Kefi Gold Regulatory News (KEFI)

 20 May 2015

KEFI Minerals Plc

("KEFI" or the "Company")

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

KEFI Minerals (AIM: KEFI), the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Democratic Republic of Ethiopia, is pleased to announce its final results for the year ended 31 December 2014.

2014 HIGHLIGHTS

· Tulu Kapi gold project, Ethiopia:

o Assumed 100% ownership of Tulu Kapi asset through acquisition of remaining 25% of KEFI Minerals (Ethiopia) Limited ("KME") for £1.5m in cash and shares - representing

o Overhauled development and production plan to focus on selective mining, and increased the life-of-mine production

o Undertook extensive site exploration resulting in independently verified updated JORC compliant Mineral Resource and Ore Reserve reporting

o Gained independent consultant verifications of all documentation to enable reactivation of Mining Licence Application ("MLA") - which had been suspended in mid-2013 by the previous owner of the asset

o Progressed project financing, including receiving headline indicative terms from several financial institutions

· Gold & Minerals Ltd Joint Venture ("G&M"), Saudi Arabia:

o Jibal Qutman:

§ Completed initial Preliminary Feasibility Study ("PFS") and draft MLA for review with G&M and the authorities

§ Drilling and trenching continued, resulting in increase in reported Resource, expansion of Mineralised Zone and identification of potential heap leach mine with lower capex

o Hawiah:

§ Hawiah Exploration Licence ("Hawiah EL") granted to KEFI's partner, Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR"), on behalf of G&M - the Company's second major licence in Saudi Arabia

§ Exploration work commenced with initial focus on a large Volcanic Hosted Massive Sulphide ("VHMS") target

POST-PERIOD HIGHLIGHTS

· Tulu Kapi, Ethiopia:

o Received Mining Licence, which is valid for a period of 20 years and fully permits the development and operation of the Tulu Kapi gold project

o Updated resource reporting: Indicated Resource of 18.8 Mt at 2.67 g/t Au for 1.62 Moz Au (JORC 2012) and Probable Ore Reserves of 15.4 Mt at 2.12 g/t Au for 1.05 Moz Au (estimated using JORC Code guidelines)

o Mine Plan and associated costs independently verified - representing accomplishment of key milestones towards finalisation of updated Definitive Feasibility Study ("DFS") to the standards required by mining project financiers

· Jibal Qutman, Saudi Arabia:

o Increased JORC Mineral Resource to 28.4 Mt at 0.80 g/t Au for 733,045 oz Au

o Received favourable metallurgical heap leach test work results

o Produced positive Preliminary Economic Assessment

Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals, said:

"We are extremely pleased with the progress that KEFI made in 2014. When we first invested in Tulu Kapi in December 2013, we were hopeful that this project would enable us to become a gold producer in a short space of time. Thanks to the hard work of our management team and all concerned, this potential has become a reality as we remain on track to transition to gold producer in 2017.

"We are also pleased with the significant progress and new discoveries that we've made in Saudi Arabia, with our Jibal Qutman and Hawiah projects expected to follow Tulu Kapi in short succession. We look forward to reporting on the momentum and milestones that we achieve in the remainder of 2015."

Enquiries:

Further information on KEFI Minerals is available at www.kefi-minerals.com 

KEFI Minerals plc

KEFI is the operator of two advanced gold development projects within the highly prospective Arabian-Nubian Shield, with an attributable 1.93Moz (95% of Tulu Kapi's 1.72Moz and 40% of Jibal Qutman's 0.73Moz) Au Mineral Resources (JORC 2012) plus significant resource growth potential. KEFI is targeting production at these projects to generate cash flows for further exploration and expansion as warranted, recoupment of development costs and, when appropriate, dividends to shareholders.

Expected milestones for the remainder of 2015 at Tulu Kapi include:

· Independently updated Definitive Feasibility Study for senior-secured finance purposes

· Formalisation of senior-secured financiersyndicate, agreement of final terms for project finance

· Full development funding and commencement of construction

In addition, during 2015 KEFI anticipates initiating a preliminary feasibility study on the planned heap leach mine at Jibal Qutman and submitting a Mining Licence Application for Jibal Qutman in Saudi Arabia through its joint venture company, Gold & Minerals Ltd.

KEFI in Ethiopia

KEFI has 95% ownership of the Tulu Kapi Mining Licence in western Ethiopia and is at an advanced stage in refining the development plan for the project, aimed at reducing the previously planned capital and operating expenditure. Detailed research has yielded encouraging results and has been summarised in recent Company announcements.

