Oxus Gold Plc Regulatory News (OXS)

30 May 2012

Oxus Gold Plc

Final Results

Oxus Gold plc ("Oxus" or the "Company") announces its Final Results for the year ended 31 December 2011. The Company's Annual Report and Accounts and Notice of Annual General Meeting will be posted to shareholders on 1 June 2012 and will be available on the Company's website (www.oxusgold.co.uk) shortly.

For further information, please contact:

CHAIRMAN'S STATEMENT

When preparing my statement for 2011, I realised that due to our very well published dispute with the Uzbek Government which had caused Oxus to delay publication of its 2010 Annual Report until November 2011, my report for that year also covered most of 2011.

Since the publication of the 2010 Annual Report, the two most important highlights worth mentioning are:

1) Negotiating and finalising an agreement with a funder to fund all our legal costs pertaining to both the international arbitration in relation to the expropriation of our investments in Amantaytau Goldfields (AGF) and the Khandiza deposit, and the English court case relating to the disputed amount claimed by the Uzbek Ministry of Finance. Details of this funding agreement were disclosed in an RNS published on 1 March 2012.

2) The majority of convertible loan noteholders have agreed in principle to postpone the conversion date of their loan notes until the award and settlement of the arbitration claim, thus demonstrating their support of the company. They have also agreed in principle to capitalise the interest due on the notes until settlement of the claim and would consider taking shares in the company on the basis of a pre-determined formula.

This will go a long way to assisting the company in further preserving its limited cash resources. In addition, Oxus has during the period covered by my report continued to reduce its overhead cost wherever possible, and has reduced overheads even further during 2012. This continues to be one of the priorities of management.

The major portion of management's time during the past year has been to accumulate and provide our lawyers with the detailed information required to substantiate our claim for compensation both in respect of AGF and Khandiza.

Oxus also continues at every opportunity to apply the appropriate pressure to push for the release of Mr Said Ashurov, a former staff member who was arrested and imprisoned in March 2011 by the Uzbek authorities on what I believe was a fabricated charge in order to apply pressure on Oxus to liquidate AGF with no claim for compensation.

I remain extremely confident that your company will be awarded fair compensation by the Arbitration Tribunal for its investments in both AGF and Khandiza, and I will continue to take whatever steps are required to maximise such compensation for the benefit of all Oxus stakeholders.

I would like to thank all the Oxus staff for their hard work and dedication shown to the company during these difficult times, and the shareholders for their continued support and understanding during the 2011 financial year.

Richard Shead

Executive Chairman

29 May 2012

FINANCIAL REVIEW

In the year ended 31 December 2010, the Group accounted for its joint venture, Amantaytau Goldfields ("AGF"), using equity accounting. The Group is currently in dispute with the Government of Uzbekistan and is seeking appropriate compensation for its 50% share in AGF via a negotiated settlement or international arbitration. The Company has commenced international arbitration proceedings against the Uzbek Government and has included the loss of the Khandiza base metals project in 2006 within the claim (the "proceedings"). For the year ended 31 December 2011 the Group has accounted for the investment in AGF as an available-for-sale ("AFS") financial asset under IAS 39 Financial Instruments: Recognition and Management, recognising the loss of joint control of the investment.

Although the outcome of the proceedings is uncertain, compensation sought from the proceedings exceeds the book value of the AGF and Khandiza assets. Accordingly no provision is considered necessary against the carrying value of the AGF investment. In addition, the carrying value of Khandiza, which was fully provided against in 2008, has been reinstated as we are also now seeking to recover this as a result of the proceedings.

In January 2011 the Uzbek shareholders in AGF agreed in principle to acquire the Group's 50% shareholding in AGF. In February 2011 the Group submitted a detailed offer-for-sale to the Uzbek shareholders of AGF. To date no reply has been received to the offer-for-sale. Subsequently AGF was subjected to an extensive audit of its financial and economic activities by an audit commission appointed by the Uzbek Government. This resulted in the Group becoming unable to manage the operational affairs of AGF and a declaration of force majeure in March 2011.

During the year the Group notified the Uzbek Government that it would revert to international arbitration if the dispute could not be settled amicably and on 31 August 2011 the Group commenced international arbitration proceedings against the Uzbek Government in order to seek appropriate compensation. The Group has also included the loss of the Khandiza base metals project in 2006 within the proceedings. The Uzbek Government is challenging the jurisdiction of the arbitration on the basis that the Group's investment in AGF was not protected under the UK - Uzbekistan Bilateral Investment Treaty although, based on legal advice, the Group believes that the objections will be dismissed and that the claim will proceed according to its merits.

Since March 2011 the Group's access to the accounting records, financial information and production data of AGF has been severely restricted and this in turn disrupted the Group's ability to complete consolidated accounts for the years ended 31 December 2010 and 31 December 2011. These restrictions have also impaired the Group's ability to manage AGF's operations and the board have concluded the Group no longer has joint control over AGF.

As a direct consequence of the loss of joint control the Group's share of AGF's profit and net assets for both of the years ended 31 December 2010 and 31 December 2011 is unaudited. The information included within the financial statements is based on management and other accounting information provided by AGF, and reviewed and checked by the Group's accounting personnel, prior to the commencement of the dispute (see note 22 to the financial statements).

RESULTS FOR THE YEAR

The Group reports a profit for the year of $22.6 million (5.41 cents per share) against a loss of $3.70 million (0.93 cents per share) for the year ended 31 December 2010. The profit for the year is after crediting $28.46 million (2010: $nil) in respect of the reversal of the impairment of the Khandiza project, which was provided against in 2008, but is now included in the arbitration proceedings and considered by the directors to be recoverable. The results do not include the Group's 50% share of AGF's profit or loss prior to the declaration of force majeure as the necessary financial records for this period have not been made available. The profit is also after deducting arbitration expenses of $1.96 million (2010: $nil) and finance expenses of $1.6 million (2010: $1.9 million).

Total Group assets increased to $76.70 million (2010: $56.79 million), including cash and cash equivalents of $1.70 million (2010: $6.70 million). This increase is largely due to the reinstatement of the carrying value of Khandiza.

CORPORATE ACTIVITIES

During the year the Company issued 4,395,647 new ordinary shares, representing capitalised fees and salaries of directors and senior management. At 31 December 2011 the total number of shares in issue was 418,816,103. Since the year-end a further 765,315 new ordinary shares have been issued, representing capitalised fees and salaries of directors, senior management and advisers. As at 1 May 2012 the total number of shares in issue was 419,581,418.

The Ministry of Finance of the Republic of Uzbekistan is claiming $10.84 million from the Company in respect of the AGF Phase 2 Project Development Fund (the "Fund") and has obtained a judgment in its favour in the Uzbek courts, which it is seeking to enforce in the English courts. The Company is vigorously defending the claim and considers that the Fund is no longer payable. The circumstances surrounding the creation of the Fund also form part of the Group's claim in arbitration against the Uzbek Government.

In May 2008 the Company issued convertible loan notes in the principal amount of $18.5 million. In January 2010 the notes were restructured such that they are convertible at 12p per share, earn interest at UK LIBOR + 3% per annum, and are repayable, if not converted, in May 2013. In November 2010 $3 million in principal amount of notes were converted. If all the remaining notes are converted the maximum number of new ordinary shares that would be issued is 80,729,166. The Company is currently in discussion with the majority of noteholders with a view to deferring interest payments and the repayment date until such time as the proceedings against the Uzbek Government have been settled.

At 31 December 2010 the Company owed Nedbank $2.5 million against a $20 million corporate loan facility. During the year this amount was repaid in full.

