Bellzone Mining Regulatory News (BZM)

26 September 2017

Bellzone Mining plc ("Bellzone" or "the Company")

Unaudited interim results for the six months ended 30 June 2017 

Bellzone Mining plc (AIM: BZM) announces its unaudited interim results for the six months ended 30 June 2017.

Key Highlights

· Bellzone's principal assets are the iron ore and nickel laterite JORC-compliant resources and reserves at Kalia in The Republic of Guinea, West Africa. Total iron ore resources are 6.16bt and nickel ore resources 79.3mt.

· Iron ore prices remain volatile in 2017 but are showing signs of settling into a medium-term average meaningfully above the theoretical 2013 BFS-assessed FOB Conakry all-in production cost of $34.39/t for 58% iron fines.

· Updating oil price assumptions in the 2013 BFS model results in a current expected all-in cost of $28.71/t for our Kalia KP1 project (7mtpa of 58% Fe fines over a life of mine of 10 years, capable of extension by further JORC Reserve drilling).

· Main iron ore price drivers include:

o Global supply and demand in iron ore have been moving closer to balance, with iron ore prices touching their highest levels for 2½ years;

o The drive to reduce Chinese airborne pollution has resulted in a demand squeeze for +62% "higher quality" iron ore, exacerbating the price premium of +62% ore over ores of lower grade. This is perceived to be the start of a long-term global change, the gradual result of which is expected to be much greater demand for the +65% pellets and sinter feed capable of being delivered by magnetite mines, as high grade oxide (DSO) mines are exhausted over time. Kalia holds 4.72bt of high quality magnetite as well as 913mt of oxide iron ore.

o The ability of the large Australian producers of iron ore to make easy productivity gains by de-bottlenecking existing mines has passed and new mines are now sought to maintain supply - for example Rio Tinto's new Silvergrass mine, opened in August 2017, is expected to produce 10mtpa;

o Of the two largest current iron ore mines in development or ramp-up globally, Hancock Prospecting's 55mtpa Roy Hill mine has recently been reported as reaching a production rate of 53.4mtpa, near capacity; and Vale's 90mtpa S11D Carajas extension is half-way through its ramp-up, scheduled to reach capacity in 2019 or 2020;

o Despite predictions of so-called "peak iron ore" or "peak steel" being reached, global seaborne demand for iron ore has continued to grow over the period 2009-2016 at a compound rate of 6.7% per annum (5.9% 2013-2016) and this growth shows little or no sign of abating. There are, to the knowledge of Bellzone, no new iron ore mines of the scale of Roy Hill or S11D scheduled for development in the foreseeable future and the absolute increase in seaborne traded iron ore tonnes in 2016 alone was 48mt.

· Markets for steel and steel alloy materials such as nickel have also strengthened, which has positive pricing effects on our potential ferronickel project. There is evidence this is not a short-term phenomenon:

o Chinese industrial modernisation in iron and steel production and, in particular, next stage environmental controls are being properly implemented in China's base metals supply chain;

o The stainless steel market is being propelled by wider usage in developing markets, particularly China, causing demand side strength in nickel. Nickel usage is also expanding rapidly in Nickel-Graphite (Lithium ion) batteries used in electric vehicles;

o Consistently negative approach of Filipino Government to open-pit mining of nickel ores and slow take-up of low grade nickel ore export licence usage in Indonesia have caused weakness in nickel supply. Indonesia and The Philippines are the world's largest producers of nickel ores.

· The results of the feasibility study work on the Kalia Ferronickel project undertaken to date, announced in August 2016, showed a conservative base case break-even nickel price of $10,617/t vs the current nickel price of $10,516/t (as at 25th September).

· In June 2017, Bellzone announced it had reached provisional agreement with the Guinean Government on the addendum to its 2010 Mining Convention for Kalia. A subsequent announcement was made on 14 September 2017 which stated that no formal signing date had yet been determined but the Company understands that there are no significant issues preventing signing. This remains the situation at this time.

· Following signature of the Addendum, it is expected that the feasibility study work on the Kalia Ferronickel Project will recommence after the worst of the annual rainy season in mid-Q4 2017 with the aim of completion by mid-2018, potential financing and construction in H2 2018 and thereby the potential for production to commence in 1H 2019.

· In parallel, Bellzone will continue to monitor developments in the iron ore market and will seek to update the 2013 BFS if market conditions remain positive, enabling the mine to be financed.

