Europa Metals Regulatory News (EUZ)

Ferrum Crescent Limited

("Ferrum Crescent", the "Company" or the "Group")(ASX: FCR, AIM: FCR)

Final Results for the year ended 30 June 2011

Ferrum Crescent Limited, today announces its final results for the year ended 30 June 2011.

HIGHLIGHTS

·; Successful Admission to AIM with gross proceeds raised of £10 million (approximately AUD16 million) in December 2010

·; JORC compliant resource of 74Mt in the Indicated Resource category and 225Mt in the Inferred Resource category delineated.

·; Offtake agreement signed with Duferco SA in June for up to 6.0 million tonnes of iron ore pellets per annum

·; Programme of reverse circulation ("RC") and diamond core drilling completed at Moonlight

·; Revised mining right application in respect of Moonlight magnetite deposit expected to be granted later this year

·; AMEC Minproc SA ("AMEC") expected to complete the Moonlight Definitive Feasibility Study in 2012

·; Key Management Appointments of Vernon Harvey as Chief Operating Officer in March 2011 and Bob Hair as Managing Director in July 2011

·; Ferrum Crescent listing on the Johannesburg Stock Exchange targeted for November 2011

Commenting on the final results, Chairman Ed Nealon said:

"Ferrum Crescent has achieved a great deal in the past twelve months including being admitted to AIM and securing the funds for delivering a successful Definitive Feasibility Study for the Moonlight iron ore project. We have been active in our exploration programme and under the guidance of Vernon Harvey and Bob Hair have a number of near term objectives to further develop the project to generate further shareholder value."

Chairman's Statement

The end of 2010 saw us successfully raise the funds Ferrum Crescent needed to progress our primary iron ore project in South Africa towards feasibility. My focus has always been to develop innovative and cost effective operations into development. Moonlight represents a niche operation in the context of the global steel manufacturing business. Utilising existing and planned infrastructure as much as possible, our objective is to complete a detailed feasibility study next year to prove our ability to create high grade processed iron product with low contaminants. With an offtake contract already achieved with international iron ore and steel group Duferco SA, I believe that Ferrum Crescent can maximise the use of existing and planned power, water and transportation infrastructure in a region with a long established tradition of mining and heavy industry. Moonlight promises to be highly cost effective with a low stripping ratio in mining, using a slurry pipeline to a DRI and/or blast furnace pelletising plant at a location with rail access and using the favourable metallurgical characteristics and purity of Moonlight material to produce a premium pellet product. Offtake has been secured with Swiss-based Duferco, which recognises the high quality of the Moonlight material. Following due diligence on the mineral assets of the Company, Duferco concluded that Ferrum Crescent should be able to produce direct reduction and/or blast furnace pellets equal to or better than current world best product. Once Moonlight is producing to full capacity, Duferco will have the right to market internationally the first 4.5 million tonnes of pellets produced and will have a first right of refusal over another 1.5 million tonnes produced from Moonlight if it is not sold domestically within South Africa.

The Company benefits from a team of individuals with a real track record of delivering projects and corporate experience. Since raising funds on AIM at the end of 2010 new operational team members have been brought on board and we have made significant progress through drilling and metallurgical testwork to better understand the Moonlight project. Having operational management with experience in delivering major feasibility studies ensures that all our work has been conducted with a clear purpose and our report completions goal of 2012 remains on target. As we complete further drilling, we expect to progress the existing resources through the levels of the JORC Code and build up an increased level of understanding of Moonlight. Corporate activities relating to securing a well respected and proactive BEE partner will also allow the Company to benefit from domestic support and maximum value from exploration activities. Our long term objective to list on the Johannesburg Stock Exchange has been progressed during the period and entry will ensure that Ferrum Crescent's future is directly aligned to the Republic of South Africa's in terms of finance, resource development and support of domestic metals manufacturing. This listing is now expected to be completed in November 2011.

Ferrum Crescent's progress towards development stage is well under way and once we have completed a definitive feasibility study, currently being conducted and audited by Amec Minproc, we shall look to finance and develop a high grade iron product operation ready for immediate commercial sale to Duferco.

