Central Asia Metals Regulatory News (CAML)

16 April 2014

CENTRAL ASIA METALS PLC

("CAML" or the "Company" or "Group")

2013 Full Year Results

Central Asia Metals plc (AIM:CAML), a copper producing company, today announces its full year results for the 12 months ended 31 December 2013.

Financial: Results enhanced by acquisition of the remaining 40% ownership in Kounrad Copper Company

· Gross revenue of $54.1 million (increase of 76%, 2012: $30.7 million)

· Group EBITDA of $32.4 million (increase of 102 %, 2012: $16.0 million)

· Operating profit of $27.9 million (increase of 86%, 2012: $15.0 million)

· $27.8 million gain on fair value uplift as a result of the 40% acquisition of KCC on 21 October 2013

· $14.1 million loss from discontinued operations (Mongolia)

· Group profit for 2013 of $34.5 million (2012: $9.8 million)

· Kounrad operating costs remain competitive and in the lower quartile of the cost curve

− C1 cash cost of $0.73/lb (2012: $0.71/lb)

− Fully inclusive cost in Kazakhstan $1.13/lb (2012: $0.98/lb)

· Cash balances of $44.5 million as at 31 December 2013 (2012: $33.9 million) and no outstanding debt

· Proposed final dividend of 5 pence per share making a total for 2013 of 9 pence per share (2012: 7 pence)

· $3.2 million for acquisition of 50% share in Copper Bay project in Chile

Operational: First full year of production exceeded target

· 2013 was the first full year of production at Kounrad with the plant producing 10,509 tonnes, exceeding target by just over 5%

· 10,689 tonnes of copper cathode sold at LME A grade quality

· Zero lost time injuries reported in 2013

· JORC compliant resources for Kounrad demonstrate over 600kt contained copper

2014 Outlook: Increased production and assessing opportunities for growth

· 2014 production target of 11,000 tonnes, Q1 2014 production 1,905 tonnes (13.7% YoY increase)

· Focus on cash costs to remain in lower quartile of cost curve at Kounrad

· Commitment to expansion of boiler house capacity at SX-EW plant

· Complete Kounrad Transaction by end H1 2014

· Continue appraisal of opportunities to grow the business and create further shareholder value in the region and beyond

Nick Clarke, Chief Executive Officer of CAML, commented:

"We are pleased to announce robust financial results for the period ending 31 December 2013, reflecting CAML's strong operational and financial performance throughout the year. Not only has our first full year of production at the Kounrad plant been a great success but we have also maintained our position within the lowest quartile of cash cost producers globally. We exceeded our full year production target by just over 5%, with production of 10,509 tonnes of copper cathode and have set ourselves an increased production target of 11,000 tonnes for 2014.

The proposed final dividend of 5 pence is evidence of our commitment to provide a return to our shareholders and takes the full year dividend to 9 pence. We have returned a total of $12.6 million in the year which represents 23% of attributable revenue. In addition, our shareholders will benefit from further growth in value as we assess opportunities to grow the business both in the Central Asian region and globally."

Analyst presentation conference call

There will be an analyst presentation and conference call on 16 April 2014 at 09:30 (BST). The call can be accessed by dialling +44 (0)20 8515 2301 and quoting 'Central Asia Metals Results Call'. The results presentation will available at http://www.centralasiametals.com/ and following the presentation a replay facility will be available.

Enquiries:

Central Asia Metals plc Nick Clarke +44 (0) 20 7898 9001

Nigel Robinson

Peel Hunt LLP Matthew Armitt +44 (0)20 7418 8900

Ross Allister

Mirabaud Securities LLP Peter Krens +44 (0)20 7878 3362

Bell Pottinger Mark Antelme +44 (0)20 7861 3894

  Lorna Cobbett +44 (0)20 7861 3883

Notes to Editors

Central Asia Metals plc ("CAML" or the "Company") is an AIM-listed UK company headquartered in London. CAML is a copper producing company with its primary asset being the Kounrad copper recovery plant in Kazakhstan. The Company also acquired a 50% stake in the Copper Bay project in Chile in 2013.

The Company announced its maiden dividend in December 2012.

Chairman's Statement

Dear Shareholders

Key achievements

The year ending 31 December 2013 has been another successful period in the development of the Company. We have delivered a strong operational and financial performance and achieved a number of significant corporate and operational milestones.

2013 was the Company's first 12-month reporting period of full production at the Kounrad plant and we were pleased to have produced 10,509 tonnes of copper which exceeded our production target by over 5%. Further, all of the copper sold through our marketing agreement with Traxys was LME Grade A quality.

We have maintained focus throughout the year on the low cost nature of our operations, maintaining our position within the lowest quartile of cash cost producers globally.

The combination of our operational strength at Kounrad and the resilience of the copper price throughout 2013, enabled the Company to build up significant cash balances which totalled $44.5 million as at 31 December 2013.

Corporate Governance

Since the IPO in September 2010, the Company has sought to build on the governance structures and internal control procedures in place at that time. The Company is committed to upholding the highest levels of Corporate Governance and the Board is well aware that it operates in a challenging business environment.

We work hard to ensure that the appropriate level of business controls are maintained across the Group's operations. A combination of experienced management and regular communications and training has led to further improvements across the Group since the IPO.

