Shefa Gems Regulatory News (SEFA)

B"H

23 August 2018

Shefa Yamim (A.T.M.) Ltd

("Shefa Yamim" or the "Company")

Interim Results

Shefa Yamim (LSE: SEFA), a precious stones exploration company in Northern Israel, announces its results for the six months ended 30 June 2018. 

H1 2018

Kishon Mid-Reach ("area of first mine")

· Started planning and initiated regulatory procedures in Zone 1 of the Kishon Mid-Reach area ensuring it remains on track for commencement of trial mining in 2019, subject to funding and good exploration results

· Successfully completed a 14 bulk sample campaign in Zone 1

o Produced 9,732.55 carats of gemstones from 6,384 tonnes of gravel

· Extended prospecting permits 837A11 and 899A6

· Progressed exploration in Zone 2 with 26 new boreholes completed during the period

· Post-period:

o Received first Prospecting licence, a significant milestone for the Company, taking it one step closer to a mining licence and renewed the Exploration permit in the Kishon Mid-Reach

o Increased gemstone portfolio to nine precious stones ("Gem Box"), with the potential to increase it further, as spinel, ilmenite and garnet are deemed to be of 'gem quality'

o Paradigm Project Management ("PPM") appointed to conduct a Technical Economic Evaluation ("TEE") of the Kishon Mid-Reach Zone 1

Good Progress with Mine-to-Market Strategy

· Progressed with the mine-to-market strategy to explore, mine and use its precious stones to design unique and branded fine jewellery pieces

· Focused on jewellery designers and marketing companies including:

o A world-renowned jewellery designer, to create an exclusive jewellery collection using Shefa Yamim's gemstones

o Global marketing company to distribute Shefa Yamim branded jewellery worldwide

H2 2018 Target Milestones

· Obtain grade and volume estimates as well as preliminary valuations on the mineral suite

· Complete Technical Economic Evaluation (TEE) for Zone 1

· Conclude geological report to the Inspector of Mines regarding Exploration permit

· Apply for new Exploration permit and submit work plan for the renewed Exploration permit

· Continue planning and regulatory procedures to advance the Kishon Mid Reach Zone 1 area in accordance with the Prospecting License

Avi Taub, CEO of Shefa Yamim, said: "This has been a highly active six months for us as evidenced by the completion of all key milestones set out at the time of the IPO in December 2017. The results of the bulk sampling in Zone 1 of the Kishon Mid-Reach area, the various gemstones identified, including the finding of high grade spinel, give us the confidence to commence trial mining in 2019.

"Additionally, we have progressed with our mine-to-market strategy and have held talks with jewellery designers to create a bespoke collection and marketing companies to distribute Shefa Yamim branded jewellery. We look forward to reporting progress on this in due course."

- Ends -

Enquiries

Overview

During the first half of 2018, Shefa Yamim continued to build on the achievements of the second half of 2017. It is pleasing to announce that to date the Company has met all of the milestones set out at IPO and is on target to achieve its stated milestones for H2 2018.

The Company moved one step closer to delivering its 'mine to market' strategy which will give Shefa Yamim control over the exploration, development, mining, design and sale of its gemstones. The intention is to create a fully integrated operation including cutting and polishing its precious stones, then mounting them in unique and branded fine jewelry pieces that will be created exclusively for Shefa Yamim. This is expected to increase the value of the gemstones found by Shefa Yamim.

The Company also made significant strides in advancing its primary target, the Kishon Mid-Reach, in particular Zone 1, where, subject to funding and good exploration results, trial mining is targeted by 2019 and commercial production is anticipated by 2020.

Operational Review

Kishon Mid-Reach

The Kishon Mid-Reach placer is the Company's most advanced exploration project and ongoing exploration activities are being undertaken with the aim of defining a Mineral Resource that is complaint with the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves ("SAMREC").

The Company has delineated the Kishon Mid-Reach placer, which is 4.5km long and approximately 150 metres wide, into three zones: Zone 1, Zone 2 and Zone 3, all of which are at different stages of development. Zone 1 is believed to contain some 1.1 Mt of gemstone-bearing gravel. Zones 1 and 2 have been the focus of the Company's drilling and bulk sampling programme.

