ROSE.L Regulatory News (ROSE)

3 May 2011 VANE Minerals plc (AIM:VML)

("VANE" or the "Company")

Audited Results for the year ended 31 December 2010 and notice of AGM

Vane Minerals Plc today announces its audited results for the year ended 31 December 2010

Financial Highlights

·; £2.65 million (net of expenses) raised in successful fundraisings in October and November 2010

·; £2.56 million revenue (2009: £2.35 million)

·; £2.45 million loss (£1.82 million before impairment) (2009: £1.86 million loss, £1.03 million before impairment)

Operational Highlights

·; Appointment of Chief Operating Officer in US

·; Mexico JV adds four more projects, La Colorada mine already producing high grade gold and silver

·; Production from Diablito amounted to 18,500 tonnes while La Colorada contributed 5,000 tonnes for a total of 23,500 tonnes. Mill heads averaged 213g/T silver and 2.08g/T gold

·; Construction started on a cyanide batch leaching and Merrill-Crowe recovery facility at the SDA Mill

·; Drilling targets defined at Yuma King copper property

·; 168 additional hectares secured for copper exploration in New Mexico

·; Wate NI 43-101 Inferred Resource increased to 886,000 lbs eU308 contained in 58,000 tonnes at an average grade of 0.76% eU308

Post-Period Highlights

·; Formation of new joint venture company, Wate Mining Company LLC

·; Inferred Resource increased by 26% to 1.123M lbs eU308

·; Permitting for exploration drilling secured for Yuma King copper property

·; Expansion plans expected to generate significant revenues by June 2012

Commenting today Steve Van Nort, CEO, of VANE said: "2010 was a key year for VANE Minerals as we enhanced the silver-gold production operations in Mexico and gathered the momentum to push forward with our porphyry copper portfolio in the South Western United States. We were also able to produce a significant inferred NI43 101 uranium resource at the Wate project and subsequent to the period have formed a JV company with partners Uranium One, to progress the project through development."

VANE also announces that the 2011 Annual General Meeting will be held at the offices of Allenby Capital Limited, Claridge House, 32 Davies Street, London W1K 4ND at 10:00 am on 2 June 2011.

The Company's annual report and financial statements for the year ended 31 December 2010, together with the Notice of AGM and proxy card, will be posted to those shareholders who requested printed documents in the next few days and will shortly be available for download from the Company's website in accordance with AIM Rule 20.

For further information, please contact:

Laurence Read/ Beth Harris

Chairman's Statement

It gives me pleasure to be able to outline the progress we have made this year and reiterate that we remain focussed on creating shareholder value by advancing our portfolio of assets in North America. During the year we have, via our joint venture in Mexico, expanded our areas of interest in Mexico by some 1,500 square kilometres, creating access to an additional four gold/silver projects. An initial mill test of Colorada ore at our San Dieguito de Arriba (SDA) mill produced better than expected concentrate grades. The Diablito mine met production goals by producing 18,000 tonnes. Combining Diablito and higher grade Colorada ore resulted in significant improvement in precious metal production. In addition to this, completion in Q1 2011 of a cyanide leach and Merrill-Crowe recovery facility is expected to eliminate the cost of transporting and smelting of concentrates. The VANE Board is continuing to look for potential acquisition opportunities to complement the concentrating and treating facilities, both standalone mine/mill operations and mine/mill production as potential feed to either of the mills. Meanwhile our commitment to expansion can be seen in the continued search both north and south of Acaponeta for producing mines and prospects with significant historic production.

Our objective within our gold/silver portfolio is to increase production from our existing concessions, thereby increasing our land position and resources base in the region. Looking forward, we aim to progress revenues from our SDA mill and report on new developments from our low-cost precious metals programme in North America.

Within our uranium exploration programme in northern Arizona, VANE continued definition drilling and post-period confirmed a NI 43-101 Inferred Resource in excess of one million pounds of eU308.