The directors continue to undertake appropriate measures in order to preserve cash until such time as the Group's operations are fully funded and the dispute with the Uzbek Government has been resolved.

On 29 February 2012 the Company announced that it had entered into a litigation funding arrangement by which the funder has agreed to pay the Group's legal costs on a non-recourse basis in relation to the international arbitration proceedings against the Uzbek Government and the action brought by the Ministry of Finance in the English courts. The Company continues to have complete control over the conduct of the proceedings, and continues to have the right to negotiate a settlement, discontinue proceedings, pursue the proceedings to trial and take any action considered appropriate to enforce judgment. The Company has given certain warranties and covenants to the funder and has agreed to pay to the funder a material portion of any final settlement of the arbitration claim. Such payment will only be payable upon a final settlement of the claim and the amount of payment is dependent upon a number of variables including the value of any settlement and the length of time taken to reach a settlement. The funder and the Company both retain the right, under certain circumstances, to discontinue the funding arrangements.

At 22 May 2012, the Group's cash resources stood at approximately $670,000, with ongoing expenditure primarily related to overheads.

BOARD OF DIRECTORS

On 3 February 2011 Miradil Djalalov and James McBurney resigned as non-executive directors. On 3 March 2011 Richard Wilkins resigned as Finance Director, but continues in the role of Company Secretary.

The board would like to express its gratitude to Miradil Djalalov, James McBurney and Richard Wilkins for their respective services to the Group.

ANNUAL GENERAL MEETING

The Company's twelfth Annual General Meeting will be held at the offices of Fairfax I.S. PLC, 46 Berkeley Square, London W1J 5AT on 25 June 2012 at 11.00 a.m.

DIRECTORS' REPORT

The directors present their report together with the financial statements for the year ended 31 December 2011.

PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS DEVELOPMENTS

During the period under review, the principal activities of the Company and its subsidiary companies ("the Group") comprised the investment in Amantaytau Goldfields ("AGF") in Uzbekistan.

In January 2011 the Uzbek shareholders in AGF agreed in principle to acquire the Group's 50% shareholding in AGF. In February 2011 the Group submitted a detailed offer to the Uzbek shareholders of AGF. To date no reply has been received to the offer and instead AGF was subjected to an extensive audit of its financial and economic activities by an audit commission appointed by the Uzbek Government. This resulted in the Group becoming unable to manage the operational affairs of AGF and a declaration of force majeure in March 2011. On 31 August 2011 the Group commenced international arbitration proceedings against the Uzbek Government in order to seek appropriate compensation. The Group has also included the loss of the Khandiza base metals project in 2006 within the proceedings. Since March 2011 the Group's access to the accounting records, financial information and production data of AGF has been severely restricted. As a result, the Group's share of AGF's profit and net assets for the years ended 31 December 2010 and 2011 remain unaudited.

Compensation sought from the proceedings exceeds the book value of the AGF and Khandiza assets. Accordingly no provision has been made in these financial statements against the carrying value of the AGF assets. In addition, the carrying value of Khandiza, which was fully provided against in 2008, has been reinstated.

Further information on the activities of the Group and a review of business developments are included in the Chairman's Statement and the Financial Review.

The Company's shares are quoted on the Alternative Investment Market ("AIM") of the London Stock Exchange, but trading in the shares was suspended on 29 June 2011 at the request of the Company, pending the publication of the audited financial statements for the year ended 31 December 2010 and the unaudited interim financial statements for the six month period ended 30 June 2011. Trading in the shares was restored on 14 November 2011.

RESULTS AND DIVIDEND

The results for the year are set out in the Consolidated Statement of Comprehensive Income.

The directors are not recommending the payment of a dividend in respect of the year under review (2010: $nil).

RECLASSIFICATION OF INVESTMENTS IN AGF

For the year ended 31 December 2011 the Group has accounted for the investment in AGF as an available-for-sale financial asset under IAS 39 Financial Instruments: Recognition and Management, to reflect the loss of joint control over the investment triggered by the declaration of force majeure.

DIRECTORS AND THEIR INTERESTS

The directors who served during the year (unless stated otherwise) were:

Richard Wilkins continues to serve as company secretary.

On 22 May 2012 the directors' interests in the equity share capital of the Company were:

In accordance with the Company's Articles of Association at least one third of the directors must retire by rotation at each Annual General Meeting, and they may stand for re-appointment at the Meeting. Additionally, a director appointed during the year must stand for re-appointment at the first Annual General Meeting after such appointment. Accordingly the director retiring by rotation is Richard Shead and, being eligible, has offered himself for re-appointment.

Richard Shead has a service contract with an unexpired term of more than one year. The contract commenced on 1 February 2009 and expires on 24 February 2014.

SHARE CAPITAL

Details of the Company's share capital are disclosed in note 27 to the Financial Statements.

On 22 May 2012 the Company was aware of the following holdings of 3% or more in the Company's issued share capital:

CORPORATE GOVERNANCE AND DIRECTORS' REMUNERATION

During the financial year to 31 December 2011 the directors sought, as far as is considered appropriate having regard to the size and nature of activities of the Company, to comply with the UK Corporate Governance Code applicable to listed companies. The board is assisted in this regard by an Audit and Independence Committee and a Remuneration and Nominations Committee, both of which are represented by Oliver Prior, the only non-executive director. Mr Prior liaises as appropriate with the Chairman of the Company and with the external auditors.

Details of the directors' remuneration are shown in note 8 to the Financial Statements.

EMPLOYEE CONSULTATION

The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through formal and informal meetings and employee representatives are consulted regularly on a wide range of matters affecting their current and future interests. The Group also operates an employee share option scheme.

The Group is committed to providing equal opportunity for individuals in all aspects of employment. The Group gives every consideration to applications for employment by disabled persons where the requirements of the job may be adequately filled by a disabled person. Where existing employees become disabled, it is the Group's policy wherever practicable to provide continuing employment under similar terms and conditions and to provide training, career development and promotion wherever appropriate.

CHARITABLE AND POLITICAL DONATIONS

The Company has created and has been sponsoring the Amantaytau Goldfields / Oxus Gold Scholarship Foundation. This sponsorship ceased from 30 June 2011 following the cessation of the Group's participation in the management of AGF. The Company contributed $15,500 to this sponsorship up to 30 June 2011.

The Company has also provided financial assistance from time to time to the Uzbek British Trade and Industry Council, a government body whose purpose is to further business ties between Uzbekistan and Great Britain, and the British Uzbek Society, a non-profit making organisation which serves to strengthen cultural and social ties between the two countries.

DIRECTORS' INDEMNITY

The Company has indemnified the directors and other officers of the Company against qualifying liabilities in accordance with the provisions of the Companies Act 2006.

PAYMENTS TO CREDITORS

The Group's policy is to settle the terms of payment with its suppliers when agreeing the terms of each transaction, either by accepting the suppliers' terms or by making the suppliers aware of alternative terms, and to abide by the agreed terms. Trade creditors of the Group at 31 December 2011 represented 32 days of annual purchases (2010: 28 days).

FINANCIAL RISK MANAGEMENT AND CAPITAL STRUCTURE

Details of the Group's policies towards financial risk management and its capital structure are disclosed in note 33 to the Financial Statements. The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Financial Review. The Group's principal risks are summarised in the going concern section below and further details given in note 1 to the Financial Statements.

GOING CONCERN

The Group has declared force majeure with regard to AGF and is seeking appropriate compensation through international arbitration. The Group has also included the loss of the Khandiza base metals project in 2006 within the proceedings. Compensation sought from the proceedings exceeds the book value of the AGF and Khandiza assets. However, the recoverability of the carrying value of the assets remains dependent on the outcome of the proceedings, which is uncertain (see note 1).

