Patagonia Gold Regulatory News (PGD)

patagonia gold plc

Condensed Consolidated Interim Financial Statements

(Expressed in U.S. dollars)

For the six months ended June 30, 2014

(Unaudited)

Chairman's introduction

I am very pleased with the progress of our Lomada mine this year and in particular with our newly formed mining team who have operated the mine with great efficiency exceeding design production by a considerable amount. During the first half of 2014, we have consolidated Patagonia Gold as a gold producer and our cash flow has improved accordingly. We look forward to continue increasing our production during the remainder of 2014.

Our successful development of the Lomada Project, together with our highly experienced exploration and management team, bodes well for the future development of our highly prospective projects.

Carlos J Miguens

Non-Executive Chairman

26 September 2014

OPERATIONS REPORT

Patagonia Gold Plc

Patagonia Gold Plc ("Patagonia" or the "Company") is a gold and silver mining and exploration company operating in Argentina. The Company's growth strategy aims to develop a number of projects located in the province of Santa Cruz in the southern Patagonia region of Argentina, a mineral-rich region that hosts several medium sized producing assets such as the Cerro Vanguardia Mine (AngloGold Ashanti), Manantial Espejo (Pan American Silver Corp.) and the world class Cerro Negro mine (Goldcorp Inc.) currently under development.

The Company holds, directly or indirectly through its subsidiaries or under option agreements, the mineral rights to over 220 property interests in Argentina and Chile. These include the mineral rights to 67 property interests in the province of Santa Cruz covering approximately 190,000 hectares held by the Company's 90%-owned Argentinian subsidiary, Patagonia Gold S.A. ("PGSA") and to 51 property interests covering approximately 156,000 hectares held by the 100%-owned Argentinian subsidiary Minera Minamalu S.A. ("Minamalu").

The Company's operations in Santa Cruz are managed and operated through PGSA and the land holdings in Santa Cruz include approximately 200,000 hectares acquired from Barrick Gold Corporation in 2007 and a further 100,000 hectares acquired from the Santa Cruz government's wholly-owned mining company, Fomento Minero de Santa Cruz Sociedad del Estado ("Fomicruz") in 2011.

Fomicruz acquired 10% of PGSA in return for the rights to explore, develop and mine 100,000 hectares of Fomicruz's prospective mining properties. Patagonia benefits from having the Santa Cruz government as a strategic partner in developing a number of PGSA's projects, including the four main properties discussed below.

Patagonia's Properties

The Lomada de Leiva gold project (the "Lomada Project") is located in the La Paloma property block approximately 120 kilometres to the north of the El Tranquilo property block. The Company successfully completed a heap leach trial at the Lomada Project and has now brought Lomada into full production.

Patagonia's flagship project is the Cap-Oeste gold and silver project (the "Cap-Oeste Project") located in the El Tranquilo property block approximately 65 kilometres southwest of the town of Bajo Caracoles in Santa Cruz. The Company's aim is to continue to expand the Cap-Oeste Project resource base and to develop the project towards production in 2016.

Two kilometres along strike from the Cap-Oeste Project is the smaller but strategically vital Cap-Oeste South-East Project (the "COSE Project"). The Company plans to commence development and mining of the COSE Project as a means of generating significant near-term cash flow to self-finance a sizeable portion of the development requirements for the Cap-Oeste Project.

The La Manchuria property block is located approximately 50 kilometres to the southeast of the El Tranquilo property block and hosts the La Manchuria Project. The Company also has a number of other highly prospective exploration leases within the Deseado Massif.

Several of the Company's properties host mineralisation that is not typical of epithermal vein systems. The properties are characterised by low sulphidation, epithermal style gold-silver deposits hosted within hydrothermal breccias or fault hosted breccias, with widths of up to 35 metres of Bonanza grade mineralisation being intersected. The Cap-Oeste Project falls into this category, as does the COSE Project. Classic low sulphidation epithermal veins with high grade Au-Ag intersected within narrow steeply dipping structures characterise other properties. The diversity and varied mineralisation styles differ with regards to location within the Deseado Massif.

Since the property acquisition from Barrick Gold Corporation ("Barrick") in 2007, the Company has rapidly grown its resource base through the implementation of a thorough and aggressive exploration and development programme.