At the end of 2013, the Ethiopian Government improved the fiscal regime applying to the gold sector, and Tulu Kapi in particular. This included lowering the income tax rate for mining (to 25% from 35%); settling of repayment schedule for inherited VAT liability (over three years rather than up-front); the removal of VAT on future exploration drilling expenditure; lowering royalty on gold mining (to 7% from 8%); accelerating the depreciation of historical and future capital expenditure (over four years); and clarifying the workings of the Government's 5% free-carried interest so that it does not impede conventional project financing terms.

KEFI in the Kingdom of Saudi Arabia

In 2009, KEFI formed G&M in Saudi Arabia with local Saudi partner Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR"), to explore for gold and associated metals in the Arabian Shield. KEFI has a 40% interest in G&M and is the operating partner. To date, G&M has conducted preliminary regional reconnaissance and has had five exploration licences ("EL") granted, including Jibal Qutman and the recently granted Hawiah exploration licence that contains over 5km2 of outcropping gossans developed on VMS altered and mineralised rocks.

ARTAR, on behalf of G&M, holds 24 exploration licence applications that cover an area of approximately 1,484km2. ELs are renewable for up to three years and bestow the exclusive right to explore and to obtain a 30-year exploitation (mining) lease within the area.

The Kingdom of Saudi Arabia has instituted policies to encourage minerals exploration and development, and KEFI Minerals supports this priority by serving as the technical partner within G&M. ARTAR also serves this government policy as the major partner in G&M, which is one of the early movers in the modern resurgence of the Kingdom's minerals sector.

OPERATIONAL REVIEW

Democratic Republic of Ethiopia

Tulu Kapi gold project, Western Ethiopia

During the year, KEFI made tremendous progress with its Tulu Kapi gold project, including the overhaul of the development and production plan and the receipt of the requisite independent verifications to enable the granting of the Mining Licence in April 2015.

In 2014, KEFI also gained 100% ownership of Tulu Kapi through the acquisition, from Nyota Minerals Limited (the previous owner of the asset), of the remaining 25% of the issued share capital of KME, which holds the Tulu Kapi licence. The acquisition was for a consideration of £1.5 million comprised of £0.75 million in cash and the issue of 50 million new ordinary shares in KEFI. The acquisition provided KEFI with full control over project development and funding flexibility, which enabled the Company to implement the actions required to make Tulu Kapi an economically viable project.

KEFI has continued to significantly advance the project in 2015. The DFS is nearing completion and a substantial reduction in the previously estimated capital and operating expenditure has been achieved. A reduction in the processing rate to 1.2 Mtpa has significantly reduced the anticipated capital expenditure, increased the head grade of gold-bearing ore and improved estimated project returns.

In February 2015, better delineation of individual ore lodes provided the basis for increasing Tulu Kapi's Indicated Resource by 45% to 18.8 Mt at 2.67 g/t gold, containing 1.62 Moz. This was followed, in April 2015, with an updated Probable Ore Reserve estimate that included a high-grade portion of 12.0 Mt at 2.52 g/t gold, containing 0.98 Moz. This estimate reflects KEFI's envisaged semi-selective mining strategy that will utilise an elevated cut-off grade of 0.90 g/t gold to provide the ore for processing over the first ten years of the project production schedule in the DFS.

KEFI has been focused on achieving robust and financeable project economics in the context of current gold prices and capital markets. Key preliminary outcomes include:

· Anticipated capital expenditure required for Tulu Kapi reduced by more than 50% (compared with initial estimates) to $120 million

· Total gold production increased to approximately 960,000 oz over 13 years

· All-in Costs (including operating, capital and closure) have been reduced to $906/oz including the initial investment and $783/oz excluding the initial investment, much lower than industry averages

· After-tax NPV of $112 million assuming an 8% discount rate and gold price of $1,250/ounce

In April 2015, the Tulu Kapi Mining Agreement ("MA") between the Ethiopian Government and KEFI was formalised. Under the MA, the Company was granted a Mining Licence valid for a period of 20 years, along with all major permits for the development and operation of the Tulu Kapi mine.

In order to begin development of this high-value and low-capex asset, KEFI has been systematically progressing negotiations with project financiers. The targeted funding mix is for up to approximately $100 million senior-secured finance and the remainder from financing arrangements with project contractors and/or equity from investment institutions at the project or parent level. Contractors and financiers have been short-listed.

KEFI is working towards finalising, in Q3 2015, the full funding required for project development. This would enable construction to commence in late 2015, plant commissioning in late 2016 and gold production in 2017 as previously outlined.

