RGM.L Regulatory News (RGM)

Regency Mines plc

("Regency" or the "Company")

Final Results

for the year ended 30 June 2010

30 December 2010

Chairman's statement

Dear Shareholders

I am pleased to present to shareholders your Company's annual report for the financial year to 30 June 2010. This is a year in which we have for the first time been able to report a pre-tax profit of £602,085, against a 2009 loss of £716,922, and an increase in net assets from £2,738,901 to £3,943,705. This profit was primarily due to a turnaround in the associate company contribution from a loss of £271,327 in the previous year to a profit of £930,809 in the year being reported. Our 20.96% owned associate company Red Rock Resources plc ("RRR") had a highly successful year, and this was reflected in our figures.

The Company has, since its admission to AIM, focussed on mining investment and on exploration of areas of nickel and copper potential in Western Australia, Queensland, and Papua New Guinea. Its declared intent has been to add value by systematic exploration and development of its assets, and by joint venture, acquisition, and disposal of mineral resource interests. Regency has at times also acted as a mining finance house, in supporting private companies and assisting in bringing them to the public markets. To date the most successful example of this latter activity has been the creation and spinning off as a listed company of RRR, which has made significant progress over the five years since IPO.

The objectives have not changed and in that Regency continues to hold as operator primarily nickel and copper assets; the focus of activity has not changed either. The Company increasingly places emphasis on long-term strategic moves, and on increasing its weighting in fields where it believes it can have leverage through potential scale in the event of success. That will involve, at the right time, moving beyond copper and nickel, attractive though we believe those commodities to be, even though we intend to keep them at the core of our portfolio. In the period since the year end Regency has made a significant investment for the first time in coal, through its investment in Oracle Coalfields plc ("Oracle").

The Company's principal metal of interest is nickel, both through its Botue-Mambare lateritic nickel and cobalt project in Papua New Guinea ("PNG"), and through its sulphide nickel prospects in the Lake Johnstone greenstone belt in Western Australia, as well as through a holding of shares in AIM-quoted Alba Mineral Resources plc ("Alba"), which has been a holder of nickel assets in Europe. Two thirds of nickel production goes into stainless steel, and that links the demand for the metal in the long term to the pace and extent of the trends towards development and urbanisation in China, India, and other countries. New sources of nickel sulphide, the main historic source of metal supply, have been hard to find, and there is increasing urgency in the search for cost-effective ways of increasing production from laterites, many of which lie close to the countries seeing strongest demand growth. The Company considers the prospects for nickel in the long term to be among the best of any metal, although the market has lagged some other metals recently.

Regency also holds copper-prospective assets, and has always wished to strengthen its portfolio of prospects or projects in this area. Despite efforts, the right opportunity has not yet been found, but the search continues. A reappraisal of the Bundarra area, where the Company holds extensive acreage encircling a granodiorite pluton which saw strong exploration activity and hosted at least a major mine in the years up to 1910, has led to a significant upgrading of prospects in this area, with two main target areas with known copper identified for further exploration. This will be a significant focus of our exploration activity in 2011.

In 2008 we initiated a search for technology partners in order to ensure that we were a leader in the new wave of technology developments in lateritic nickel processing technology. After extensive search, we were in no doubt that the technology that stood out was that being pursued by Direct Nickel Pty Ltd ("DNi") of Sydney. In the year under review we signed joint venture agreements inaugurating a period of much closer co-operation with them, and we have continued to develop the relationship. The alliance of our potentially massive resources at Botue-Mambare with their technology (to say nothing of their experience and knowledge in Papua New Guinea) is a key milestone in our development.

In deciding to work with our new partners at Oracle, it was not technology but ability to solve the logistics and financing issues of developing coal in the Thar desert and, once again, country knowledge, that were the key ingredients that we required in a partner. It may seem contradictory that we were the finance source that is helping Oracle move to the next stage, and yet we consider them to have ability on the financing side; however, we believe that local offtake and joint venture arrangements and gaining the confidence of the local banking community in Pakistan, are areas in which our partners have already shown some capacity, and that the problems Oracle had in raising finance were temporary and largely due to their PLUS Markets listing, which is no longer appropriate for a company which will need to raise substantial institutional finance. We will help them with their efforts to achieve a listing early in 2011 on a better-recognised market.

