ended 31 December 2010

Share Translation Other Retained Total

Non-controlling Total

capital reserves reserves earnings interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 1,045 (1,215) 663 15,153 15,646 - 15,6462009 Revaluation of - - - 67 67 - 67investment properties Other income statement - - - 3,606 3,606 - 3,606movements Profit for the year - - - 3,673 3,673 - 3,673 Exchange adjustment - 530 - - 530 - 530 Total comprehensive - 530 - 3,673 4,203 - 4,203income for the year Dividend - - - (366) (366) - (366) Equity share options - - (183) - (183) - (183) Balance at 1 January 1,045 (685) 480 18,460 19,300 - 19,3002010 Revaluation of - - - 245 245 - 245investment properties Other income statement - - - (1,457) (1,457) (74) (1,531)movements Loss for the year - - - (1,212) (1,212) (74) (1,286) Exchange adjustment - 753 - - 753 (6) 747 Total comprehensive - 753 - (1,212) (459) (80) (539)income for the year Dividend - - - (418) (418) - (418) Equity share options - - 5 - 5 - 5 Disposal of shares in - - - (474) (474) 474 -subsidiary Balance at 31 December 1,045 68 485 16,356 17,954 394 18,3482010 Consolidated cash flow statementfor the year ended 31 December 2010 Year ended Year ended 31 December 2010 31 December 2009 £'000 £'000

Cash flows from operating activities

Operating (loss)/profit (1,705) 4,892 Adjustments for: Depreciation 2,414 2,541 Share based payment expense 5 (183) Gain on investment held for trading (90)

(425)

Unrealised gain on investment properties (245)

(67)

Cash flow before working capital 379 6,758 Change in inventories 434 258 Change in trade and other receivables (2,150)

4,042

Change in trade and other payables 834 (1,478) Change in provisions 253 201

Acquisitions of held for trading investments (6)

(75)

Proceeds from held for trading investments -

617

Cash generated from operations (256) 10,323 Interest received 174 226 Interest paid (343) (216) Income tax paid (112) (2,359) Cash flow from operating activities (537)

7,974

Cash flows from investing activities Acquisition of reserves, plant and equipment (2,639)

(2,087)

Disposal/(acquisitions) of investments 405

(136)

Cash flow from investing activities (2,234)

(2,223)

Cash flows from financing activities

Borrowings drawn 2,300 406 Borrowings repaid (231) (700) Equity dividends paid (418) (366) Cash flow from financing activities 1,651

(660)

Net (decrease)/increase in cash and cash (1,120) 5,091equivalents Cash and cash equivalents at 1 January 5,077 (116) Exchange adjustment 20 102 Cash and cash equivalents at 31 December 3,977

5,077

Cash and cash equivalents at 31 December

comprise: Cash and cash equivalents as presented in the 5,399 6,609balance sheet Bank overdrafts (secured) (1,422) (1,532) 3,977 5,077Group accounting policiesfor the year ended 31 December 2010

Basis of accounting

The financial information presented in this preliminary announcement does notconstitute the statutory accounts of Bisichi Mining plc for the years ended 31December 2010 or 31 December 2009 but is derived from those accounts. Statutoryaccounts for 2009 have been delivered to the Registrar of Companies and thosefor 2010 will be delivered in due course. The auditor has reported on both the2009 and 2010 accounts; their reports were(i) unqualified, (ii) did not includea reference to any matters to which the auditor drew attention by way ofemphasis without qualifying their report and (iii) did not contain a statementunder section 498 (2) or (3) of the Companies Act 2006.The results for the year ended 31 December 2010 have been prepared inaccordance with International Financial Reporting Standards (IFRS) as adoptedby the European Union and with those parts of the Companies Act 2006 applicableto companies reporting under IFRS. The principal accounting policies aredescribed below:

The group financial statements are presented in £ sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise stated.

International Accounting Standards (IAS/IFRS)The financial statements are prepared in accordance with InternationalFinancial Reporting Standards and Interpretations in force at the reportingdate. These are prepared under the historic cost convention as modified by therevaluation of investment properties and available for sale investments.

During 2010 the following accounting standards and guidance were adopted by the group:

* IAS 27 (Revised): Consolidated and separate financial statements

The standard requires that transactions involving non-controlling interests,where no change in control occurs should be accounted for as equitytransactions. Furthermore losses of the group, which are attributable to theowners of non-controlling interest, are attributed to these owners, even ifthis results in a deficit.

The impact on the results for the year is the disclosure of a £74,000 loss for the year attributable to non-controlling interest.

During 2010 all other standards and interpretations that were mandatory for theaccounting period and were required to be adopted by the group either had nomaterial impact on the group's financial statements or were not relevant to theoperations of the group.

The group has not adopted any standards or interpretations in advance of the required implementation dates. It is not expected that adoption of any standards or interpretations which have been issued by the International Accounting Standards Board but have not been adopted will have a material impact on the financial statements.

Key Judgements and Estimates

The directors consider their judgements and estimates surrounding the life ofthe mine and its reserves to have the most significant effect on the amountsrecognised in the financial statements and to be the area where the financialstatements are at most risk of a material adjustment due to estimationuncertainty.

In addition the directors note that other areas, in particular the valuation of the investment properties, are considered to be less judgemental due to the nature of the underlying properties and the use of external valuers.

Basis of consolidation

The group accounts incorporate the accounts of Bisichi Mining Plc and all ofits subsidiary undertakings, together with the group's share of the results ofits joint ventures and associates. Non-controlling interests in subsidiariesare presented separately from the equity attributable to equity owners of theparent company. When changes in ownership in a subsidiary do not result in aloss of control, the non-controlling shareholders' interest are initiallymeasured at the non-controlling interests' proportionate share of thesubsidiaries net assets. Subsequent to this, the carrying amount ofnon-controlling interests is the amount of those interests at initialrecognition plus the non-controlling interests' share of subsequent changes inequity. Total comprehensive income is attributed to non-controlling interestseven if this results in the non-controlling interests having a deficit balance.

Revenue

Revenue comprises sales of coal and property rental income. Revenue is recognised when delivery of the product or service has been made and when the customer has a legally binding obligation to settle under the terms of the contract and has assumed all significant risks and rewards of ownership.

Revenue is only recognised on individual sales when all of the significantrisks and rewards of ownership have been transferred to a third party. In mostinstances revenue is recognised when the product is delivered to the locationspecified by the customer, which is typically when loaded into transport, wherethe customer pays the transportation costs.

Rental income is recognised in the group income statement on a straight-line basis over the term of the lease. This includes the effect of lease incentives.