Kingdom of Saudi Arabia

Jibal Qutman project, Saudi Arabia

At Jibal Qutman in Saudi Arabia, exploration and evaluation of several gold deposits progressed well over the course of 2014, with Mineral Resources totalling more than 730,000 oz of gold being identified (May 2015).

KEFI completed a PFS in 2014, which demonstrated a profitable carbon-in-leach ("CIL") operation, and subsequent drilling identified additional oxide gold mineralisation that is amenable to heap leach ("HL") processing. KEFI is continuing to explore Jibal Qutman with the aim of increasing oxide gold Mineral Resources from the current 287,000 oz. Preliminary pit shells at a price of $1,250/oz Au have been designed on the oxide resource indicating a potential open cut mineable resource of 6.6 Mt at 0.95 g/t Au for 201,600 oz Au.

The development of an open-pit, heap-leach gold operation is now being evaluated for a low-capex start-up that can be expanded in modular stages as further mineralisation is delineated. An internal preliminary assessment using 69% gold recovery and local costs suggests an operating cash cost of $597/oz on a 1.5 Mtpa heap leach mine.

Hawiah project, Saudi Arabia

In December 2014, the Company received confirmation that the 95km2 Hawiah EL had been granted to ARTAR, KEFI's partner, on behalf of the KEFI-operated G&M joint venture company. Exploration work commenced with initial focus on a large VHMS target. VHMS deposits are closely associated with submarine volcanic rocks and are major sources of Gold, Copper, Zinc, Lead and Silver. Testing will begin on a 4km-long gold mineralised gossan (surface-exposed iron-rich oxidized portion of the VHMS mineralisation). 

Post-period end, KEFI reported the results of a self-potential geophysical survey that was carried out over the southern half of the 6km-long gold mineralised system exposed at the surface (outcropping gossan structure), which identified an intense anomaly that suggests the possibility of a large metal-bearing body at depth.

OUTLOOK

The Company's focus is on completing the DFS for Tulu Kapi during Q2 2015, and, at the same time, securing the planned project financing to enable construction to commence in late 2015. As such, the milestones for Tulu Kapi for the remainder of 2015 are expected to include the following:

· Independently updated Definitive Feasibility Study for banking purposes

· Formalisation of bank syndicate, agreement of final terms for project finance

· Full development funding and commencement of construction

At Jibal Qutman, the results of recent exploration indicate the economic merit of development and, therefore, the Company intends to commence an updated Preliminary Feasibility Study on the heap leach mine in Q3 2015, which it expects to complete in mid-2016. This will coincide with the commencement of the processes for submitting a Mining Licence Application.

As a result, KEFI is on schedule for commencing development in 2015, commissioning in 2016 and production in 2017 at Tulu Kapi. This is expected to be complemented by progress at Jibal Qutman in Saudi Arabia, in particular, as well as at KEFI's other exploration targets. Consequently, the Board remains confident of delivering value to shareholders.

Consolidated statement of comprehensive income

Year ended 31 December

(All amounts in GBP thousands unless otherwise stated)

The Company has taken advantage of the exemption conferred by section 408 of Companies Act 2006 from presenting its own statement of comprehensive income. Loss after taxation amounting to GBP3.2 million (2013: GBP2.5 million) has been included in the financial statements of the parent company.

The notes are an integral part of these consolidated financial statements.

Statements of financial position

31 December

(All amounts in GBP thousands unless otherwise stated)

The notes are an integral part of these consolidated financial statements.On 19 May 2015, the Board of Directors of KEFI Minerals Plc authorised these financial statements for issue.

Consolidated statement of changes in equity

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

The following describes the nature and purpose of each reserve within owner's equity:

Reserve Description and purpose

Share capital amount subscribed for share capital at nominal value

Share premium amount subscribed for share capital in excess of nominal value, net of issue costs

Share options reserve reserve for share options granted but not exercised or lapsed

Foreign exchange reserve cumulative foreign exchange net gains and losses recognized on consolidation

Accumulated losses cumulative net gains and losses recognized in the statement of comprehensive income, excluding foreign exchange gains within other comprehensive income

Non-controlling interest (NCI) the portion of equity ownership in a subsidiary not attributable to the parent company

The notes are an integral part of these consolidated financial statements.