The Ministry of Finance of the Republic of Uzbekistan is claiming $10.84 million from the Company in respect of the AGF Phase 2 Project Development Fund (the "Fund") and has obtained a judgment in its favour in the Uzbek courts, which it is seeking to enforce in the English courts. The Company is vigorously defending the claim and considers that the Fund is no longer payable. The circumstances surrounding the creation of the Fund also form part of the Group's claim in arbitration against the Uzbek Government. The Fund is disclosed as a contingent liability within the financial statements (see note 36).

In May 2008 the Company issued convertible loan notes (the "Notes") in the principal amount of $18.5 million which were repayable, if not converted, in May 2010. In January 2010 the Notes were restructured such that they are convertible at 12p per share, earn interest at UK LIBOR + 3% per annum, and are repayable, if not converted, in May 2013. In November 2010 $3.0 million in principal amount of Notes were converted. The Notes' conversion documentation is unclear as to whether the noteholders are entitled to convert back to the original (May 2008) terms, as further described in note 30 of the financial statements. The Company is currently in discussion with a majority of the noteholders with a view to deferring interest payments and the repayment date until such time as the proceedings against the Uzbek Government have been settled and has therefore assumed that conversion back to the original (May 2008) terms will not occur and that neither interest nor principal payments will be required in the 12 months from the date of these financial statements. The Notes are disclosed as a current liability (see note 30).

The directors continue to undertake appropriate measures to preserve cash until such time as the Group's operations are fully funded and the dispute with the Uzbek Government has been resolved. On 29 February 2012 the Company announced that it had entered into a litigation funding arrangement by which the funder has agreed to pay the Group's legal costs on a non-recourse basis in relation to the international arbitration proceedings against the Uzbek Government and the action brought by the Ministry of Finance in the English courts. The Company continues to have complete control over the conduct of the proceedings, and continues to have the right to negotiate a settlement, discontinue proceedings, pursue the proceedings to trial and take any action considered appropriate to enforce judgment. The Company has given certain warranties and covenants to the funder and has agreed to pay to the funder a material portion of any final settlement of the arbitration claim. Such payment will only be payable upon a final settlement of the claim and the amount of payment is dependent upon a number of variables including the value of any settlement and the length of time taken to reach a settlement. The funder and the Company both retain the right, under certain circumstances, to discontinue the funding arrangements. At 22 May 2012, the Group's cash resources stood at approximately $670,000.

The future of the Group and its principal activities remain materially uncertain depending on the outcome of the dispute with the Uzbek Government. Therefore a material uncertainty exists which may cast significant doubt on the Company and the Group's ability to continue as a going concern and, therefore, to realise its assets and discharge its liabilities in the normal course of the business. Once the outcome is known, it is currently the intention of the directors to consult the Company's shareholders as to the future direction of the Group's activities. Nevertheless after making enquiries, and considering the uncertainties described above, and noting that litigation funding has been obtained, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.

AUDITOR

Each of the persons who is a director at the date of approval of this annual report confirms that:

- so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

- the director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

Deloitte LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

Richard Wilkins

Company Secretary

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable laws and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under the law the directors have, as required by the AIM Rules for Companies (the "AIM rules"), prepared the Group financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and have also elected to prepare the Company financial statements in accordance with those standards. Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements the directors are required to:

- select suitable accounting policies and then apply them consistently;

- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

- provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

- make an assessment of the Company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements and other information included in annual reports may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

1. the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

2. the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board

Richard Shead

Executive Chairman

29 May 2012

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF OXUS GOLD PLC

We were engaged to audit the financial statements of Oxus Gold plc for the year ended 31 December 2011 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Balance Sheets, the Consolidated and Parent Company Cash Flow Statements, the Consolidated and Parent Company Statements of Changes in Shareholders' Equity and the related notes 1 to 38. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Basis for disclaimer of opinion on financial statements

The audit evidence available to us was limited due to restrictions placed on the scope of our work as a result of the ongoing legal dispute between the Uzbekistan Government and Oxus Gold Plc.

As a result we did not have access to the financial records and management of Amantaytau Goldfields ("AGF"), the joint venture through which the Group has conducted its operations in Uzbekistan, and have been unable to obtain sufficient appropriate audit evidence in the Group financial statements concerning:

- the existence of the Group's drill rig held in the possession of AGF, which has a carrying value of $2.0 million;

- the carrying value of the $42.2 million AGF available-for-sale investments as at 31 December 2011; and

- the Group's share of any profit or loss generated in 2011 by AGF prior to the date joint control was lost in March 2011, noting that the financial statements include a figure of $nil for this period as the Group did not have access to the necessary financial records.

In addition, as shown in notes 22 and 23 to the financial statements, the company's AGF investment has been shown net of a liability previously imposed against the Group, and upheld in the Uzbekistan courts in 2010, in respect of the AGF Phase II development fund. The carrying value of this liability at 31 December 2011 was $10.8 million. The Uzbekistan Government has brought this case before the United Kingdom (UK) courts to enforce the ruling obtained in Uzbekistan. The directors are unable to provide evidence as to whether the Group has been formally released from this liability and are currently challenging this claim in the UK courts as well as in the international arbitration detailed in note 1. We have been unable to obtain sufficient appropriate audit evidence as to whether the Company has been released from liability and accordingly whether the accounting treatment adopted by the Company as outlined above is in accordance with IFRS.

In addition, as disclosed in note 9, the Group has reversed a previous impairment provision of $28.5 million, relating to its investment in the Khandiza base metals project ("Khandiza"), as the related costs are included in the arbitration proceedings referred to below. The directors are unable to provide evidence of any indication that the conditions that triggered this impairment loss no longer exist and accordingly we believe that it should not have been reversed. This would result in a loss for the year of $5.9 million and reduce net assets by $28.5 million.

Disclaimer of opinion on financial statements

Because of the significance of the matters described in the Basis for Disclaimer of Opinion on Financial Statements paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly we do not express an opinion on the financial statements.

Emphases of matter - going concern and recoverability of assets

Notwithstanding our disclaimer of opinion on the financial statements, we draw your attention to the disclosures made in note 1 to the financial statements in relation to going concern and the Company's ability to recover asset values depending on the outcome of the international arbitration described below.

During early 2011 the Group ceased operations in Uzbekistan and, in March 2011, declared force majeure in respect of its management obligations towards the AGF joint venture in that country. The company subsequently entered into international arbitration with the Uzbekistan Government on 31 August 2011 asserting that the Uzbekistan Government has violated the terms of the 1993 Agreement for the Promotion and Protection of Investments between the United Kingdom and the Republic of Uzbekistan and the case is ongoing. At present the directors of the Company believe it is not possible to estimate reliably the outcome of the arbitration and the extent to which certain assets related to its investment in Uzbekistan may be recoverable. As disclosed in note 1, the Company is seeking compensation for the loss of its investments in AGF and Khandiza. Depending on the outcome of the arbitration the Group and Company may not be able to recover fully the carrying value of mining properties of $30.5 million, and the $42.2 million AGF available-for-sale investment as at 31 December 2011 (which is net of the $10.8 million liability related to the AGF development fund which may become due and payable). The carrying value of mining properties represents $28.5 million in respect of Khandiza and $2.0 million relating to other mining expenditure in Uzbekistan incurred by the Group. In addition, the parent company may not be able to recover fully its investments of $75.7 million and loans of $4.9 million.

In July 2011, the Group submitted a claim to its insurers regarding the drill rig, with a carrying value of $2.0 million at 31 December 2011, held in the possession of AGF. Depending on the outcome of the claim, the Group may not be able to recover fully the value of the drill rig.