In December 2013, Mr Kenges Rakishev was appointed to the CAML Board as a Non-Executive Director. We are delighted to welcome Kenges to the Board and believe that his knowledge of the business environment in Kazakhstan and his entrepreneurial experience will prove of great value to the Company in future years.

Commitments to a sustainable business

Within Kazakhstan we feel we have a positive role to play as we develop our business. The Company is proud to contribute to the wider Kazakhstan economy through our business operations and plan to be there for the long term. The economic benefits generated for our local communities are significant both in terms of the employment opportunities and our social contributions.

As a responsible operator, we are also fully aware of our obligations to the environment and are committed to the sound management of our operating area in full compliance with the applicable environmental regulations and laws of Kazakhstan.

Strategy and Growth

Since listing, the strategy and direction of the business has been clear and focused on the delivery of the Kounrad project. The Board is extremely proud of what has been achieved by the management and staff during this period and the Company can justifiably say that it has delivered on its key promises made at the time of the IPO.

We are now entering an exciting period in the Company's development and growth and are well placed to take advantage of opportunities that may arise in the sector at this stage of the economic cycle. The Company aims to complete the Kounrad Transaction in the first half of 2014, and to subsequently update shareholders on its plans to expand copper production on site. The details and timing of this aspect of the Company's growth strategy will be announced during the course of 2014 as events unfold.

In addition to consolidating our business in Kazakhstan, the Company will be looking to identify attractive opportunities to expand its portfolio of assets in Kazakhstan and elsewhere.

Returns to Shareholders

Our strong operational performance in 2013, has enabled the Company to return funds to shareholders through its dividend policy which was announced in December 2012. Having raised $60 million at IPO in September 2010, the Company has already returned $21.6 million to shareholders through a combination of dividends and share buybacks.

The CAML Board will propose a final dividend for 2013 of 5 pence per ordinary share taking the total dividend for 2013 to 9 pence per ordinary share. This will increase the amount returned to existing shareholders since the commencement of production at Kounrad to $28.6 million, or 47.6% of the amount raised at the IPO.

It is the intention of the Board that the Group's dividend policy, which is financed from the attributable revenue earned at Kounrad, will remain in place as we look to build on the Company's activities and create further shareholder value.

Outlook

As a copper producer the Company's fortunes are inextricably linked to the commodity price cycle over which the Board has no control. However, as a low cost producer, the Board is confident that the Company will be able to operate profitably even if the copper price should fall significantly below current levels.

Nigel Hurst-BrownChairman

Chief Executive Officer's Statement

Strong Operational Performance

The Company's first full year of production at the Kounrad Project has been a great success. We produced 10,509 tonnes of copper cathode and surpassed our production target by 5% whilst maintaining a competitive cash cost base. During 2013, our C1 cash cost of production was $0.73/lb (2012: $0.71/lb) and fully absorbed costs within Kazakhstan were $1.13/lb (2012: $0.98/lb).

Since the Company's IPO in September 2010, management has focused the Company's efforts towards early cash flowing projects and away from exploration. The Kounrad SX-EW project in Kazakhstan was identified as the project capable of delivering on this objective and now, just three and a half years later, the Company has a world-class facility that consistently produces high-quality copper cathode at industry competitive cash costs.

The company took a decision pre-IPO to use the services of a Chinese engineering group, BGRIMM, to undertake the design and costing for our Kounrad SX-EW plant which resulted in significant capital cost savings. The design of the plant along with the dedication and professionalism of the Group's 217 employees at site ensured that the plant ran efficiently and profitably.

The generation of $76m of project revenue at Kounrad during 2013, combined with the low costs of production has resulted in healthy cashflows for the Group enabling us to instigate and maintain an aggressive dividend policy. The full-year dividend proposed for 2013 of 9 pence per share amounts to $12.6 million and represents 23% of the Group's attributable revenue for the year.

Capacity expansion at Kounrad

Having successfully met our 2013 production target we have already committed to some minor expansion at the SX- EW plant in advance of completing the ownership transaction with Mr Kenges Rakishev. In January 2014, we announced that our targeted copper production for the year at Kounrad would increase to 11,000 tonnes. The increased capacity will be made possible due to the expansion of the boiler house with the installation of additional coal-fired boilers taking the boiler house capacity to 14Mw. In turn, this will allow increased volumes of copper bearing solution to be processed during winter operations.

Additional and more significant capacity expansion at Kounrad is also being evaluated and management thinking is well advanced with regard to the various options available at the site given its size and characteristics. Management believes that the most efficient means by which the resource base can be exploited over the remaining life of the licence is an expansion of the existing plant. This appears to offer the best value for shareholders whilst managing the risks associated with expanding the leaching process to the western dumps.

Further analysis and preliminary engineering design work with BGRIMM and local design institutes is planned for early 2014. The CAML Board will not make a definitive decision on the expansion plans until the transaction with Mr Kenges Rakishev is completed.

Corporate and Social Responsibility

Management is fully committed to adopting the highest possible standards of Corporate and Social Responsibility and in line with this commitment, in July 2013, I was delighted to appoint a hydrogeologist and environmental engineer, Nick Shirley, as CSR Director to lead the Kounrad Health and Safety and environmental team.

The health and safety of our employees and contractors is our number one priority and I am pleased to report that we have had no lost-time injuries during the period. Indeed, since the commencement of construction back in July 2010 we can report in excess of 1.6m man-hours have been worked without a lost-time injury.