The Company has identified key milestones in its progress and the progress of Moonlight. Listing on the JSE and the grant of the Moonlight mining right application are two, expected to be achieved within 2011. Completion of the Moonlight DFS is expected in 2012, and if the outcome is positive the Company believes that construction of the Project and its various components (mine, slurry pipeline and pelletiser plant) should be complete in 2016 or 2017.

Operational

Moonlight Iron Ore Project

The Group's operational focus is the Moonlight Iron Ore Project in Limpopo Province in the Republic of South Africa, which hosts iron ore occurrences that are magnetite bearing banded iron formations ("BIF") that have undergone varying intensities of metamorphic alteration. The BIFs are of Archaean age and located in and adjacent to the Limpopo Mobile Belt ("LMB") in the Limpopo Province, some 350 km north-east of Johannesburg.

During the year, the Group commenced its definitive feasibility study in relation to the Project, with studies including pipeline route, beneficiation processes and plant location and study of water and transport options. Various supporting plans and studies relating to the Group's mining right application were advanced, and the application is expected to be processed by the end of December 2011. As required under the Mineral and Petroleum Resources Development Act (Act No. 28 of 2002) and the National Environmental Management Act (Act 107 of 1998) of South Africa, the Company is required to complete and submit an environmental impact assessment (EIA) within 180 days of the Mining Right application. Turquoise Moon Trading 157 (Pty) Ltd, the holder of the prospecting rights, contracted Metago Environmental Engineers (Pty) Ltd, an independent firm of certified consultants, to undertake this activity.

A scoping report was prepared and subjected for public consultation. This scoping report identified a number of specialist studies which were also completed during the period. The final report was prepared and submitted to the various interested parties and government authorities. Public consultation meetings were held in August 2011. The final document, including any comments arising from public consultation, will be submitted for review and decision as soon as practicable afterwards.

The finalisation of the community participation in the Project has been approved by the National Department of Mineral Resources. This demonstrates the Company's commitment to meaningful social change in the areas in which it operates.

Throughout the reporting period, the Group conducted several drilling campaigns and progressed its exploration and development of the Moonlight Project. Encouragingly for the group, intersections of iron mineralisation were found in all twelve holes that were considerably thicker than predicted by the geological model in this area of the deposit.

Significant intersections of iron mineralisation include*:

- 43m @ 31.34% Fe from 96m downhole in FCL088

- 28m @ 33.97% Fe from 104m downhole in FCL089

- 13m @ 35.43% Fe from surface in FCL087

- 43m @ 35.26% Fe from 92m downhole in FCL092

- 16m @ 36.72% Fe from 134m downhole in FCL093

- 15m @ 32.34% Fe from 48m downhole in FCL0097

*Note - full details of assayed intercepts are shown in Table 1.

Moonlight contains a current JORC compliant resource of 74Mt in the Indicated Resource category and 225Mt in the Inferred Resource category at a grade of 30% Fe.

The RC drilling was planned to provide additional information allowing refinement of the geological model in areas of sparse drilling. The results confirm confidence in the geological model and demonstrate excellent continuity of iron mineralisation. Planned holes were superimposed on the model and indicated that it was likely that the total of mineralised intersections in all holes would be 295m. The actual sum of mineralised intersections above a grade of 15% Fe was 368m. This provides the Group with a high level of confidence in the geological interpretation and hence continuity of iron mineralisation through the deposit.

Table 1: Intercepts of iron mineralisation greater than or equal to 5m in width

Drilling by reverse circulation using 5.25 inch face sampling hammer.

·; All holes drilled vertical.

·; Mineralisation has a generally flat dip to the north - intersection widths approximate the true width of the mineralisation.

·; Samples are collected through a rig mounted cyclone over 1m intervals and geologically logged.

·; All samples are weighed as a check on recovery and representivity.

·; 1m sub samples for assay are split using a single stage Jones type riffle splitter.