Resources delineated as at 22 August 2014 are listed in the table below.

*Lomada resource to be depleted during Q3 2014, pending completion of third party estimation

Table 1: 2014 resource Statement Santa Cruz Properties

The Company has long term debt of $US 3.7M and continues to raise further equity as needed to carry out its exploration and development plans.

Lomada de Leiva Project

The Lomada Mine reported record production in August, with a total of 2,961 ounces of gold recovered from the main and trial heap leach pads combined at an all-inclusive cash cost of $625 per ounce.

For the first eight months of 2014 the Lomada Project sold a total of 16,088.43 ounces of gold and 298 ounces of silver for gross revenues of $US 20,837,508 at an average all in cash cost of $US812 per ounce. Total ore mined from the commencement of the project is 736,600t @ 2.10 g/t for 49,800 oz contained gold.

Lomada is on-track to achieve its expansion target of 3,000 ounces of gold per month production by the end of Q3. The mining fleet is nearing design capacity for planned mine expansion with the second large excavator delivered and operational.

The trial pad has been loaded to capacity and first pass irrigation completed, second pass irrigation commenced in late May and has now recovered 16,868 oz since irrigation commenced. A total of 61.2% of the estimated contained gold within the trial pad has now been recovered through the addition of 1.27m3/t of solution or 63% of the design quantity. The trial is being operated in conjunction with the main pad on a rotational basis being irrigated for 30 days and then rested for a further 30 days, since irrigation recommenced in late June 2014 391 oz of gold for approximately $US 509,800 of revenue has been produced

The construction of the main pad is now complete and has been in production since January of 2014, as of 30 June 2014 a total of 331,000 T @ 2.15g/t Au grade had been loaded and in part irrigated with a total estimated Au recovery of 10,200 oz for 44.6% to 30 June. Lining of sufficient capacity for 1.5mt of crushed ore feed has been completed and a permanent stockpile and crushing area installed to the western side of the pad. The mining fleet has been expanded with the addition of a second 90T class excavator and two additional hire haulage units

Full year production guidance has been forecast down from 31,000 ounces to 26,900 due to lower than expected production for the months of April, May and June caused by import restrictions and delays with new mining machinery and spare parts. However, weather conditions impacted production far less than expected with only

three days of lost production in July due to freezing and access difficulties. Forecast production for the period August to December 2014 is 13,200 ounces

Exploration on the Lomada block is planned to recommence in Q4 of this year aimed at replenishing depleted resources from production and extending the mine life. The 40,000 hectares of PGSA leases around the existing mine has not been extensively explored and first pass geophysics and geochemical programmes are planned for the area.

Cap-Oeste Project

The Cap-Oeste Project is the Company's flagship project and is located within a structural corridor extending six kilometres from the La Pampa prospect in the northwest to the Tango prospect in the southeast. The Cap-Oeste deposit to date has an identified and delineated strike extent of 1.2 kilometres.

Since acquiring the property from Barrick in 2007, the Company has drilled 449 holes by 31July 2013 for a total of 95,721 metres. In this time the Company has filed four Canadian National Instrument 43-101 ("NI 43-101") resource estimates, with the latest reported on 10 September 2012, when the Company announced an updated resource estimate of 1,197,000 gold equivalent ounces in the indicated category, an increase of 230,000 ounces on the previous resource update, together with a 30% increase in gold equivalent grade.

The Cap-Oeste mineralisation has now been intersected over a distance in excess of 1,200 metres along the Bonanza fault structure, the majority of which is concentrated within a strike length of 650 metres by 350 metres in depth and in excess of 12 metres in average true width. The thickening of the mineralisation is due to areas of dilation where two or more major structures intersect. These zones of structural complexity exhibit the most potential for future resource expansion and are now the focus of future exploration.

Three options are currently being investigated as potential development options of the Cap-Oeste deposit. A standalone Heap Leach plant for oxide treatment with a crushed and agglomerated product leached to produce an estimated 50,000 oz Au Eq per annum, the second option would be to develop and construct a flotation and or pressure oxidation or Albion process style recovery plant to extract up to 100,000 oz AuEq per annum from both the oxide and refractory sulphide material and the third option is to develop both Cap-Oeste and COSE in unison.