Throughout 2013, we continued to build on the positive relations we have developed with the local community and stakeholders. We place great importance on such relationships and during the year we contributed over $178,000 towards regional area local causes. We also provided assistance to a number of community development programmes with the focus being on health, welfare and education.

Finally, we have placed particular emphasis during 2013 on raising the environmental awareness of all our staff throughout the Company through specialist training programmes. The aim of the programmes is to ensure all staff are aware of the environmental standards and requirements of the Company.

Kounrad Ownership

As reported last year, the transaction to amalgamate 100% ownership of the Kounrad project within the Group has been going through due process with the Kazakhstan authorities since early 2012. This remains the case as at 31 December 2013, although, as announced on 27 June 2013, the nature of the transaction was renegotiated during the year with Mr Kenges Rakishev.

Significantly, and as a consequence of the renegotiated transaction, the transfer of the 40% interest in Kounrad Copper Company LLP was registered on 21 October 2013. This was a notable milestone for the Company, as this entity owns the SX-EW copper plant which is responsible for the production and delivery of the copper cathodes and is the key revenue generator for the overall business.

On conclusion of this part of the overall transaction, and in accordance with the contractual arrangements, Mr Kenges Rakishev was duly appointed a Non-Executive Director to the CAML Board in December 2013.

The Company will endeavour to complete the final part of the transaction, the transfer of the subsoil use contract to our subsidiary company, as quickly as possible through the help of Mr Kenges Rakishev and our locally based management team. We remain confident that it will be completed during the first half of 2014.

More detail on the transaction is set out below.

Copper Bay Limited

The Company made its first investment outside of the Central Asia region during 2013 with the investment of $3.2 million for a 50% shareholding in Copper Bay Limited. The funds will be used to complete a pre -feasibility study on the copper tailings project at Chañaral Bay, Chile.

Management believe that the Chañaral Bay project has merit and we look forward to working with the Copper Bay management team in taking it to the next phase. The Company has the option to invest a further $3 million to increase its shareholding to 75% in Copper Bay Limited. It is currently envisaged that this further investment would be used to complete a definitive feasibility study on the project.

Mongolia

The Company's Mongolian assets were not progressed during the year. Efforts to sell the Ereen and Handgait projects were unsuccessful, however we continue to look to dispose of these projects. Our application for a mining permit at the Alag Bayan exploration project was not successful and as a result our exploration licence expired.

Consequently, management took the decision to close down our Mongolian operations and accordingly incurred a write down on the asset values of $12.9 million. As at 31 December 2013, two of the subsidiaries, New CAML Mongolia LLC and Mongolian Silver Mountain LLC, had been sold locally for nil consideration and a third, Bayanresources LLC was close to finalisation, also for nil consolidation.

The Ereen and Handgait projects remain available for sale and management hope to complete this process during 2014.

Outlook

The Company's primary objective for 2014 is to produce 11,000 tonnes of copper at Kounrad and remain in the lowest quartile of the cash cost curve. Completion of the ownership transaction with Mr Kenges Rakishev remains a key objective for the first half of the year and this will then enable the Company to finalise its expansion plans for the Kounrad SX-EW project.

Outside of Kazakhstan, we will look for other opportunities to grow the business. We continue to evaluate other investment and acquisition opportunities worldwide for the Company which would add value to the shareholders and strengthen the Group's asset portfolio.

I look forward to an exciting 2014 and would like to take this opportunity to thank all the staff for their hard work and dedication in making 2013 such a successful year for the Company.

Nick ClarkeChief Executive Officer

Kounrad Ownership

THE KOUNRAD TRANSACTION

· September 2007, the Group awarded the Subsoil Use Contract (SUC) to develop the Kounrad Project

· SUC historically owned jointly on a 60:40 basis between Sary Kazna LLP ("SK"), a 100% owned CAML subsidiary, and SEC Sary Arka ("SA"), a Kazakhstan government organisation

· Kounrad Copper Company LLP ("KCC") incorporated in October 2008 to build and operate the SX-EW plant and owned on a 60:40 basis between the Group and SA

Changes in Ownership Structure - Initial deal with the SAT Group - January 2012

· January 2012, SA sells its 40% share in the Kounrad Project to the SAT Group ("SAT"), based in Kazakhstan

· January 2012, CAML agrees to purchase the 40% share from SAT for a consideration of 8,616,593 ordinary shares in the Company

Revised deal with Mr Kenges Rakishev - June 2013 - the "Kounrad Transaction"

During the early part of 2013, it was becoming clear to CAML management that the above deal with the SAT Group was taking longer to conclude than had been anticipated. A meeting was convened with the major shareholder and effective owner of the SAT Group, Mr Kenges Rakishev ("KR") in March 2013. The purpose of the meeting was to understand where the possible problems and delays were originating from and what could be done to expedite the process.

The outcome of the meeting was a revised deal whereby KR personally agreed to oversee the completion of the deal in exchange for an enhanced ownership in the Company of 20% post completion of the transaction. After careful consideration and deliberation, the CAML Board decided to accept the offer from KR and on 27 June 2013 the Company announced a new Framework Agreement (the "Agreement") for the acquisition of the remaining 40% of the Kounrad Project. The Agreement superseded the previous arrangements with SAT.