This was a defining moment for the Company and further proves that the Wate high-grade breccia pipe has sufficiently strong economics to warrant moving into the development stage. We look forward to working with our partner, Uranium One, in progressing both this and our extensive portfolio of other pipe targets, which we are continuing to explore, and we also look forward to the US Government's decision on the segregated lands which is anticipated to be released in late July 2011.

Also within the work programme, drilling was completed on the Tank 4½, Miller Southwest and ERG-26 projects and continues on the Miller pipe and Roadrunner target, with completion expected in 2011. Drilling on five approved permits on newly acquired state lands due to start in 2011, and permits pending on an additional 20, the Board is confident it has an excellent platform with which to move forward. The Board continues to firmly believe in the long-term fundamentals of nuclear energy and the outlook for uranium in 2011 and beyond.

With regards to our copper portfolio, VANE has identified more than 23 potential porphyry copper targets in the southwest USA. In addition to securing three of these targets, a priority for the Company in the coming year will be the acquisition of other sites. We have been encouraged by post-period results from laboratory and geologic studies at the Yuma King property, which includes 320 federal lode mining claims covering approximately 6,400 acres in the Granite Wash Mountains of Arizona. VANE awaits final permission for drilling holes at Granite Gap and McGhee Park prospects where the Company acquired another 168 hectares for copper exploration in Q4 which are fully permitted for access and exploration. The evidence of data and follow-up field work are testament to the potential that this area shows and will continue to show for the foreseeable future.

The successful fund raising during the year puts us in a strong position financially to expand our Mexican milling operations, extend milling processing to include leaching and Merrill Crowe precipitation and to further explore the Company's uranium and copper assets. We are confident that the long term fundamentals for copper, gold and silver and nuclear energy remain strong over the medium and long term.

We thank our investors for their current and continuing support and look forward to updating you with our progress throughout the rest of the year.

Sir Richard Needham

28 April 2011

Review of Operations

VANE saw steady progress during 2010 as VANE management continued to focus on expansion and value creation in all three operating divisions.

In Mexico, a joint venture was formed that provides access to four high-grade mines, one of which came on stream in August. Three mines are being prepared for development and production. Ore from these mines will supplement, and eventually replace, production from the Diablito Mine, now in its sixth year of operation. A contract was let for the addition of a ball mill and cyanide leaching/Merrill Crowe facility at the San Dieguito de Arriba Mill (SDA). Completion of the facility is expected during Q2 2011, with start-up operations to follow.  All expenditures for development, improvements, and expansion have been covered by revenue generated from Mexican operations.

In southwestern USA, one porphyry copper target was drilled with negative results. Permitting got underway at the Yuma King project in western Arizona where drilling is expected to commence in Q2 2011. Evaluation of three prospects including Granite Gap, McGhee Peak and Railroad in southwestern New Mexico provided encouragement sufficient to justify drilling. Property positions have been established and permitting is underway.

Drilling continued in the uranium breccia pipe district of northern Arizona with excellent results. Drilling completed post-period at the Wate pipe pushed the NI 43-101 Inferred Resource past the one million pound eU3O8 threshold necessary to trigger mine development that will be undertaken by our joint venture partner, Uranium One Exploration U.S.A. Inc. as stipulated in the joint venture agreement. Exploration, which is the responsibility of VANE, will shift from Wate to focus on the 126 additional pipe targets situated on state lands currently controlled by the joint venture.

The successful fund raise that completed in November, along with the projected cash flow out of Mexico, will sustain the Company during the coming year as we strive towards further creation of additional value in the production, as well as exploration, sectors of the company.

Southwest USA Copper Exploration

AVEN Associates LLC, VANE's 100%-owned subsidiary, continued its search for porphyry copper deposits in the copper quadrilateral of southern Arizona and southwestern New Mexico. The Lordsburg West project was drilled with negative results and our property position has been relinquished.

Field and laboratory geologic studies of the Yuma King property have proven very encouraging. Permitting and bonding for a drilling program are underway at the time of writing with drilling expected to be initiated in Q2 2011. Two additional properties were claimed during the year and one additional property was claimed in post-period. Nineteen additional targets continue to be evaluated and prioritized for future drilling.