Investment Properties

Investment properties comprise freehold and long leasehold land and buildings.Investment properties are carried at fair value in accordance with IAS 40`Investment Properties'. Properties are recognised as investment propertieswhen held for long-term rental yields, and after consideration has been givento a number of factors including length of lease, quality of tenant andcovenant, value of lease, management intention for future use of property,planning consents and percentage of property leased. Investment properties arerevalued annually by professional external surveyors and included in thebalance sheet at their fair value. Gains or losses arising from changes in thefair values of assets are recognised in the consolidated income statement inthe period to which they relate. In accordance with IAS 40, investmentproperties are not depreciated. Properties held for use in the business are notrecognised as investment properties and are held at depreciated historicalcost.

The fair value of the head leases is the net present value of the current head rent payable on leasehold properties until the expiry of the lease.

Mining reserves, plant and equipment

The cost of property, plant and equipment comprises its purchase price and anycosts directly attributable to bringing the asset to the location and conditionnecessary for it to be capable of operating in accordance with agreedspecifications. Freehold land is not depreciated. Other property, plant andequipment is stated at historical cost less accumulated depreciation.The life of mine remaining as at year end is currently estimated at 5 years. Aprovision for rehabilitation of the mine is carried at fair value and isprovided for over the life of mine. The provision includes the restoration ofthe underground, opencast and surface operations and is estimated to beutilised at the end of the life of mine of the group. The timing and final costof the rehabilitation is uncertain and will depend on the duration of the minelife and the quantities of coal extracted from the reserves.

Mine reserves and development cost

The purpose of mine development is to establish secure working conditions and infrastructure to allow the safe and efficient extraction of recoverable reserves. Depreciation on mine development is not charged until production commences or the assets are put to use. On commencement of full production, depreciation is charged over the life of the associated mine reserves on a straight-line basis.

Surface mine development

Expenditure incurred prior to the commencement of working surface mine sites,net of any residual value and taking into account the likelihood of the sitebeing mined, is capitalised within property, plant and equipment and charged tothe income statement over the life of the recoverable reserves of the scheme.

Other assets and depreciation

The cost, less estimated residual value, of other property, plant and equipmentis written off on a straight-line basis over the asset's expected useful life.Residual values and useful lives are reviewed, and adjusted if appropriate, ateach balance sheet date. Changes to the estimated residual values or usefullives are accounted for prospectively. Heavy surface mining and other plant andequipment is depreciated at varying rates depending upon its expected usage.

The depreciation rates generally applied are:

Mining equipment The shorter of its useful life or the life of the mine

Mining reserves Over the expected life of the reserves

Motor vehicles 25-33 per cent per annum

Office equipment 10-33 per cent per annum

Employee Benefits

Share based remuneration

The company operates a share option scheme. The fair value of the share optionscheme is determined at the date of grant. This fair value is then expensed ona straight-line basis over the vesting period, based on an estimate of thenumber of shares that will eventually vest. The fair value of options grantedis calculated using a binomial or Black-Scholes-Merton model. Details of theshare options in issue are disclosed in the Directors' Remuneration Report onpage 25 under the heading Share option schemes which is within the audited

partof this report.Pensions

The group operates a defined contribution pension scheme. The contributions payable to the scheme are expensed in the period to which they relate.

Foreign Currencies

Monetary assets and liabilities are translated at year end exchange rates andthe resulting exchange rate differences are included in the consolidated incomestatement within the results of operating activities if arising from tradingactivities and within finance cost/income if arising from financing.For consolidation purposes, income and expense items are included in theconsolidated income statement at average rates, and assets and liabilities aretranslated at year end exchange rates. Translation differences arising onconsolidation are taken directly to reserves. Where foreign operations aredisposed of, the cumulative exchange differences of that foreign operation arerecognised in the consolidated income statement when the gain or loss ondisposal is recognised.

Transactions in foreign currencies are translated at the exchange rate ruling on transaction date.

Financial Instruments

The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Bank loans and overdrafts

Bank loans and overdrafts are included as financial liabilities on the groupbalance sheet at the amounts drawn on the particular facilities net of theunamortised cost of financing. Interest payable on those facilities is expensedas finance cost in the period to which it relates.

Finance lease liabilities

Finance lease liabilities arise for those investment properties held under aleasehold interest and accounted for as investment property. The liability isinitially calculated as the present value of the minimum lease payments,reducing in subsequent reporting periods by the apportionment of payments tothe lessor.Interest rate derivatives

The group uses derivative financial instruments to manage the interest raterisk associated with the financing of the group's business. No trading in suchfinancial instruments is undertaken. At each reporting date, these interestrate derivatives are recognised at fair value, being the estimated amount thatthe group would receive or pay to terminate the agreement at the balance sheetdate, taking into account current interest rates and the current credit ratingof the counterparties. The gain or loss at each fair value re-measurement isrecognised immediately in the income statement.

Held for trading investments

Financial assets/liabilities held for trading or short-term gain are measuredat fair value and movements in fair value are charged/credited to the incomestatement in the period.Trade receivables

Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated recoverable amounts as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.

Trade payables

Trade payables are not interest bearing and are stated at their nominal value,as the interest that would be recognised from discounting future cash paymentsover the short payment period is not considered to be material.

Other Financial assets and liabilities

The groups other financial assets and liabilities not disclosed above are accounted for as shown below.

Financial assets:

- Cash and cash equivalents are measured at cash value.

- Other receivables at amount owed

- Other loans receivable at amount owed

Finance liabilities:

- Other payables at amount owing

Joint Ventures

Investments in joint ventures, being those entities over whose activities thegroup has joint control, as established by contractual agreement, are includedat cost together with the group's share of post acquisition reserves, on anequity basis.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes materials, direct labour and overheads relevant to the stage of production. Net realisable value is based on estimated selling price less all further costs to completion and all relevant marketing, selling and distribution costs.

Other Investments

Other investments that do not have a quoted market price in an active marketand whose fair value cannot be reliably measured are recognised at cost lessany provision for impairment.

Impairment

Whenever events or changes in circumstance indicate that the carrying amount ofan asset may not be recoverable an asset is reviewed for impairment. An asset'scarrying value is written down to its estimated recoverable amount (being thehigher of the fair value less cost to sell and value in use) if that is lessthan the asset's carrying amount.

Deferred Tax

Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the tax computations, and isaccounted for using the balance sheet liability method. Deferred taxliabilities are generally recognised for all taxable temporary differences anddeferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporarydifferences can be utilised. In respect of the deferred tax on the revaluationsurplus, this is calculated on the basis of the chargeable gains that wouldcrystallise on the sale of the investment portfolio as at the reporting date.The calculation takes account of indexation on the historical cost of theproperties and any available capital losses.Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the group income statement, except when it relates toitems charged or credited directly to equity, in which case it is also dealtwith in equity.Dividends

Dividends payable on the ordinary share capital are recognised as a liability in the period in which they are approved.