·; Assays determined by Fusion XRF, LOI (loss on ignition) determined at 1000C0. Some samples show negative LOI results. This characteristic indicates that the weight increase arising from oxidation of Fe2+ to Fe3+ (FeO to Fe2O3) is higher than the weight loss caused by removing volatiles from the mineral structures.

·; Composite intervals have been determined with regard to geological description using a lower cut off grade of 15% Fe and a minimum composite length of 5m.

·; Appropriate quality control methods have been used including standards, blanks and field duplicates.

·; Drill holes have been located hand using held GPS methods using the South African, Hartbeeshoek94 Lo29 WGS system.

Core drilling

An 11 hole HQ diamond core programme was completed on 16 April 2011. The core was used to provide sample for metallurgical testwork as well as adding over 130 new bulk density measurements to the existing database.

All the core holes were drilled from the same location as existing holes so as to "twin" holes that produced samples from a variety of drill techniques from various drill campaigns dating back to 1985. Core drilling is accepted as the most reliable method of collecting sample and the objective is, based on a comparison of the results, to provide a high level of confidence in all drill holes that will be used in estimating the resource. This analysis is expected to be complete and announced to the market later in 2011.

Metallurgical Testwork

As at the date of this report, the Company is in the process of confirming final details of a comprehensive metallurgical programme that will include comminution and beneficiation studies. The initial phase of this work will use core samples from the HQ diamond core programme and be directed at the development of a probable flow sheet for the upgrade of iron mineralisation to a product grade of suitable composition for the production of DRI pellets.

Offtake Agreement with Duferco SA

On 22 June 2011, the Company announced it had entered into an offtake agreement with Swiss based Duferco SA ("Duferco"), a leading private company in the trading, mining, and end use of iron and steel products and raw materials for the steel industry. Following due diligence on the mineral assets of the Company, Duferco concluded that Ferrum Crescent should be able to produce direct reduction and/or blast furnace pellets equal to or better than current world best product.

The offtake agreement with Duferco SA covers up to 6 mt of anticipated iron ore pellet production from Ferrum Crescent's Moonlight Project. Under the agreement, Ferrum Crescent will sell Duferco all of their production available for export (in total 4.5 mt) and will give Duferco a first right of refusal over an additional 1.5 mt per year to the extent that the product is not sold domestically, thus allowing Ferrum Crescent to follow a growth strategy at its South African projects.

The offtake agreement has an initial five year term commencing when the Moonlight Project plant operations reach full production, and the term is automatically renewed for further periods of five years unless one of the parties elects to terminate the agreement within the final six months of any five year period. The agreement contains termination mechanisms in the case of specified failure to perform or a party's insolvency. In addition, either party may terminate the agreement in the case where a single shareholder holds 50% or more of Ferrum Crescent's voting capital.

The agreement contains standard commercial terms and provisions customarily set out in such contracts. Although the financial details of the agreement are to remain confidential, the offtake agreement is of immense importance to Ferrum Crescent as it will underpin the ability of the Company to finance project development.

BEE Transaction

On 23 December 2010, the Company announced that the sale agreement relating to the acquisition by the Company's new strategic BEE partner of the 26% of the Moonlight Iron Ore Project from the Company's former BEE partner had completed.

As described in the Company's AIM admission document dated 10 December 2010, a company, Mkhombi Investments (Pty) Ltd ("Mkhombi Investments"), which meets the requirements of applicable South African legislation in respect of historically disadvantaged persons (referred to in South Africa as being "BEE controlled"), entered into an agreement on 26 October 2010 with the then current holder of 26% of Turquoise Moon Trading 157 (Pty) Ltd ("TMT") to purchase that holder's right, title and interest in TMT for ZAR30 million (approximately AUD4.4 million). The South African Department of Mineral Resources expressed its support of the transaction.