The Yuma King property includes 320 federal lode mining claims covering approximately 6,400 acres in the Granite Wash Mountains of western Arizona. Initial interest in the area arose as a result of previous drilling by another company that intersected disseminated porphyry-style copper and molybdenum mineralization. Geologic study of the area has revealed a structurally complex system of low angle faults that appears to have cut and displaced a porphyry copper system. Two drilling targets have so far been defined and permitting is presently under way with final approval received in Q1 2011. One target is an off-set of favourable geology and geochemistry encountered in previous drilling. The other is a structural geology feature with an associated favourable geophysical anomaly. Continued exploration and the location of subsequent holes will be result driven.

The Granite Gap and McGhee Peak prospects are two covered-area type targets situated on the southwestern New Mexico mineral trend that includes five porphyry copper deposits. Hillsboro lies at the northeast end, Bisbee at the southwest with Chino, Continental and Tyrone in between. Permitting in New Mexico has proven to be both frustrating, challenging and time consuming, for although targets are situated on federal lands administered by the U.S. Bureau of Land Management, property acquisition and permitting regulations require dealing with no less than five federal, state and county agencies located in four different cities. Despite the various permitting obstacles, we continue to explore in southwestern New Mexico firmly convinced of the geologic favourability of the area. Four holes are planned at Granite Gap and three or more holes at McGhee Peak. Final permit approvals at Granite Gap should be received in Q2 2011, with McGhee Peak approval to follow shortly thereafter.

Exploration, Mining and Milling Operations - Mexico

Minerales VANE SA de CV, VANE's 100% owned subsidiary of VANE Minerals plc, broadened its reach in west-central Mexico during 2010. Operations at the Diablito Mine and at our 100 tonne/day (tpd) flotation mill, located 30 km north of the mine, continue to be directed from the headquarters located in Acaponeta, Nayarit that include offices, living quarters and analytical facilities.

Following several months of negotiations, your Company signed a joint venture agreement with the Ruiz brothers, members of a long time mining family located in El Rosario, Sinaloa. The joint venture has an area of interest covering some 1,500 square kilometers in southern Sinaloa. It includes three separate mining districts; La Rastra, Escuinapa and Rosario as well as four properties owned by the prominent Ruiz family. The Colorada mine is in production providing feed for the SDA mill. Three additional concessions, Maria Fernanda, Valenzuela and Jorge Luis cover three partly developed high-grade veins.

Plans to double the capacity of the SDA mill to 200 tpd and add a cyanide leach/Merrill-Crowe recovery circuit to treat concentrates changed in late 2010 when the opportunity became available to purchase a ball mill having a rated capacity of 200 tpd. Ball mills of this type represent the heart of any new concentrator and are in very short supply. Management concluded that it was in the best interest of our Mexican program to shelve the planned 100 tpd expansion of the SDA mill in favour of purchasing the 200-tonne ball mill with the idea of constructing an additional 200 tpd concentrator at a location central to future mining operations once reserves/resources sufficient to provide five years of feed are identified. The ball mill is currently stored in El Rosario. The new concentrator will most likely be constructed at a location within the Rosario joint venture area of interest.

A contract was let in late 2010 for design and construction of a cyanide batch leaching and Merrill-Crowe recovery facility at the SDA mill site. Construction is underway at this writing with completion expected by the end of Q2 2011. The product from this installation will be a very high-grade silver/gold zinc precipitate which can be sold in a number of alternative markets in either the USA or Mexico. The plant, which will eliminate the cost of transporting and smelting of concentrates, has been designed with excess capacity allowing us to accept both custom concentrates and very high-grade ore from various sources.

Ore production from Diablito in 2010 amounted to 18,500 tonnes while production from Colorada contributed 5,000 tonnes for a total of 23,500 tonnes or 1,958 tonnes per month. This was slightly below our target rate of 2,000 tonnes per month. The short fall resulted from delays related to record-breaking rainfall during September 2010.