Company statement of changes in equity

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

The following describes the nature and purpose of each reserve within owner's equity:

Reserve Description and purpose

Share capital amount subscribed for share capital at nominal value

Share premium amount subscribed for share capital in excess of nominal value, net of issue costs

Share options reserve reserve for share options granted but not exercised or lapsed

Accumulated losses cumulative net gains and losses recognized in the statement of comprehensive income

The notes are an integral part of these consolidated financial statements.

Consolidated statement of cash flows

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

The notes are an integral part of these consolidated financial statements.

Non-cash transactions

On 30 December 2013, the Company issued 107,081,158 shares of GBP0.01 at a price of GBP0.0185 per share as part of the consideration to acquire 75% of the share capital of KEFI Minerals (Ethiopia) Limited (note13.1).

On 5 September 2014, the Company issued 50,000,000 shares at GPB0.01 at a price of GBP0.015 per share as part of the consideration to acquire the 25% minority in its subsidiary KEFI Minerals (Ethiopia) Limited (note13.1).

Company statement of cash flows

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

The notes are an integral part of these consolidated financial statements.

Non-cash transactions

See Consolidated Cash Flow StatementNotes to the consolidated financial statements

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

1. Incorporation and principal activities

Country of incorporation

KEFI Minerals Plc (the "Company") was incorporated in United Kingdom as a public limited company on 24 October 2006. Its registered office is at 27/28, Eastcastle Street, London W1W 8DH.

Principal activities

The principal activities of the Group for the year were:

· To explore for mineral deposits of precious and base metals and other minerals that appear capable of commercial exploitation, including topographical, geological, geochemical and geophysical studies and exploratory drilling.

· To evaluate mineral deposits determining the technical feasibility and commercial viability of development, including the determination of the volume and grade of the deposit, examination of extraction methods, infrastructure requirements and market and finance studies.

· To develop mineral deposits and market the metals produced.

2. Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the period presented in these financial statements unless otherwise stated.

Basis of preparation and consolidation

The Company and the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. They comprise the accounts of KEFI Minerals Plc and all its subsidiaries made up to 31 December 2014. The Company and the consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments.

Going concern

The Directors have formed a judgment at the time of approving the financial statements that there is a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future.

The financial information has been prepared on the going concern basis, the validity of which depends principally on the discovery of economically viable mineral deposits and the availability of subsequent funding to extract the resource or alternatively the availability of funding to extend the Company's and Group's exploration activities. The financial information does not include any adjustments that would arise from a failure to complete either option.

Functional and presentational currency

Items included in the Group's financial statements are measured using the currency of the primary economic environment in which the entity operates ("the functional currency") which for the Company is British Pounds (GBP). The financial statements are presented in British Pounds (GBP).

Foreign currency translation

(1) Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss in the statement of comprehensive income.

(2) Foreign operations

On consolidation, the assets and liabilities of the consolidated entity's foreign operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly in which case they are recorded at the actual rate. Exchange differences arising, if any, are recognized in the foreign currency translation reserve and as a component of other comprehensive income, and recognized in profit or loss on disposal of the foreign operation.

Revenue recognition

The Group had no sales/revenue during the period under review.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

2. Accounting policies (continued)

Property plant and equipment

Property plant and equipment are stated at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition less depreciation.

Depreciation is calculated using the straight-line method to write off the cost of each asset to their residual values over their estimated useful life. The annual depreciation rates used are as follows:

Acquisitions and goodwill

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are written off to the statement of comprehensive income. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognized at their fair values at the acquisition date. Where the Group acquires a subsidiary for less than the fair value of its assets and liabilities, this results in negative goodwill which is recognized in profit and loss.

Purchased goodwill is capitalized and classified as an asset on the statement of financial position. Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized.

Goodwill is reviewed for impairment on an annual basis. When the directors consider the initial value of the acquisition to be negligible, the goodwill is written off to the statement of comprehensive income immediately. Trading results of acquired subsidiary undertakings are included from the date of acquisition.

Goodwill is deemed to be impaired when the present value of the future cash flows expected to be derived is lower than the carrying value. Any impairment is charged to the statement of comprehensive income immediately.

Interest in jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which each venturer has joint control are referred to as jointly controlled entities. The results and assets and liabilities of jointly controlled entities are included in these financial statements for the period using the equity method of accounting.

Finance costs

Interest expense and other borrowing costs are charged to the statement of comprehensive income as incurred.

Tax

The tax payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Tax is payable in the relevant jurisdiction at the rates described in note 8.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognized for all taxable differences and deferred tax assets are recognized to the extent that taxable profits will be available against which deductible temporary differences can be utilized. The amount of deferred tax is based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities, using tax rates that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.