Kishon Mid-Reach Zone 1

During the period Shefa Yamim continued to advance its exploration activity in the Kishon Mid-Reach Zone 1, announcing results from bulk samples BS-1212, BS-1227 and BS-1226 in March 2018 as part of a fourteen bulk sample exploration campaign to determine a resource estimate for gemstones and other heavy minerals, and producing a total of 744.8 carats ("ct") from 1,485 tonnes ("t") of gravel. This was followed by the completion of its bulk sampling exploration campaign in Zone 1, announced in May 2018, where 137 drill holes (total of 1,378.4 metres drilled) and 14 bulk samples (total of 6,385 tonnes) took place.

Post period, the Company announced the addition of a ninth gemstone to its portfolio, spinel. The inclusion of spinel, as well as ilmenite and garnet to the Company's 'Gem-Box' suite, follows a re-classification of these gemstones which were deemed to be of high enough quality to be considered 'gemstones'. Additional gemstones may be added to the Gem-Box at a later stage and this is totally dependent on the Company's exploration findings and the quality and quantity of gemstones found at the deposit. The Target Mineral Assemblage "TMA" recovered from the 6,384 tonnes bulk sampling campaign in Zone 1 increased from a total of 5,825.24 carats ("cts") to a new total of approximately 9,778.15 cts enabling the original TMA to be updated to a predominantly gemstone suite.

In July, Shefa announced the appointment of PPM, a South African project management and engineering company with extensive experience in carrying out due diligence work, as well as managing and executing projects within the mining sector, to provide the Company with the working and capital costs of bringing the Kishon Mid-Reach alluvial deposit into production. The report, which is due to be completed by the end of August 2018, is the first step in starting to build the economic profile of the project as the Company progresses towards commercial production.

Kishon Mid-Reach Zone 2

In May 2018, the Company started processing bulk samples collected between August and September 2017 from the Kishon Mid-Reach Zone 2 as it continued to assess the resource potential of the Kishon Mid-Reach placer. In total the Company will be processing five bulk samples consisting of approximately 2,900 tonnes of gravel.  In June 2018, the Company advanced its exploration in Zone 2 with the completion of 26 new boreholes.

Post period, Shefa Yamim announced the results of BS-1230, one of the five bulk samples mentioned above. A total of 1,380.69 cts of gemstones were recovered from 568.9 tonnes ('t') of basal gravels with an overall TMA recovered grade of 242.69 carats per hundred tonnes ("cpht") at a bottom screen size of 1mm. Of this, the Gem Box suite comprised 99% of the TMA, with the Heavy Industrial Minerals "HIM" suite of zircon and rutile accounting for the balance of 1%.

BS-1230 is the first sample from Zone 2 to incorporate spinel, ilmenite and garnet in the Gem Box suite, following the update of the Company's TMA announced 3 July 2018 due to their gem quality. The addition of spinel resulted in a significant increase in the overall TMA grade of this bulk sample.

Permo-Triassic-Jurassic rocks identified

Shefa Yamim continues to work with Professor William Griffin of the ARC Centre of Excellence for Core to Crust Fluid Systems at Macquarie University, Australia. As announced in February 2018, the results of studies conducted by Macquarie University, and led by Professor Griffin, provided a clearer understanding of why Shefa Yamim has been able to find a suite of gemstones in its exploration area, including Natural Moissanite™ and Carmel Sapphire™. Macquarie University used isotopic analyses of the mineral zircon to recognize the presence of deep-seated basaltic rocks beneath Mount Carmel, dated to the geological age of Permo-Triassic-Jurassic times.

Zircon analysis is a widely-used tool in mineral exploration. Professor Griffin and his team analysed 260 individual zircons from the vent rocks and tuffs of Mount Carmel and compared them with nearly 200 zircons in alluvial samples from the Kishon Mid-Reach placers discovered by Shefa Yamim. The analysis revealed that besides zircons from the known volcanoes on Mount Carmel, the alluvial samples also contain zircons from other Cretaceous eruptions that have not been identified yet.

The depth of formation and sequence of cooling of these older-than-Cretaceous intrusions may be responsible for the creation of the gemstones found in the Shefa Yamim license areas. The ancient volcanic rocks that were discovered refine the geological history of the region and point to further exploration potential.

Operations / Licensing and Permitting

Shefa Yamim holds a well-established Operational Site & Laboratories in Akko, Israel (total of 6,000 metres²) that has the capacity to process a range of sample sizes (more than 600 tonnes) for final mineral extraction, including washing, screening, sieving, mineral identification and definition.