Cash and Cash Equivalents

Cash comprises cash in hand and on-demand deposits. Cash and cash equivalentscomprises short-term, highly liquid investments that are readily convertible toknown amounts of cash and which are subject to an insignificant risk of changesin value and original maturities of three months or less. The cash and cashequivalents shown in the cashflow statement are stated net of bank overdrafts.

Segmental Reporting

For management reporting purposes, the group is organised into businesssegments distinguishable by economic activity. The group's only businesssegments are mining activities and investment properties. These businesssegments are subject to risks and returns that are different from those ofother business segments and are the primary basis on which the group reportsits segment information. This is consistent with the way the group is managedand with the format of the group's internal financial reporting. Significantrevenue from transactions with an individual customer, which makes up 10percent or more of the total revenue of the group, is separately disclosedwithin each segment.Notes to the financial statementsfor the year ended 31 December 20101. Segmental reportingBusiness analysis 2010 Mining Property Other Total £'000 £'000 £'000 £'000 Significant revenue 11,265 - - 11,265customer A Significant revenue 8,456 - - 8,456customer B Significant revenue 3,398 - - 3,398customer C Other revenue 8,707 975 23 9,705 Segment revenue 31,826 975 23 32,824 Operating (loss)/profit (2,664) 616 8 (2,040)before fair value adjustments Revaluation of - 245 90 335investments Operating (loss)/profit (2,664) 861 98 (1,705)and segment result Segment assets 15,061 12,557 606 28,224 Unallocated assets - Non-current assets 28 * Cash & cash 5,399 equivalents Total assets 33,651 Segment liabilities (7,769) (2,473) (15) (10,257) Borrowings (663) (5,000) - (5,663) (8,432) (7,473) (15) (15,920) Unallocated liabilities (2,990) Total liabilities (18,910) Net assets 14,741 Investment in joint 3,607ventures non segmental Net assets as per 18,348balance sheet Geographic analysis United South Other Unallocated Total Kingdom Africa £'000 £'000 £'000 £'000 £'000 Revenue 998 31,826 - - 32,824 Operating profit/(loss) 959 (2,664) - - (1,705)and segment result Non-current assets 12,343 9,586 - 29 21,958excluding investments Total net assets 5,637 6,604 63 6,044 18,348 Capital expenditure 2 2,637 - - 2,639Notes to the financial statementsfor the year ended 31 December 20101. Segmental reportingBusiness analysis 2009 Mining Property Other Total £'000 £'000 £'000 £'000 Significant revenue 10,524 - - 10,524customer A Significant revenue 6,991 - - 6,991customer B Significant revenue 3,747 - - 3,747customer C Other Revenue 6,544 1,005 205 7,754 Segment revenue 27,806 1,005 205 29,016 Operating profit before 3,873 621 (94) 4,400fair value adjustments

Revaluation of investments - 67 425

492 Operating profit and 3,873 688 331 4,892segment result Segment assets 11,587 12,236 509 24,332 Unallocated assets - Non-current assets 60

* Cash & cash equivalents

6,609 Total assets 31,001 Segment liabilities (5,568) (2,736) (117) (8,421) Borrowings (894) (2,700) - (3,594) (6,462) (5,436) (117) (12,015) Unallocated liabilities (2,945) Total liabilities (14,960) Net assets 16,041 Investment in joint 3,259ventures non segmental Net assets as per balance 19,300sheet Geographic analysis United South Other Unallocated Total Kingdom Africa £'000 £'000 £'000 £'000 £'000 Revenue 1,210 27,806 - - 29,016 Operating profit and 1,019 3,873 - - 4,892segment result Non-current assets 12,111 7,997 - 60 20,168excluding investments Total net assets 7,151 5,112 55 6,982 19,300 Capital expenditure 25 2,062 - - 2,0872. Operating costs 2010 2009 £'000 £'000 Mining 26,979 16,462 Property 120 81 Share dealing - - Cost of sales 27,099 16,543 Administration 7,765 8,073 Operating costs 34,864 24,616

The direct property costs are:

Ground rent 9 15 Direct property expense 81 63 Bad debts 30 3 120 81

3. Gain on revaluation and sale of investment properties

The reconciliation of the investment surplus to the gain on revaluation of investment properties in the income statement is set out below:

2010 2009 £'000 £'000 Investment surplus 258 55

(Gain)/loss on valuation movement in respect of head (13)

12lease payments

Gain/(loss) on revaluation of investment properties 245

67

4. (Loss)/profit before taxation

(Loss)/profit before taxation is arrived at after charging/(crediting):

2010 2009 £'000 £'000 Staff costs (see note 28) 6,036 6,661 Depreciation 2,414 2,541 Exchange gain (526) (237)

Fees payable to the company's auditor for 40

45

the audit of the company's annual accounts Fees payable to the company's auditor and its associates for other services: The audit of the company's subsidiaries, pursuant to 32

28legislation Other services 5 1

The directors consider the auditors were best placed to provide the above non-audit services. The audit committee reviews the nature and extent of non-audit services to ensure that independence is maintained.

5. Directors' emoluments

Directors' emoluments are shown in the Directors' remuneration report on pages24 and 25 under the heading Directors' remuneration which is within the auditedpart of this report.6. Interest payable 2010 2009 £'000 £'000

On bank overdrafts and bank loans 291

94 Other interest payable 52 122 Interest payable 343 2167. Taxation 2010 2009 £'000 £'000

(a) Based on the results for the year: Corporation tax at 28% (2009: 28%) 352

1,203

Adjustment in respect of prior years - UK 6

- Current tax 358 1,203 Deferred tax - current year (885) 127 Total tax in income statement (527)

1,330

(b) Factors affecting tax charge for the year: The corporation tax assessed for the year is different from that at the standard rate of corporation tax in the United Kingdom of 28% (2009: 28%) The differences are explained below:

(Loss)/profit on ordinary activities before taxation (1,813) 5,003

Tax on profit on ordinary activities at 28% (2009: 28%) (508) 1,401 Effects of:

Expenses not deductible for tax purposes 84

67

Capital gains in excess of profit on disposal 13

- Other differences (127) (119)

Adjustment to smaller companies rates -

(19)

Adjustment in respect of prior years 11

- Total tax (527) 1,330

(c) Analysis of United Kingdom and Overseas tax

United Kingdom tax included in above:

Corporation tax 300

-

Adjustment in respect of prior years 6

- Current tax 306 - Deferred tax 113 242 419 242

Overseas tax included in above:

Corporation tax 52 1,203 Current tax 52 1,203 Deferred tax (998) (115) (946) 1,0888. Dividends paid 2010 2010 2009 2009 Per share £'000 Per share £'000

Dividends paid during the year 4.00 p 418 3.50 p

366relating to the prior period Dividends to be paid: Interim dividend for 2010 paid on the 1.00 p 105 1.00p 1054 February 2011

Proposed final dividend for 2010 3.00 p 313 3.00p

313 4.00 p 418 4.00p 418

The dividends to be paid are not accounted for until they have been approved at the Annual General Meeting. The amount will be accounted for as an appropriation of retained earnings in the year ending 31 December 2011.