The Agreement will result in CAML obtaining control over the Kounrad Project in two transactions:

· The first transaction ("KCC Transaction") will be effected by the transfer of the remaining 40% share capital of KCC from SAT to KR, followed by a subsequent transfer to CAML's wholly owned subsidiary CAML Kazakhstan BV ("CAML BV")

· The second transaction ("SUC Transaction") will be effected by the transfer of the remaining 40% economic interest in the SUC from SAT, once it acquired it from SA, to KR, followed by a subsequent transfer to CAML's wholly owned subsidiary SK

· The two elements of the deal together being referred to as the "Kounrad Transaction". Both parts are required to be completed for any consideration to be paid

· In March 2014, the long stop date, namely the date by which both parties committed to complete all aspects of the deal, was extended by mutual agreement to 30 June 2014

The agreed purchase consideration consists of 21,211,751 Ordinary Shares in the capital of the Company ("CAML Shares") and an entitlement to a cash payment in lieu of any benefits to which KR might have been entitled to had the CAML Shares been issued to KR on the transfer of the KCC interest to CAML BV, rather than on completion.

The CAML Shares will be allocated in two tranches, with one tranche of 15,336,096 Ordinary Shares (72.3% of the CAML Shares) for the transfer of the 40% share capital of KCC to CAML BV (the "CAML Shares 1"). The remaining 5,875,655 Ordinary Shares (27.7% of the CAML Shares) for the transfer of the 40% economic interest in the SUC to SK (the "CAML Shares 2").

As part of the Agreement, KR was to be appointed to the CAML Board and this was duly completed on 9 December 2013.

Status of ownership changes as at 31 December 2013

· The KCC transfer to the Group was registered on the 21 October 2013

· The SUC Transaction remains outstanding as at the year end, pending receipt of the relevant consent and waiver of the pre-emptive rights of the government of the Republic of Kazakhstan

The accounting treatment for the Kounrad Transaction is detailed in note 20 to the accounts under Business Combinations.

Financial Review

Overview

The Company has reported another strong set of financial results on the basis of its operational performance at Kounrad and the associated low costs of production at this project. The resulting cashflows have enabled the Company to return $19.7 million in dividends to shareholders during 2013 as well as strengthen our cash resources.

The year ending 31 December 2013 represented the Company's first complete 12 months of production at the Kounrad SX-EW project having commenced production of copper cathodes on 30 April 2012.

Further, on 21 October 2013, the ownership of Kounrad Copper Company LLP increased from 60% to 100%. Consequently, the results for 2013 comprise only 60% of the revenues and costs for the first nine months of the year but 100% for the final three months of the year.

The accounting treatment for the business combination resulting from the acquisition of the additional 40% share in KCC resulted in an uplift to the asset values of $46.4 million and an exceptional gain in the Income Statement of $27.8 million.

The impact of the above two events make comparisons difficult from the annually reported numbers in several of the notes to the accounts. A more meaningful analysis of the reported revenues and costs can be obtained in the table below Financial Performance - Group vs Kounrad Project.

Details of the business combination and accounting treatment are contained in note 20.

Income Statement

The Group operating profit for the 12 month period was $27.9 million (2012: $15.0 million).

Profit for the year from continuing operations increased significantly to $48.6 million (2012: $10.3 million), but after allowing for the one off exceptional gain associated with the acquisition of the additional 40% in KCC of $27.8 million, the profit is a more comparable $20.8 million (2012: $10.3 million). This is still more than a 100% increase year on year.

During the year, the Group decided to write down the value of all its Mongolian operations due to the protracted nature of its efforts to sell the Ereen and Handgait assets and the unsuccessful application for a mining licence at Alag Bayan in the Southern Gobi.

Management reviewed the carrying value of these assets and recognised an overall impairment loss of $12.9 million (2012: nil).

The Group profit for the year after tax of $34.5 million (2012: $9.8 million) resulted in earnings per share of 38.89 cents (2012: 11.42 cents) or 37.36 cents (2012: 11.03 cents) on a fully diluted basis.

Revenue

10,500 tonnes of copper cathode were sold by Traxys as part of the Company's off-take arrangements at Kounrad and a further 189 tonnes were sold locally. The Company achieved an average selling price of $7,114 (2012: $7,995) per tonne and this generated reported revenues for the Group of $54.1 million (2012: $30.7 million).

Revenues at the Kounrad Project level, assuming 100% ownership throughout the 12 month period, were $76.0 million (2012: $51.1 million).

The Company has an offtake arrangement with Traxys to sell 90% of its product through to 31 December 2015. As part of this arrangement, Traxys takes the goods at the SX- EW plant at Kounrad and is then responsible for transporting the goods to the end customer.

The costs of marketing, distribution and selling associated with this arrangement are borne by the Company and during 2013 a fixed fee of $350 per tonne of copper shipped was negotiated with Traxys. This amount was based on the actual costs incurred during the first eight months of the arrangement in 2012 following the commencement of production in late April 2012. During 2012, the Group reimbursed Traxys for such costs directly.

As a consequence of the change in approach between 2012 and 2013, the Group has reported both a gross revenue and net revenue line for 2013 which reflects the offset of the fixed fee from the price of the copper achieved.

Managing the cost base

Cost of sales

The cost of sales for the period was $13.8 million (2012: $5.8 million) which included an additional $1.6 million of depreciation and charges associated with the acquisition of the 40% interest of KCC.