In February 2018, the Company announced substantial improvements to its operational site aimed at reducing costs and making the processing of materials more efficient.

Improvements included a new upgraded jigging system which can now also separate fractions of gravel at 8-25 mm. Shefa now has two jigging lines at its operational site, one for fractions of 8-25mm and one for fractions of 0-8mm. Three new pumps were added to maximise the volume of water entering the machine and two new plants to dry the material were ordered and placed in the scrubber. The scrubber will reduce the time it takes to wash the material gathered from the bulk sample significantly and will increase productivity

During the period, the Company advanced its permitting and licensing across all its project areas with the renewal of two prospecting permits: Permit 837A11 for the Carmel site and 899A6 for the Ramot Menashe site. Post period, the Company announced the receipt of its first Prospecting license and renewal of Exploration permit 869B8. This is a significant step towards the Company achieving its target of commencing trial mining in 2019.

The Company intends to continue its exploration programme with the aim of delineating a mineral resource that is compliant with the SAMREC code.

Corporate Review

On the 24 April, Shefa Yamim strengthened its advisory team with the appointment of Daniel Stewart & Company. Post period, the Company progressed its mine-to-market strategy by focusing on developing the plans to have a unique jewellery collection designed and created exclusively for the Company. This collection would use only the gemstones discovered by Shefa Yamim. This progress marks a pivotal stage in the Company's development towards taking control of the exploration, mining, design and distribution of its own gemstones.

Financial Review

Over the last six months the Company recorded a Comprehensive loss for the period, of TNIS (in thousands) 959 (2017: TNIS 716) equating to a loss per share of NIS 0.069 (2017: 0.076). The loss was attributed to general and administrative expenses, including expenses in respect of registration of the Company for trading in London. At the end of the year, the Company's cash and cash equivalents stood at TNIS 1,737.

Outlook

This has been a very encouraging first half year period for Shefa Yamim. The Company intends to continue its exploration programme with the aim of delineating a mineral resource at its most advanced project, the Kishon Mid-Reach, whilst expanding its exploration efforts to Zone 2 in order to increase its understanding of the scale and scope of this unique deposit.

SHEFA YAMIM (A.T.M.) LTD.

NIS in thousands

The accompanying notes to these condensed interim financial statements are an integral part thereof.

SHEFA YAMIM (A.T.M.) LTD. 

NIS in thousands (except for per share losses)

The accompanying notes to these condensed interim financial statements are an integral part thereof.

SHEFA YAMIM (A.T.M.) LTD.

NIS in thousands

Audited

The accompanying notes to these condensed interim financial statements are an integral part thereof.

SHEFA YAMIM (A.T.M.) LTD.

NIS in thousands

The accompanying notes to these condensed interim financial statements are an integral part thereof.

SHEFA YAMIM (A.T.M.) LTD.

NIS in thousands

* Net of depreciation encumbered on the exploration and evaluation assets for precious stones.

The accompanying notes to these condensed interim financial statements are an integral part thereof.

SHEFA YAMIM (A.T.M.) LTD.

In NIS in thousands

NOTE 1:- GENERAL

1. a. The reported entity -

Shefa Yamim (A.T.M.) Ltd. (hereinafter - "the Company") is an Israeli company engaged in exploration for precious stones in the northern area of Israel.

The Company is a subsidiary of Shefa Yamim Ltd. (hereinafter - "the top-co.") that, until December 2017, owned 75% of the shares of the Company. Subsequent to the issuance of shares on the London Stock Exchange by the Company on December 18, 2017, the top-co currently owns 48.84% of the Company's shares. The top-co is a public company whose securities are registered for trade on the Tel Aviv Stock Exchange.

b. These condensed interim financial statements are to be viewed together with the annual financial statements of the Company as of December 31, 2017 and their accompanying Notes.

c. Since the operations of the Company are prospecting and exploration of gold, precious stones and diamond deposits and the Company has not yet commenced commercial mining, as a result, the Company does not as yet have revenues, rather only expenses. Concurrently, the Company has a deficit in working capital as of June 30, 2018 in the amount of NIS 32 thousand. Financing of its operations has been performed until now by infusions of capital and/ or by loans received by the top-co and its continued operation is contingent upon the further infusions of capital. In view of past experience, the Company's management believes that it can mobilize the sources for money in order to complete the explorations, but there remains uncertainty in this regard since the mobilizations are dependent on other parties. These factors create significant doubts in regard to continued operation of the Company as a "going concern."