9. (Loss)/earnings and diluted (loss)/earnings per share

Both the basic and diluted (loss)/earnings per share calculations are based ona loss of £1,286,000 (2009: profit £3,673,000). The basic (loss)/earnings pershare have been calculated on 10,451,506 (2009: 10,451,506) ordinary sharesbeing in issue during the period. The diluted (loss)/earnings per share havebeen calculated on the number of shares in issue of 10,451,506 (2009:10,451,506) plus the dilutive potential ordinary shares arising from shareoptions of nil (2009: 241,313) totalling 10,451,506 (2009: 10,692,819).

Dilutive potential ordinary shares of 279,790 were excluded from the calculation of diluted ordinary shares in 2010 as there was no dilutive effect due to the loss for the year.

10. Investment properties Long Freehold Leasehold Total £'000 £'000 £'000 Valuation at 1 January 2010 8,865 3,000 11,865 Additions - - - Revaluation 245 - 245 Valuation at 31 December 9,110 3,000 12,1102010 Valuation at 1 January 2009 8,673 3,100 11,773 Additions 25 - 25 Revaluation 167 (100) 67 Valuation at 31 December 8,865 3,000 11,8652009 Historical cost At 31 December 2010 4,801 728 5,529 At 31 December 2009 4,801 728 5,529

Long leasehold properties are those for which the unexpired term at the balance sheet date is not less than 50 years.

All investment properties are held for use in operating leases and all properties generated rental income during the period.

Freehold and Long Leasehold properties were externally professionally valued at 31 December on an open market basis by:

2010 2009 £'000 £'000 BNP Paribas Real Estate 9,100 8,865 Carter Towler LLP, Chartered Surveyors 3,000 3,000 12,100 11,865

The valuations were carried out in accordance with the Statements of AssetValuation and Guidance Notes published by

The Royal Institution of Chartered Surveyors.

11. Mining reserves, plant and equipment

Mining Mining Motor Office Reserves equipment Vehicles equipment Total £'000 £'000 £'000 £'000 £'000 Cost at 1 January 2010 1,911 12,581 387 119 14,998 Exchange adjustment 318 2,094 42 12 2,466 Additions - 2,637 - 2 2,639 Disposals (17) (2,372) - (5) (2,394) Cost at 31 December 2010 2,212 14,940 429 128 17,709 Accumulated depreciation 1,407 5,195 271 68 6,941at 1 January 2010 Exchange adjustment 267 829 31 6 1,133 Charge for the year 111 2,245 43 15 2,414 Disposals in year (17) (2,372) - (5) (2,394) Accumulated depreciation 1,768 5,897 345 84 8,094at 31 December 2010 Net book value at 31 444 9,043 84 44 9,615December 2010 Cost at 1 January 2009 1,705 11,360 346 103 13,514 Exchange adjustment 225 1,500 23 7 1,755 Additions - 2,000 50 12 2,062 Disposals (19) (2,279) (32) (3) (2,333) Cost at 31 December 2009 1,911 12,581 387 119 14,998 Accumulated depreciation 1,151 4,523 232 54 5,960at 1 January 2009 Exchange adjustment 156 593 21 3 773 Charge for the year 119 2,358 50 14 2,541 Disposals in year (19) (2,279) (32) (3) (2,333) Accumulated depreciation 1,407 5,195 271 68 6,941at 31 December 2009 Net book value at 31 504 7,386 116 51 8,057December 2009

12. Investments held as non-current assets

2010 2010 2009 2009 Joint Joint Ventures Ventures Assets Other Assets Other £'000 £'000 £'000 £'000 At 1 January 2,343 779 2,363 617 Disposals - (405) - - Transfer - - (121) 137 Exchange adjustment - 59 - 25 Share of gain/(loss) in joint 61 - (101) -ventures Net assets at 31 December 2,404 433 2,343 779Loan to joint venture:At 1 January 916 - 709 - Additions 287 - 207 - At 31 December 1,203 - 916 - At 31 December 3,607 433 3,259 779

Provision for diminution in value:

At 1 January - (283) - (283) Write down of investment - - - - At 31 December - (283) - (283) Net book value at 31 December 3,607 150 3,259

496

Included in other investments are: 2010

2009 £'000 £'000 Net book value of unquoted 133 133investments Rehabilitation fund - 348

Net book value of investments 17

15

listed on overseas Stock Exchanges

150 496

Market value of the overseas listed 17

15investments 13. Joint venturesThe company owns 50% of the issued share capital of Dragon Retail PropertiesLimited, an unlisted property investment company. The remaining 50% is held byLondon & Associated Properties PLC. Dragon Retail Properties Limited isincorporated in England and Wales. It has issued share capital of 500,000(2009: 500,000) ordinary shares of £1 each.The company owns 49% of the issued share capital of Ezimbokodweni Mining (pty)Limited, an unlisted prospective coal production company. The company isincorporated in South Africa. It has issued share capital of 100 (2009: 100)ordinary shares of ZAR1 each. Ezimbokodweni Dragon 49% 50% 2010 2009 £'000 £'000 £'000 £'000 Turnover - 103 103 101 Profit and loss Profit before tax - 61 61 101 Taxation - - - - Profit after taxation - 61 61 101 Balance sheet Non-current assets 1,203 1,583 2,786 2,431 Current assets - 1,339 1,339 1,311 Current liabilities (1,203) (1,061) (2,264) (1,952) Non-current liabilities - (140) (140) (130) Share of net assets at 31 - 1,721 1,721 1,660December 14. Subsidiary companiesThe company owns the following ordinary share capital of the principalsubsidiaries which are included within the consolidated financial statements: Activity Percentage of share capital Country of incorporation Mineral Products Limited Share dealing 100% England and Wales Black Wattle Colliery Coal mining 62.5% South Africa(pty) Limited Bisichi Coal Mining (pty) Coal mining 100% South AfricaLimited Bisichi Mining Holding company 100% England and Wales(Exploration) Limited Ninghi Marketing Limited Dormant 90.1% England and WalesDetails on the non-controlling interest in subsidiaries are shown under note26.15. Inventories 2010 2009 £'000 £'000 Coal Washed 540 1,048 Run of mine 122 57 Other 43 34 705 1,139