In 2010, the SDA mill treated 29,134 tonnes of ore, 18,500 from Diablito, 4,336 tonnes from Colorada and 6,298 tonnes of lower grade material previously stockpiled at Diablito and averaged 2,428 tonnes per month or 97% of target. The original low-grade stockpile at the Diablito mine has now been depleted. Operations at Diablito, however, have enabled us to stockpile some 4,000 tonnes of material classified as waste, and which may become viable as mill feed if metal prices continue to rise. The cost of producing this material has been expensed so consequently this waste stockpile is carried on the books at zero value.

Having carried out a re-evaluation of the remaining ore at Diablito we have reduced the mine life as at 31 December 2010 to 18 months from the previous estimate of 3 years. This is primarily because mining operations being carried out on what was previously thought to be a continuing vein resulted in the realisation that this was not the case. However, as is explained below, ore from our other sources is proving to be of higher grade and the reduction in life of Diablito is therefore not expected to adversely impact future revenues.

Precious metal grades at Diablito continued to suffer as a result of mining-related dilution but mill concentrate grades improved as a result of being able to process 4,336 tonnes of Colorada ore through the SDA mill in late 2010. For the year 2010, mill heads averaged 213 g/T silver and 2.08 g/T gold, an improvement over 1H 2010 results, while recoveries for silver and gold averaged 78% and 76% respectively. Mill recovery suffered somewhat due to the oxidized nature of the Colorada and stockpiled ore. Concentrates produced amounted to 444 tonnes or 37 tonnes per month (concentration ratio of 65.6:1) and averaged 10,700 g/T silver and 97 g/T gold. All concentrates produced were sold to Peñoles via the Nexxtrade metal trading company. The weighted average metal price received on sale of our 2010 concentrates was $19.43/oz for silver and $1,204.09/oz for gold, up from the 2009 averages of $14.53 and $966.90, respectively. Planning for 2011 assumes prices of $27.00/oz of silver and $1,325/oz of gold as compared to current prices of approximately $37.00/oz of silver and $1,425/oz of gold.

With concentrating and treating facilities strategically situated along major north-south highways and rail routes, the Minerales VANE SA de CV team continues to seek and evaluate acquisition opportunities, both stand-alone mine/mill operations and mine/mill production as potential feed to the SDA mill and cyanide leach-Merrill Crowe plant. We also continue to look both north and south of Acaponeta for opportunities similar to the Rosario joint venture. This broad area of interest contains both producing mines and significant historic production and represents the first of what we see as a number of opportunities to expand our business.

Uranium Exploration in the USA

The world outlook for nuclear energy remained strong in 2010, reinforcing your Company's commitment to uranium. After unchecked upward movement of the spot price of yellowcake peaking at near $135/lb U3O8, the price settled to US$40/lb U3O8 in May 2010, but strengthened to US$65/lb U3O8 by year end. The Company continued to achieve significant milestones in the exploration and development of uranium in northern Arizona. In order to move the Wate project to prefeasibility, definition drilling continued toward the goal of confirming a minimum of 1 million lbs eU3O8 of the resource reported in historic Rocky Mountain Energy documents. The Wate NI 43-101 Inferred Resource increased to 886,000 lbs eU3O8 contained in 58,000 tons at an average grade of 0.76% eU3O8 as announced on 9 November 2010, and drilling continued through year end. The Wate NI 43-101 Inferred Resource was further increased to 1.123 million lbs eU3O8 contained in 80,000 tons with an average grade of 0.70% eU3O8 (based on drilling as announced 8 Feb 2011). In anticipation of forming the Wate Mining Company LLC in accordance with the terms of VANE's agreement with U1, accounting procedures were put in place in November 2010 and the new joint venture company was formed in January 2011

Exploration drilling was conducted on the Miller, Miller SW, and Tank 4½ pipes as well as the ERG-26 target, with results reported in the 10 November 2010 Press Release. Drilling started in Q4 on the Roadrunner target and due to formation conditions, was suspended until 2011 when a core rig can be mobilized to complete the project.