The Group's and the Company's abilities to continue as a going concern are dependent upon a favourable outcome of the international arbitration without which they may not be able to settle their liabilities as they fall due during the 12 months from the date of approval of these financial statements. These conditions, along with other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's and Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

Opinion on other matter prescribed by the Companies Act 2006

Notwithstanding our disclaimer of an opinion on the financial statements, in our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

Arising from the limitations on our work referred to above:

- we were unable to determine whether adequate accounting records have been kept;

- we have not obtained all the information and explanations that we require for our audit; and

- adequate returns for our audit have not been received from the AGF investment, which has not been visited by us.

Other than as disclosed above, we have nothing further to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

- adequate accounting records have not been kept by the parent Company; or

- the parent Company financial statements are not in agreement with the accounting records and returns; or

- certain disclosures of directors' remuneration specified by law are not made.

David Paterson (Senior statutory auditor)

for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor

London

29 May 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011

All amounts related to continued operations.

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2011

These financial statements were approved by the board of Oxus Gold plc, registered in England and Wales No. 4056219, on 29 May 2012 and signed on their behalf by:

Richard Shead

Executive Chairman

COMPANY BALANCE SHEET AS AT 31 DECEMBER 2011

These financial statements were approved by the board of Oxus Gold plc, registered in England and Wales No. 4056219, on 29 May 2012 and signed on their behalf by:

Richard Shead

Executive Chairman

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2011

COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2011

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

Share capital is the amount subscribed for shares at nominal value.

Share premium represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.

Capital reserve represents the credit to equity in respect of share-based payments adjusted for foreign exchange movements together with reserves arising from the acquisition of minority interests, the capital proportion of convertible loans and historic adjustments arising from corporate reconstructions prior to the adoption of international accounting standards.

The merger reserve comprises gains arising from a Group corporate reconstruction in 2001.

The fair-value reserve represents the gain or loss held in equity from the change in value of available-for-sale financial investments.

Retained deficit represents the cumulative loss of the Group attributable to equity shareholders.

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

Share capital is the amount subscribed for shares at nominal value.

Share premium represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.

Capital reserve represents the credit to equity in respect of share-based payments adjusted for foreign exchange movements together with reserves arising from the acquisition of minority interests, the capital proportion of convertible loans and historical adjustments arising from corporate reconstructions prior to the adoption of international accounting standards.

Retained deficit represents the cumulative loss of the Group attributable to equity shareholders.

NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

1. General information

Oxus Gold plc (the "Company") is a company incorporated in England and Wales under the Companies Act 2006 and is quoted on the Alternative Investment Market of the London Stock Exchange. The registered number is 4056219 and the address of the registered office is 52 Charles Street, London, W1J 5EU. The nature of the Group's operations and its principal activities are set out in the Directors' Report and Financial Review.

These financial statements are presented in US Dollars which is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 3.

Going concern

The Group has declared force majeure with regard to its investment in Amantaytau Goldfields ("AGF") and is seeking appropriate compensation through international arbitration. The Group has also included the loss of the Khandiza base metals project in 2006 within the proceedings. Compensation sought from the proceedings exceeds the book value of the AGF and Khandiza assets. However, the recoverability of the carrying value of the assets remains dependent on the outcome of the proceedings, which is uncertain (see"Dispute with Uzbek Government" below).

The Ministry of Finance of the Republic of Uzbekistan is claiming $10.84 million from the Company in respect of the AGF Phase 2 Project Development Fund (the "Fund") and has obtained a judgment in its favour in the Uzbek courts, which it is seeking to enforce in the English courts. The Company is vigorously defending the claim and considers that the Fund is no longer payable. The circumstances surrounding the creation of the Fund also form part of the Group's claim in arbitration against the Uzbek Government.

In May 2008 the Company issued convertible loan notes in the principal amount of $18.5 million which were repayable, if not converted, in May 2010. In January 2010 the notes were restructured such that they are convertible at 12p per share, earn interest at UK LIBOR + 3% per annum, and are repayable, if not converted, in May 2013. In November 2010 $3.0 million in principle amount of notes were converted. The Notes' conversion documentation is unclear as to whether the noteholders are entitled to convert back to the original (May 2008) terms, as further described in note 30 of the financial statements. The Company is currently in discussion with a majority of the noteholders with a view to deferring interest payments and the repayment date until such time as the proceedings against the Uzbek Government have been settled and has therefore assumed that conversion back to the original (May 2008) terms will not occur and that neither interest nor principal payments will be required in the 12 months from the date of these financial statements. The outstanding liability is disclosed as a current liability within these financial statements.

The directors continue to undertake appropriate measures in order to preserve cash until such time as the Group's operations are fully funded and the dispute with the Uzbek Government has been resolved. On 29 February 2012 the Company announced that it had entered into a litigation funding arrangement by which the funder has agreed to pay the Group's legal costs in relation to the international arbitration proceedings against the Uzbek Government and the action brought by the Ministry of Finance in the English courts on a non-recourse basis. The Company continues to have complete control over the conduct of the proceedings, and continues to have the right to negotiate a settlement, discontinue proceedings, pursue the proceedings to trial and take any action considered appropriate to enforce judgment. The Company has given certain warranties and covenants to the funder and has agreed to pay to the funder a material portion of any final settlement of the arbitration claim. Such payment will only be payable upon a final settlement of the claim and the amount of payment is dependent upon a number of variables including the value of any settlement and the length of time taken to reach a settlement. The funder and Company both retain the right, under certain circumstances, to discontinue the funding arrangements. At 22 May 2012, the Group's cash resources stood at approximately $670,000.

The future of the Group and its principal activities remain materially uncertain depending on the outcome of the dispute with the Uzbek Government. Therefore a material uncertainty exists which may cast significant doubt on the Company and the Group's ability to continue as a going concern and, therefore, to realise its assets and discharge its liabilities in the normal course of the business. Once the outcome is known, it is currently the intention of the directors to consult the Company's shareholders as to the future direction of the Group's activities. Nevertheless after making enquiries, and considering the uncertainties described above, and noting that litigation funding has been obtained, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.

Dispute with the Uzbek Government

In January 2011 the Uzbek shareholders agreed in principle to acquire the Group's 50% shareholding in AGF. In February 2011 the Group submitted a detailed offer to the Uzbek shareholders of AGF. To date no reply has been received to the offer and instead AGF has been subjected to an extensive audit of its financial and economic activities by an audit commission appointed by the Uzbek Government. This has resulted in the Group becoming unable to manage the operational affairs of AGF and declaration of force majeure in March 2011. Since February 2011 the Group has been unable to gain access to AGF accounting records which has meant that the Group has been unable to provide assurance that the numbers disclosed in these accounts relating to AGF are accurate and complete.

On 31 August 2011 the Company initiated international arbitration proceedings against the Republic of Uzbekistan under the United Kingdom - Republic of Uzbekistan Bilateral Investment Treaty. The Company is seeking compensation for the loss of its investments in AGF and Khandiza. The parties are currently exchanging submissions on the question of jurisdiction, and a decision thereon from the Arbitral Tribunal is expected in July 2012.

In parallel, and without prejudice to its ruling on jurisdiction, the Tribunal has set, at the Company's request, 31 July 2012 as the date for the Company's principal submission on the merits of its case.

On 21 July 2011 the Ministry of Finance of the Republic of Uzbekistan initiated proceedings before the English High Court to enforce a judgment obtained in the Uzbek courts ordering payment from the Company of $10.84 million constituting the AGF Phase 2 Project Development Fund. Following submission of the Company's defence to enforcement on 27 October 2011, the Ministry of Finance applied for summary judgment on all eight of the Company's defences. The Ministry of Finance subsequently amended its application and requested summary judgment on only five of the Company's eight defences. A hearing on the summary judgment application shall be held on 2 July 2012. Regardless of this hearing's outcome, a full trial is expected to take place in late 2012 or early 2013.