A subscription agreement was entered into between the Company and Mkhombi AmaMato (pty) Limited ("AmaMato") on 4 November 2010 (the "Subscription Agreement"). On completion of the Subscription Agreement (subject to the fulfilment of the conditions precedent to that agreement), AmaMato will subscribe for such number of shares in the Company as is equal to 7.8% of the issued shares at that time (the "First Subscription"). The price payable for the subscription for the Shares under the First Subscription will be ZAR $7.5 million.

AmaMato will also, on or before the later of (i) the date falling 10 business days after the Closing Date (as defined in the Subscription Agreement) and (ii) 30 November 2011 (the "Subscription Period"), which period will be extended by the Company for a period of 1 year in the event that it raises not less than ZAR $7.5 million in 2011, subscribe for a further 7.8% of the issued shares of the Company (calculated by reference to the issued share capital of the Company at the time of the First Subscription adjusted for any subsequent share splits, consolidations or bonus capitalisations) for a further ZAR $7.5 million.

The conditions precedent to the Subscription Agreement which must be fulfilled by 21 December 2011, include no insolvency event occurring, the granting of a mining right in respect of the Project, necessary South African Reserve Bank approvals and shareholder and other approvals required under the Corporations Act and the AIM/ASX listing rules, including shareholder approval.

In the event that the conditions precedent to the Subscription Agreement are not fulfilled by 21 December 2011, then AmaMato will have the right, for 60 days, to require Nelesco to purchase all of AmaMato's rights, title and interest in, and all its claims against, Mkhombi Investments for the price of ZAR $12.5million.

Kofi Morna, a Director of the Company, is also a director of AmaMato and of Mkhombi Investments. He became a Director of the Company during the period for the purposes of the above transaction. He holds an indirect non-controlling interest in AmaMato.

Upon completion of the Subscription Agreement, the Company will legally own directly and indirectly through its wholly owned subsidiary, Mkhombi Investments, 97% of TMT, with the remaining 3% held by the locally impacted community. AmaMato will own 15.6% of the Company.

Mining Right Application

As announced on 24 January 2011, the South African Department of Mineral Resources ("DMR") accepted a revised mining right application in respect of the Moonlight Deposit. The DMR has indicated that it expects to process the mining right application by the end of December 2011 for an initial period of 30 years.

The Company's subsidiary, Turquoise Moon Trading 157 (Pty) Ltd ("Turquoise Moon"), holds Ferrum Crescent's interests in both the Moonlight Deposit and the De Loskop prospect. Previously, these were both held under a single mining right application. The DMR allowed De Loskop to be excluded from the mining right application, with the result that Turquoise Moon can concentrate wholly on developing Moonlight as a mining project while allowing De Loskop to be treated as a prospecting area. Administratively and practically, due to the distance between the project areas, it was considered advantageous to deal with the two areas separately. Should Turquoise Moon wish to conduct mining activities in the De Loskop project area, a separate mining right application would need to be submitted.

Sale of Australian Exploration Interests

On 29 October 2010, the Company announced that it had agreed with Northern Uranium Limited ("Northern") to sell all of its Australian minerals exploration interests to Northern for the sum of AUD$600,000. The offer from Northern was a cash offer, subject to due diligence on the Company's tenement interests. The offer in respect of two tenements was subject to the consent of joint venturers and to Northern due diligence.

The agreement ("Sale Agreement") with Northern was structured so that Northern would acquire all of the Company's interests in exploration or mining tenements in Australia. The agreement was dated 15 November 2010 and was subject to the receipt of any necessary approvals under the relevant mining legislation in Western Australia and the Northern Territory.

Under the Sale Agreement, the Company was to transfer any legal title that it held or in which it had an interest and would assign its beneficial interest in all tenements that it did not hold legally.

Upon completion of the Sale Agreement, Northern assumed the Company's obligations in respect of any joint ventures in which the Company had an interest, with the parties entering into deeds of assignment and assumption in respect thereof. The Company delivered all technical information in its possession in respect of the interests transferred ("Mining Information").