It has been our practice in previous years to provide a quick summary of activity during the year, and we continue with this practice:

Summary

The Company reports the following developments in the financial year to 30 June 2010:

·; Share price change from 0.98 pence to 1 penny;

·; £1,172,615 new cash before expenses raised from share placings;

·; Standby Equity Distribution Agreement entered into;

·; Exercise of Lake Johnstone option taking holdings in gold/nickel belt to 140km;

·; Geophysical work at Lake Johnstone trend identifies new targets;

·; Receipt and interpretation of drill results from Botue-Mambare;

·; Joint venture with Direct Nickel Pty Ltd on Botue-Mambare;

·; 2,401m of aircore drilling at Lake Johnstone trend tests magnetic and EM targets, and encounters significant sulphides in regolith.

Since the end of the financial year the following developments have occurred:

·; Share price rise from 1 penny to 6 pence;

·; £1,638,100 new cash before expenses raised from share placings;

·; US$2m loan agreement entered into to finance acquisitions;

·; Strategic investment in Oracle Coalfields plc;

·; Investment in Direct Nickel Pty Ltd; agreement with DNi on joint exploration programme for Botue-Mambare;

·; Field visit to and reinterpretation of Bundarra Cu/Au tenements in Queensland;

·; 837 line/km VTEM survey flown over three Kambalda and Lake Johnstone targets.

Financial review

The Group made a pre-tax profit of £602,085 (2009: loss of £716,922 after tax and minority interests) during the financial year; no dividends have been paid or proposed. As in previous years, exploration assets where the costs of acquisition and exploration were considered to contribute to project value and in the view of management no need for impairment arose were capitalised. Exploration assets rose from £1,593,870 to £2,048,408 over the year. In addition £53,432 of exploration costs were treated as expenses.

As a result of placings of new shares in the Company during the financial year and of the profit contribution, the Group's total equity rose from £2,738,901 to £3,943,705 during the financial year, despite a tax provision and an increase in administrative expenses. The latter remain, at £495,161, low for a company of this size and with this range of activities.

Exploration review

The year was a quiet one at Botue-Mambare, as we awaited the receipt of the geophysical survey flown over our area as part of an international aid programme, the results of which were expected to be released in March but were eventually received and interpreted over the end of the year period. Consideration has also been given over this period to different possible structures for the joint venture with DNi; planning of the next phase of exploration was postponed until that was resolved. After the year end, a programme was developed with DNi for the next phases of exploration, and an agreement reached on joint funding a £2m programme to establish a JORC Resource over part of the area and to conduct preliminary exploration over new priority areas. The first phase of this programme is expected to proceed very early in 2011.

In Western Australia, after geophysical interpretation identified some key targets, an initial phase 1 exploratory aircore drilling programme was carried out on the E74/318 license at the Lake Johnstone belt, situated in the south east of Western Australia approximately 50 kilometres east of the nickel and gold bearing centre at Ravensthorpe. The objective was, to test an airborne moderate electro-magnetic (AEM) and a magnetic target under cover for precious and/or base metals mineralisation and to attempt to define contact zones between the Archaean Craton and the Proterozoic Albany-Frazer Complex (this contact zone hosts AngloGold Ashanti's 5m oz Tropicana deposit and is the focus of strong exploration interest). Near the contact, the southernmost drill line encountered significant sulphide levels in all holes. Sulphide intersections were not expected and are potentially significant. The westernmost hole of the southern line intersected 24m of sulphide at an average grade of 10.6% with a maximum grade of 18% sulphide. This hole ended in a sulphide mineralisation grade of 8.87%. This work was followed up since the financial year end by an 837 line/km Versatile Time-Domain Electromagnetic (VTEM) geophysical survey of this area and two other areas of interest. Preliminary results indicate two good potential conductive targets along the trend of the earlier intersected sulphides, but interpretation remains incomplete. Further drilling will be planned to test these targets in 2011.

Important targets at or near old mine locations have been identified at Bundarraa, and the Company expects to develop a programme of testwork and exploration, to start with geophysics, that will begin in 2011 and continue into 2012.

Corporate review

During the year the Company announced the formation of a joint venture with DNi, intended to be 50:50, to carry out exploration and development of Botue-Mambare and to apply to it the treatment technology of DNi. Since the year end the Company has announced the next stages in that joint enterprise under which Regency will invest US$6m in DNi, a private company intending to seek a listing during the course of 2011, and will become the largest shareholder after the founders with approximately 7.31% of DNi's enlarged issued share capital. The subscription by Regency was in the form of an issue of new Regency shares and attributes a valuation to DNi of approximately US$75m, the same basis as an investment by the Commonwealth Scientific and Industrial Research Organisation ("CSIRO"), Australia's national science agency, in June 2010.