The pre-feasibility is underway with the final definitive round of Metallurgical testwork due to start in Q4 2014. A mix of open pit and underground extraction methods will be investigated along with trade off studies to choose which process route will be the most economic over the life of mine. Detailed engineering will then be completed and a definitive feasibility study completed. The pre-feasibility study is scheduled now for completion in late 2015

COSE Project

The COSE Project, located two kilometres along strike from the Cap-Oeste Project, is currently planned to be the second project within the Company's portfolio to be developed. COSE is a fault breccia hosted quartz sulphide rich Au-Ag system hosted within the intersection of the steeply dipping COSE (extension of Bonanza) fault and cross cutting northeast and southwest trending structures. The mineralisation was discovered in early 2010 during exploration along the Bonanza fault towards Tango.

The COSE Project was previously undrilled and initial drilling results indicated that the grades intersected might lead to the delineation of a stand-alone resource for short-term development. This proved to be the case with a resource in excess of 100,000 AuEq ounces being delineated in approximately 36,000 tonnes of material. Wide low grade or diffuse zones of Ag rich low-grade Au mineralisation characterise the mineralisation outcrops at surface and within the first 130 metres vertically down dip. Below 130 metres and continuing to a currently delineated depth of 260 metres, the width of the fault hosted breccia decreases and the grade of both Au and Ag increase exponentially leading in turn to the overall resource grade being estimated in excess of 90 g/t Au Eq. The mineralised structure containing the COSE deposit remains open at depth and along strike. Future deeper drilling which is required in order to test the down dip potential of the deposit will be carried out from underground.

In 2010 the Company filed the maiden NI 43-101 resource estimate for the COSE Project. A preliminary economic assessment ("PEA") was completed to establish viability for the construction, mining and processing of the deposit. The PEA showed the project could be constructed and mined out in a 23-month period and to have very attractive financial characteristics that included a production rate of 3,600 tonnes per month at a cash cost of $167 per tonne, net revenue of $63.7 million (assuming gold price of $1,204 per ounce and Ag of $23.75 per ounce), net present value of $56.8 million at an 8% discount rate, an extraordinary internal rate of return of 870% and a payback period of only two months after the start of production.

Drilling continued in 2011 / 2012 and as at 30 June 2012, a total of 107 holes, including geotechnical and water monitoring totalling 22,638 metres had been completed on the COSE Project and the area directly surrounding the delineated resource. A further 10 diamond core HQ drill-holes totalling 2,475 metres were completed in the Q2-2013 programme targeting the wide mineralised area between Cap-Oeste and COSE along the Bonanza corridor and at depth to the NW of the existing mineralisation.

At present an updated resource model is being calculated and a new mine design and cashflow model will be developed based on treating the mined product in house or selling locally and not the previously preferred option of direct shipping for smelting offshore. The study is scheduled to be completed by November 2014. All metallurgical testwork has now been completed for the project and a process route and preliminary plant design also completed. The Au and Ag contained in the COSE orebody is readily extractible via cyanide leaching and also through flotation and high cyanidation of the concentrate

La Manchuria Project

The La Manchuria Project is located approximately 44 kilometres south-east of the Cap-Oeste and COSE deposits and represents a large system of low sulphidation style vein hosted gold-silver (Au-Ag) mineralisation which outcrops at surface. Shortly after acquisition from Barrick in 2007, the Company launched a three-year exploration programme that included soil geochemistry, mapping, trenching, petrographic analysis and topographic surveying. To date, the Company has completed three drilling campaigns for a total of 20,993 metres of diamond and reverse circulation drilling on this project.

An NI 43-101 resource estimate, released in September 2010, listed Indicated Resources at 55,684 ounces of gold equivalent and Inferred Resources of 90,682 ounces. High-grade gold and silver mineralisation is open along strike to northeast and southeast.