Financial Performance - Group vs Kounrad Project*

* See note 5.

The table excludes all costs associated with the pilot plant which is no longer operated.

The costs related to the physical production of copper cathodes are the production labour, reagents and electricity, plus any other SX- EW site related cost. These costs amounted to $6.1 million (2012: $2.7 million).

Mineral Extraction Tax is charged by the Kazakhstan authorities at the rate of 5.7% on the value of the metal recovered and during the year this amounted to a further cost of $3.1 million (2012: $1.8 million).

Distribution and selling costs

The major portion of the sales and distribution costs consist of the fees paid to Traxys as part of the offtake agreements as noted above. During 2013 the Company incurred costs of $2.6 million (2012: $1.1 million) associated with these arrangements with Traxys. Local sales and distribution costs on site were $0.4 million (2012: $0.2 million) for the period.

Administrative expenses

The Group employed 234 people on average during the year (2012: 259) with the majority employed on site at Kounrad. The Group employs 40 (2012: 37) staff at Kounrad to oversee the technical and commercial management of the operations in Kazakhstan together with a small office headquarters in London of 7 (2012: 7) staff.

Group overheads for the year are $9.6 million (2012: $8.5 million) reflecting the growth of the Group during the period.

Depreciation and Amortisation

During the year depreciation and amortisation charges amounted to $4.6 million (2012: $0.9 million). The large increase is due to the impact of a full year charge in 2013 of $3.0 million compared to only 6 months in 2012.

A further charge of $1.6 million was incurred in the period 3 months of 2013 as a result of the acquisition of KCC and the fair value uplift.

Impact on unit costs of production

Given the changes in the business over the past two years, it is difficult to ascertain the impact on the Group's productivity and unit cost measures from the reported numbers above. The table above reconciles the reported numbers from the Group accounts with those reported internally at project level.

The Group's C1 cash costs of production remained competitive throughout the year at $1,600 per tonne (2012: $1,561) or $0.73/lb (2012: $0.71/lb). This represents a 2.5% increase year on year. Given that the Group currently only has one significant project, it seems reasonable to report the Group's unit cost base on a fully inclusive basis. The fully inclusive unit costs are $3,152 (2012: $3,184) or $1.43/b (2012: $1.44/lb).

The main change in the Group's unit costs during 2013 was the increased unit costs for depreciation and amortisation.

Balance Sheet

As a result of the Kounrad Transaction there has been a significant uplift to the Group's asset base. Property, plant and equipment at Kounrad has increased to $77.7 million (2012: $20.3 million), whilst the intangible assets of the Group have also increased to $16.7 million 2012: $7.5 million).

The cash reserves held within the Group also increased during the year to $44.5 million (2012: $33.9 million) due to the strong performance at Kounrad. As a consequence, the Group's total asset base increased to $161.5 million (2012: $91.6 million).

During the year the Company took the opportunity to restructure the balance sheet and transferred $61.4 million from the Share Premium account to distributable reserves. The transfer was approved by means of a court scheme and will facilitate the payment of dividends by the Company for the foreseeable future. The agreed equity consideration for the KCC element of the Kounrad Transaction of $39.4 million is also repeated within other reserves. The shares will only be issued on completion of the whole transaction.

Cashflows

During the year the Group generated $41.1 million (2012: $28.0 million) from operations which resulted in the Group's cash balances increasing to $44.5 million (2012: 33.9 million) as at 31 December 2013.

The return of $19.7 million of funds to shareholders through dividends was the main outflow of cash during the year within the Group.

At Company level, all of the funds advanced to the Kounrad subsidiaries for the development and construction of the project since 2007 were fully repaid by late October 2013. This represented a return of funds of $53.6 million in just 18 months of production.

Taxation

The tax legislation in Kazakhstan is developing and at times the interpretation and compliance can be challenging for businesses operating in the country. During 2013, Sary Kazna LLP, the Kazakhstan subsidiary that effectively manages the leaching process on the Kounrad dumps and currently owns 60% of the subsoil use contract, was subjected to a taxation charge of $3.7 million for the classification of the Kounrad Resources onto a state approved list.

This taxation charge is locally known as the Commercial Discovery Bonus and is a required statutory payment to the Kazakhstan authorities based on 0.1% of the estimated value of the mineral resources discovered. The law supporting this taxation charge is ambiguous and CAML management spent significant amounts of time in seeking external legal and taxation advice to challenge the payment. Despite the efforts of management, the conclusion of the CAML Board was that any grounds for a legal challenge were subjective and could have led to potential additional fines or penalties and reputational risk. Consequently, the decision was taken to pay the tax and accept the charge as the price for compliance with local tax legislation.

The Group is also owed over $5.4 million (2012: $2.0 million) by the Kazakhstan authorities for recoverable VAT. The amount has been audited by the tax authorities on a number of occasions during 2013. The conclusion from the authority's audit work was that the VAT amount claimed has been determined correctly and was supported by the required documentary evidence. Despite this, the amount remained unpaid as at 31 December 2013, and the Group has lodged an appeal with the authorities to recover the tax owed with the support of a local specialist tax firm.

Foreign Exchange

The Group operates overseas and is exposed to foreign currency movements. On 11 February 2014, the Kazakhstan Tenge devalued by almost 20% overnight as highlighted in note 21. Given that the Group's operations in Kazakhstan generate their income in US dollars through the export of copper, the immediate impact from a purely financial standpoint was positive. It is estimated that approximately 60% of the cost base in Kazakhstan is denominated in Kazakhstan Tenge.