As a result of shifting its program to Arizona state lands from federal lands due to the Segregation Order that shut down exploration on 1.1 million acres, the JV's progress on the newly acquired state lands consisted of receiving drilling permits on five projects to start 2011. Drilling permits are pending on an additional 20 targets. These include six from a number of "blind" pipe targets identified in the JV's airborne VTEM geophysical data. Blind targets are geophysical features that are indicative of pipes, but have no visible surface expression. The ability of VTEM to detect breccia pipes has already been proven successful by another firm in the discovery of two mineralized pipes that do not extend to the surface.

VANE looks forward to what promises to be a very productive 2011 on the JV program with a total exploration budget of US$2.4 million. As has been widely reported, the US Government has proposed that the 1.1 million-acre tract of federal land, now segregated, be the subject of a 20- year moratorium which, if approved, would extend the impacts on exploration and mining activities in the designated area where we have several target properties. As we expected, preliminary findings revealed during the draft Environmental Impact Study (EIS) process do not support a withdrawal of these lands, nor do they justify the segregation. We remain cautiously optimistic on the anticipated decision at the end of the segregation period on 21 July 2011, that the outcome will be based on fact rather than political preference, and VANE has set aside a budget of US$200,000 to restart exploration efforts for the non-JV breccia pipe properties.

The Richter 9.0 seismic event that resulted in extensive damage to Japan's Fukushima nuclear generating station has recently focused attention on the nuclear power industry and moved governments throughout the world to review safety procedures as well as options for large-scale power generation. VANE management continues in its firm belief that nuclear energy, along with fossil and renewable energy sources, will play a continuing and increasingly important role in satisfying world demand for clean, safe and reliable electric power in the years ahead.

The US presently imports 90% of the uranium necessary to meet its fuel requirements. Breccia pipe uranium deposits, of the sort VANE is exploring and developing, are among the highest grade, and therefore highest margin, occurrences in the US. Mining of deposits of this type has established a track record of safe operation and successful reclamation over more than three decades. This being the case, your management is convinced that the course upon which we originally embarked remains the correct one most likely to create value for the company and its shareholders.

PRINCIPAL RISKS AND UNCERTAINTIES

The directors believe that the immediate matters which could affect the performance of the Company in the future are:

·; The Company currently generates its income from two mines, Diablito and Colorada, so in that respect, it is dependent on their smooth operation. We have excellent relationships with the Diablito mining contractor and the Ruiz brother's team mining the Colorada, and other contractors are available if needed. The group sells all its concentrates to a single third party smelter and in this regard has a single customer although there are other smelters to whom the board is satisfied that its products could be sold.

·; The concentrates are currently transported and sold to a third-party smelter and we are therefore subject to commercial charges of those parties and continuity of labour. However, the new cyanide leaching/Merrill Crowe plant will alleviate this potential bottleneck. The SDA mill will be producing high-grade zinc precipitates starting in Q2 2011, whereby we will be selling the silver/gold precipitates to smelters or other third parties at roughly half our current smelting charges.

·; Drill rigs can be in short supply but VANE has secured drill rigs to cover all of the on-going exploration programs in the Southwestern USA porphyry copper program and Colorado Plateau uranium program.

·; Additional drilling permits are under application and the timing and receiving of these can vary greatly as we have seen in our request for uranium drilling permits, 4-6 weeks (Arizona), to copper drilling permits, 1-6 months (New Mexico).

·; Changes in the US Mining Law of 1872, is currently before Congress but is not likely to be voted on during the next two years. Voting may affect future operations in that royalties on minerals extracted from federal lands may be imposed.

