Rockfire Regulatory News (ROCK)

27 June 2014

Papua Mining plc

 ("Papua Mining")

Final results for the year ended 31 December 2013

Papua Mining, a UK company focussed on the exploration for and if commercially feasible, development of gold and copper deposits in Papua New Guinea, announces its final results for the twelve months ended 31 December 2013.

Highlights:

· Successful completion of initial vector drilling at Tripela

· Deeper drilling of advanced target at Tripela underway

· New exploration targets emerging on other licences

· Completion of £2.5 million placing in June 2014

Enquiries:

Company Registration No. 07791328 (England and Wales)

Papua Mining plc

Financial statements for the year ended 31 December 2013

Papua Mining plc

Financial statements for the year ended 31 December 2013

Papua Mining plc

Financial statements for the year ended 31 December 2013

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Chairman's Statement

I am pleased to be presenting our report for Papua Mining plc ("Papua" or "the Company") for the financial year ended 31st December 2013 at this exciting time in your Company's development. It has been a very busy year and there have been many very positive developments in our exploration activities within this highly prospective part of the Pacific "Ring of Fire".

Papua now holds thirteen Exploration Licences granted by the Minister for Mining in PNG. Twelve of the licences are located in the central part of New Britain Island and the thirteenth is in the East Sepik region of the mainland. The total area under licence is currently approximately 2,600 square kilometres. In addition, two further licences covering just over 1,000 square kilometres in New Britain are under application.

Our exploration programmes over the past year have succeeded in outlining some very attractive targets, especially in the Mt. Nakru area of Exploration Licence ("EL") 1462. Most of this work has been carried out in very difficult terrain and often in appalling weather conditions with heavy rainfall a constant companion. Notwithstanding these challenges, our dedicated geologists and exploration crews have persevered and discovered some very exciting copper mineralization, the most advanced of which has been the focus of a diamond drilling programme at Tripela since January 2014. This drilling programme at Tripela follows on an earlier drilling programme in the second half of 2013, during which the first two targets were drilled at Junction and Flying Fox. The results of all of the comprehensive, methodical exploration work carried out to date give us great hope that we are moving ever closer to the porphyry body or bodies that we believe to be present in the area we are drilling.

Despite the decline in the market valuations of publicly quoted mining and exploration companies in the last year in particular, Papua has continued with its aggressive exploration activity in PNG and indeed we are one of the most active explorers currently in the country. We have a large area of very prospective ground under licence and we have a first class technical team so that, when the market conditions do improve, we will be ready to take full advantage of the very positive exploration results we have already achieved and expect to continue to achieve through 2014. PNG is 'elephant country' when it comes to the potential size of copper porphyry deposits and we are hopeful that all the positive signs we have seen in our field exploration and our drilling to date will lead us to such a deposit.

While we carried on our drilling programme on the Tripela target during the first half of 2014, we also continued with our focused exploration programmes on selected targets on our other licences. It was one of these targets on EL 2051, which returned very significant gold results during May of this year. High grade gold values of up to 35.5 grams per tonne in outcrop were discovered over a wide area measuring some 4.5 kilometres by 1.5 kilometres. Associated high copper values of up to 9% Cu have also been found in outcrop in this area. Although the initial sampling programme on EL2051 was reconnaissance in nature, further, follow-up soil geochemistry, rock sampling and trenching is now planned for this exciting new target.

We have been fortunate in that the strength of our exploration results to date has enabled us to secure new equity financing as required. Our latest financing was completed in June and comprised of a Placing of 12,500,000 Placing Units, each Placing Unit consisting of one ordinary share and one warrant at a price of £0.20 per Placing Unit. Each warrant is exercisable over a two year period for one new ordinary share at an exercise price of £0.30 per share. This Placing raised a total of £2.5 million before expenses. An Offer for Subscription to existing shareholders of up to £1.5 million in new shares and warrants on the same terms and conditions as the Placing is currently underway and the results of this offer will be announced following the closure of acceptances on June 30th. This funding will be adequate to complete the next phase of drilling which we expect will continue well into 2015.

The Government of Papua New Guinea is very committed to the future of the resource industry in the country. The process of Exploration Licence issue and renewal has been considerably improved over the last year or so and credit is due to the Mineral Resource Authority in PNG for their continuing efforts to streamline the regulatory process and to make it more responsive to the Industry.