Whilst the above proceedings are ongoing, the Company continues to seek an amicable settlement to the dispute.

Depending on the outcome of the arbitration the Group and the Company may not be able to recover fully the carrying value of mining properties of $30.5 million (see note 20), and the $42.2 million AGF available-for-sale investment as at 31 December 2011 (see note 23). In addition, the parent company may not be able to recover fully its investments of $75.7 million (see note 24) and loans of $4.9 million (see note 25).

In July 2011, the Group submitted a claim to its insurers regarding the drill rig, with a carrying value of $2.0 million at 31 December 2011, held in the possession of AGF. Depending on the outcome of the claim, the Group may not be able to recover fully the value of the drill rig (see note 21).

2. Application of new and revised International Financial Reporting Standards (IFRSs)

The following standards have been applied by the Group from 1 January 2011:

- improvements to IFRSs (endorsed by the European Union in February 2011); and

- amendments to IFRS7 Financial Instruments: Disclosures - Transfers of Financial Assets (endorsed by the European Union in November 2011).

There has been no material impact on the Group arising from the adoption of these standards.

Standards and interpretations issued but not yet applied

Any standards and interpretations that have been issued but are not yet effective have not been applied by the Group in these financial statements. Application of these Standards and Interpretations will not have a material effect on the financial statements in future periods.

3. Significant accounting policies

(a) Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The financial statements have also been prepared in accordance with IFRSs adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain assets and financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies adopted are set out below.

The Group has taken advantage of the exemption under section 405 of the Companies Act 2006 and consequently the income statement of the parent company is not presented as part of these financial statements. The loss of the parent company for the financial year amounted to $3.0 million (2010: $5.7 million).

The following subsidiary undertakings have been consolidated within the financial statements:

(b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (together the "Group") made up to 31 December each period. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group's equity. Minority interests consist of the amount of those interests at the date of the original business combination and the minority interest's share of changes in equity since the date of the combination.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition, or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra group transactions, balances, income and expenses are eliminated on consolidation.

(c) Joint venture entities

A joint venture entity is an entity in which the Group holds a long-term interest and shares joint control over the strategic, financial and operating decisions with one or more other ventures under a contractual arrangement.

Jointly controlled entities are included in the financial statements using the equity method of accounting. Under the equity method, an investment in a joint venture is initially recognised in the consolidated balance sheet at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the joint venture. When the Group's share of losses of a joint venture exceeds the Group's interest in that joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture. Adjustments are made to the financial statements of joint ventures where necessary to comply with IFRSs.

Profits and losses arising on transactions between the Group and jointly controlled entities are recognised only to the extent of unrelated investors' interests in the entity. The investor's share in the jointly controlled entity's profits and losses resulting from these transactions is eliminated against the asset or liability of the joint venture arising on the transaction.

Where joint control of the entity ceases the investment is reclassified as a financial asset until such time that joint control is re-established.

The Group assesses at each balance sheet date whether there is objective evidence that its investment in jointly controlled entities is impaired. The processes adopted for the impairment review are set out in accounting policy (p) below.

(d) Business combinations

The consolidated financial statements incorporate the results of business combinations using the purchase method. The acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Where the fair value of consideration paid exceeds the fair value of the identifiable assets, liabilities and contingent liabilities acquired the resulting difference is classified as goodwill and presented as a non-current intangible asset. Where the fair value of consideration paid is lower than the fair value of identifiable assets, liabilities and contingent liabilities acquired the difference is classified as 'negative goodwill' and recognised in income statement. Goodwill arising from business combinations is assessed for impairment (policy 'p' below).

The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.

Where the value of a business combination increases as a result of the purchase of all or part of a minority interest in an existing subsidiary or of an investment in an associated company which as a result of the increase in investment by the Group becomes classified as a subsidiary in the year of the increase, the purchase method as set out above is applied proportionately to the increase in investment as set out above. The relevant proportion of the results of the acquired operations is included in the consolidated income statement from the date of the relevant acquisition.

In accordance with the exemption in IFRS 1, where merger accounting has been used for the relevant acquisition in years prior to the transition date to IFRS of 1 July 2006, the accounting method used for the relevant acquisition has not been restated.

(e) Foreign currencies

The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in US Dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for:

- exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

- exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments / hedge accounting); and

- exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to minority interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(f) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

Interest revenue

Interest income, being the only revenue generated during 2010 and 2011, is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

(g) Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs (see below). Contingent rentals are recognised as expenses in the periods in which they are incurred.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(h) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

To the extent that variable rate borrowings are used to finance a qualifying asset and are hedged in an effective cash flow hedge of interest rate risk, the effective portion of the derivative is recognised in other comprehensive income and released to profit or loss when the qualifying asset impacts profit or loss. To the extent that fixed rate borrowings are used to finance a qualifying asset and are hedged in an effective fair value hedge of interest rate risk, the capitalised borrowing costs reflect the hedged interest rate.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(i) Operating profit

Operating profit or loss is stated after the share of results of profit or loss from joint venture operations but before crediting or charging the share of results of associates, investment income and finance costs.

(j) Finance income

Finance income comprises interest income on funds invested. Interest income is recognised in the income statement as it accrues, using the effective interest rate method.

(k) Finance costs

Financing costs comprise interest payable on borrowings calculated using the effective interest rate method, the accumulation of interest on provisions and foreign exchange losses.

(l) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement 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. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

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 balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

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 they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

(m) Exceptional items

Exceptional items are those significant items which are separately disclosed by virtue of their size and incidence to enable a full understanding of the financial performance. Transactions which may give rise to exceptional items are principally gains and losses on the sale of investments, impairment charges and reversals relating to major mining properties and investments in subsidiary undertakings, restructuring costs and the results and costs relating to litigation.

(n) Mining properties

Mineral rights acquired and exploration and evaluation expenditure capitalised

Mineral rights and exploration and evaluation costs arise from expenditure incurred prior to development activities and include the cost of acquiring and maintaining the rights to explore, investigate, examine and evaluate an area for mineralisation.

Exploration and evaluation expenditure in the relevant area of interest comprises costs which are directly attributable to:

- researching and analysing existing exploration data;

- conducting geological studies, exploratory drilling and sampling;

- examining and testing extraction and treatment methods; and

- compiling pre-feasibility and feasibility studies.

Exploration and evaluation expenditure also includes the costs incurred in acquiring mineral rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects. Capitalised costs, including general and administrative costs, are only allocated to the extent that those costs can be related directly to operational activities in the relevant area of interest, and where the existence of a commercially viable mineral deposit has been established.

No amortisation charge is recognised in respect of these intangible assets. Mineral rights and exploration and evaluation expenditure are capitalised within intangible assets until such time that the activities have reached a stage which permits a reasonable assessment of the existence of commercially exploitable reserves. Once this has occurred, the respective costs previously held as intangible assets are transferred to mine development costs in property, plant and equipment.

Where the projects have not yet been granted a licence or are determined not to be commercially viable, the related costs are written off to the income statement.

Capitalised exploration and evaluation expenditure is assessed for impairment in accordance with the indicators set out in IFRS 6 Exploration for and Evaluation of Mineral Reserves. In circumstances where a property is abandoned, the cumulative costs relating to the property are written off.

Mineral rights acquired through a business combination or an asset acquisition are capitalised separately from goodwill if the asset is separable or arises from contractual or legal rights and the fair value can be measured reliably on initial recognition.