·; The dispute between the US Forest Service and various environmental groups is delaying the approval of the necessary permits covering some of our uranium targets. The Secretary of the Interior, Ken Salazar, has issued a 2-year segregation order covering approximately 1,000,000 acres in the northern Arizona breccia pipe district. This order limits our ability to do work on our claims located on the affected federal lands until 21 July 2011 and, depending on the Secretary's decision, may affect future exploration, development and mining within these segregated lands. State of Arizona lands, on which the Company is now focusing its efforts, are unaffected by this segregation order.

·; We continue to monitor commodity prices. The prices of silver and gold have continued to rise over the past year and given the current economic climate we do not anticipate a precipitous drop in the near future. Uranium oxide prices have risen over the last 6 months, from $40/lb to currently $65/lb and reflect the growing concern over future supplies as dozens of new reactors are under construction around the world. Copper prices remain firm.

Relationships

The Company enjoys good relationships with all of its suppliers, professional advisers and joint venture partners.

FINANCIAL REVIEW

Revenues

Revenues from the Diablito mine during the year have been lower than expected owing to a combination of factors:

·; Continued, unpredictable dilution of grades;

·; Lower recoveries due to supplementing mill feed (to keep the mill running at 100% capacity) with stockpiled material particularly as some material had oxidized in the stockpile. That caused our concentrate grades to decrease and our concentrate tonnes to increase resulting in higher transportation costs;

·; Mine production below budget of 2,000 tonnes per month at approximately 1,958 tonnes per month during the year (DMO + PGO, direct milling ore and stockpiled lower grade ore).

Results for the year

The Group reported a net loss after tax of £2,451,639 or 1.12p per share for the year ended 31 December 2010 (2009: £1,864,026 or 0.98p). Of the total net loss for the year, £244,212 (2009: £4,621) was due to the impairment of intangible exploration and evaluation assets relating to uranium projects, £107,098 relating to copper projects (2009: nil) and £66,277 (2009: £826,627) in respect of the Paraguay project. An additional impairment of £213,571 (2009: £nil) was made in respect of the available for sale investment. Exploration assets are impaired when drilling or other investigative actions result in an asset having no commercial value.

Employee recruitment and retention 

Although the Company has no quantitative target for the number of employees it needs or retains, this metric is closely monitored. The Company has an excellent record of retaining key staff.

During the year no new members have been added to the uranium team. Post-period, Robert A. Jackson was hired to manage the Northern Arizona uranium programs.

Significant equity events

During the year a share capital reorganisation took place by means of a special resolution. Each issued ordinary share of 10p was converted into one ordinary share of 0.1p and one deferred share of 9.9p, and each unissued ordinary share of 10p was converted into one hundred ordinary shares of 0.1p.

On 6 October 2010, the Company completed a placing of 107,260,000 ordinary shares of 0.1p each at a price of 2p per share, resulting in net proceeds of £2,019,819.

A further placing took place on 24 November 2010 and the Company issued a further 29,555,550 ordinary shares of 0.1p each at a price of 2.25p per share, resulting in net proceeds of £626,789.

No share options were issued or exercised during the year.

Cash position

At 31 December 2010 the Group had cash and cash equivalents of £2,750,399 (2009: £1,818,959).

Inventory valuation

The closing inventory value for the reporting period was lower than 2009 as stock of ore material has been gradually added to the mill feed during the year.

Key performance indicators 

There are a number of key performance indicators that are reviewed regularly by the Board as set out below in respect of 2010:- 

Outlook 

VANE's board, management and dedicated exploration team continue to investigate and evaluate new opportunities designed to improve share price and, ultimately, shareholder value. VANE, as a diversified exploration company, is well situated with silver/gold production and exploration in Mexico, copper exploration in the highly productive southwest USA copper quadrilateral and uranium exploration and development in the high-grade breccia pipe district of northern Arizona. Drill holes discover ore bodies and VANE is dedicated to putting the majority of our exploration dollars into drilling. All it takes is one or two drill holes through a buried copper-rich chalcocite blanket to move VANE up the ladder from a junior company.

We all would like to take this opportunity to thank you, our shareholders, for your continued support.