16. Trade and other receivables

2010 2009 £'000 £'000Amounts falling due within one year: Trade receivables 3,791 1,875 Other receivables 112 98 Prepayments and accrued 816 87income 4,719 2,060

17. Held for trading investments

2010 2009 £'000 £'000 Market value of Listed Investments: Listed in Great Britain 522 448 Listed outside Great Britain 83 62 605 510 Original cost of Listed 458 452Investments Unrealised surplus of market 147 58value over cost 18. Trade and other payables 2010 2009 £'000 £'000 Trade payables 3,604 1,004 Amounts owed to joint 1,205 1,165ventures Other payables 687 569 Accruals and deferred 2,369 2,833income 7,865 5,571

19. Financial liabilities - borrowings

Current Non-current 2010 2009 2010 2009 £'000 £'000 £'000 £'000

Bank overdraft (secured) 1,422 1,532 -

- Bank loan (secured) 337 3,061 5,326 533 1,759 4,593 5,326 533 2010 2009 £'000 £'000

Bank overdraft and loan instalments by reference to the balance sheet date:

Within one year 1,759 4,593 From one to two years 5,326 533 From two to five years - - 7,085 5,126 Bank overdraft and loan analysis by origin: United Kingdom 5,000 2,700 Southern Africa 2,086 2,426 7,085 5,126The United Kingdom bank loans and overdraft are secured by way of a firstcharge over the investment properties in the UK which are included in thefinancial statements at a value of £12,100,000. The South African bank loansare secured by way of a first charge over specific pieces of mining equipmentand the debtors of the relevant company which holds the loan which are includein the financial statements at a value of £6,507,000.Consistent with others in the mining and property industry, the group monitorsits capital by its gearing levels. This is calculated as the net debt (loansless cash and cash equivalents) as a percentage of the equity. During 2010 thisincreased to 9.4% (2009: nil) which was calculated as follows: 2010 2009 £'000 £'000 Total debt 7,085 5,126 Less cash and cash (5,399) (6,609)equivalents Net debt 1,686 (1,483) Total equity 17,954 19,300 Gearing 9.4% -

20. Provision for rehabilitation

2010 2009 £'000 £'000 As at 1 January 772 571 Additions 253 201 As at 31 December 1,025 77221. Financial instrumentsTreasury policyThe group enters into derivative transactions such as interest rate swaps andforward exchange contracts as necessary in order to help manage the financialrisks arising from the group's activities. The main risks arising from thegroup's financing structure are interest rate risk, liquidity risk, marketrisk, credit risk, currency risk and commodity price risk. There have been nochanges during the year of the main risks arising from the groups financestructure. The policies for managing each of these risks and the principaleffects of these policies on the results are summarised below.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument orcashflows associated with the instrument will fluctuate due to changes inmarket interest rates. Interest rate risk arises from interest bearingfinancial assets and liabilities that the group uses. Treasury activities takeplace under procedures and policies approved and monitored by the Board tominimise the financial risk faced by the group. Interest bearing assetscomprise cash and cash equivalents which are considered to be short-term liquidassets and loans to joint ventures. Interest bearing borrowings comprise bankloans, bank overdrafts and variable rate finance lease obligations. The ratesof interest vary based on LIBOR in the UK and PRIME in South Africa.As at 31 December 2010, with other variables unchanged, a 1% increase ordecrease in interest rates, on investments and borrowings whose interest ratesare not fixed, would respectively decrease or increase the profit for the yearby £27,000 (2009: £14,000). The effect on equity of this change would be anequivalent decrease or increase for the year of £27,000 (2009: £14,000).

Liquidity risk

The group's policy is to minimise refinancing risk. Efficient treasurymanagement and strict credit control minimise the costs and risks associatedwith this policy which ensures that funds are available to meet commitments asthey fall due. As at year end the group held borrowing facilities in the UK inBisichi Mining Plc and in South Africa in Black Wattle Colliery (Pty) Ltd. Thecompany was within its bank borrowing facilities and had not breached any ofits covenants. New borrowings were signed in March 2010 in both the UK andSouth Africa. Further details are provided in borrowing facilities informationlater in this note. Trade and other payables are all due within one year.

The table below shows the currency profiles of cash and cash equivalents:

2010 2009 £'000 £'000 Sterling 3,710 2,904 South African Rand 1,689 3,705 5,399 6,609

Cash and cash equivalents earn interest at rates based on LIBOR in Sterling and Prime in Rand.

Market riskThe group is exposed to market price risk through interest rate and currencyfluctuations and commodity price risk.

Credit risk

The group is exposed to credit risk on its cash and cash equivalents and tradeand other receivables as per the balance sheet. At the balance sheet date therewas no significant concentration of credit risk. The maximum exposure to creditrisk is represented by the carrying amount of each financial asset in thebalance sheet which at year end amounted to £9,302,000 (2009: £8,582,000).Trade debtor's credit ratings are reviewed regularly. The group only depositssurplus cash with well-established financial institutions of high qualitycredit standing. As at year end the amount of material receivables held pastdue date was £nil (2009: £nil).

Financial assets maturity

On 31 December 2010, cash at bank and in hand amounted to £5,399,000 (2009: £6,609,000) which is invested in short term bank deposits maturing within oneyear bearing interest at the bank's variable rates. Cash and cash equivalentsall have a maturity of less than 3 months.

Total financial assets and liabilities

The group's financial assets and liabilities are as follows, representing both the fair value and the carrying value:

Assets at Financial fair Liabilities value measured at through Loans and amortised profit receivables cost and loss 2010 2009 £'000 £'000 £'000 £'000 £'000 Cash and cash 5,399 - - 5,399 6,609equivalents Investments held for - - 605 605 510trading Other Investments - - 150 150 496 Trade and other 3,903 - - 3,903 1,973receivables Bank Borrowings - (7,085) - (7,085) (5,126) Finance leases - (233) - (233) (246) Other Liabilities - (7,677) - (7,677) (5,403) 9,302 (14,995) 755 (4,938) (1,187)

Investments held for trading fall under level 1 of the fair value hierarchyinto which fair value measurements are recognised in accordance with the levelsset out in IFRS 7. Other investments are held at cost. The directors are of theopinion that the difference in value between cost and fair value of otherinvestments is not significant or material. The comparative figures for 2009fall under the same category of financial instrument as 2010.