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Chairman's Statement

I am very mindful of the hardships endured by our team in Papua New Guinea. The weather and topographic conditions are extremely difficult and it is a great credit to all of our management and exploration team to have achieved as much as we have done in spite of those circumstances. Our technical management team of senior geologists Lindsay Bandy and Yaeti Gaegae, led by Kieran Harrington and Chris Muller, is committed to progressing our programme to the extent necessary to fully evaluate our targets and to locate whatever porphyry deposits may lie beneath our extensive, prospective acreage. 

In conclusion, I thank all our shareholders for their patience. We are greatly encouraged by the results of our exploration to date. We are confident that we are getting closer to discovery of the porphyry body or bodies that we believe lie within our target zone at Tripela and we are hopeful that the drilling programme recently recommenced there will result in confirmation of that belief. The new high grade gold discovery on EL2051, confirming the potential of some of our other licence areas, will ensure that we can look forward to an exciting twelve months ahead of us.

Michael Gordon Jolliffe

26 June 2014

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Directors' Biographies

Michael Gordon Jolliffe (aged 64) Non-Executive Chairman

Michael Jolliffe holds dual Greek/U.K. citizenship. He is currently Chairman and the largest beneficial shareholder of Wigham-Richardson Shipbrokers Limited. ("WRS"), one of the oldest established shipbrokers, which was established in 1894 in the U.K. WRS is one of the oldest members and shareholders of the Baltic Exchange. WRS also owns Harion Shipping Services, a shipbroker based in Piraeus. Michael Jolliffe was one of the two founding shareholders of Burren Energy plc (originally known as Sumo Oil Limited) and was its original President and CEO. Following the involvement of outside private equity investors and its focus on E&P, and the appointment of Finian O'Sullivan (former Chevron executive) as the CEO of the company, Michael Jolliffe remained as a director of Burren until its flotation on the London Stock Exchange some eleven years later in 2003. The company was sold to ENI the Italian State Oil Company in 2007.

Mr. Jolliffe also has significant experience with maritime companies in accessing the public capital markets in the U.S. He was the former Joint Managing Director and is currently Co-Founder and Vice Chairman of Tsakos Energy Navigation which is currently quoted on the New York Stock Exchange, and today controls 61 tankers with an average age of around five years.

Mr. Jolliffe is also Chairman of StealthGas Inc., a shipping company which has 51 LPG ships under operation, and four product tankers. This company was listed on the NASDAQ in October 2005.

Hugh Martin McCullough (aged 64), Chief Executive Officer

Hugh McCullough has over 40 years' experience in gold and base metal exploration, principally in Ireland, Ghana and Mali.

Having previously worked as a project geologist, in 1982 he became chief executive of Glencar Mining plc, a public company listed on the IEX (of the Dublin Stock Exchange) and AIM. Mr. McCullough was responsible for the management, financing and strategy of Glencar for over 27 years until Glencar was taken over by Gold Fields Limited in September 2009. During his time at Glencar, Mr. McCullough was involved in a number of multimillion ounce gold discoveries and oversaw the development of one of those gold deposits from exploration to production.

Mr.McCullough is a Professional Geologist and holds an Honours degree in Geology from University College Dublin and the degree of Barrister-at-Law from the King's Inns, Dublin. In 1994 he was appointed by the then Irish Minister for Energy to the National Minerals Policy Review Group to review Irish Minerals Policy and to make recommendations to the Minister for the reform of the fiscal and regulatory policy for the mining industry in Ireland. 

Kieran Harrington (aged 51), Technical Director

Kieran Harrington is a geologist with over 30 years of experience and expertise in gold exploration, mine development, project evaluation and project management, with particular experience and past success in exploration of gold deposits in West Africa and Europe. He joined Glencar Mining plc in 1992 as a senior geologist where he was involved in the discovery of a major commercial mine in Ghana (Wassa) and the more recent discovery of the Komana Deposit in Southern Mali. He left Glencar as Technical Director on its acquisition by Gold Fields Limited in 2009. Prior to joining Glencar, Mr. Harrington worked with Tara Prospecting Ltd and Burmin Exploration and Development Ltd. Mr. Harrington is a Professional Geologist holding an Honours degree in Geology from the National University of Ireland, Galway.

Keith Geddes Lough (aged 55), Non-Executive Director

Keith Lough has over 30 years experience in the natural resources sector in both senior finance and general management roles. Mr Lough was previously CEO of Hutton Energy plc and CEO and Founder Shareholder of Composite Energy Limited. He was also Finance Director of British Energy plc from 2001 to 2004 during which he led the financial restructuring of that company.