Nevertheless, the CAML Board was concerned about the impact of such a devaluation on its local employees. Having monitored the situation carefully in the days following the devaluation, and in line with other large and responsible employers in the country, the Board agreed to increase salaries for staff in the country by 10% from the beginning of February 2014. The Board will continue to monitor events in the country and respond accordingly.

The Group does not keep large amounts of cash in the Kazakhstan Tenge and as at 31 December 2013 held the US dollar equivalent of $0.6 million (2012: $0.2 million).

Dividend Policy

As a result of the Group dividend policy announced in December 2012, the Group returned a total of $19.7 million to shareholders in 2013. This represented a 7 pence annual dividend for 2012 plus a 3.7 pence special dividend related to cost savings made on the construction of the SX-EW plant. An interim dividend for 2013 of 4 pence per share was also announced on 27 September 2013 and paid on 15 November 2013.

As part of these annual results, the CAML Board is proposing a 5 pence per ordinary share final dividend for 2013 payable, subject to the approval of shareholders on 20 June 2014 to those shareholders on the Company's register on 30 May 2014, making a total dividend for the year of 9 pence (2012: 7 pence).

Financing growth

As at 31 December 2013 the Group had $ 44.5 million of cash in the bank of which $30.6 million was held in London and the balance of $13.9 million in Kazakhstan to cover both working capital requirements in country and also the 2013 Corporate Income Tax which is due in April 2014.

The Group has no debts outstanding as at 31 December 2013 and with the cash reserves at its disposal is confident that it has sufficient funds available to finance both the dividend policy in the coming years and also the capital expansion plans being finalised for the Kounrad project.

The overall combination of no outstanding debt, a strong cash balance and positive cashflows from Kounrad will provide the Company with the financial flexibility and strength to support the growth of the business.

Nigel RobinsonChief Financial Officer

Consolidated Income Statementfor the year ended 31 December

Consolidated Statement of Comprehensive Incomefor the year ended 31 December

During 2013 the Group had no balances attributable to non-controlling interests (2012: nil). Items in the statement above are disclosed net of tax.

Statements of Financial Positionat 31 December

Consolidated Statement of Changes in Equityfor the year ended 31 December

During 2013 the Group had no balances attributable to non-controlling interests (2012: nil).

Company Statement of Changes in Equityfor the year ended 31 December

During 2013 the Group had no balances attributable to non-controlling interests (2012: nil).

Statements of Cash flowsfor the year ended 31 December

Notes to the Consolidated Financial Statementsfor the year ended 31 December 2013

1. General information

Central Asia Metals plc ("CAML" or the "Company") and its subsidiaries (the "Group") are a mining and exploration organisation with operations primarily in Kazakhstan and a parent holding company based in the United Kingdom.

The Group's principal business activity is the production of copper cathode at its Kounrad operations in Kazakhstan. The Group also owns various exploration projects in Mongolia which are held for sale and has recently invested in a copper tailings project in Chile.

CAML is a public limited company, which is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange Plc and incorporated and domiciled in the UK. The address of its registered office is Masters House, 107 Hammersmith Road, London, W14 0QH. The Company's registered number is 5559627.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of Preparation

The Group's consolidated financial statements have been prepared in accordance with International Finance Reporting standards ("IFRS") as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention with the exception of assets held for sale which have been held at fair value. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2013. The Group financial statements are presented in US Dollars ($).

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are explained in note 3.

The Group commenced production of copper cathodes on 30 April 2012. The cathodes are produced by the SX-EW plant at Kounrad which is owned and operated by Kounrad Copper Company LLP. Consequently during 2012 the cost of sales and distribution and selling costs refer to only eight months of operations.

On 21 October 2013, the ownership of Kounrad Copper Company LLP increased from 60% to 100% following the acquisition of 40% of KCC. Consequently, the results for 2013 comprise only 60% of the revenues and costs for the first nine months of the year but 100% for the final three months of the year.

The impact of the above two events make annual comparisons difficult from the annually reported numbers in several of the notes to the accounts. A more meaningful analysis of the reported revenues and costs can be obtained from the Financial Review above.

Where a change in the presentational format between the prior year and current year financial statements has been made during the year, comparative figures have been restated accordingly.

The financial information set out above does not constitute the Group's statutory accounts for the year ended 31 December 2013, but is derived from the Group's full financial accounts. The Group's full financial accounts are prepared under International Financial Reporting Standards as adopted by the European Union. The financial statements are prepared on a going concern basis.

Basis of Consolidation

Joint Venture Accounting - Kounrad Project

The Kounrad Project ownership changes have taken a significant amount of time to complete. Throughout the periods of joint ownership and under the terms of the JOA, both of the parties had an equal vote on all significant operational, financial and planning matters. Consequently, it was concluded that Joint Control existed over the Kounrad project and so, whilst the various transactions have been negotiated and submitted for government approval, the Kounrad Project has been accounted for in the following manner;

1. The sub soil user licence operations under SK are classified as a jointly controlled asset. The assets, liabilities, income and expenditure have been proportionately consolidated on a 60:40 basis.