Borrowing facilities

The group has signed new borrowing facilities in both its UK and South African operations.

In the UK, a term loan facility of £5million and an overdraft facility of £2million were signed by Bisichi Mining Plc in March 2010 with Royal Bank ofScotland. This facility will expire in December 2012 and is secured against thegroup's UK retail property portfolio.In South Africa, a structured trade finance facility of R60million (SouthAfrican Rand) was signed by Black Wattle Colliery (pty) Limited in March 2010with Absa Bank Limited, a South African subsidiary of Barclays Bank PLC. Thefacility is renewed annually and is secured against inventory, debtors and cashthat are held by Black Wattle Colliery (pty) Limited. This facility comprisesof a R40million revolving loan to cover the working capital requirements of thegroup's South African operations, and a R20million loan facility to coverguarantee requirements related to the group's South African mining operations.At 31 December 2010 the group was within its bank borrowing facilities and hadnot breached any of its covenants. Term loan repayments are as set out in Note19. Details of other financial liabilities are shown in notes 18 and 19.

Commodity price risk

Commodity price risk is the risk that the group's future earnings will beadversely impacted by changes in the marketof commodities. The group is exposed to commodity price risk as its futurerevenues will be derived based on a contract with a physical off-take partnerat prices that will be determined by reference to market prices of coal at thedelivery date.

From time to time the group may manage its exposure to commodity price risk by entering into forward sales contracts with the goal of preserving future revenue streams.

Foreign exchange risk

All trading is undertaken in the local currencies. Funding is also in local currencies other than inter-company investments and loans and it is not the group's policy to obtain forward contracts to mitigate foreign exchange risk on these amounts.

As a result of the group's mining assets being held in South Africa and havinga functional currency different than the presentation currency, the groupbalance sheet can be affected significantly by movements in the pounds sterlingto the South African Rand. During 2009 and 2010 the group did not hedge itsexposure of foreign investments held in foreign currencies. There is nosignificant impact on profit and loss from foreign currency movementsassociated with these South African subsidiary assets and liabilities as theeffect of foreign currency gains or losses arising are recorded through thetranslation reserve.

The effect of a movement in foreign currencies on the income statement and equity of the group is shown in the sensitivity analysis below:

Profit and loss Equity Equity 2010 2009 2010 2009 £'000 £'000 £'000 £'000 If there were a 10% weakening of the South African Rand against Sterling with all other (136) (185) (573) (598)variables held constant - (decrease) If there were a 10% strengthening of the South African Rand against Sterling with all other 181 211 701 731variables held constant - increase 22. Deferred taxation 2010 2009 £'000 £'000 Balance at 1 January 2,985 2,625 Recognised in income (885) 127 Exchange adjustment 240 233 2,340 2,985 The deferred tax balance comprises the following: Revaluation of properties 1,229 1,216 Capital allowances 552 1,969 Short-term timing 559 (200)differences 2,340 2,98523. Share capital 2010 2009 £'000 £'000 Authorised: 13,000,000 1,300 1,300 ordinary shares of 10p each Allotted and fully paid: 1,045 1,04510,451,506 ordinary shares 24. Other reserves 2010 2009 £'000 £'000 Equity share options 399 394 Net premium on share 86 86capital in joint venture 485 48025. Share based payments

Details of the share option scheme are shown in the Directors' remunerationreport on page 24 and 25 under the heading Share option schemes which is withinthe audited part of this report. Further details of the share option schemesare set out below.

The Bisichi Mining PLC Unapproved Option Schemes:

Year of Subscription Period within Number of Number of Number ofgrant price per which options share share share share exercisable for which options for which options issued/ options outstanding (cancelled) outstanding at during year at 31 December 31 December 2009 2010 2002 34.0p Sep 2005 - Sep 313,000 - 313,000 2012 2004 149.0p Sep 2007 - Sep 80,000 - 80,000 2014 2006 237.5p Oct 2009 - Oct 325,000 - 325,000 2016 2010 202.5p Aug 2013 - Aug - 80,000 80,000 2020 The exercise of options under the Unapproved Share Option Schemes is subject tothe satisfaction of objective performance conditions specified by theremuneration committee, which will conform to institutional shareholderguidelines and best practice provisions in force from time to time. Theremuneration committee has not yet set these guidelines for the first schemeand the 2006 scheme. The performance conditions for the 2004 and 2010 scheme,agreed by members on 23 June 2005 and 31 August 2010 respectively, requiresgrowth in net assets over a three year period to exceed the growth of theretail prices index by a scale of percentages.

The 2010 options were valued at £45,000 at date of grant using the Black-Scholes-Merton model with the following assumptions:

Expected volatility 62.80%Expected life 4.00 YearsRisk free rate 1.44%Expected dividends 1.95%Expected volatility was determined by reference to the historical volatility ofthe share price over a period commensurate with the option's expected life. Theexpected life used in the model is based on the risk-averse balance likely toberequired by the option holders. 2010 2010 2009 2009 Weighted Weighted average average Exercise Exercise Number price Number price Outstanding at 1 January 718,000 138.9p 1,113,000 164.4p Granted / (cancelled) 80,000 202.5p (395,000) 210.6pduring year Outstanding at 31 December 798,000 145.2p 718,000 138.9p Exercisable at 31 December 718,000 138.9p 718,000 138.9p26. Non-controlling Interest 2010 2009 £'000 £'000 As at 1 January - - Issue of shares in subsidiary 474 - Share of loss for the year (74) - Exchange adjustment (6) - As at 31 December 394 -The issue of shares in subsidiary relates to the disposal of a 37.5%shareholding in Black Wattle Colliery (pty) Ltd. The total issued share capitalin Black Wattle Colliery (pty) Ltd has been increased from 136 shares to 1000shares at par of R1 (South African Rand) through the following shares issue: * a subscription for 489 ordinary shares at par by Bisichi Mining (Exploration) Limited increasing the number of shares held from 136 ordinary shares to a total of 675 ordinary shares;

* a subscription for 110 ordinary shares at par by Vunani Mining (pty) Ltd;

* a subscription for 265 "A" shares at par by Vunani Mining (pty) Ltd

Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi Mining PLC incorporated in England and Wales.

Vunani Mining (pty) Ltd is a South African Black Economic Empowerment company and minority shareholder in Black Wattle Colliery (pty) Ltd.

The "A" shares will rank pari passu with the ordinary shares save that they will have no dividend rights until such time as the dividends paid by Black Wattle Colliery (pty) Ltd on the ordinary shares subsequent to 30 October 2008 will equate to R832,075,000.