The purchase price for the package was AUD$600,000, and the sale was completed on 15 November 2010. Two tenements were subject to joint venturers' pre-emptive rights, and if those rights were not waived by the time of completion, then the value ascribed to those tenements would have been withheld accordingly. The values ascribed were AUD$25,000 in respect of one tenement and AUD$100,000 in respect of the other. Both joint venture partners chose to waive their pre-emptive rights by the time of completion and the Sale Agreement was concluded for the full amount of AUD$600,000.

Corporate

Capital Raising and Admission to AIM

During September 2010, the Company successfully raised AUD$1.2 million by issuing 10 million shares at AUD$0.12 per share to sophisticated investors in order to carry out further capital raising in conjunction with a London AIM listing.

As announced on 16 December 2010, Ferrum was admitted to trading on the AIM market of the London Stock Exchange and completed a capital raising of 10 million pounds Sterling ("GBP") (equal to approximately AUD$16 million) before expenses, via a placement of shares ("the Placing").

Pursuant to the Placing, by Ocean Equities Limited, the Company issued 100 million new shares at 10 pence per share ("Placing Price") to a broad base of institutional and other investors. Ambrian Partners Limited is acting for the Company as Nominated Adviser and Ocean Equities Limited as broker.

The proceeds of the capital raising are being used to fund the upgrade of the magnitude and confidence of the current JORC resource estimate and to carry out the definitive feasibility study in respect of the Moonlight Iron Ore Project.

Option Cancellation

Prior to the beginning of the reporting period, Ferrum commenced a process by which the holders of listed options to acquire shares in the Company were offered one fully paid ordinary share for every ten options held by them. This process was completed in July 2010, the offer having closed with acceptances representing approximately 78.85% of listed options. The closure of the offer resulted in the issue of 8,012,005 new shares in the Company to former option holders.

Executive and Board Changes

During the year there were several changes to the composition of the Board of the Company. Mr Adrian Griffin and Mr Matodzi Nesongozwi resigned as Directors and Messrs Klaus Borowski, Kofi Morna, Ted Droste and Grant Button joined the Board as Non-executive Directors.

Dr Fanie Botha joined the Board as a Non-executive Director in July 2010 before accepting the role of Operations Director in November of the same year. On 4 March 2011, Dr Botha resigned from the Board but remains with the Company as a consultant.

Mr Scott Huntly accepted the role of Strategic Development Manager on 4 March 2011, resigning as Managing Director on 4 March 2011.

Mr Ed Nealon assumed the role of Executive Chairman, Mr Vernon Harvey was appointed as Chief Operating Officer and Mr Bob Van Der Laan accepted the role of Joint Company Secretary along with Mr Robert Hair and Mr Andrew Nealon. In April 2010, Mr Van Der Laan resigned as Joint Company Secretary but continues consulting to the Company in his role as Chief Financial Officer.

Subsequent to the reporting period, Mr Robert Hair resigned from his position of Joint Company Secretary and assumed the role of Managing Director.

Competent Person's Statement:

The information in this report is based on information compiled by Lindsay Cahill, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Cahill has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Cahill is a consultant to Ferrum Crescent Limited and the mining industry. This report is issued with Mr Cahill's consent as to the form and context in which the exploration results appear.

Consolidated Statement of Comprehensive Income

For the period 1 July 2010 to 30 June 2011

Consolidated Statement of Financial Position

As at 30 June 2011

Consolidated Statement of Cash Flows

For the period 1 July 2010 to 30 June 2011

Consolidated Statement of Changes in Equity

For the period 1 July 2010 to 30 June 2011

 Selected Notes to the financial statements

Note 3: Revenue and expenses

Revenue and Expenses from Continuing Operations

(b) (i) During the year Ferrum Crescent Limited entered into and completed an agreement with Northern Uranium Limited ("Northern") (ASX: NTU) to dispose all of its Australian minerals exploration interests for a cash sum of $600,000. The offer from Northern was subject to both due diligence on the Company's tenement interests and the consent where relevant of joint venturers. Due diligence was concluded favourably, and a pre-emptive right was exercised, with the result that the Group's Australian exploration assets were all sold during the half-year.