These financial statements do not contain any adjustments for valuation of assets and liabilities or their classification that would likely be necessary in the event that the Company is unable to continue its operation as a "going concern."

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

a. Declaration in regard to Implementation of International Financial Reporting Standards (IFRS)

The interim financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting." The financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual consolidated financial statements as at and for the year ended December 31, 2017 (hereinafter: "the Annual Financial Statements"). However, selected explanatory notes are included to explain events and transactions that are significant for an understanding of the changes in the Company's financial position and performance since the Annual Financial Statements.

b. Foreign Currency and Linkage Basis

Detail in regard to the change in the Consumer Price Index and the exchange rate of the foreign currency:

c. Judgments and Estimates

In preparing these Interim Financial Statements in accordance with the IFRS, management is required to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities as well as income and expenses. We clarify that actual results may differ from these estimates.

The significant judgments made by management in applying the Company's accounting policies and the key sources of estimation that served for estimates that are bound up with uncertainty were the same as those that were applied in the Annual Financial Statements.

d. IFRS 9 "Financial Instruments"

IFRS 9 (July 2014) "Financial Instruments" (hereinafter: "the Standard") is the final Standard of the Financial Instruments package and replaces IAS 39 - "Financial Instruments: Recognition and Measurement." This Standard supersedes all previous versions and includes instructions for financial instruments: classification and measurement, impairment and hedging accounting.

The Standard determines that upon initial recognition, all financial instruments shall be measured in accordance with fair value. For consecutive periods, the debit instruments should be measured by depreciated cost only if the following two conditions exist:

- The asset is held in the framework of a business model, aimed at maintenance of the asset in order to collect the projected cash flows that will derive from this financial asset.

- In accordance with projected terms of the financial asset, the Company is entitled, at certain times, to receive the projected cash flows that constitute only payments of the principal and payments of the interest on the principal balance.

Follow-up measurement of all other debit financial instruments will be in accordance with their fair value. The Standard distinguishes between debit financial instruments that will be measured at fair value through profit and loss and other debit financial instruments that will be measured at fair value through other comprehensive income.

Investments in capital instruments will be measured during consecutive periods at fair value, with differences charged to profit and loss or to other comprehensive profit (loss), in accordance with the company's election in regard to each financial instrument. In the event that these are capital instrument that are held for business purposes, then they must be measured at fair value through profit and loss.

The Standard includes a new model, built in three stages, that is utilized to measure decrements in debit

financial instruments that are not measured by fair value through profit and loss and that is based on projected

credit losses. Each stage determines the method of measurement of projected credit losses, based on changes

that occurred in the credit risk for the debit financial instrument. Concurrently, the model offers some relief

for financial assets that have short-term credit spans, such as receivables.

Classification and measurement of credit financial instruments have remained unchanged, except for

recognition of changes in liabilities that were designated for fair value through profit and loss, that derive

from a credit risk of the entity, in other comprehensive income.

The Standard includes new requirements in regard to hedging accounting.

The Standard was initially implemented in these financial statements.

The Company chose to implement the Standard retroactively without restating the comparative figures. The

initial implementation of this Standard will not have a significant effect on the Company's financial

statements.

e. IFRS 15 - "Revenues from to Contracts with costumers"

In May 2014, the IASB published IFRS 15 (hereinafter: "the Standard"). This Standard replaces IAS 18, "Revenue" and IAS 11, "construction Contracts." The main principle of this Standard is recognition of revenues from receivables with a methodology that reflects a transfer of control of goods or services that are provided to receivables in the framework of those contracts.

The Standard presents a model of five conditions:

Stage 1 - identification of the contract with the client.

Stage 2 - identification of several separate performance obligations in the contract.

Stage 3 - Determination of the transaction price.

Stage 4 - Allocation of the transaction price to the various performance obligations in the contract.

Stage 5 - Revenue recognition upon performance of the contract obligation, while differentiating between an obligation performed at a specific time and an obligation performed over a period of time.

The Standard is implemented initially in these financial statements.

Since the Company does not as yet perform operations that yield revenues, the Standard does not have any significant effect on these financial statements.

f. IFRS 16 - "Leases"

In January 2016 the IASB published IFRS 16 in regard to leasing (hereinafter - "the new Standard"), that replaces the guidelines presently included in IAS 17 - "Leases."