A non-controlling interest of 15% in Black Wattle Colliery (pty) Ltd isrecognised for all profits distributable to the 110 ordinary shares held byVunani Mining (pty) Ltd from the date of issue of the shares (18 October 2010).An additional non-controlling interest will be recognised for all profitsdistributable to the 265 "A" shares held by Vunani Mining (pty) Ltd after suchtime as the profits available for distribution, in Black Wattle Colliery (pty)Ltd, before any payment of dividends after 30 October 2008, exceedsR832,075,000.

27. Related Party Transactions

At 31 During the December year Amounts Costs Cash paid owed Amounts recharged (to) to related owed (to) / by / by party by related related related £000 party party party £000 £000 £000 Related party:

London & Associated Properties 326 - 275

(92) PLC (note (a)) Dragon Retail Properties 1,205 - (72) 72Limited (note (b)) Ezimbokodweni Mining (pty) - (1,203) (287) -Limited (note (c)) As at 31 December 2010 1,531 (1,203) (84) (20) London & Associated Properties 143 - 300 (304)PLC (note (a)) Dragon Retail Properties 1,205 - (40) (265)Limited (note (b)) Ezimbokodweni Mining (pty) - (916) (208) -Limited (note (c)) As at 31 December 2009 1,348 (916) 52 (569)

London & Associated Properties PLC is a substantial shareholder.

Dragon Retail Properties Limited is a joint venture and is treated as a non-current asset investment.

Ezimbokodweni Mining (pty) Limited is a joint venture and is treated as a non-current asset investment.

(a) London & Associated Properties PLC Property management, office premises, general management, accounting and administration services are provided for Bisichi Mining PLC and its UK subsidiaries.

(b) Dragon Retail Properties Limited

Dragon Retail Properties Limited is owned equally by the company and London & Associated Properties PLC.

(c) Ezimbokodweni Mining (pty) Limited

Ezimbokodweni Mining is a prospective coal production company based in South Africa.

Details of key management personnel compensation and interest in share optionsare shown in the Directors' Remuneration Report on pages 24 and 25 under theheadings Directors' remuneration, Pension schemes and incentives and Shareoption schemes which is within the audited part of this report.28. Employees 2010 2009 Number Number

The average weekly numbers of employees of the

group during the year were as follows: Production 257 325 Administration 18 18 275 343 £'000 £'000 Staff costs during the year were as follows: Salaries 5,666 6,462 Social security costs 111 129 Pension costs 254 253 Share based payments 5 (183) 6,036 6,66129. Capital commitments 2010 2009 £'000 £'000 Commitments for capital expenditure approved 146 604 but not contracted for at the year end Share of commitment of capital expenditure in 2,451

2,101

joint venture

30. Head lease commitments and future property lease rentals

Present value of head leases on properties

Minimum Present value lease of Minimum payments lease payments 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Within one year 14 15 14 15 Second to fifth year 56 59 52 55 After five years 1,708 1,978 167 176 1,778 2,052 233 246 Discounting (1,545) (1,806) - -adjustment Present value 233 246 233 246Finance lease liabilities are in respect of leased investment property. Many ofthe leases provide for contingent rents in addition to the rents above whichare a proportion of rental income. Finance lease liabilities are effectivelysecured as the rights to the leased asset revert to the lessor in event ofdefault.The group leases out its investment properties under operating leases. Thefuture aggregate minimum rentals receivable under non-cancellable operatingleases are as follows: 2010 2009 £'000 £'000 Within one year 805 727 Second to fifth year 2,707 2,384 After five years 10,650 9,910 14,162 13,02131. Contingent liabilitiesBank guarantees have been issued by the bankers of Black Wattle Colliery (pty)Limited on behalf of the company to third parties. The guarantees are securedagainst the assets of the company and have been issued in respect of thefollowing: 2010 2009 £'000 £'000 Rail siding 3 - Rehabilitation of mining land 1,732 1,734 Water & electricity 90 78

Company Registration No. 112155

Company balance sheetat 31 December 2009 2010 2009 Notes £'000 £'000 Fixed assets Tangible assets 33 12,138 11,925 Investment in joint ventures 34 846 846 Other investments 34 1,013 1,030 13,997 13,801 Current assets Debtors 35 2,794 654 Bank balances 4,841 3,960 7,635 4,614

Creditors - amounts falling due within one year 36 (2,508) (5,139) Net current assets/(liabilities) 5,127 (525) Total assets less current liabilities 19,124 13,276 Creditors - amounts falling due within one year 36 (5,000) -- medium term bank loan Net assets 14,124 13,276 Capital and reserves Called up share capital 23 1,045 1,045 Revaluation reserve 38 6,183 5,938 Other reserves 38 400 395 Retained earnings 38 6,496 5,898 Shareholders' funds 14,124 13,276

The company financial statements were approved and authorised for issue by the board of directors on 15 April 2011

and signed on its behalf by:A R Heller G J CaseyDirector DirectorCompany accounting policiesfor the year ended 31 December 2010

The following are the main accounting policies of the company:

Accounting convention

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, and in accordance with applicable UK Generally Accepted Accounting Practice.

Dividends received

Dividends are credited to the profit and loss account when received.

Depreciation

Provision for depreciation on tangible fixed assets is made in equal annual instalments to write each item off over its useful life. The rates generally used are:

Motor vehicles 25 - 33 per cent

Office equipment 10 - 33 per cent

Foreign currencies

Monetary assets and liabilities expressed in foreign currencies have been translated at the rates of exchange ruling at the balance sheet date. All exchange differences are taken to the profit and loss account.

Investment properties

The investment property portfolio is included in the financial statements atopen market valuation. An external professional valuation is carried outannually by professional external surveyors. Surpluses and deficits arising onvaluations are taken direct to the revaluation reserve. No depreciation oramortisation is provided in respect of freehold and leasehold investmentproperties. The directors consider that this accounting policy, which is not inaccordance with the Companies Act 2006, results in the accounts giving a trueand fair view. Depreciation or amortisation is only one of many factorsreflected in the valuation and the amount which might otherwise have been showncannot be separately identified or quantified.

Investments

Investments of the company are stated in the balance sheet as fixed assets at cost less provisions for impairment.

Financial Instruments

Bank loans and overdrafts

Bank loans and overdrafts are included in creditors on the company balance sheet net of the unamortised cost of financing.

Interest payable on those facilities is expensed as a finance cost in the period to which it relates.

Interest rate derivatives

The company uses derivative financial instruments to manage the interest raterisk associated with the financing of the group's business. No trading in suchfinancial instruments is undertaken.

Debtors

Debtors do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated recoverable amounts.

Creditors

Creditors are not interest bearing and are stated at their nominal value.

