Kemin Resources Regulatory News (KEM)

25 September 2014

Kemin Resources plc("Kemin" or the "Company")

Interim report - Six months to 30 June 2014

Kemin (AIM:KEM), the molybdenum and tungsten exploration and development company with substantial interests in Kazakhstan, announces its unaudited interim results for the six month period ended 30 June 2014.

Highlights:

· Reserves and resources to be restated according to internationally accepted JORC standards. International consultants Venmyn Deloitte are expected to complete an independent Competent Person's Report (CPR) and Definitive Feasibility Study (DFS) for the Drozhilovskoye and Smirnovskoye deposits during 2015;

· Completion of a £2.05m fundraising in June 2014 to advance the Group's work programme;

· Smirnovskoye and Drozhilovskoye deposits have been approved for inclusion in the State Programme on Forced Industrial-Innovative Development (SPFIID).

· Investigation into possibility of a one million tonne per year 'pilot processing plant' as a quick route to cashflow;

· Additional metallurgical test work completed, which focused on maximising tungsten recovery to improve financial outcomes.

Commenting on the results, Sanzhar Assaubayev, CEO of Kemin Resources said:

"It has been a very important six months for Kemin during which time the Board has had the opportunity to set a clear direction for the Group and the Kazakhstan Government has reaffirmed its support for the development of the Group's deposits. The results of the PFS have also confirmed our view of the financial viability of the projects.

"The move to internationally recognised JORC based reserves and resources and an independent CPR will, I believe, demonstrate the quality and potential of the Drozhilovskoye and Smirnovskoye deposits."

Kemin Resources Plc

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Kemin Resources Plc

Chief Executive Officer's Review

During the first six months of 2014, the Company continued to execute its strategy of preparing the Smirnovskoye and Drozhilovskoye deposits for development. To finance working capital, in June 2014, the Company completed a fundraising of £2.05m, gross, via a placement of 22,804,310 new ordinary shares, through JSC Visor Capital, a Kazakhstan focused investment bank. In addition, the Company continues to benefit from the support being provided by Amrita Investments Limited, which has provided a facility to draw funding to meet liabilities as they fall due. Further details are provided in the notes to the interim statements.

Following the announcement of the successful outcomes of the Pre-Feasibility Study ("PFS") in December 2013, additional work as identified in the PFS has been finalised. After discussions with consulting company Project XXI SG LLP ("Project XXI"), the Board concluded that it would be advantageous to carry out the additional work identified as it would have an impact on improving the economics of the Drozhilovskoye and Smirnovskoye deposits. This work has been completed by two Institutes in Kazakhstan with the objective of better understanding the metallurgical extractive processes to achieve the maximum value of the tungsten minerals contained within both deposits. The Management considered this to be an important step prior to commencing the Definitive Feasibility Study ("DFS") on the two deposits.

Further, the Board decided, prior to commencing work on the DFS, to upgrade the resource and reserve estimates of both the Drozhilovskoye and Smirnovskoye deposits into a JORC compliant estimate using Venmyn Deloitte. They will also prepare the independent Competent Person's Reports ("CPR") for both deposits.

As part of the CPR process, Venmyn Deloitte will independently review the findings of Project XXI's work in order to avoid a duplication of costs and to shorten the time line for completion of the CPR for each deposit. Upon completion of each CPR, the intention is to advance both deposits to a DFS using the updated JORC reserve and resource estimates as the basis for the study. The CPR is due to be completed in in Q1 2015 and the DFS is expected to be completed during 2015. It is expected that Amrita Investments Limited will support the company through this work programme if additional funding is required to complete the DFS.

With the support of the Government of Kazakhstan, the Board is continuing to review the option of a pilot processing plant and mine of 1 million tonne per annum ("Mtpa") capacity as an initial early, quick start, investment option prior to the major investment required at the 5Mtpa operation at Drozhilovskoye and then Smirnovskoye. This provides a unique opportunity to:

· Establish a market presence for the mine outputs;

· Establish a customer base;

· Define an efficient logistics chain to customers.

Venmyn Deloitte's scope includes assisting in identifying a mineral reserve base within the deposit that would maximize this quick start opportunity at the higher grade Drozhilovskoye deposit with the more favourable existing infrastructure. The Group is well placed at Drozhilovskoye in terms of the approvals and permitting process to achieve this quick start option, if this is seen as creating an overall positive impact to Kemin.

Kemin is pleased to report that the Smirnovskoye and Drozhilovskoye deposits have been approved for inclusion in the State Programme on Forced Industrial-Innovative Development (SPFIID). These assets have been identified as strategic mineral developments for Kazakhstan, and the Government will:

· Build infrastructure to connect Kemin's planned processing plant to the Bukhara-Ural gas pipeline, and will provide electricity, water and transportation networks

· Ensure regulatory approvals are issued in a timely manner.

Additionally, the Government of Kazakhstan has enacted broad legislative changes that will further increase state support for key mineral development projects including:

· Income tax exemptions for 10 years;

· Land tax exemptions for 10 years;

· Property tax exemptions for 8 years;

· Reimbursement of up to 30 per cent of project capital expenditures;

· Guarantees to keep tax rates and state tariffs unchanged for period of 10 years; 

· Policies to allow investors to hire foreign staff for the period of construction without applying for labor quotas.

The impact of this support by the Government of Kazakhstan and the proposed legislative changes has further strengthened the investment case for both deposits and considerably reduced the risk and should aid the Company in receiving the necessary development permits in a timely manner. This is an important step forward for both deposits development prospects.