L C Arnold K K Hefton S D Van Nort

Director of Exploration COO, VANE Minerals plc CEO, VANE Minerals plc

CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2010

The financial statements on were approved by the directors and authorised for issue on 28 April 2011 and are signed on its behalf by:

Sir Richard Needham, Director MC Idiens, Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2010

1 An analysis of other comprehensive income is provided in the Consolidated Statement of Comprehensive Income

CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2010

COMPANY STATEMENT OF FINANCIAL POSITION as at 31 December 2010

The financial statements were approved by the directors and authorised for issue on 28 April 2011 and are signed on its behalf by:

Sir Richard Needham, Director MC Idiens, Director

COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2010

COMPANY CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2010

The principal activities of the Group during the year were those of evaluation and acquisition of mineral exploration targets, principally gold, silver, copper and uranium targets and the development and operation of a mine at Diablito, Mexico.

1. PRESENTATION OF FINANCIAL STATEMENTS

VANE Minerals plc (the"Company") is domiciled and incorporated in the United Kingdom. The Company is listed on the AIM Market of the London Stock Exchange plc.

The financial statements are presented in pounds sterling as this is the currency in which funds from financing are generated and in which receipts are usually retained. Foreign operations are included in accordance with the policies set out in note 2.

As permitted by section 408 of the Companies Act 2006, the parent company's income statement and other comprehensive income statement have not been included in these financial statements.

Financial information in this preliminary statement does not comprise statutory accounts for the purpose of section 435 of the Companies Act 2006 and has been extracted from the audited consolidated accounts for the period to 31 December 2010. The statutory accounts for the year to 31 December 2009 have been filed with the Registrar of Companies and those for the year to 31 December 2010 will be filed on or before 30 June 2011. The auditor's report on the 2010 statutory accounts is unqualified. This statement was approved by the Board of Directors on 28 April 2011.

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union ("EU").

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

GOING CONCERN

Historically the Group has relied upon investment funds from its shareholders to fund its operations. The Group is still undertaking extensive exploration activities and as such is dependent upon its cash resources for continuance of its programme. The Group generates cash from one of its subsidiaries through mining operations in Mexico, but this activity provides insufficient cash flow to fund the other activities of the Group.

The Group's exploration expenditure is largely discretionary and its activities can be adjusted to enable the Group to operate within available resources for the foreseeable future.

The board has considered the repayment of the convertible loan notes that are due to be repaid during 2012 and it is confident that the terms may be renegotiated should this be required.

Having made appropriate enquires, having considered all the matters raised in the preceding paragraphs, and having examined the major areas which could affect the Group's financial position, the directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to adopt the going concern basis in preparing the financial statements.

FOREIGN CURRENCIES

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

Transactions in currencies other than the functional currency of each group company ("foreign currencies") are translated into the functional currency at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated into the functional currency at the rates prevailing on the reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Gains and losses arising on translation are included in net profit or loss for that period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity in the statement of other comprehensive income.

For the purpose of presenting consolidated financial statements, the income statement and statement of financial position of foreign operations and foreign entities are translated into the presentational currency (pound sterling) on consolidation at the average rates for the period and the rates prevailing at the reporting dates respectively. Exchange gains and losses arising on the translation of the Group's net investment in foreign operations and foreign entities are recognised as a separate component of shareholders' equity via the statement of other comprehensive income. On disposal of foreign operations and foreign entities, the cumulative translation differences are recycled to the income statement and recognised as part of the gain or loss on disposal. 

Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. The Group has elected to treat fair value adjustments arising on acquisitions before the date of transition to IFRS as pound sterling denominated assets and liabilities.

The most important foreign currencies for the Group are the US dollar and the Mexican peso. The relevant exchange rates for these currencies in sterling were: 

TAXATION

The tax amount in the income statement represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the taxable result for the period. Taxable result differs from result as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities for financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit.

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

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based upon rates enacted or substantively enacted at the reporting date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity via the statement of other comprehensive income.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority.