DNi is currently demonstrating a potentially revolutionary process with attractive economics for treating laterite nickel ores (the "Direct Nickel Process" or the "Process"). The Direct Nickel Process is a hydrometallurgical process for treating nickel laterites with unprecedented efficiency and environmental benefits. It is designed to operate with tank leaching at atmospheric pressure, and is the first to treat both limonite and saprolite ores with a single flowsheet. The Process recycles its novel reagents, offers high cobalt and nickel recoveries with short residence time, produces mixed hydroxide precipitates ("MHP") or sulphide concentrate, and has substantially lower capital and operating costs than competing processes and is fully scalable.

DNi owns the worldwide perpetual rights to the Process which it developed from precursor processes originally developed in the chemical processing sector in the USA. DNi has spent more than US$14m over the past three years on proving the Process, partly through technical partnership with its shareholder and major Canadian miner, Teck Resources Limited.

The Direct Nickel Process has the potential to revolutionise the economics of global nickel production. We are delighted by this positive outcome to our search for a technology partner, and convinced that this joint venture can deliver a large uplift in value for shareholders.

After the year end Regency agreed to subscribe for 18,500,000 new shares in Oracle for a cash consideration of £1,017,500. Following further purchases, Regency now holds approximately 12 per cent. of the enlarged issued share capital of Oracle. It is the announced intention of Oracle to seek admission to trading on AIM in the first half of 2011. In consideration of the subscription by Regency, Oracle has agreed that Regency will be given the right, but will have no obligation, to subscribe, at the time of admission to trading on AIM or another recognised market ("Listing"), for up to such number of Oracle shares as, when aggregated with the new Oracle shares, will constitute 20 per cent. of the issued share capital of Oracle following Listing. This right will be exercisable at the Listing price.

Oracle, through its 80 per cent. owned subsidiary Sindh Carbon Energy Limited, holds an exploration license over the 66.1 sq km Block VI of the Thar Coalfield in Sindh Province, Pakistan, some 380 km distant from Karachi, as well as other licenses. Block VI is situated 32km from the town of Islamkot with close proximity to roads and power networks. UK coal consultants Dargo Associated Limited have defined a JORC Measured Resource of 1,423m tonnes of lignite coal in the license area, with an open-pittable Proven Reserve of 371m tonnes defined in part of the licence. Oracle has reported that the coal at Block VI has an average calorific value of 3,537 kcal/kg, a moisture content of 40% which can be reduced to 14% by drying, a sulphur level of 1.2% and an ash content of 7.5% which is low when compared to typical lignite coals and further that the coal quality is suitable for power plants and industry, particularly in the cement sector.

Memoranda of Understanding have been announced by Oracle with Karachi Electric Supply Company for a joint venture mine mouth power station and, with Lucky Cement Limited for coal supply. Oracle has appointed SRK Consultants UK Limited to conduct a bankable feasibility study ("BFS") which is targeted for completion during 2011 and Wardell Armstrong International to conduct an Environmental and Social Impact Assessment. Following the completion of the BFS Oracle intends to seek conversion to a Mining License and to start mine development and production in 2012, subject to timely completion of the BFS and capital investment, at an initial level of 2.5m tpa to 3.5m tpa of coal. Regency believes it can make a significant contribution to the success of Oracle, and has established a good relationship with the Oracle management.

Personnel

We were pleased to appoint Ed Bugnosen to the board during the year. His knowledge of Papua New Guinea, and his general experience, have proved invaluable to us.

The Future

Both in terms of exploration, and in corporate developments, the next twelve months look to be an exciting time. Our increasingly valuable shareholding in RRR, currently £21m, has given us the confidence to make bold strategic moves and will continue to underpin our value. Our relationships with Oracle and with DNi will also be key drivers of growth. We look to develop the autonomy and strength of our Australian exploration activities, and are investigating the possibility of an independent listing on the Australian Stock Exchange. We look to the future with confidence.

Andrew Bell

Chairman & chief executive

29 December 2010

Enquiries:

Updates on the Company's activities are regularly posted on its website, www.regency-mines.com.

Results and dividends

Regency and its subsidiaries (the "Group") made an after tax profit of £515,807 (2009: loss £716,922).

The Directors do not recommend the payment of a dividend.

The following financial statements are extracted from the audited financial statements which were approved by the Board of Directors and authorised for issue on 29 December 2010.

Consolidated statement of financial position

as at 30 June 2010

Consolidated statement of income

for the year ended 30 June 2010

Consolidated statement of comprehensive income

for the year ended 30 June 2010

Consolidated statement of changes in equity

for the year ended 30 June 2010

Consolidated statement of cash flows

for the year ended 30 June 2010

Notes