(o) Property, plant and equipment

On initial recognition, land, property, plant and equipment are valued at cost, being the purchase price and the directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary for the asset to be capable of operating in the manner intended by the Group.

Properties in the course of construction for production, supply or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use and transferred to the appropriate category of property, plant and equipment.

Mining assets including any capitalised stripping costs and except for certain mining equipment and buildings, where economic benefits from the asset are not consumed in a pattern which is linked to the production level, are depreciated using a units of production method based on estimated economically recoverable reserves, which results in a depreciation charge proportional to the depletion of reserves. In applying the units of production method, depreciation is normally calculated using the quantity of material processed at the mine in the period as a percentage of the total quantity of material to be extracted in current and future periods based on proven and probable reserves.

Depreciation on all other assets is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

Expenses incurred in respect of the maintenance and repair of property, plant and equipment are charged against income when incurred. Refurbishment and improvement expenditure, where the benefit is expected to be long lasting, is capitalised as part of the appropriate asset.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income.

The carrying value of property, plant and equipment is assessed annually and any impairment is charged to the statement of comprehensive income. The expected useful economic life and residual values of property, plant and equipment are reviewed annually.

(p) Impairment of tangible and intangible assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(q) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and on demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash.

(r) Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial Assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified at fair value through profit or loss, which are initially measured at fair value and reclassifications from other financial asset categories which are measured initially at book value.

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The Group has no financial assets treated as FVTPL or held-to-maturity.

Available-for-sale financial assets

Listed shares and listed redeemable notes held by the Group that are traded in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in a fair-value reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Financial assets reclassified from another category whose fair value cannot be reliably estimated are initially stated at book value as at the date of transfer. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is reclassified to profit or loss.

The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the balance sheet date. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive income.

Loans and receivables

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 amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For listed and unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, including redeemable notes classified as AFS and finance lease receivables, objective evidence of impairment include:

- significant financial difficulty of the issuer or counterparty; or

- the existence of a significant legal dispute in respect of the financial asset or

- default or delinquency in interest or principal payments; or

- it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables include the Group's past experience of collecting payments as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instruments

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 recognised at the proceeds received, net of direct issue costs.

Compound instruments

The component parts of compound instruments (convertible loan notes and similar instruments) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.

Financial liabilities

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis as described above.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost and any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method as described above. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(s) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset only if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

(t) Pensions

The Group does not enter into any pension scheme arrangements. The Group does make payments in lieu of pensions for certain individuals; these costs are expensed as incurred.

(u) Employee bonus

Employee costs include bonus payments made to certain directors and employees based upon predetermined performance targets set by the Group. Any such bonus payments directly attributable to the exploration and mining development properties or the mining properties are capitalised against the carrying values of such assets until commercial production commences where such costs are amortised on the same basis as the exploration and mining development properties. All other bonus payments are expensed in the income statement as incurred.

(v) Share-based payments

Certain employees (including directors and senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments ('equity-settled transactions').

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value of share options is determined by an external valuer using an appropriate pricing model. The fair value of the options granted is measured using a binomial option valuation model for options granted before 19 May 2008 and a Black-Scholes model for options granted on or after this date, both models taking into account the terms and conditions upon which the options were granted.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ('the vesting date'). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

4. Accounting estimates and judgements

Certain of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to previous experience but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial statements and the key areas are summarised below.

The key judgements in respect of the 2011 financial statements are the application of the going concern basis of accounting and the extent to which the Group's Uzbek mining properties, property, plant and equipment and AGF available-for-sale investment are recoverable, following the declaration of force majeure in March 2011 and resulting international arbitration. Further details of both of these matters are provided in note 1 of these financial statements.

In addition, the directors' conclusion that there is no reliable measure available to determine the fair value of the Group's investment in AGF at the date joint control was lost, as discussed in note 23, is also a significant judgement.

5. Segmental analysis

Business segments

The Group has two reportable segments under IFRS 8:

- The Metals segment, comprising precious and base metals operations at different stages, from field exploration through to mine development and precious metals production. The Metals segment includes the Group's principal mining, development and exploration activities in Uzbekistan through its interest in AGF.

- The Corporate segment includes the corporate cost centre primarily serving administrative and fund raising functions to support the Metals segment.

The Group only operated in the United Kingdom and Malta in support of its operations in Uzbekistan and all activities are in respect of mining operations.

Segment information

Segment information about the Group's reportable segments is presented below.

6. Operating profit/(loss)

Operating income/(loss) for the year has been arrived at after charging/(crediting):

(1) The amount in respect of share-based payments is non-cash and relates solely to equity-settled arrangements.

7. Staff costs

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group, including the head of the representative office in Tashkent, Uzbekistan.

8. Directors' remuneration

Details of share options and interests in the Company's shares of each director are shown in the Directors' Report.

Salary includes a bonus related to amounts recovered from AGF since the commencement of the dispute with the Uzbek Government. From 1 October 2008 all the directors elected to receive approximately 20% of their salaries in shares of the Company, rather than cash. From 1 February 2011 Richard Shead has elected to be remunerated by bonus only, dependent on the Group recovering monies owed by AGF and / or reaching a settlement in respect of the international arbitration proceedings against the Uzbek Government, and Oliver Prior has elected to receive approximately 33% of his fees in shares of the Company. The figures for Richard Wilkins relate to the period prior to his resignation as a director on 3 March 2011. Other benefits represent payments in lieu of pension contributions, private medical insurance and life assurance. The Company offers no other benefits in kind.

9. Reversal of impairment provision related to Khandiza mining properties

On 31 August 2011 the Group commenced international arbitration proceedings against the Uzbek Government in order to seek appropriate compensation for its 50% share in AGF. The Group has also included the loss of the Khandiza base metals project in 2006 within the proceedings. Accordingly the carrying value of Khandiza, which was fully provided against in 2008, has been reinstated at its original cost of $28,456 million as the directors consider it to be recoverable through the arbitration proceedings.

The arbitration requests that damages be awarded in favour of the Group in an amount to be proven and quantified in the proceedings but believed to be in excess of the carrying value of the Group's non-current assets. Therefore, management believes that the carrying values of the Group's and Company's investments in and receivables from both AGF and Khandiza are fully recoverable.

10. Gain on sale of investments

In April 2010 the Group sold the balance of its investment in Tethys Petroleum Limited for gross proceeds of $1,522,000 and a gain on sale of $1,074,000. Gains which arose from changes in fair value of $195,000 accumulated in the investments revaluation reserve were recycled to the income statement.

11. Penalty interest on joint venture dividends receivable

In June 2006 the AGF shareholders resolved to pay dividends based on the operating results of AGF for 2005. As at 31 December 2011, AGF had not paid the dividends to certain shareholders, including Oxus Resources Corporation. In accordance with a resolution approved by the AGF shareholders in April 2010, a penalty for late payment of dividends has been accrued as payable by AGF. For the year ended 31 December 2010 an amount of $474,000 has been accrued by the Group as penalty interest receivable and recognised as an exceptional item. No amounts have been accrued during 2011 following the declaration of force majeure in March 2011, as described in note 1.

12. Costs of aborted CITIC financing

In January 2010 the Company announced that it had signed a conditional agreement with a consortium of Chinese investors to invest and arrange financing in a total aggregate amount of up to approximately $185 million (the "Financing"). The funds were to be used to provide working capital to the Company and to finance and develop AGF's operations in Uzbekistan, including the expansion of open pit heap leach mining operations, the development of one or more underground mines and an accelerated exploration programme. The Company's shareholders approved the terms of the Financing at an EGM held on 26 January 2010. The Financing lapsed on 31 December 2011 following the inability of AGF to renew or obtain certain operating and exploration licences from the Uzbek Government and the failure to obtain final regulatory approvals from the Chinese Government.