SHARE-BASED PAYMENTS

The Group operates an equity-settled share option plan. The fair value of the employee service received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

Fair value is measured by use of a Monte-Carlo valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.

The proceeds received are credited to share capital (nominal value) and share premium when the options are exercised. The costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that would otherwise have been avoided.

3. REVENUE

The external revenue of the Group arises solely from the sale of precious minerals arising from the activities in Mexico.

4. SEGMENTAL INFORMATION

For management purposes, the Group is organised into three operating divisions: UK, USA and Mexico. These divisions are the basis on which the Group reports its segment information.

Segment information about these divisions is presented below. The tables show the geographic segmentation of the Group. Activities in Mexico are currently concerned with gold and silver mining and exploration. Activities in the USA are split between research for further gold, silver and copper properties, and research and evaluation of potential uranium properties. Activities in the United Kingdom are concerned with administration and management of the Group.

The average numbers of employees for the year for each of the Group's principal divisions were as follows:

All the assets of the Group relate to the mining operations in Mexico and USA or for administration operations to support the mining. The business segmentation effectively follows the geographic segmentation given above. All of the Group's revenue was generated from one customer.

5. LOSS BEFORE TAXATION

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

6. TAXATION

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

Unrelieved tax losses carried forward, as detailed in note 23, have not been recognised as a deferred tax asset, as there is currently insufficient evidence that the asset will be recoverable in the foreseeable future. The losses must be utilised in relation to the same operations. Tax for other jurisdictions is provided at rates prevailing in those countries.

Income tax charge included in other comprehensive income during the year is:

7. LOSS PER ORDINARY SHARE

Basic loss per ordinary share is calculated by dividing the net loss for the year attributable to owners of the parent company by the weighted average number of ordinary shares outstanding during the year. The calculation of the basic and diluted loss per ordinary share is based on the following data:

Due to the losses incurred in 2010 and 2009, there is no dilutive effect from the existing share options or convertible loan notes.

8. SHARE-BASED PAYMENTS

Equity settled share option plan

The Company has a Share Option Plan under which options to subscribe for the Company's shares have been granted to certain directors and to selected employees and consultants. The options vest and are exercisable according to performance criteria set out in the option letters of grant. The Company has no legal or constructive obligation to repurchase or settle the options in cash. The option is forfeited if the employee or consultant leaves the Group before the options vest.

No options were granted during the current year (2009: 500,000).

The fair value of the options has been calculated using the Monte-Carlo model. The significant inputs into the model for the IFRS2 valuation were share price of £0.10, performance criteria as discussed below, vesting period of 4.5 years for 500,000 options, dividend yield of 0%, annual risk-free interest rate of 2.9% and share volatility of 69.8%. The volatility was measured at the standard deviation of expected share price returns based on statistical analysis of daily share prices over the period since admission in June 2004.

At 31 December 2010, the following share options over ordinary shares of 10p each of the Company had been granted and not exercised:

4,000,000 of these options are exercisable in the event that in any continuous period of 90 days expiring on or after 2 June 2005, the average mid-market share price exceeds 16.5p, representing 150% of the share price at the date the Company's shares were admitted to trading on AIM. This vesting condition was met during a prior year.

600,000 of these options are exercisable in three equal, annual tranches from 2 June 2005. All these have now vested and are exercisable at any time up to 25 May 2014. The average contractual life of all outstanding share options is 5.4 years (2009: 6.4 years).

9,400,000 of these options are exercisable in the event that in any continuous period of 90 days expiring on or after 23 October 2008, the average mid-market share price exceeds 15.0p, representing 150% of the exercise price of the options. This vesting condition was not met during the year.

500,000 of these options are exercisable in the event that in any continuous period of 90 days expiring on or after 20 July 2009, the average mid-market share price exceeds 15.0p, representing 150% of the exercise price of the options. This vesting condition was not met during the year.

In the year ended 31 December 2010 the Company recognised a total expense of £30,540 (2009: £48,951) related to equity-settled share-based payment transactions (refer to note 27).