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Directors' Biographies (Continued)

Keith Geddes Lough (aged 55), Non-Executive Director (Continued)

He is currently also a Non-Executive Director and Audit Chair of the UK Gas & Electricity Markets Authority (Ofgem) and of Rockhopper Exploration plc and is a Non-Executive Director of Rock Solid Images plc and IM Power plc.

Mr. Lough has an Honours Degree in Economics from Edinburgh University, an MSc in Finance from London Business School and is a Fellow of the Chartered Association of Certified Accountants.

Gunnar Palm (aged 57), Non-Executive Director

Gunnar Palm is a partner at Richmond Park Partners LLP, an independent merchant bank providing advisory, capital markets and risk and asset management services. Prior to Richmond Park Partners LLP, Mr. Palm was Co-head of HSBC Global Banking, Coverage and Client Management for EMEA.

He has advised on a number of cross border mandates in the Middle East, India, Europe and the US. Prior to HSBC, Mr. Palm was a managing director at Barclays Capital and Credit Suisse First Boston in New York and London. Between 2007 and 2010 Mr Palm was also a Director of Bay Capital Partners (UK) Ltd, an independent India focused investment management firm. Mr. Palm began his career with The Boston Consulting Group in Munich. Mr. Palm received a BA from the Stockholm School of Economics and a MBA from The Wharton School of the University of Pennsylvania.

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Review of Operations

The year in review saw the landmark completion of our first phase of drilling on our New Britain project. In total, just over 4,000 metres of drilling have been completed at the Junction, Flying Fox and Tripela targets. Extensive "boots on the ground" exploration carried out between 2011 and 2013 had delineated three priority drilling target areas within EL1462 namely the Flying Fox, Junction and Tripela prospects. The relatively easily accessible Junction and Flying Fox targets were the first two targets to be drilled.

On 1st June 2014 the Group held thirteen exploration licences over an aggregate area of 2,642 square kilometres. Twelve of these licence areas are on New Britain island. In addition two further applications have been lodged with the Mineral Resource Authority over an aggregate area of 1,063 square kilometres on New Britain island.

Table 1. List of the Papua Mining plc Group tenements in Papua New Guinea

The Junction target

Two holes were drilled between April and August 2013 at the Junction prospect to 841 metres and 736 metres respectively for a total of 1,577 metres of drilling. Both holes were targeted at a strong combined chargeability and conductivity anomaly delineated in ground geophysical surveys in 2012. No ore-grade copper intervals were intersected but significant copper mineralisation was recorded in an intrusive lithology intersected below 700 metres downhole depth. Both drillholes intersected widespread brecciation and extensive zones of intense alteration consistent with proximity to a porphyry copper gold deposit. The Junction drillcore was reviewed by Dr Greg Corbett and Mr Douglas Menzies of Corbett and Menzies Consulting in September 2013. Several features intersected in the drillcore are regarded by Corbett & Menzies as particularly diagnostic of nearby porphyry intrusion such as pebble dykes and mineralised D-veins. D-veins are relatively distal veins related to porphyry intrusion and the term is derived from a porphyry vein type classification proposed by researchers Gustafson & Hunt in 1975. From their observations at Junction, Corbett & Menzies concluded that the porphyry intrusion there may be deeper than we had originally envisaged and they recommended a deep borehole possibly to a depth of some 1,500 metres. The full text of the Corbett & Menzies report on their review of the Junction drilling data was made available for download on our company website at www.papuamining.com

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Review of Operations (Continued)

Tripela Target

While the Junction drilling was underway, an intensive sampling and mapping programme was undertaken over the Tripela target area immediately east of Junction. Previous sampling in this area had discovered a number of high grade copper occurrences in a zone of strong copper in soil anomalism. The follow-up sampling and geological and alteration mapping recognised significant D-vein development in the area closely associated with the main copper geochemical anomaly. The work culminated in the decision to commence a relatively shallow drilling programme in January 2014. The programme was designed to test for alteration mineralogy and other geological data to identify and map a zonation vector towards the inferred porphyry body already interpreted from geological evidence.

A kilometre - long drill access track was constructed between Junction and Tripela and a new drilling basecamp was constructed capable of accommodating 80 people. During the drill pad preparation some spectacular alteration zones were exposed. These exposures included several spectacular developments of massive sulphide, primarily pyrite but including significant copper mineralisation.