The sale of these Australian exploration interests has enabled the Company and its management to focus on developing its iron ore interests in Southern Africa and in particular to concentrate on progressing Moonlight Iron Ore Project and finalising the mining right application process in respect of the Moonlight Deposit.

(ii) In August and September 2010, the Group disposed of its interest in 12,460,071 shares and 1,873,667 options held in Northern Uranium for $1,574,920. These financial assets were designated as available for sale, with all prior gains on such investments taken to equity. The fair value change of the financial assets of $665,242 from 1 July 2010 to the date of sale was taken to the available for sale reserve. The above amount represents the release of the unrealised gains reserve upon sale (gross of tax).

Note 5: Income tax

Note 6: Directors' and executives' remuneration

(a) Compensation of Key Management Personnel

Note 8: Earnings per share

During the period there were no listed options that were exercised.

These options are not considered dilutive for the purpose of the calculation of diluted earnings/loss per share as their conversion to ordinary shares would decrease the net loss from continuing operations per share. Consequently, diluted earnings/loss per share is the same as basic earnings per share.

There have been no transactions involving ordinary shares or potential shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

Note 9: Cash and cash equivalents

Note 10: Receivables

(i) Non-trade debtors are non-interest bearing and are generally on 30-90 days terms. The carrying amounts of these receivables represent fair value and are not considered to be impaired.

Note 11: Available-for-sale investments

Listed Shares

In August and September 2010, the Group disposed of its interest in 12,460,071 shares and 1,873,667 options held in Northern Uranium for $1,574,920. These financial assets were designated as available for sale, with all prior gains on such investments taken to equity. The fair value change of the financial assets of $665,242 from 1 July 2010 to the date of sale was taken to the available for sale reserve.

Note 12: Plant and equipment

Note 13: Trade and other payables

(i) Trade and other payables are non-interest bearing and are normally settled on 30-day terms.

(ii) Unsecured loan is interest free and has no defined terms of repayment.

(iii) During the year, various agreements were entered into in respect of the minority interest in the Moonlight Iron Project.

A company, Mkhombi Investments (Pty) Ltd ("Mkhombi Investments"), which meets the requirements

of applicable South African legislation in respect of historically disadvantaged persons (referred to in South Africa as being "BEE controlled"), entered into an agreement on 26 October 2010 with the then current holder of 26% of Turquoise Moon Trading 157 (Pty) Ltd ("TMT") to purchase that holder's right, title and interest in TMT for ZAR30 million (approximately AUD4.4 million) ("TMT Sale Agreement"). The South African Department of Mineral Resources expressed its support of the transaction.

Nelesco 684 (Pty) Ltd ("Nelesco"), a wholly owned subsidiary of the Company, entered into agreements with Mkhombi Investments and its holding company, Mkhombi AmaMato (Pty) Ltd ("AmaMato"), the terms of which provide for the following to take place:

a) Nelesco would be issued shares in Mkhombi Investments such that it holds an initial 32.17% interest in Mkhombi Investments, with the remaining 67.83% held by AmaMato;

b) AmaMato would lend the sum of ZAR $7.5 million to Mkhombi Investments, to be applied as part of the purchase price under the TMT Sale Agreement. The advance, which has been made as at 31 December 2010, does not attract interest and is only repayable in certain circumstances (namely, the failure of the conditions precedent set out in the Subscription Agreement, as defined below);

c) Nelesco would lend the sum of ZAR $22.5 million to Mkhombi, to be applied as paying the balance of the purchase price under the TMT Sale Agreement. The advance, which has been made as at 31 December 2010, does not attract interest and is repayable in certain circumstances (namely, the failure of the conditions precedent set out in the Subscription Agreement, as defined below);

d) Mkhombi Investments would issue shares and/ or Nelesco will transfer some of its shares in Mkhombi Investments so that 11.54% of Mkhombi Investment's shares on issue are held by a trust representing the locally impacted community, with the resulting shareholdings being AmaMato 60%, Nelesco 28.46%, and the locally impacted community 11.54%; and

e) AmaMato will, subject to the conditions precedent to the Subscription Agreement, as defined below, sell its entire right, title and interest in, and all of its claims against, Mkhombi Investments to Nelesco for ZAR $7.5 million (A$1,036,500).