Exploration of the La Manchuria block is scheduled to recommence in Q3 2014 with a geophysical and geochemical study over the La Manchuria and La Manchuria South properties. Existing geochemical anomalies and anomalous surface rock chip and trench will be tested and drill targets developed for the 2015 field season

El Tranquilo Project

Exploration drilling recommenced in Q2 of 2014 with recently developed geophysical and geochemical targets being tested with shallow RC rig drilling a total of 28 holes for 2,784 metres. Encouraging results were received for several previously undrilled large targets such as El Calafate, Santiago and La Canada. Follow-up drilling will commence in late 2014 once a recently approved geophysical survey is completed over the most prospective areas.

Table 2; Significant intervals from first pass RC programme El Tranquilo

To date the Calafate prospect has delivered the best results with 12 metres @ 0.52 g/t Au and 1.4 g/t Ag intersected within a broad zone of intense argillic alteration from 22m downhole, three of the six holes were drilled into a NW-SE striking 1km long section of the Calafate area with all three intersecting mineralisation

Social and economic responsibility

Patagonia maintains a strong awareness of its responsibilities towards the environment and existing social structures.

Careful attention is given to ensure that all exploration and development work is carried out strictly within the guidelines of the relevant mining and environmental acts. Patagonia attempts, where possible, to hire local personnel and use local contractors and suppliers.

Matthew Boyes

Chief Operating Officer

26 September 2014

PATAGONIA GOLD PLC

Condensed Consolidated Interim Statement of Comprehensive Income

(Expressed in thousands of U.S. dollars, except per share amounts)

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

PATAGONIA GOLD PLC

Condensed Consolidated Interim Statement of Financial Position

(Expressed in thousands of U.S. dollars)

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

PATAGONIA GOLD PLC

Condensed Consolidated Interim Statement of Changes in Equity

(Expressed in thousands of U.S. dollars)

(Unaudited)

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

PATAGONIA GOLD PLC

Condensed Consolidated Interim Statement of Cash Flows

(Expressed in thousands of U.S. dollars)

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

PATAGONIA GOLD PLC

Notes to Condensed Consolidated Interim Financial Statements

The financial information represents the results of the parent company Patagonia Gold Plc (the "Company") and its subsidiaries, collectively known as the "Group".

1. Basis of preparation

Patagonia Gold Plc is a company registered in England and Wales. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.

These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and with the Companies Act 2006 applicable to companies reporting under IFRS. The Group's condensed consolidated interim financial statements have also been prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB"). This condensed consolidated financial information does not comprise statutory financial statements within the meaning of Section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 December 2013 were approved by the Board of Directors on 16 May 2014. These financial statements which contained an unqualified audit report under Section 495 of the Companies Act 2006, with an emphasis of matter paragraph on going concern, did not contain any statements under Section 498(2) or (3) of the Companies Act 2006, and have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

The accounting policies applied in these condensed consolidated interim financial statements are consistent with those used in the annual consolidated financial statements for the year ended 31 December 2013. These condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements. There has been no change in critical accounting estimates from year-end.

2. Going concern

These condensed consolidated interim financial statements are prepared on a going concern basis, which the Directors believe to be appropriate.

Patagonia Gold is an advanced gold and silver exploration and development company which commenced commercial production of gold in 2013 upon the successful commissioning of its new gold processing facility at the Lomada de Leiva Project. Gold production continued and reached nameplate 1,750 ounces per month in November 2013 and has continued at or above that level to date. The Group has decided to expand production from Lomada to 3,000 ounces per month to be achieved by Q4 2014. Minimal capital is required to achieve this expansion.

Regular monthly cash flow from the Lomada Project main heap leach is targeted to partly finance the Company's exploration programme for the remainder of 2014, the expansion of the Lomada heap leach project and continuing studies on the Cap Oeste / COSE project. These works will require additional capital financing.

The Company will be investigating opportunities to raise this additional capital, however, the continued volatility in equity and debt markets coupled with the current gold price indicate the existence of a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern. The Group and Company are evaluating additional strategies and corresponding financing requirements for 2014 and beyond and are confident in their ability to secure additional funding at a competitive rate to continue to meet commitments as they fall due.