The initial shallow vectoring programme was completed in early May 2014 with seven drillholes completed for a total of 2,169 metres of drilling. The map below shows the location of the holes relative to copper in the soil anomaly and the distribution of mapped D-veins at surface. Several of the holes in this programme intersected broad zones of visible copper mineralisation which, although not of economic grade, represent further positive vectors towards the projected deeper porphyry. All core has been systematically tested for a range of geological, geochemical and geophysical parameters. Of particular significance are the tests mapping the clay mineralogy zonation in the downhole data. This is one of the key datasets which will direct the next deeper phase of drilling. Test results to date suggest that we have drilled through Phyllic zone (retrograde) and Outer Propylitic zone (prograde) margins of a porphyry system. Potassic zone alteration characteristic of the central parts of most porphyry systems has not yet been intersected.

The entire downhole database is currently being collated into a comprehensive 3-dimensional geological model. These drilling results to date combined with the surface discovery of high-grade copper mineralisation in outcrops, many of which are interpreted as D Veins, point to the potential presence of a porphyry nearby.

The next phase of drilling at Tripela has already commenced. This will be the first deeper drilling in the area aimed at intersecting a porphyry intrusion. We anticipate a programme of up to 4,500 metres during the coming year at Tripela.

The Flying Fox Prospect

The Flying Fox prospect lies some five kilometres north of the Junction prospect and some six kilometres north west of Tripela. Mapping of zones of intense clay alteration and the discovery of widespread copper mineralisation at surface were followed up with soil geochemical surveys which delineated a broad zone of copper-lead-mercury-arsenic anomalism. These results provided the impetus for a ground geophysics survey which was completed in the first quarter of 2013. That survey defined a north-south trending chargeability anomaly at least 800 metres long which lies east of the main geochemical anomaly.

In September 2013 a single drillhole was drilled to a depth of 470 metres targeting the centre of the chargeability anomaly. Our geologists logged multiple phases of intrusion occurring extensively down the hole below 60 metres depth - an earlier phase of quartz-feldspar andesite porphyry dykes was recorded, mineralised with disseminated pyrite +/- copper (primarily in the form of chalcopyrite) and a second phase of intrusion of microdiorite mineralised with pyrite-chalcopyrite +/-bornite. However no ore-grade intersections were recorded. In addition we did not recognise porphyry alteration zonation and we feel Flying Fox does not present an immediate target as compelling as those at Junction and Tripela. Consequently no further drilling is planned here for the time being.

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Review of Operations (Continued)

Discoveries on EL2051 and EL2050

During the first quarter of 2014 and while drilling at Tripela was ongoing, the Group's exploration team continued to carry out some limited reconnaissance work on a number of our other licence areas, most notably EL2051, EL2050 and EL2146.

EL2051, East New Britain/West New Britain

Reconnaissance rock sampling and mapping was completed between March and April 2014. This area had been selected for reconnaissance ground surveys based on geological, aerial reconnaissance and remote sensing data. Our field team located evidence of extensive surface mineralisation in both float and outcrop in a predominantly intrusive rock suite in the south-eastern part of the licence area where well developed copper and zinc mineralisation were observed. Assay results have subsequently confirmed that the outcrop and float contain significant gold mineralisation with values up to 35.5 grams per tonne. Of 326 samples collected, 28 graded above 1.0 grams per tonne gold and 13 were greater than 5 grams per tonne gold. The maximum grade returned was 35.5 grams per tonne gold from a sulphide rich andesitic outcrop. Ten samples returned grades greater than 1% copper. The anomalous outcrop falls largely within a zone with a north-south extent of 4.5 kilometres and an east-west extent of 1.5 kilometres.

The mineralised zone falls within an area which lies close to the eastern and southern boundaries of the EL2051 tenement. The Group has a pre-existing application for ELA1804 which incorporates a possible southerly extension of the mineralised zone, immediately adjacent to the southern boundary of EL2051. In May 2014 an application was lodged with the MRA for an area of approximately 89 square kilometres contiguous with the eastern boundary of EL2051.

EL2051 is located some 20 kilometres northeast of EL1462, the licence area which includes the Tripela, Junction and Flying Fox targets. Follow up geochemical sampling on the target commenced in early-June 2014.

EL2050, East New Britain

A short reconnaissance programme was carried out in the Mt. Silo area in the central part of EL2050 in November 2013. As with the EL2051 reconnaissance work described above, this area was selected for reconnaissance ground surveys based on geological, aerial reconnaissance and remote sensing data. Of particular significance here is the presence of a geological contact between the volcanic sequence and the overlying limestone.