A subscription agreement was entered into between the Company and AmaMato on 4 November 2010 (the "Subscription Agreement"). On completion of the Subscription Agreement (subject to the fulfilment of the conditions precedent to that agreement), AmaMato will subscribe for such number of shares in the Company as is equal to 7.8% of the issued shares at that time (the "First Subscription"). The price payable for the subscription for the Shares under the First Subscription will be ZAR $7.5 million.

AmaMato will also, on or before the later of (i) the date falling 10 business days after the Closing Date (as defined in the Subscription Agreement) and (ii) 30 November 2011 (the "Subscription Period"), which period will be extended by the Company for a period of 1 year in the event that it raises not less than ZAR $7.5 million in 2011, subscribe for a further 7.8% of the issued shares of the Company (calculated by reference to the issued share capital of the Company at the time of the First Subscription adjusted for any subsequent share splits, consolidations or bonus capitalisations) for a further ZAR $7.5 million.

The conditions precedent to the Subscription Agreement which must be fulfilled by 21 December 2011, include no insolvency event occurring, the granting of a mining right in respect of the Project, necessary South African Reserve Bank approvals and shareholder and other approvals required under the Corporations Act and the AIM/ASX listing rules, including shareholder approval.

In the event that the conditions precedent to the Subscription Agreement are not fulfilled by 21 December 2011, then AmaMato will have the right, for 60 days, to require Nelesco to purchase all of AmaMato's rights, title and interest in, and all its claims against, Mkhombi Investments for the price of ZAR $12.5 million.

Kofi Morna, a Director of the Company, is also a director of AmaMato and of Mkhombi Investments. He became a Director of the Company during the period for the purposes of the above transaction. He holds an indirect non-controlling interest in AmaMato.

Upon completion of the Subscription Agreement, the Company will legally own directly and indirectly through its wholly owned subsidiary, Mkhombi Investments, 97% of TMT, with the remaining 3% held by the GaSeleka Community. AmaMato will own 15.6% of the Group.

In the opinion of the Directors, the conditions precedent to the Subscription Agreement are essentially procedural in nature, following the completion of the Company's capital raising of 10 million pounds Sterling ("GBP") (equal to approximately AUD 16 million) before expenses, completed on 16 December 2010. As such, while the Company's legal interest in the Moonlight Iron Ore Project increased from 74% to approximately 81.5%, the Directors hold an effective interest in the underlying project of 97% as at 31 December 2010 as a result of the minority purchase obligation.

Note 14: Financial liability

The above liability will be settled in the company's shares and not in cash.

As described above, in the opinion of the Directors, the remaining procedural conditions precedent under the Subscription agreement will be fulfilled within one year from balance date. Under the Subscription Agreement, the Company has agreed to issue shares to AmaMato equal to 15.6% of the issued share capital of the Company for ZAR $15 million. The above financial liability, measured at fair value through profit and loss, represents the Company's best estimate of the fair value of this contractual arrangement. Refer to Note 27 for the Group's exposure to equity price risk on this amount.

Note 15: Provisions

Note 16: Issued Capital

Capital management

When managing capital (which is defined as the Company's total equity), management's objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. As the equity market is constantly changing management may issue new shares to provide for future exploration and development activity. The Company is not subject to any externally imposed capital requirements.

If, any time during the exercise period, an employee ceases to be the employee, all options held by that employee will lapse one month after the employment end date. Therefore above employee shares are recognised in issued capital when issued to the employees.

This account is used to record the value of shares issued under the Executive Share Incentive Plan (ESIP). The ESIP is accounted for as an "in-substance" option plan due to the limited recourse nature of the loan between employees and the Company to finance the purchase of ordinary shares. The total fair value of the "in substance" options issued under the plan is recognised as a share-based payment expense over the vesting period, with a corresponding increase in equity. Information on the valuation of shares issued under the ESIP during the period is disclosed in Note 20.