3. Recent accounting pronouncements

The following IFRS standards and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 1 January 2014 or later periods. The Company has not implemented early adoption:

· IFRS 2 (Annual Improvements for 2010-2012 Cycle), 'Share-based Payment', effective for annual periods beginning on or after 1 July 2014. The amendments to IFRS 2 clarify the definition of 'vesting condition' and 'market condition' and add definitions for 'performance condition' and 'service condition';

· IFRS 8 (Annual Improvements for 2010-2012 Cycle), 'Operating Segments', effective for annual periods beginning on or after 1 July 2014. The amendments require an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments and clarifies that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segments' assets are reported regularly.;

· IFRS 9, 'Financial Instruments - Classification and Measurement', effective for annual periods beginning on or after 1 January 2015. The standard reflects the first phase of the IASB's three stage project to replace IAS 39. The first phase deals with the classification and measurement of financial assets and financial liabilities. The Company will also consider the impact of the remaining phases of IFRS 9 when completed by the IASB;

· IFRS 10, 'Consolidated Financial Statements', effective for annual periods beginning on or after 1 January 2014. This standard replaces the consolidation sections of IAS 27 and SIC 12. The standard sets out a new definition of control, which exists only when an entity is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to effect those returns through power over the investee;

· IFRS 12, 'Disclosure of Interests in Other Entities', effective for annual periods beginning on or after 1 January 2014. The standard sets out disclosure requirements for investments in subsidiaries, associates, joint ventures and unconsolidated structured entities. The disclosures are aimed to provide information about the significance and exposure to risks of such interests. The most significant impact is in the disclosure requirement for unconsolidated structured entities or off-balance sheet vehicles;

· IFRS 13 (Annual Improvements for 2010-2012 Cycle), 'Fair Value Measurement', effective for annual periods beginning on or after 1 July 2014. The amendment clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting if the effect of not discounting is immaterial;

· IAS 16 (Annual Improvements for 2010-2012 Cycle), 'Property, Plant and Equipment', effective for annual periods beginning on or after 1 July 2014. The amendment clarifies that when an item of PPE is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount;

· IAS 24 (Annual Improvements for 2010-2012 Cycle), 'Related Party Disclosures', effective for annual periods beginning on or after 1 July 2014. The amendment clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity;

· IAS 27, 'Separate Financial Statements', effective for annual periods beginning on or after 1 January 2014. The standard is a consequential amendment as a result of IFRS 10. The amended standard now only deals with separate financial statements;

· IAS 32, 'Financial Instruments: Presentation', effective for annual periods beginning on or after 1 January 2014. The amendment offers clarification of certain aspects concerning the requirements for offsetting financial assets and financial liabilities;

· IAS 38 (Annual Improvements for 2010-2012 Cycle), 'Intangible Assets', effective for annual periods beginning on or after 1 July 2014. The amendment clarifies that when an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount.

The effect of the new standards and interpretations have been considered by management and are not expected to result in a material adjustment to the consolidated financial statements.

4. Segmental analysis

Management do not currently regard individual projects as separable segments for internal reporting purposes with the exception of the Lomada Project, which commenced commercial production in Q3 2013 and the COSE Project where construction work has commenced. All revenue in the year is derived from sales of gold and silver.

The Group's net loss and its geographic allocation of total assets and total liabilities may be summarised as follows:

(1) Segment represents other exploration projects.

(1) Segment represents other exploration projects.

(1) Segment represents other exploration projects.

(1) Segment represents exploration projects other than the Lomada Project and the COSE Project.

From 1 September 2010 onwards, expenditures incurred at the Lomada Project are capitalised and disclosed as mineral properties - mining assets (See Note 8). From 1 April 2011 certain costs are included in inventory.

From 1 March 2011 onwards, expenditures incurred at the COSE Project are capitalised and disclosed as mineral properties - assets in the course of construction (See Note 8).

Exploration costs incurred at all the other projects are written off to the statement of comprehensive income in the period they were incurred.

5. Other administrative costs

6. Remuneration of Directors and key management personnel

Parent company Directors' emoluments:

In the six months ended 30 June 2014, the highest paid Director received $142 thousand (six months ended 30 June 2013: $131 thousand). This amount does not include any share-based payments charge.

Key management personnel emoluments:

Subsequent event

On 25 July 2014 the Group issued 7,000,000 options at an exercise price of 7.875p per Ordinary share to a Director and senior management of the Company.