139 outcrop and float samples were collected during the field programme. The field team observed significant copper mineralisation within the northern half of the tenement area. The samples were analysed using using our in-house XRF analyser. 28 samples returned copper values greater than 0.1% with five of those samples yielding values greater than 1% copper. The anomalous copper values were split quite evenly between outcrop and float samples.

EL2050 lies some 25 kilometres east of EL2051 and some 50 kilometres northeast of EL1462.

Follow-up mapping and sampling is planned for this area in mid-2014.

EL2146, West New Britain

The EL2146 licence area is contiguous with the eastern boundary of EL1462. During the year in review a reconnaissance ridge and spur soil sampling programme was completed over a ten kilometre long (N-S) by five kilometre wide (E-W) area east of the Tripela target area. Some clustering of point anomalies for copper and other pathfinder elements is evident from the resulting assay data in the northwest and northeast quadrants of the surveyed area. A follow-up programme of outcrop and float sampling and prospecting is underway at the time of writing. Grid based soil sampling will follow where and if warranted.

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Review of Operations (Continued)

Other Licences

Reconnaissance exploration comprising ridge and spur soil geochemical surveys were completed across a 99 square kilometer area of EL1802 in West New Britain between July and August of 2013. No significant anomalies for base metal or pathfinder elements were defined. No further work is currently planned for this small licence area.

The EL1766 licence was finally renewed in November 2013 after a protracted renewal process. No fieldwork was completed during the year on this licence.

The Corbett & Menzies Project Review of EL1462 exploration results

The Corbett & Menzies review of our work in the Mt. Nakru area was delivered to us in September 2013 and gave a positive review of our exploration methodology. When exploring for porphyry copper-gold systems Corbett & Menzies utilise established vectors when assessing exploration programs in copper-gold systems. These are namely: zoned wall rock mineral assemblages; proximal to distal quartz-sulphide vein styles; zoned surface metal content in soil and rock samples, the presence of multi-phases of igneous intrusion activity and prominent geophysical targets. The CMC report concluded that our project in the Mt Nakru area exhibits the following key characteristics:

· well defined wall-rock mineral assemblage and quartz-sulphide veins typical of the upper parts of mineralised porphyry copper-gold bearing environments,

· elevated copper-molybdenum in surface soil samples similar to copper-gold deposits elsewhere,

· multiple phases of igneous intrusions and

· geophysical targets indicative of mineralisation.

We regard Dr. Corbett as one of the world's leading experts in porphyry copper-gold deposits. The CMC findings are a valuable validation of our view that the project area is highly prospective for porphyry-related copper-gold mineralisation and of our exploration strategy towards discovery of a major copper-gold pophyry deposit in the Kulu-Fulleborn Trend.

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Key Performance Indicators and Risk Management

Key performance indicators

The Board monitors KPIs which it considers appropriate for a group at Papua Mining's stage of development.

As a mineral exploration business, an important factor is a steadily improving market perception of the progress and value of the business leading to an improving share price, continued support from shareholders and therefore the ability to raise new equity capital at increasing prices, thus minimising dilution for those early investors who bore significant risk.

The KPIs for the Group are as follows:

Financial KPIs

Shareholder return - the performance of the share price.

The Company listed on AIM in March 2012 at a share price of £0.44 ($0.68) and issued further shares in February 2013 at £0.80 ($1.24) per share. The share price at 11 June 2014 was £0.21 ($0.36). The recent fall in share price is unfortunate, but not entirely unexpected in the context of current market conditions and given the early stage of development of the Group's exploration activities. The Directors are, however, optimistic of an improved market value of the business in 2014 and 2015 given the positive future prospects for the Group's exploration operations, as demonstrated by the confidence shown by investors in the June 2014 share placing.

Exploration expenditure - funding and development costs.

The availability of sufficient cash to facilitate continued investment and funding of exploration programmes is essential. The Group monitors the availability of sufficient cash to fund exploration programmes. At 31 December 2013 the Group had cash of $3,626,880 (2012: $6,996,182), and has raised further funds of $4.2m since the year end.

Non financial KPIs

Environment management - the Group has environmental policies in place.

The Group is aware of the potential impact that its operations may have on the environment. The Group ensures that, at a minimum, its subsidiaries comply with the local regulatory requirements and industry standard principles for environmental and social risk management.

Performance against these environmental policies is continuously monitored. The Directors consider that this has served to minimise any negative impact of current exploration activities on the environment.

Operational - the number of additional Exploration Licences and exploration successes.