13. Legal costs and settlement of claims

During the year ended 31 December 2010 the Company incurred legal and settlement costs of $1.11 million in respect of a claim brought against the Company by a former director. There is no further dispute between the parties.

14. Arbitration expenses

Legal costs associated with the international arbitration against the Uzbek Government in order to seek appropriate compensation for the Group's investments in the AGF investment and Khandiza mining properties constituted $1.96 million (2010: $nil). Since the year-end a further $1.43 million has been expended, of which $1.05 million has been paid by the litigation funder (see the Financial Review and note 38).

15. Share of profit from joint venture

The Group's joint venture operations are conducted through Amantaytau Goldfields AO ("AGF"). The information disclosed below has been extracted from the latest unaudited financial statements of AGF prepared in accordance with IFRS as of and for the year ended 31 December 2010. Since March 2011 the Group's access to the accounting records, financial information and production data of AGF has been severely restricted and no records for any period during 2011 have been made available. Accordingly no information is disclosed in respect of AGF's operations for the year ended 31 December 2011. See note 22 and the Financial Review for further information. The investment has been reclassified as an available-for-sale investment following the loss of joint control in March 2011. There has been no income received during the year.

Revenue comprises proceeds that AGF received for the sale of gold and silver, 50% of which is attributable to the Group.

16. Financial income

17. Financial expense

18. Taxation

The charge for the year can be reconciled to the profit/(loss) per the income statement as follows:

The Group has losses available for offset against future income of approximately $ 31.1 million (2010: $27.2 million), for which no asset has been recognised as there is insufficient evidence of future taxable profits.

19. Earnings per share

The calculation of the basic earnings/(loss) per share is based on the following data:

The calculation of diluted earnings per share for 2011 relates to the convertible loan notes. The earnings figure used therefore adds back the related interest charge of $1,369,000 and the weighted average number of ordinary shares includes an additional figure of 80,729,166. The effect of share options was anti-dilutive in 2011 and, as the Group was loss making in 2010, the effect of both the convertible loan notes and share options was anti-dilutive in the prior year.

20. Mining properties

The Group tests intangible and tangible assets for impairment annually, or more frequently, if there are indications that assets might be impaired.

The Group made a full provision against the carrying value of its investment in the Khandiza project during the year ended 31 December 2008 as, at that time, it was uncertain whether the Group would be invited to participate in the future development of this asset or would as an alternative commence international arbitration proceedings with regards to it. On 31 August 2011 the Group included the loss of the Khandiza project within the international arbitration proceedings commenced against the Uzbek Government in respect of AGF. Accordingly the carrying value of Khandiza has been reinstated.

21. Property, plant and equipment

a. Group

Included in the net book value is a drill rig carried at $1.99 million. In April 2010 AGF entered into an operating agreement with Oxus Resources Corporation ("ORC") whereby AGF leased a drilling rig from ORC. As a condition of this agreement AGF arranged insurance against Physical Loss of, or Damage to, the drill rig and its spares for a policy period of 12 months commencing 2 August 2010 with a sum insured of $2.37 million and ORC was a named co-insurer. On 10 May 2011 ORC wrote to AGF terminating the agreement in accordance with its provisions. AGF have not responded to this letter nor have they returned the drill rig as requested. Having had no response, on 26 July 2011, ORC, as a named co-insured, filed a claim for Physical Loss of the drill rig seeking $2.37 million from the insurer, Uzbekinvest National Export-Import Insurance Company, and this is being vigorously pursued by EOS Risq, the Insurance Broker that arranged the policy.

b. Company

22. Investment in joint venture

The interest in the joint venture is the Group's 50% attributable interest in AGF.

The value of the Group's investment in AGF has been subject to an impairment review by determining recoverable amount using 'fair value less costs to sell' calculations. The key assumption adopted in the impairment review is the successful completion of the arbitration proceedings with regards to the Group's 50% interest in AGF as discussed in note 1. No information is available for 2011 and the value of the Group's investment in the AGF joint-venture has been reclassified as an 'available-for-sale financial asset' following the loss of joint control in March 2011 when force majeure was declared.

Further information in respect of AGF:

At 31 December 2011 AGF had a liability to the Group in respect of unpaid dividends of $3.0 million (2010: $3.0 million). This dividend is included in the Group's investment in AGF. As discussed in note 11, penalty interest receivable for late payment of the dividend has been accrued by the Group for the year ended 31 December 2010 in the amount of $474,000.

23. Available-for-sale financial assets

The amount stated represents the net investment of the Group in AGF up to the time that joint control was lost in March 2011 following the declaration of force majeure. In the view of the directors, due to the uncertainties surrounding the arbitration with the Uzbek government disclosed in note 1, there is no reliable measure available to determine the fair-value of AGF in March 2011 and they have accordingly valued their interest in AGF at that date at its historical carrying value.

24. Investment in subsidiaries

Subsidiary undertakings of the Company are set out in note 3. The Company's investments into its subsidiaries comprised US$75,726,000 as of 31 December 2011 and 2010.

The Company tests investments in subsidiaries annually for impairment or more frequently if there are indications that investments might be impaired. The key assumption adopted in the impairment review is the successful completion of the arbitration proceedings with regards to the Group's 50% interest in AGF as discussed in note 1.

25. Trade and other receivables

a. Group

b. Company

The trade and other receivable balances are categorised as loans and receivables. At the balance sheet date, with the exception of the amounts due from AGF, none of the trade and other receivable balances is past due but not impaired. The recoverability of the AGF receivable is dependent on successful completion of the arbitration proceedings, described in note 1.

26. Cash and cash equivalents

a. Group

b. Company

Cash at bank and bank deposits comprise only cash.

27. Share capital

a. Authorised share capital

At the Company's Annual General Meeting held on 30 June 2010 the Articles of Association of the Company were amended to remove the concept of authorised share capital in accordance with the Companies Act 2006.

b. Issued and fully paid share capital

Capital structure

Details of the issued share capital, together with details of the movements in the Company's issued share capital and details of employee share schemes are shown above and below. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Company's Articles of Association, the Companies Acts and related legislation. The directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

The convertible loan notes issued by the Company could result in a maximum number of new ordinary shares being issued of 80,729,166, see also note 30. Share options outstanding at 31 December 2011 could result in the issue of a maximum of 14,010,000 ordinary shares. These shares, if issued, will rank pari passu with existing ordinary shares.

28. Share options

a. Share options granted under the Company's employee share option plan

At 31 December 2011, executives and senior employees held options over 14,010,000 ordinary shares of the Company (31 December 2010: 15,760,000), which will expire as set out below.

Share options granted under the Company's employee share option plan carry no rights to dividends and no voting rights. During the year ended 31 December 2011, no share options have been exercised (2010: nil) and 1,750,000 share options expired, lapsed or been cancelled (2010: 1,511,000). Since the year-end an additional 5,000,000 share options have been issued to a current executive, exercisable at 1.34 pence and with an expiry date of 28 February 2014.

Included within the above are 5,550,000 share options relating to current executives and employees and 6,000,000 share options related to resigned executives and employees exercisable at 6 pence, and a further 2,460,000 share options related to resigned executives and senior employees exercisable at a weighted average price of 25 pence.

The range of option exercise prices is 6 pence to 54 pence.

The weighted average contractual life of the 11,550,000 options exercisable at 6 pence is 2.53 years. The weighted average contractual life for the 2,460,000 other issued options is 1.38 years.

b. Fair value of share-based payments

No new share options were issued in the year. The total charge for the period was $213,000.