7. Loss per share

The calculation of basic and diluted earnings per share is based on the following data:

There is no difference between the diluted loss per share and the basic loss per share presented. Due to the loss incurred in the period the effect of the share options in issue is anti-dilutive.

At 30 June 2014, there were 78,883,000 (30 June 2013: 75,295,000; 31 December 2013: 84,070,000) share options and 24,705,000 warrants (30 June 2013 and 31 December 2013: 24,705,000) in issue, which would have a potentially dilutive effect on the basic profit per share in the future.

8. Mineral properties

Mining assets

The Lomada Project completed the trial heap leach phase and entered full commercial production in Q3 2013. From 1 September 2010 all development costs incurred in respect of the project have been capitalised as mineral properties - mining assets. The revenue received from the sale of gold and silver recovered from the Lomada trial heap phase was offset against the capitalised costs of Lomada Project development in compliance with IAS 16. Amortisation is charged based on the unit-of-production method.

Surface rights 

The Company owns the surface rights to over 63,000 hectares of land encompassing the Estancia La Bajada, Estancia El Tranquilo and the Estancia El Rincon.

The Company has clear title and outright ownership over Estancia La Bajada and Estancia El Tranquilo. There is a back in right granted to the sellers under Estancia El Rincon's title deed whereby the Company irrevocably committed to resell the estancia to its former owner in the event that two consecutive years elapse without mining activities. Current activity on this estancia includes the Lomada de Leiva project.

Assets in the course of construction

From 1 March 2011, exploration costs on the COSE Project have been capitalised as mineral properties - assets in the course of construction, prior to the receipt of full permitting for extraction of the mineralisation.

9. Property, plant and equipment

Improvements and advances at the year-end relate to the development and modification of software and plant, including advance payments. During the period, assets under development with a cost of $165 thousand came into use and were subsequently reclassified as plant.

10. Mining rights

On 14 October 2011, Patagonia Gold, PGSA and Fomicruz entered into a definitive strategic partnership agreement in the form of a shareholders' agreement ("Fomicruz Agreement") to govern the affairs of PGSA and the relationship between the Company, PGSA and Fomicruz. Pursuant to the Fomicruz Agreement, Fomicruz contributed to PGSA the rights to explore and mine approximately 100,000 hectares of Fomicruz's mining properties in Santa Cruz Province in exchange for a 10% equity interest in PGSA. The Fomicruz Agreement establishes the terms and conditions of the strategic partnership for the future development of certain PGSA mining properties in the Province. The Company will fund 100% of all exploration expenditures on the PGSA properties to the pre-feasibility stage, with no dilution to Fomicruz. After feasibility stage is reached, Fomicruz is obliged to pay its 10% share of the funding incurred thereafter on the PGSA properties, plus annual interest at LIBOR +1% to the Company. Such debt and interest payments will be guaranteed by an assignment by Fomicruz of 50% of the future dividends otherwise payable to Fomicruz on its shares. Over a five year period, the Company through PGSA is required to invest $5.0 million in exploration expenditures on the properties contributed by Fomicruz, whose rights to explore and mine were contributed to PGSA as part of the Fomicruz Agreement. The Company will manage the exploration and potential future development of the PGSA properties.

Fomicruz contributed to PGSA certain mining rights in exchange for a 10% equity interest in PGSA. Pursuant to IFRS 2 Share-based Payment, the mining rights acquired have been measured by reference to the estimated fair value of the equity interest given to Fomicruz. Management has estimated the fair value of the 10% interest in PGSA acquired by Fomicruz, on or about 14 October 2011 at $4.0 million. In determining this fair value estimate, management considered many factors including the net assets of PGSA and the illiquidity of the 10% interest. This amount has been recorded as an increase in the equity of PGSA and as a mining right asset. In the consolidated financial statements, the increase in equity in PGSA has been recorded as non-controlling interest. The initial share of net assets of PGSA ascribed to the non-controlling interest amounted to $4.0 million.

Management do not consider there to be any indications of impairment and no review of the carrying value has been undertaken.

The mining rights acquired by PGSA are for a forty-year period from the date of the agreement. As indicated above, these mining rights have been recorded as an intangible asset and are amortised on a straight-line basis over forty years commencing in 2012.

11. Other receivables

Non-current assets