Investments

Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognized as an expense in the period in which the impairment is identified, in the Company accounts. These investments are consolidated in the Group accounts.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

2. Accounting policies (continued)

Exploration costs

The Group has adopted the provisions of IFRS 6 "Exploration for and Evaluation of Mineral Resources".

Exploration, evaluation and development expenditure, including acquisition costs of licences, in respect of each identifiable area of interest is expensed to the statement of comprehensive income as incurred, until the point at which development of a mineral deposit is considered economically viable.

Once the Board decides on the development of a project, development expenditure will be capitalized as incurred and amortized over the estimated useful life of the area according to the rate of depletion of the economically recoverable reserves or over the estimated useful life of the mine, if shorter.

The directors consider that the stage of development of its Licence areas in Saudi Arabia has not yet met its criteria for capitalization. Capitalized development costs for the Group's project in Ethiopia have been recognized on acquisition, and will continue to be capitalised since this date, in accordance with IFRS 6.

A regular review will be undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated capitalized costs in relation to an abandoned area of interest will be written off in full against profit in the year in which the decision to abandon the area is made. Capitalized development expenditure will be amortized from the date at which production commences on a unit of production basis over the lifetime of the ore reserves for the area to which the costs relate.

Share‑based compensation benefits

IFRS 2 "Share‑based Payment" requires the recognition of equity‑settled share‑based payments at fair value at the date of grant and the recognition of liabilities for cash‑settled share‑based payments at the current fair value at each statement of financial position date. The total amount expensed is recognized over the vesting period, which is the period over which performance conditions are to be satisfied.

The fair value is measured using the Black Scholes pricing model. The inputs used in the model are based on management's best estimate, including consideration of the effects of non-transferability, exercise restrictions and behavioural considerations.

Financial instruments

Financial assets at amortized cost

Loans and receivables are recognized when the Group becomes party to the contractual provisions of the financial instrument. Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include available for sale financial assets. Subsequent to initial recognition, when a financial asset is designated as such on initial recognition, it is classified as held at fair value through profit or loss. Assets other than held for trading are designated at fair value through profit and loss when the Group manages the holdings and makes purchase and sale decisions based on fair value assessments and documented risk management and investment strategies. Attributable transaction costs and changes in fair value are recognized in profit or loss.

Financial liabilities - equity

Financial liabilities are recognized when the Group becomes party to the loan. Financial liabilities represent trade payables and are initially measured at fair value and subsequently at amortized cost.

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand with an original maturity date of less than three months.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

3. Financial risk management

Financial risk factors

The Group is exposed to market risk (interest rate risk and currency risk), liquidity risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below:

Market risk - Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's management monitors the interest rate fluctuations on a continuous basis and acts accordingly.

At the reporting date the interest rate profile of interest-bearing financial instruments was:

Sensitivity analysis

An increase of 100 basis points in interest rates at 31 December 2014 would have increased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. For a decrease of 100 basis points there would be no impact on profit and other equity.

Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the functional currency of the entity.

The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Euro, Turkish Lira, US Dollar, Ethiopia ETB and Saudi Arabian Riyal. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

Sensitivity analysis

A 10% strengthening of the British Pound against the following currencies at 31 December 2014 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening of the British Pound against the relevant currency, there would be an equal and opposite impact on the loss and equity.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

3. Financial risk management (continued)

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.

The Group's contractual cash flows for its financial liabilities are all due within 3 months or less. In January 2014 agreement was made with the Ethiopian tax authorities to pay the VAT over a period of three years (principal and interest).

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. This is done through the close monitoring of cash flows.

The capital structure of the Group consists of cash and cash equivalents of GBP640,000 (2013: GBP3,279,000) and equity attributable to equity holders of the parent, comprising issued capital of GBP12,352,000 (2013: GBP8,535,000), reserves of GBP9,195,000, (2013: GBP8,298,000) and accumulated losses of GBP14,389,000 (2013: GBP10,062,000). The Group does not use derivative financial instruments and has no long term debt facilities.

Fair value estimation

The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date.

Available for sale financial assets are classified as Level 1 within the fair value hierarchy, except for Ethiopian Government bonds, which are classified as Level 2. Level 1 items are derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 items are derived from inputs other than quoted prices included within Level 1 that are observable for the assets either directly or indirectly.

Other financial assets and liabilities are short term and their carrying value is considered to approximate to their fair value.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

3. Financial risk management (continued)

The Group used a variety of methods, such as estimated discounted cash flows, and makes assumptions that are based on market conditions existing at the statement of financial position date.