Financing activities

Bellzone announced a new US$4.0m loan facility with Hudson Global Group ("Hudson") in December 2016 to finance its operations through FY2017. Strict cost discipline (detailed below), resulted in a delayed initial draw down of US$0.8m in June 2017, and as Bellzone continues to run ahead of budgeted costs, no further draw downs have yet been necessary.

To remove any potential short-term financing overhang, Bellzone agreed first with CS International (S) Pte Limited in July 2017 and then with Hudson in August 2017 to extend loan maturity dates of all three outstanding loans to 31 December 2018.

Costs

The company's overall operating costs decreased by 36.2% compared to 1H2016. This was made possible with the full cooperation of our Guinea staff as the technical leave programme was extended for a further 6 months. Despite higher absolute interest costs resulting from the additional Hudson loan drawdown, the Company's loss for the period decreased by US$1.4mil compared with 1H2016.

We expect further cost savings in 2H2017 arising from ongoing structural staffing changes in Guinea as well as from the agreement of expatriate and non-Guinea staff to accept salary reductions, coupled with lower Director fees.

Enquiries:

Bellzone Mining plc

Simon Edwards +44 (0) 7767 492 712

WH Ireland Limited

Nominated Adviser and Broker

James Joyce / James Bavister +44 (0) 20 7220 1666 

http://www.bellzone.com

Condensed Consolidated Statement of Financial Position

At 30 June 2017

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2017

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2017

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2017

The above consolidated cash flow statement should be read in conjunction with the accompanying notes.

Notes to The Unaudited Interim Condensed Consolidated Financial Statements For the six months ended 30 June 2017

1. Reporting Entity

The condensed consolidated interim financial statements of Bellzone Mining plc ("the Company") for the six months ended 30 June 2016 were issued on 26 September 2017 in accordance with the authority of a resolution of the board.

Bellzone Mining plc is a public company listed on the AIM Market of the London Stock Exchange, and incorporated and registered in Jersey, Channel Islands. The Company's registered office is located at Standard Bank House, 47-49 La Motte Street, St Helier, Jersey, JE2 4SZ.

The condensed consolidated financial statements of the Company as at and for the six months period ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the "Group").

The nature of the principal activities of the Group is the exploration and development of resources, primarily at its flagship Kalia Iron Ore and Nickel Project in Guinea, West Africa. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied unless otherwise stated.

2. Basis of preparation

a. Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union.

b. Early adoption of standards

The Group has not early-adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

c. Basis of measurement

The financial statements have been prepared on the historical cost basis except where indicated otherwise in the notes to the interim condensed consolidated financial statements.

d. Functional and presentation currency

The functional currency of the Company and all of its subsidiaries is the United States Dollar ("$"), which is the currency of the primary economic environment in which the entities operate. All amounts are expressed in $ and all values are rounded to the nearest thousand ($'000) unless otherwise stated.

e. Going concern

The nature of the Group's current activities does not provide the Group with production or trading revenues. In June 2017, the Group announced the conclusion of negotiations with the Guinea Government on an Addendum to its Kalia mining convention which would provide the necessary framework for the development of the proposed ferronickel project and the overall Kalia iron ore project.

Following the expected amendment to the Kalia mining convention, the Group will continue feasibility study work on its proposed ferronickel project within the Kalia licence area and has set aside sufficient funding to complete this study which is expected to be completed in the first half of 2018. However, our ability to complete this study is also dependent on our majority shareholder Hudson releasing the remaining funds from its US$4.0 million facility, which is at Hudson's discretion and could be impacted if agreement is not reached on the amendment to the Kalia convention.

Given difficult market conditions, Bellzone remains wholly reliant on its majority shareholder, Hudson. China Sonangol (a related company of Hudson) provided loan financing to the Company from August 2014 to the end of 2015, totalling a principal amount of US$10.2 million. Hudson provided a second loan in the principal amount of US$6.5 million to finance the Company through 2016, with the final drawdown on this loan received in March 2017. The Company has drawn these loans fully, amounting to US$16.7 million and the total principal and accrued interest for both loans was US$19.6 million as at 30 June 2017. A further loan of US$4.0 million was agreed with Hudson to enable the Company to continue operating through 2017 and the first draw down on this loan in the amount of US$800,000 was completed on 6 June 2017. It is at Hudson's discretion to allow further drawdowns under this facility. Due to successful cost management which has obviated the need to draw down on this third loan earlier, this most recent loan amount is expected to be sufficient to meet Bellzone's working capital needs up to June 2018, subject to assumptions necessarily made in respect of the group's cashflow forecast.