Joint Ventures

Investments in joint ventures, being those entities over whose activities thegroup has joint control as established by contractual agreement, are includedat cost, less impairment.Deferred taxationAs required by FRS 19 "Deferred Tax", full provision is made for deferred taxarising from all timing differences between the recognition of gains and lossesin the financial statements and recognition in the tax computation, except forthose timing differences in respect of which the standard specifies thatdeferred tax should not be recognised. Deferred tax assets and liabilities arecalculated at the tax rates expected to be effective at the time the timingdifferences are expected to reverse.

Leased Assets and Obligations

All leases are "Operating Leases" and the annual rentals are charged to theprofit and loss account on a straight line basis over the lease term. Rent freeperiods or other incentives received for entering into a lease are accountedfor over the period of the lease so as to spread the benefit received over

thelease term.Pensions

The company makes contributions to a money purchase scheme and the costs are charged to the profit and loss account in the period to which they relate.

Share based remuneration

The company operates a share option scheme. The fair value of the share optionscheme is determined at the date of grant. This fair value is then expensed ona straight-line basis over the vesting period, based on an estimate of thenumber of shares that will eventually vest. The fair value of options grantedis calculated using a binomial model or Black-Scholes-Merton model. Details ofthe share options in issue are disclosed in the Directors' Remuneration Reporton pages 24 and 25 under the heading Share option schemes which is within theaudited part of this report.

Notes to the financial statements continued

For the year ended 31 December 2010

32. Dividends

The aggregate amount of dividends comprises:

2010 2009 £'000 £'000

Final dividends in respect of prior year but not 418 366 recognised as liabilities in that year:

The aggregate amount of dividends to be paid and not recognised as liabilities as at year end is £418,000 (2009: £418,000).

33. Tangible fixed assetsInvestment properties Long Motor Office Freehold leasehold vehicles Equipment Total £'000 £'000 £'000 £'000 £'000 Cost or valuation at 1 8,865 3,000 137 49 12,051January 2010 Additions - - - 2 2 Disposals - - - - - Revaluation 245 - - - 245 Cost or valuation at 31 9,110 3,000 137 51 12,298December 2010 At valuation 9,110 3,000 - - 12,110 At cost - - 137 51 188 9,110 3,000 137 51 12,298

Accumulated depreciation - - 88 38 126

at 1 January 2010 Charge for the year - - 29 5 34 Disposals in year - - - - -

Accumulated depreciation - - 117 43 160

at 31 December 2010 Net book value at 31 9,110 3,000 20 8 12,138December 2010 Net book value at 31 8,865 3,000 49 11 11,925December 2009

Details of historical cost of investment properties are shown in note 10.

34. Investments Joint Subsidiaries ventures Other Shares Shares Loans investments Total £'000 £'000 £'000 £'000 £'000 Cost at 1 January 2010 846 111 1,580 300 1,991 Invested during the year - 250 - - 250 Drawn in year - - (267) - (267) Cost at 31 December 2010 846 361 1,313 300 1,974 Provision for impairment As at 1 January - - (678) (283) (961) Impaired during the year - - - - - As at 31 December 2010 - - (678) (283) (961) Net book value at 31 846 361 635 17 1,013December 2010 Net book value at 31 846 111 902 17 1,030December 2009

Other investments comprise £17,000 (2009: £17,000) shares and £nil (2009: £nil) loans.

Investments in subsidiaries are detailed in note 14. In the opinion of thedirectors the aggregate valueof the investment in subsidiaries is not less than the amount shown in thesefinancial statements.35. Debtors 2010 2009 £'000 £'000 Amounts falling due within one year: Amounts due from subsidiary 2,578 527 undertakings Other debtors 110 96

Prepayments and accrued income 106 31

2,794 654 36. Creditors 2010 2009 £'000 £'000 Amounts falling due within one year: Bank loan (secured) - 2,700 Joint venture 1,205 1,165 Current taxation 292 -

Other taxation and social security 48 60

Other creditors 424 276 Accruals and deferred income 539 938 2,508 5,139 Amounts falling due in more than one year: Bank loan (secured) 5,000 -

Bank and other loan instalments by reference to the balance sheet date:

Within one year - 2,700 From one to two years 5,000 - From two to five years - - 5,000 2,700

The bank loan of the company is secured by a charge over freehold and long leasehold properties.

37. Provisions for liabilities

No provision has been made for the approximate taxation liability at 28% (2009: 28%) of £1,229,000 (2009: £1,216,000) which would arise if the investment properties were sold at the stated valuation.

38. Share Capital & Reserves

Share Revaluation Other Retained Shareholders Capital reserve reserve earnings funds £'000 £'000 £'000 £'000 £'000 Balance at 1 January 1,045 5,938 395 5,898 13,2762010 Dividend paid - - - (418) (418) Revaluation of - 245 - - 245investment property Share options - - 5 - 5 Retained profit for - - - 1,016 1,016the year Balance at 31 1,045 6,183 400 6,496 14,124December 2010

A profit and loss account for Bisichi Mining PLC has not been presented as permitted by Section 408(2) of the Companies Act 2006. The profit for the financial year, before dividends, was £1,016,000 (2009: £938,000).

Details of share capital are set out in note 23 and details of the shareoptions are shown in the Directors' Remuneration Report on page 25 under theheading Share option schemes which is within the audited part of this reportand note 25.

39. Related party transactions

At 31 During the year December Costs Cash paid Amounts recharged (to) owed (to) / by / by by related related related party party party £000 £000 £000 Related party:

Black Wattle Colliery (pty) Ltd (2,776) (2,501)

- (note (a))

Ninghi Marketing Limited (note (102) -

-(b)) As at 31 December 2010 (2,878) (2,501) - Black Wattle Colliery (pty) Ltd (739) (1,443) 6,373 (note (a))

Ninghi Marketing Limited (note (102) -

-(b)) As at 31 December 2009 (841) (1,443) 6,373

(a) Black Wattle Colliery (pty) Ltd Black Wattle Colliery (pty) Ltd is a coal mining company based in South Africa.

(b) Ninghi Marketing Limited

Ninghi Marketing Limited is a dormant coal marketing company incorporated in England & Wales.

In addition to the above, the company has issued a company guarantee of R17,000,000 (2009: nil) (South African Rand) to the bankers of Black Wattle Colliery (pty) Ltd in order to cover bank guarantees issued to third parties in respect of the rehabilitation of mining land.

Under Financial Reporting Standard 8 Related Party Disclosures, the Company hastaken advantage of the exemption from disclosing transactions with other whollyowned Group companies.

Details of other related party transactions are given in note 27 of the Group financial statements.