Note 18: Reserves

Nature and purpose of reserves

Share based payments reserve

This reserve is used to record the value of equity benefits provided to employees, consultants and directors as part of their remuneration.

Options reserve

This reserve is used to record the value of options issued, other than share-based payments to directors, employees and consultants as part of their remuneration.

Foreign Currency Translation Reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Equity Reserve

The Equity reserve is used to record the acquisition of the non controlling interest by the Group and to record differences between the carrying value of non controlling interests and the consideration paid / received, where there has been a transaction involving non controlling interests that do not result in a loss of control.

The reserve is attributable to the equity of the parent.

Note 19: Accumulated losses

20 Share Based Payments

Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the year were as follows:

(i) Options issued in consideration for services

On 30 November 2010, the Company issued 2,950,000 options with an exercise price of 19.80 cents to employees as approved by then shareholders meeting held on 30 November 2010. There are no voting rights attached to the options and they may be exercised from 7 December 2011.

Fair value of options granted

The fair value at grant date of options issued is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The table below summarises the model inputs (post consolidation) for options granted during the period year ended 30 June 2011:

The expected price volatility is based on the historic volatility of the Company's share price in the market.

(ii) Shares issued under the Executive Share Incentive Plan (ESIP)

Executive Share Incentive Plan

Under the plan, eligible employees are offered shares in The Company at prices determined by the Board. The Board has the ultimate discretion to impose special conditions on the shares issued under the ESIP and can grant a loan to a participant for the purposes of subscribing for plan shares. Shares issued under loan facilities are held on trust for the benefit of the participant and will only be transferred into the participant's name once the loan has been fully repaid. ESIP participants receive all the rights associated with the ordinary shares.

Loans granted to participants are limited recourse and interest free unless otherwise determined by the Board. The loans are to be repaid via the application of any dividends received from the shares and/or the sale of the plan shares. Where the loan is repaid by the sale of shares, any remaining surplus on sale is remitted to the participant while any shortfall is borne by the Group.

During the reporting period, the Company issued the following shares under the ESIP:

1. 350,000 shares at 19.8 cents per share to Mr Robert Van der Laan, Chief Financial Officer, on 30 November 2010 after shareholder approval.

2. 350,000 shares at 19.8 cents per share to Mr Lindsay Cahill, Mine Services Manager, on 30 November 2010 after shareholder approval.

3. 500,000 shares at 19.8 cents per share to Mr Grant Button, Non-executive Director, on 30 November 2010 after shareholder approval.

4. 75,000 shares at 19.8 cents per share to Ms Theresa Miloseski, Administration Officer, on 30 November 2010 after shareholder approval.

5. 500,000 shares at 19.8 cents per share to Mr Robert Hair, Company Secretary, on 30 November 2010 after shareholder approval.

6. 350,000 shares at 19.8 cents per share to Mr Christian Kunze, Engineering Manager, on 30 November 2010 after shareholder approval.

7. 200,000 shares at 19.8 cents per share to Mr Andrew Nealon, Joint Company Secretary, on 30 November 2010 after shareholder approval.

8. 600,000 shares at 19.8 cents per share to Mr Ed Nealon, Non-Executive Chairman, on 30 November 2010 after shareholder approval.

The above shares vest as follows:

·; one third of shares vest after 12 months;

·; one third of shares vest after 24 months; and

·; one third of shares vest after 36 months.

If any time during the exercise period an employee ceases to be the employee, all options held by that employee will lapse one month after the employment end date.

Fair value of shares granted

Shares granted under the ESIP are accounted for as "in-substance" options due to the limited recourse nature of the loan between the employees and the Company to finance the purchase of ordinary shares. The fair value at grant date for the various tranches of shares issued under the ESIP is determined using a Black-Scholes model using the following model inputs:

Note 25: Cash flow information

Note 26: Annual Report and Accounts

The annual report and accounts of the Company are available on the Company's website at www.ferrumcrescent.com/reports.