All three loan agreements have the same repayment date for principal and accrued interest of 31 December 2018. If no additional funds are raised before such time to allow Bellzone to discharge its loan obligations, Bellzone, China Sonangol and Hudson would need to reach agreement to defer repayment to avoid Bellzone defaulting.

A positive outcome on the ferronickel feasibility study is uncertain and in any event additional funding is likely to be required to advance the project to a bankable feasibility stage. Furthermore, to commence development, significant funding would be required from external parties which is not committed at the date of this interim statement.

The current cash reserves and shareholder loans would be sufficient to see the Group's activities through to the end of June 2018, however drawdowns on the shareholder loan facility are at the discretion of the shareholder. The Group will therefore require drawdowns to be made available and further financing beyond 30 June 2018 to enable it to continue to meet its liabilities as and when they fall due.

The Group continues to evaluate its strategy and its ability to secure funding that would enable it both to continue operations for the short term and in the long term to develop the Kalia licence area. However, at present there are no committed facilities which would enable Bellzone to continue as a going concern for a period of 12 months from the date of this interim report nor provide certainty that the ferronickel feasibility study can be completed. In the event of Hudson withdrawing support, the Directors' view is that additional funding may be sourced from one or more of the following:

• placement of further securities;

• the sale of assets; and/or

• funding in exchange for an interest in the Group's projects or future production from the projects.

Whilst the above funding sources are considered available to the Group, there are currently no advanced plans to execute any of these strategies.

Hudson has confirmed in a letter to the Directors dated 29 June 2017 that its current intention is to continue making funds available to support the Group's working capital requirements for a period of 12 months from the date of signing of the financial statements for the period ending 31 December 2016, on a basis that allows Hudson to change that intention. On this basis and given Hudson's past support, the Directors believe they have a reasonable expectation that Hudson will continue to provide on-going funding to Bellzone, as well as consider favourably postponing the repayment date for all of its existing loans.

Taking the above factors into account, the Directors believe it is reasonable to expect that the Group will obtain sufficient funding from one or more of the aforementioned funding sources and have continued to adopt the going concern basis of accounting in preparing the Consolidated Financial Statements. However, the Directors wish to highlight that there is a material uncertainty in relation to the continuing support from Hudson, in particular the availability of committed short-term funding, and reaching an agreement for the deferral of the repayment date for its loan facilities.

As the Directors have concluded that there is a material uncertainty that may cast significant doubt on the ability of Bellzone to continue as a going concern beyond a period of 12 months from the date of this report, there is a risk that the Group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.

3. Mineral properties in the exploration and evaluation phase

The above asset values relate to the mineral properties in the exploration and evaluation phase and are based on the cost of acquiring 100% of the companies holding the Kalia and Faranah exploration permits.

The Agreement with China International Fund ("CIF") of 2 August 2010 required certain actions to be fulfilled for the transfer of 50% of the defined Kalia II area (part of the Kalia permit) and 100% of the Faranah permit to be transferred to CIF. The prerequisite actions have not occurred and the transfers have not taken place. The permitted areas remain 100% owned by Bellzone through the relevant subsidiaries. In addition to the costs of acquiring the exploration permits through the acquisition of the subsidiaries, the statutory fees paid on the issue of the Mining Concessions (Permits) for the Kalia and Faranah areas are included.

4. Issued capital

The Company is a no par value company. No share issued by the Company shall have a par value.

There is no limit on the number of shares which may be issued by the Company, subject to shareholder approval, and if the share capital structure of the Company is at any time divided into separate classes of share there is no limit on the number of shares of any class which may be issued by the Company.

Subject to the provisions of the Companies (Jersey) Law 1991 (as amended) (the "Companies Law") and the Articles of the Company and without prejudice to any rights attached to any existing shares or class of shares, any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Board shall determine.

The Company may, pursuant to the Companies Law, issue fractions of shares and any such fractional shares shall rank pari passu in all respects with other shares of the same class issued by the Company.

The Company shall maintain a stated capital account in accordance with the Companies Law for each class of issued share. A stated capital account may be expressed in any currency determined by the Board from time to time.

Ordinary shares have no par value, carry one vote per share and carry the right to dividends.

The Group is in a project development stage and did not declare or pay any dividends during the period (2016: nil).

5. RESERVES

6. Events occurring after the reporting period

There were no significant events occurring after the balance sheet date and the date of this report.

7. Reconciliation of loss after income tax to net cash OUTflow from operating activities