There has been extensive exploration activity in the year, and the Directors are encouraged by the prospectivity of the Group's Exploration Licences and by the exploration results obtained to date. The Group currently has two new Exploration Licence applications pending.

Except for the fall in share price during the year, the Directors consider that performance against all other KPIs in 2013 was acceptable.

Risk Management

The Directors consider that assessing and monitoring the inherent risks in the exploration business, as well as other financial risks, is crucial for the success of the Group. Risk assessment is essential in the Group's planning processes. The Board regularly reviews the performance of projects against plans and forecasts. Further detail on management of financial risk is set out in note 16.

Principal Risks and Uncertainties

The management of the business and the execution of the Board's strategy are subject to a number of risks:

· the success of mineral exploration projects is, by their nature, inherently uncertain, and the availability of new information can significantly change estimates of mineral reserves;

· the viability of exploration projects is largely driven by commodity prices;

· commodity prices can be subject to volatile fluctuations.

The principal risks and the measures taken by the Group in order to mitigate these risks are set out in more detail below.

Papua Mining plc

Report and financial statements for the year ended 31 December 2013

Strategic Report

Key Performance Indicators and Risk Management (Continued)

Exploration and development risk

The Group's business operations are subject to risks and hazards inherent in the exploration industry. The exploration for and the development of mineral deposits involves significant risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, it is impossible to ensure that the Group's current exploration programmes will result in a profitable commercial mining operation.

The Board aims to manage the development of the Group as a successful exploration business by ensuring that additional prospective licences are applied for and granted on a timely basis, or otherwise acquired.

Exploration licences are held on the Papua New Guinea island of New Britain and in the East Sepik region on the mainland of Papua New Guinea. Thirteen Exploration Licences are currently held, and two further licences are under application.

Political Risk

There is a risk that assets will be lost through expropriation, unrest or war. Papua Mining minimises political risk by operating in a country with relatively stable political systems, established fiscal and mining codes and a well established, successful mining industry.

Papua Mining further minimizes risk by ensuring that the majority of cash funds are securely held within financial institutions of high standing outside of Papua New Guinea.

Commodity Risk

Commodities are subject to high levels of volatility in price and demand. The price of commodities depends on a whole range of factors, which are outside the control of the Group. There is the risk the price for minerals will fall to a point where it becomes uneconomic to extract them from the ground. This is an inherent risk of the mining industry, mitigation of which is currently outside of the group's control whilst it is still in an exploration, rather than extraction, phase.

Liquidity Risk

There is a risk of running out of working and investment capital. The Group relies for funding on the issue of share capital. The Group has no borrowing and maintains tight financial and budgetary control to keep its operations cost effective. The Directors are confident that adequate resources exist to finance future exploration operations. However, to the extent that there can be no absolute assurance that adequate funding will be available when required, the Directors do have a reasonable expectation that they will secure additional funding when required to do so, as demonstrated by the fundraising in February 2013 and the recent fundraising of June 2014.

Currency risk

Fluctuations in currency exchange risks can significantly impact cash flows. The Group maintains currency in Sterling and Papua New Guinea Kina to finance its overseas operations. In 2014 the Group will have exposure amongst others to Sterling, Euro, Australian Dollars and Papua New Guinea Kina. The mix of currencies are such that the Directors believe the Group's exposure is minimal. The Directors do however regularly monitor currency exchange rates and make judgments as to whether to enter into hedging contracts accordingly. Currently no such hedging contracts are in place.

Interest rate risk

The only significant interest-bearing asset within the Group is cash. The Directors constantly review the interest rate to ensure optimum return on deposits for the Group.

Strategic report approved on behalf of the board

Hugh McCullough

Director

Date 26 June 2014

Papua Mining plc

Financial statements for the year ended 31 December 2013

Principal Activity

The principal activities of the Group are the exploration for gold and copper resources in Papua New Guinea (PNG). The Group's strategy is to explore for and, where the Directors believe that it is commercially feasible, develop deposits of gold and/or copper within the territory of PNG.

Thirteen Exploration Licences have so far been granted by the Minister for Mining in PNG. Twelve of the licences are located in the central part of New Britain Island and the thirteenth is in the East Sepik region of the mainland. Two further licences in New Britain are under application.

Financial overview

The loss for the year is in line with the Directors' expectations. With significant funding being raised in February 2013, and further funds of $4.2m (£2.5m) raised subsequent to the year end (see note 22), the Directors are satisfied that the Group has sufficient working capital to complete the planned exploration programmes.