In summary, work during the next six months will be aimed at providing the broader financial community with a greater understanding and increased confidence in Kemin's assets by upgrading to a JORC compliant reserve and resource statement and will be followed up by independent CPRs in 2015. Good progress has been made in obtaining approval and permitting process with the support of the Government of Kazakhstan and this is expected to continue in the current period.

Sanzhar Assaubayev

CEO Kemin Resources Plc

Kemin Resources Plc

Notes to the consolidated financial information

Six months ended 30 June 2014

1 Statutory accounts

The interim financial results for the period ended 30 June 2014 are unaudited. The financial information contained within this report does not constitute statutory accounts as defined by Section 434(3) of the Companies Act 2006.

2 Basis of preparation

Kemin Resources Plc is registered and domiciled in England and Wales.

The consolidated interim financial information has been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU.

This interim financial information of the Company and its subsidiaries ("the Group") for the six months ended 30 June 2014 has been prepared on a basis consistent with the accounting policies set out in the Group's consolidated annual financial statements for the year ended 31 December 2013. It has not been audited, does not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 31 December 2013. The 2013 annual report and accounts, received an unqualified opinion from the auditors, and there was no note by way of emphasis, it did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006, have been filed with the Registrar of Companies. As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Reporting'.

The financial information is presented in British Pounds and has been prepared under the historical cost convention.

The same accounting policies, presentation and method of computation are followed in this consolidated financial information as were applied in the Group's latest annual financial statements except that in the current financial year, the Group has adopted a number of revised Standards and Interpretations. However, none of these have had a material impact on the Group.

In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

Going Concern

As at 30 June 2014, the Group had cash in hand of £1.9m (2013:£17,000).

Under a loan agreement dated 10 April 2013, Amrita Investment Limited (a company incorporated in the British Virgin Islands and ultimately controlled by the Assaubayev family) made available a facility of £7,000,000 on an unsecured basis. This was to be applied towards the Group's working capital requirements and the settlement of debts due of the Joint Venture Kazakhstan-Russian Mining Company LLP (KMRC).

The loan bears interest at LIBOR+5%. The loan is repayable on the earlier of the fifth anniversary of the agreement or of the fundraising completion date in respect of any equity fundraising which raises at least £5,000,000, (before expenses). At this point the Lender may chose to convert the loan in the ordinary shares of the Company at the conversion rates stipulated within the contract.

The Directors are confident that the Group has sufficient resources available to meet its liabilities as they fall due and its working capital requirements going forward and have therefore prepared these financial statements on a going concern basis.

Kemin Resources Plc

3 Loss per ordinary share

The calculation of basic and diluted earnings per share from continuing operations is based upon the retained loss for the financial period, six months to 30 June 2014 of £470,000, (30 June 2013 £2,699,000; 31 December 2013 £3,099,000).

The weighted average number of ordinary shares for calculating the basic loss per share and diluted loss per share for the six months to 30 June 2014 is 153,288,644, (30 June 2013 148,320,720 ; 31 December 2013 150,483,730).

4 Functional and presentational currency

The Group has prepared its financial statements in British Pounds. The functional currency of Joint Venture Kazakhstan-Russian Mining Company LLP (KRMC) trading company in Kazakhstan is the Kazakhstan Tenge ("KZT"). The functional currency of Kemin Resources is Pound Sterling. The rates used to convert Kazakhstan Tenge into British Pounds in these financial statements are as follows:

The currency translation movement on the Group's net investment in its subsidiaries in Kazakhstan is taken to reserves.

The financial statements of all Group companies are translated into British Pounds whereby their income statements are translated at the average rate of exchange for the year and their statement of financial position at the closing rate of exchange at the reporting date. Currency translation adjustments arising on the restatement of opening net assets, together with adjustments arising from the retranslation of intergroup and long term foreign currency loans to subsidiaries, are taken direct to reserves.

Transactions denominated in currencies other than the functional currency of a Company are recorded at the rate of exchange prevailing at the date of the transaction. Monetary assets and liabilities are translated into the relevant functional currency at the closing rates of exchange at the reporting date. Exchange differences arising from the restatement of monetary assets and liabilities at the closing rate of exchange at the reporting date or from the settlement of monetary transactions at a rate different from that at which the asset or liability was recorded are dealt with through the income statement.

Kemin Resources Plc

5 Events after the balance sheet date

There were no significant transactions after the reporting date.

6 Approval of interim group financial statements

The interim group financial statements for the six months to 30 June 2014 were approved by the directors on 24 September 2014.

7 Ultimate Controlling Party

The controlling party of Kemin Resources plc is Bergfolk Corporation, by virtue of the fact that it owns 76% of the voting rights in the company. The ultimate controlling party is the Assaubayev family.

Kemin Resources Plc

Company Details

Directors Sanzhar Assaubayev, Chief Executive Officer

Kanat Assaubayev, Chairman

Ashar Qureshi, Non-Executive Vice-Chairman

Aidar Assaubayev, Non-Executive Director

William Trew, Non-Executive Director

Ken Crichton, Non-Executive Director

Neil Herbert, Non-Executive Director

Secretary Rajinder Basra

Registered office 28 Eccleston Square

London

SW1V 1NZ

Nominated adviser and joint broker Strand Hanson Limited

26 Mount Row

Mayfair

London

W1K 3SQ

Telephone: +44 (0) 20 7409 3494

Joint broker Peat & Co

118 Piccadilly

London

W1J 7NW

Auditors to the group BDO LLP

55 Baker Street

London

W1U 7EU

BDO Kazakhstanaudit, LLP

56 "A", micro region 6 Almaty city

050036

Kazakhstan

Solicitors Gowlings (UK) LLP

15th Floor

125 Old Broad Street

London

EC2V 5EH

Registrars Neville Registrars

18 Laurel Lane

Halesowen

West Midlands

B63 3DA