29. Interest-bearing loans and borrowings

a. Group

b. Company

In April 2010, the Group entered into a credit agreement with Atlas Copco Customer Finance AB under the terms of which the Group leased certain of its exploration equipment under finance lease. The lease term is three years. The ownership title for the leased assets will be transferred to the Group at the end of the lease term for no charge. The Group's obligations under finance leases are secured by the lessors' title to the leased assets. Interest rates underlying all obligations under the finance lease were fixed at the contract date at 8.7% per annum. Since the year end the lessor has granted a grace period of six months, with payment of interest only, commencing in February 2012 (see also note 38).

The fair-value of the income-earning financial assets and the interest-bearing financial liabilities is not materially different from the values attributed to these items in the financial statements.

30. Convertible loan notes

On 14 May 2008 the Company completed a placement of 8.0% unsecured convertible loan notes in units of $250,000 each at par, due May 2010 (the "Notes"), for gross proceeds of $18.5 million. The Notes were convertible into a maximum of 26,315,789 new ordinary shares of the Company at a price of £0.37 per share. On 26 January 2010, the Company completed a restructuring of the Notes such that they are now convertible at £0.12 per share, earn interest at UK LIBOR plus 3% per annum, and the repayment date has been extended to May 2013. In November 2010, $3.0 million in principal amount of Notes were converted. The Notes' conversion documentation is unclear as to whether the noteholders are entitled to convert back to the original terms in the event that a minimum of $80 million of project financing was not obtained by 31 December 2010. Although the financing was not obtained the original terms have now expired and the noteholders have continued to accept the amended terms. The Company is currently in discussion with the majority of noteholders with a view to deferring interest payments and the repayment date until such time as the proceedings against the Uzbek Government have been settled. The CLNs are disclosed as a current liability.

 If all the Notes outstanding at 31 December 2011 are converted, a total of 80,729,166 new ordinary shares in the Company would be issued.

The Notes contain two components: liability and equity elements. The equity element is presented in equity under the heading of "Capital Reserve". The effective interest rate of the liability element on initial recognition subsequent to substantial modification in January 2010 is 9.8% per annum.

31. Trade and other payables

a. Group

b. Company

The directors consider that there is no material difference between the fair values and book values of Trade and other creditors.

32. Amounts due to group undertakings

The loan notes were issued to Oxus Resources Corporation on 22 June 2007. The notes are unsecured and carry a coupon based upon six months US$ LIBOR. The loan notes are redeemable in whole or in part on or after 22 June 2008 at the Company's option or upon receiving one month's notice of redemption from the loan note holder. It is not the intention of the either the Company or Oxus Resources Corporation to redeem all or part of the loan notes in the foreseeable future.

33. Risk and sensitivity analysis

The Group and Company ("the Group") are exposed through its operations to a number of financial risks. The policy for managing these risks is set by the board and all such risks are managed at a Group level within the organisation. The policies for these risks are described further below:

Foreign currency risk

The Group is not currently exposed to any material foreign exchange risk.

Liquidity risk

Liquidity risk is monitored by the Group to ensure that the Group has sufficient resources to meet its financial obligations as they fall due.

The liquidity risk of the Group is managed centrally. New borrowings are taken on where additional funds are required. Surplus funds not allocated to future investment and working capital requirements are used to repay existing loans and borrowings or are held on deposit. The Group intends to maintain a balance of funding designed to reduce liquidity risks whilst also seeking to minimise the costs of borrowing. Where appropriate the board will seek additional funds from the issue of share capital, convertible loan notes and warrants.

The board monitors its liquidity requirements through monthly management accounts, periodic cash flow forecasts and weekly statements of liquidity. Further details in respect of the Group's and Company's principal exposure in respect of investments, loans and trade and other receivables is set out in notes 23, 24 and 25.

Credit risk

The Group is exposed to credit risk in respect of management and administrative fees for services and interest on loans charged to AGF as well as credit risks arising from the outstanding indebtedness of AGF to the Group.

Fair value and cash flow interest rate risk

The Group utilises or intends to utilise fixed and variable rate loans. The Group's principal variable rate borrowings are the convertible loan notes issued in the prior period. The board sets a policy for each material borrowing dependent upon the prevailing market conditions and the terms available in respect of each particular financial instrument and the interest rates attaching thereto. The board seeks to achieve an appropriate balance of exposure to these risks. An analysis of the effect of interest rate movements in respect of the Group and Company borrowings is set out in the table below.

Interest rate table

34. Operating leases

Operating leases relate to leases of office properties with lease terms of between one and five years. The Group does not have an option to purchase the leased properties at the expiry of the lease periods. Future payments under non-cancellable operating lease liabilities, which are not discounted, are as follows:

a. Group

b. Company

35. Capital commitments

The Group and the Company had no capital commitments outstanding at 31 December 2011.

36. Contingent asset

In May 2007 the Group disposed of its interests in Kyrgyzstan (the Jerooy project), Turkey and Romania to KazakhGold Group Limited. KazakhGold is contracted to pay additional consideration of up to $80 million conditional upon KazakhGold or a nominee acquiring a licence to mine, or acquiring a Company or entity that has the benefit of a license to mine, the Jerooy deposit and commencing development or production at this site.

No amounts have been recognised in these financial statements for this contingent asset. There have been no changes to this position known to the Company.

Contingent liability

AGF Phase 2 Project Development Fund

Since 2004 the Company has accrued the AGF Phase 2 Project Development Fund (the "Fund") in respect of an amount to be paid to the Uzbek Government. Given the current dispute with the Uzbek Government, and the fact that the AGF Phase 2 Project is unlikely to be developed by the Group, the Fund has now been reclassified as a contingent liability of approximately $10.8 million the enforcement and recognition of which is subject to the outcome of the litigation in the English courts and the international arbitration against the Uzbek Government (see notes 1 and 38).

37. Related-party transactions

The Group has a related party relationship with its subsidiaries and, up to the declaration of force majeure in March 2011, AGF. Transactions between the Group entities are eliminated on consolidation and are not included in this note. Transactions with AGF and balances outstanding as receivable from this entity, which were not eliminated to the extent of the Group's interest in the then joint venture, are disclosed in notes 15, 16, 22, 23 and 25.

As at 31 December 2011, two shareholders of the Company had interests in the Company's convertible loan notes totalling $12,000,000 (2010: $12,000,000).

38. Post-balance sheet events

Dispute with the Uzbek Government

The dispute with the Uzbek Government is ongoing and the Company continues to seek an amicable settlement to the dispute. For more detail please refer to note 1.

Litigation funding

On 29 February 2012 the Company announced that it had entered into a litigation funding arrangement by which the funder has agreed to pay the Group's legal costs on a non-recourse basis in relation to the international arbitration proceedings against the Uzbek Government and the action brought by the Ministry of Finance in the English courts. The Company continues to have complete control over the conduct of the proceedings, and continues to have the right to negotiate a settlement, discontinue proceedings, pursue the proceedings to trial and take any action considered appropriate to enforce judgment. The Company has given certain warranties and covenants to the funder and has agreed to pay to the funder a material portion of any final settlement of the arbitration claim. Such payment will only be payable upon a final settlement of the claim and the amount of payment is dependent upon a number of variable including the value of any settlement and the length of time taken to reach a settlement. The funder and the Company both retain the right, under certain circumstances, to discontinue the funding arrangements.

Deferral of Atlas Copco lease payments

From 1 February 2012, Atlas Copco Customer Finance AB granted the Company a grace period of six months, with payment of interest only, in respect of exploration equipment leased under a finance lease and entered into in April 2010, with an original lease term of three years. The lease is now due to be repaid by 31 January 2014 (see also note 29).