A detailed review of the Group's business, including its targets and strategies is given in the Chairman's Statement and the Review of Operations.

Results and Dividends

The results for the year are in line with Directors' expectations. The Directors do not recommend a dividend.

Going Concern

It is the prime responsibility of the Board to ensure the Group remains a going concern. The Group raised funds of $3.9m through a private equity placing in February 2013. At 31 December 2013 the Group had cash of $3,626,880 (2012: $6,996,182) and no borrowings. The Group has raised further funds of $4.2m (£2.5m) through a share placing in June 2014. The Board considers it has sufficient cash to maintain the Group as a going concern for a period of at least 12 months from the date of signing the annual report and accounts. Although Papua Mining was successful in raising finance in June 2014, there is no assurance that it will be able to obtain adequate finance in the future. However the Directors have a reasonable expectation that they will secure additional funding when required. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

Directors

The Directors in office during the year are listed below. The interests of the Directors in the shares of the Company at the relevant dates were as follows:

Papua Mining plc

Financial statements for the year ended 31 December 2013

Substantial Shareholdings

As at 11 June 2014, being the latest practical date prior to publication of this document, the Company was aware of the following holdings of 3% or more of the issued share capital of the Company:

Directors' remuneration

The remuneration of the Directors during the year was made on the recommendation of the Remuneration Committee, taking into consideration remuneration packages of directors in comparable businesses and in order to retain high quality executives within a competitive market place.

Salaries and fees were paid to the Directors for the year ended 31 December 2013. In addition, certain directors also received benefits in kind, principally private medical insurance, and fees were paid to businesses with which some of the Directors are associated.

The Group made payments into the private pension schemes of two of the Directors.

No share options were granted to the Directors during the year.

Full details of Directors' emoluments are set out in note 19 of the financial statements.

Environmental Policy

The Group's projects are subject to the relevant PNG laws and regulations relating to environmental matters.

The Group's strategy is to explore for and, where the Directors believe that it is commercially feasible, develop deposits of gold and/or copper within the territory of PNG. It is the Group's intention to conduct its activities in a professional and responsible manner, for the benefit of the Company's shareholders, its employees and the national and local communities within which it operates.

The Group aims to, at all times, conduct its operations in an environmentally responsible manner and in accordance with relevant legislation. The Group aims to adopt Best Practice policies as recommended by the World Bank, the International Council on Mining & Metals ("ICMM") and others where the Group deems local legislation to be inadequate in terms of environmental protection. The Group has in place a detailed Field Operations Guidelines Manual which covers in considerable detail the measures to be taken by field personnel to minimize any negative environmental impact of current exploration activities on the environment.

The Group also recognises the enormous potential of its activities for positive impact on the communities in which it operates and strives to optimise these positive impacts as far as is possible.

The Papua Mining plc ("PM plc") Executive Directors have extensive experience and expertise in environmental aspects of mineral exploration and mining. The Group Country Manager, Chris Muller, who, in addition to his significant geological qualifications and experience, is a renowned lepidopterist who has participated in many important environmental studies in PNG and who is credited with the discovery of a significant number of new butterfly species. All Group personnel are encouraged to take an active interest in environmental matters.

Directors' Indemnities

The Group has purchased insurance to cover its Directors and officers against the costs of defending themselves in legal proceedings taken against them in that capacity and in respect of any damages resulting from those proceedings. The insurance does not provide cover where the Director has acted fraudulently or dishonestly.

Papua Mining plc

Financial statements for the year ended 31 December 2013

Political contributions

No political donations have been made.

Corporate Governance

The Board of Directors is committed to maintaining high standards of corporate governance and is accountable to the shareholders for the proper corporate governance of the group. The UK Corporate Governance Code does not apply to AIM companies, and Papua Mining plc instead follows the principles of corporate governance set out in the QCA Guidelines. Papua Mining plc operates within the mining sector in an effective and efficient way, with integrity and due regard for the interests of shareholders, and applies principles of general governance applicable to the size and stage of development of the Group.

- Audit Committee

The Audit Committee ensures the operation of good financial practices throughout the Group, ensures that controls are in place to protect the assets of the Group, reviews the integrity of financial information, reviews the interim and annual financial statements and reviews all aspects of the audit programme.

The Audit Committee is chaired by Mr. Keith Lough and also comprises Mr. Michael Jolliffe and Mr. Gunnar Palm.

- Remuneration Committee

The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive remuneration and for setting the remuneration packages of individual Executive Directors, and will meet at least twice per annum.