The nominal value less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments.

4. Use and revision of accounting estimates and judgements

The preparation of the financial report requires the making of estimations and assumptions that affect the recognized amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Significant judgements include:

Going concern

The going concern presumption depends principally on the discovery of economically viable mineral deposits and the availability of subsequent funding to extract the resource or alternatively the availability of funding to extend the Company's and Group's exploration activities.

Significant estimates include:

Fair value of acquisitions

The 'acquisition method', which generally requires assets acquired and liabilities assumed to be measured at their fair values at the acquisition date. Fair value estimates are required. In calculating the fair value estimates of net identifiable net assets on acquisition significant judgements and estimates are required.

Share based payments

In calculating the fair value at the grant date, the Black Scholes model requires us to estimate the inputs to this model, in particular in respect of volatility. This assessment is based on historical share price movements assuming these will continue into the future.

Impairment review of asset carrying values

Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular year. Where the recoverable amounts of Group cash generating units are assessed by analyses of discounted cash flows, the resulting valuations are particularly sensitive to changes in estimates of long term commodity prices, exchange rates, operating costs, the grouping of assets within cash-generating units and discount rates.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

5. Operating segments

The Group has only one distinct operating segment, being that of mineral exploration. The Group's exploration activities are located in the Kingdom of Saudi Arabia (through the jointly controlled entity), Ethiopia and its administration and management is based in Cyprus.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

6. Expenses by nature

The Group's stages of operations in Saudi Arabia as at the year-end and as at the date of approval of these financial statements have not yet met the criteria for capitalization of exploration costs. Direct development costs have been capitalized for the operations in Ethiopia.

Directors' remuneration is disclosed in note 21.1

The Company is resident in Cyprus for tax purposes.

A deferred tax asset of GBP1,056,460 (2013: GBP730,709) has not been accounted for due to the uncertainty against future recoverability.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

9. Tax (continued)

Cyprus

The corporation tax rate is 12.5%. Under certain conditions interest income may be subject to defence contribution at the rate of 15%. In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 20% for the tax year 2013 and 17% for 2014 and thereafter. Due to tax losses sustained in the year, no tax liability arises on the Company. Under current legislation, tax losses may be carried forward and be set off against taxable income of the five succeeding years. As at 31 December 2014, the balance of tax losses which is available for offset against future taxable profits amounts to GBP7,203,371 (2013: GBP6,220,480).

Bulgaria

Mediterranean Minerals (Bulgaria) EOOD, the 100% subsidiary of the Company, is resident in Bulgaria for tax purposes. The corporation tax rate is 10%. Due to tax losses sustained in the period, no tax liability arises on the Mediterranean Minerals (Bulgaria) EOOD. Under current legislation, tax losses may be carried forward and be set off against taxable income of the following five years. As at 31 December 2014, the balance of tax losses which is available for offset against future taxable profits amounts to GBP171,146 (2013: GBP166,250).

Turkey

Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket (Doğu Akdeniz Mineralleri), the 100% subsidiary of Mediterranean Minerals (Bulgaria) EOOD, and ultimately 100% subsidiary of the Company, is resident in Turkey for tax purposes. The corporation tax rate is 20%. Under local tax legislation, exploration costs are can only be set off against income from mining operations. Tax losses may be carried forward and be set off against taxable income of the five succeeding years As at 31 December 2014, the balance of exploration costs that is available for offset against future income from mining operations amount to GBP908,198 (2013: GBP871,424).

Ethiopia

KEFI Minerals Ethiopia Limited is subject to other direct and indirect taxes in Ethiopia through its foreign operations. The mining industry in Ethiopia is relatively undeveloped. As a result, tax regulations relating to mining enterprises are evolving. There are transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

During 2013, the House of People's Representatives passed an amendment to the Mining Income Tax Proclamation, subsequent to the end of the Financial Year, reducing income tax from 35% to 25% and had received an initial draft of proposed amendments to the Mining Proclamation, which includes a reduction in royalty on gold production from 8% to 7%.

10. Loss per share

The calculation of the basic and fully diluted loss per share attributable to the ordinary equity holders of the parent is based on the following data:

The effect of share options and warrants on losses per share is anti-dilutive.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

11. Property, plant and equipment

The above property, plant and equipment is located in Turkey and Ethiopia.

The Company has no significant property, plant and equipment.

Notes to the consolidated financial statements (continued)

Year ended 31 December 2014

(All amounts in GBP thousands unless otherwise stated)

12. Intangible assets