2. All of the operations conducted under Kounrad Copper Company LLP have also been proportionately consolidated on a 60:40 basis as it has been a jointly owned legal entity. During 2013 the Group took advantage of the EU exemption which enabled it to delay implementing revised accounting standards under IFRS 11 for joint entities.

Business Combinations - Kounrad Project

Throughout 2013 the above Joint Venture Accounting has remained in place although it is recognised that the completion of both transactions (KCC and SUC) will result in a change in control of the Kounrad Project from joint control to control by CAML.

As such an IFRS 3 "Business Combination" will be deemed to have taken place upon completion.

Details of the accounting treatment for the business combination are contained in note 20.

3. Critical accounting estimates and judgments

The Group has four key areas where critical accounting estimates and judgements are required that could have a material impact on the financial statements:

Impairment

As mentioned above estimates are required periodically to assess assets for impairment. These estimates will incorporate the expected future commodity prices, estimates of the ore reserves and projected future costs of development and production. This includes an assessment of the carrying values of assets held for sale.

The carrying value of the goodwill generated by accounting for the business combination of the Group acquiring an additional 40% in the Kounrad Project requires an annual impairment review. This review will determine whether the value of the goodwill can be justified by reference to the carrying value of the business assets and the future discounted cash flows of the business.

Mineral reserves and resources

The major value associated with the Group is the value of its mineral resources. These resources are the Group's best estimate of product that can be economically and legally extracted from the relevant mining property. The Group's estimates are supported by geological studies and drilling samples to determine the quantity and grade of each deposit.

Significant judgement is required to generate an estimate based on the geological data available. Ore resource estimates may vary from period to period. This judgement has a significant impact on impairment consideration and the period over which capitalised assets are depreciated within the financial statements.

The resources have been independently verified by Wardell Armstrong International and were classified as JORC Compliant in 2013.

Decommissioning and site rehabilitation estimates

Provision is made for the costs of decommissioning and site rehabilitation costs when the related environmental disturbance takes place. Provisions are recognised at the net present value of future expected costs using discount rate of 6.40% (2012: 6.86%).

The provision recognised represents management's best estimate of the costs that will be incurred, but significant judgement is required as many of these costs will not crystallise until the end of the life of the mine. Estimates are reviewed annually and are based on current contractual and regulatory requirements and the estimated useful life of mines. Engineering and feasibility studies are undertaken periodically; however significant changes in the estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period.

Business combination

The Kounrad Transaction will ultimately result in the Group acquiring the 40% of the joint venture project at Kounrad that it did not previously own. The assessment of the fair value uplift of the underlying assets acquired and the treatment of the two legal entities involved in the project as at the 31 December 2013 period end required a high degree of judgement.

The assessment of the overall project as a business combination for both legal entities, Kounrad Copper Company LLP and Sary Kazna LLP, and the impact on that judgement caused by the different stages of completion as at 31 December 2013 required a careful review of the overall transaction as opposed to the specific nature of the assets being acquired.

The fair value uplift of the assets acquired as a result of that judgement and the resulting accounting treatment have resulted in a significant change to both the income statement and the balance sheet of the business. The details are explained in note 20.

4. Segmental information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Board considers the business from a geographic prospective.

As at 31 December 2013, the Group only had one business segment consisting of an SX-EW copper plant at Kounrad in Kazakhstan. The Group operations are controlled from a head office in London, UK but this does not represent a separate business segment.

Previously reported business segments within the Group, namely all the Mongolian operations, are classified as held for sale as at 31 December 2013. As part of the sale process, in December 2013, New CAML Mongolia LLC and Mongolian Silver Mountain LLC were sold for nil consideration.

The Board assesses the performance of the Kounrad project based on a number of key operational and financial measures which relate to copper production output, revenues from the sales of copper and the overall costs of producing the copper. All capital related expenditure at the project is also closely monitored and controlled.

The segmental results for the year ended 31 December 2013 are as follows:

The total production at Kounrad for the 12 month period was 10,509 tonnes whilst the total quantity of copper sold was slightly higher at 10,689 tonnes. The average price achieved from the sale of copper was $7,114 per tonne.

EBITDA is a non-IFRS financial measure. CAML calculates EBITDA as profit or loss for the period excluding the following items:

· Income tax expense;

· Finance income and expense;

· Depreciation and amortisation; and

· Discontinuing operations; and Gain on re-measuring to fair value and other income or expenses.

EBITDA is intended to provide additional information to investors and analysts. It does not have any standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA differently.

A reconciliation between net profit for the period and EBITDA is presented below:

Segmental assets and liabilities for the year ended 31 December 2013 are as follows:

5. Revenue

The Group sells and distributes its copper cathode product primarily through an offtake arrangement with Traxys. The offtake arrangements are for 90% of the SX-EW plant's output for the period up until 31 December 2015. The copper cathodes are delivered from the Kounrad site by rail under an FCA (Incoterms 2010) contractual basis and delivered to the end customers in Turkey. As part of the offtake arrangements, the Group sells the copper cathodes at a price linked to the London Metal Exchange (LME) copper price based on an agreed quotational period.

The offtake arrangements with Traxys started in May 2012 in line with the commencement of production on site. Given the lack of previous knowledge and experience of both the logistical issues and costs associated with delivering the copper cathodes from Kounrad to the end customers at that time, it was agreed to deliver the cathodes on an "open book" basis for the remaining eight months of 2012. This basis allowed the Group to better understand the costs and logistical issues involved during this learning period and thereby agree rates for future periods on a more informed basis.