The Remuneration of Non-Executive Directors will be a matter for the executive members of the Board.

The Remuneration Committee is chaired by Mr. Michael Jolliffe and also comprises Mr. Keith Lough and Mr. Gunnar Palm.

Auditor

The auditor, Grant Thronton UK LLP, has indicated its willingness to continue in office and a resolution proposing that they be re-appointed will be put to the Annual General Meeting.

Statement of Disclosure to Auditor

The Directors who held office at the date of approval of the Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware and each Director has taken all 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.

Shareholders' consent is sought at the Annual General Meeting which will propose the reappointment of Grant Thornton UK LLP as independent auditor of the Company and to authorise the Directors to determine the auditor's remuneration.

Papua Mining plc

Financial statements for the year ended 31 December 2013

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Strategic Report, the Director's Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and have elected to prepare the company financial statements in accordance with IFRS as adopted by the EU.

The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the Group and the Company and the financial performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

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 Group and the Company and of the profit or loss of the Group for that period.

In preparing the Group and Company financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent; and

· state whether they have been prepared in accordance with IFRSs adopted by the EU.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and 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 Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Group's report and accounts will be published on the Group's website and in this regard the Directors accept responsibility for the maintenance and integrity of the website.

Annual General Meeting and Recommendation

The Board considers that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and the Group as a whole and its unanimous recommendation is that shareholders support these proposals as the Directors intend to do in respect of their own holdings.

On behalf of the board

Hugh McCullough

Director

Date 26 June 2014

Independent auditor's report to the members of Papua Mining plc

__________________________________________________________________________

We have audited the financial statements of Papua Mining plc for the year ended 31 December 2013 which comprises the group and parent company's statement of financial position, the group statement of comprehensive income, the group and parent company statements of changes in equity, the group and parent company statements of cash flow and the related notes. 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 regards the parent company financial statements, as applied in accordance with the provision 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 set out on page 16, 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 (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of the audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion:

· the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2013 and of the group's loss for the year then ended;

· the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

· the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinions on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and 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

We have nothing 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 returns adequate for our audit have not been received from branches not visited by us; 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; or

· we have not received all the information and explanations we require for our audit.

Christopher Smith

Senior Statutory Auditor

for and on behalf of Grant Thornton UK LLP

Statutory Auditor

Chartered Accountants

London

26 June 2014

Papua Mining plc

Consolidated statement of financial position at 31 December 2013

__________________________________________________________________________

The financial statements were approved and authorised for issue by the Board of Directors on 26 June

2014 and signed on its behalf by:

Hugh McCullough

Director

The notes on pages 25 to 38 form part of these financial statements.

Papua Mining plc

Company statement of financial position at 31 December 2013

__________________________________________________________________________

The financial statements were approved and authorised for issue by the Board of Directors on 26 June

2014 and signed on its behalf by:

Hugh McCullough

Director

The notes on pages 25 to 38 form part of these financial statements.

Papua Mining plc

Company statement of financial position at 31 December 2013

__________________________________________________________________________

The notes on pages 25 to 38 form part of these financial statements.

The Company has elected to take exemption under section 408 of the Companies Act 2006 to not

present the parent Company statement of comprehensive income. The loss for the Company

is shown in the statement of changes in equity.

Papua Mining plc

Consolidated statement of changes in equity for the year ended 31 December 2013

__________________________________________________________________________________

The notes on pages 25 to 38 form part of these financial statements

Share capital

Represents the par value of shares in issue.

Share premium

Represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

Share based payment reserve

Represents the reserve account which is used for the corresponding entry to the share based payment charge through profit and loss (note 14).

Other reserve

Represents the reserve arising from a share for share exchange as part of a group reorganisation in 2011.

Papua Mining plc

Company statement of changes in equity for the year ended 31 December 2013

__________________________________________________________________________

The notes on pages 25 to 38 form part of these financial statements

Share capital

Represents the par value of shares in issue.

Share premium

Represents amounts subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

Share based payment reserve

Represents the reserve account which is used for the corresponding entry to the share based payment charge through profit and loss (note 14).

Other reserve

Represents the reserve arising from a share for share exchange as part of a group reorganisation in 2011.

Papua Mining plc

Consolidated statement of cash flows for the year ended 31 December 2013

__________________________________________________________________________________

The notes on pages 25 to 38 form part of these financial statements.

Papua Mining plc

Company statement of cash flows for the year ended 31 December 2013

__________________________________________________________________________________