Consequently, during 2012 the costs associated with the sales and distribution of the copper cathodes from Kounrad to the end customer were incurred by Traxys but paid for by the Group. During 2013, the costs of delivery to the end customers have been effectively borne by the Group through means of an annually agreed buyer's fee which is offset from the selling price (note 8).

During 2013 the Group sold 10,500 tonnes (2012: 6,083 tonnes) of copper through the offtake arrangements. Some of the copper cathodes are also sold locally and during 2013 a total of 189 tonnes (2012: 320 tonnes) were sold to local customers.

6. Cost of sales by nature

7. Distribution and selling costs by nature

The above distribution and selling costs are those incurred at the Kounrad site in addition to the costs associated with the offtake arrangements. Note 5 above refers to the costs associated with the offtake arrangements with Traxys.

8. Administrative expenses by nature

9. Income tax

UK corporate income tax is calculated at 23.25% (2012: 24.5%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the UK statutory rate of 23.25% (2012: 24.5%) applicable to the profit of the Group, as follows:

The tax on the Company's loss before tax differs from the theoretical amount that would arise using the UK statutory rate of 23.25% (2012: 24.5%) applicable to the loss of the Company, as follows:

From 1 April 2013, the main UK Corporation tax rate reduced from 24% to 23%. Further reductions in the main tax rate to 21% from 1 April 2014 and 20% from 1 April 2015 have been announced.

The rate reductions were substantively enacted on 3 July 2013 and have been reflected in the calculation of deferred tax at the statement of financial position date.

10. Earnings/(loss) per share

(a) Basic

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average number of Ordinary Shares in issue during the year excluding Ordinary Shares purchased by the Company and held as treasury shares.

(b) Diluted

The diluted earnings/(loss) per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding after assuming the conversion of all outstanding granted share options and exercise of outstanding security warrants.

11. Property, plant and equipment

Included within the line Acquisition of Subsidiary are a number of adjustments resulting from the Kounrad Transaction, explained in note 20. The adjustments comprise:

1. A proportionate increase (i.e. from 60% to 100%) in the carrying values of Kounrad related property, plant and equipment of $11,214,903 and accumulated depreciation of $605,294.

2. A fair value uplift applied to the Kounrad assets of $46,392,000 (of which $27,835,000 results from measuring at fair value the Group's 60% equity interest in KCC held before the business combination). This fair value uplift resulted in an additional depreciation charge of $1,335,856 during the year; and

3. The transfer of assets related to the Kounrad project of $4,508,743, previously recognised as investments.

The Company had $198,119 of office equipment at net book value as at 31 December 2013 (2012: $9,543).

12. Intangible assets

As a result of the Kounrad Transaction, explained within the Chief Executive Officer's Statement, the Group has recognised goodwill of $9,278,000.

During the year the Group also paid a Commercial Discovery Bonus ("CDB") of $3,680,486 ($2,208,292 on 60% consolidation basis) to the Kazakhstan Government on completion of the exploration and resource studies associated with the Kounrad waste dumps. The completion of this work enabled the resources on site to be registered as part of the Kazakhstan Government official list of resources ('State Balance') and thereby facilitate their transfer to a mining licence and the subsequent production of copper from the resources. The amount of CDB has been capitalised under Mining licences and permits during the year and will be amortised over the remaining life of the mine.

The investment of $3,222,420 in Copper Bay has been classified as an intangible asset and added to Mining licences and permits.

During the year the Group reclassified the Alag Bayan project (Bayanresources LLC) as held for sale and consequently made a full write down of the assets held by the subsidiary.

The Company had no intangible assets as at 31 December 2013 (2012: $1,000,000). During the year the Company has reclassified the Alag Bayan project to the assets classified as held for sale and consequently fully impaired the asset.

Impairment test for goodwill

The Group currently only has one business segment, namely the Kounrad project located in Kazakhstan. The goodwill associated with this project and the Kounrad Transaction will be monitored by management in the future but as at 31 December 2013 the goodwill did not require impairment.

The recoverable amount of all CGUs has been determined based on value-in- use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the copper business in which the CGU operates.

13. Trade and other receivables

The carrying value of all the above receivables is a reasonable approximation of fair value.

The amounts receivable from related parties is a consequence of the joint venture accounting treatment required at the Kounrad project due to the nature of the ownership structure (note 20). The amounts will disappear once the transaction to acquire 100% of the project is completed.

The Group's main receivable is the VAT incurred on purchases within Kazakhstan. As at 31 December 2013 a total of $5,436,475 (2012: $2,047,553) of VAT receivable was still owed to the Group by the Kazakhstan authorities. The Group still remains confident about its prospects to recover this outstanding debt and is working closely with its advisers and local partners to achieve this. The planned means of recovery will be through a combination of the local sales of cathode copper to effectively offset VAT liabilities and by a successful appeal to the authorities. An appeal was lodged on 19 November 2013 by the local tax advisers and the outcome was still pending as at 31 December 2013. However, as a result of the above and the uncertainty regarding timing, the Group has reclassified the VAT receivable from current to non-current.

Management's policy is to assess all trade and other receivables for recoverability on a regular basis. A provision is made where doubt exists and amounts are fully written off when information comes to light that the amounts due will not be recovered.

14. Cash and cash equivalents