In accordance with the new Standard, a lease is defined as a contract, or part of a contract, that transfers the right to use the asset for a defined period of time in return for a consideration.

Following are the terms of the new Standard:

- Lessees will recognize a liability that reflects future lease payments and will recognize an asset that is the right of usage, in general for all leasing contracts (except for certain circumstances, detailed below). Concurrently, the lessees will recognize separately related variable interest payments in regard to the liability and depreciation expenses in regard to the right of usage of the asset.

- Variable leasing payments that are not dependent on the Index or interest and are based on performance or usage (e.g., a percentage of the redemption) will be recognized as an expense on the part of the lessees or as revenues on the part of the lessors, when incurred.

- In the event of a change in variable leasing payments linked to the Consumer Price Index ("CPI"), the lessee is obligated to recalculate the liability for leasing, with the effect of the change charged to right of usage of the asset.

- The Standard exempts lessees from implementation of its leasing terms for the short-term and for leasings where the leased property is of minimal value.

- Accounting treatment for the lessor is not materially affected as compared with the existing Standard, that is classification as a financial or an operating lease.

The Standard will be initially implemented commencing with the annual financial statements referring to January 1, 2019 and thereafter. Earlier implementation is possible.

At this stage, the Company does not intend to adopt earlier implementation.

The Standard allows partial earlier implementation. In accordance with this approach, the balance of liabilities at initial implementation date will be computed including the existing capitalization interest at that date. In regard to balance of the right of usage asset, the Company may decide, in regard to each leasing separately, to recognize the asset at the leasing liability or, alternatively, to recognize the asset as though it was always measured in accordance with the new Standard. Any difference arising at initial implementation date will be recognized as an adjustment to the profit balance at that date and will not require restatement of the comparative figures. Alternatively, one may choose complete early implementation of the new Standard while restating the comparative figures.

In Company estimation, after examining the implications of early implementation, there will be no significant effect of implementation on the Company's financial statements.

NOTE 3:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD AND SUBSEQUENTLY

a. Composition

b. On December 18, 2017 the Company completed its share issuance (IPO) on the London Stock Exchange in the framework thereof it registered for trading the issued and outstanding shares prior to the IPO, in the amount of 9,387,600 Ordinary Shares, and also allotted an additional 4,517,456 Ordinary Shares as follows:

3,973,461 Ordinary Shares as a result of loan conversions (see Note 13c of the annual financial statements).

320,856 Shares were allotted to an interested party in the framework of a debt conversion (see Note 11b of the annual financial statements).

202,230 Shares were allotted as compensation for payment of debts to the issuance consultants.

20,909 Shares were allotted to the people who ordered them on the issuance date.

From the abovementioned shares, an amount of 4,294,317 shares were allotted at a 15% discount from the basic issuance price - £ 1.10. The comprehensive amount that was charged to capital in accordance with the basic price per share is NIS 18,857 thousand (net of issuance expenses and fees in the amount of approximately NIS 4,470 thousand).

c. On April 23, 2018 the Company allotted 5,100 Ordinary Shares to Share Talk, a company which provide access to social networking for listed companies. Allocation of the shares constitutes a payment for operations in regard to the Company.

d. On June 5, 2018 the Company allocated 13,770 Ordinary Shares to the brokerage company Daniel Stewart in order that he serves as a "Joint Broker" together with the head Company broker (VSA Brokers), in order to assist the Company in mobilization investors.

e. As part of the share allocation in December 2017, the Company allocated to investors, an amount of 6,589,331 non-marketable Warrants. In accordance with an evaluation by an external independent assessor, it was determined that the fair value of the Warrants for shares that were rendered, as of June 30, 2018, is in the amount of approximately NIS 9 million.

Graded valuation of the Warrants -

Measurement of the fair value of the financial instruments is performed utilizing a graded valuation of fair value that reflects the essence of the data utilized in performance of the measurement of fair value. The graded valuation is based on the following three levels:

Level 1 - Quoted prices (unadjusted) on operating markets for similar assets or liabilities.

Level 2 - Data that are not quoted prices included in the abovementioned Level 1, that may be viewed directly (that is, in price quotes) or indirectly (that is, derived from quoted prices).

Level 3 - Data in regard to an asset or a liability that are not based on market information that may be viewed (data that may not be seen).

As of June 30, 2018 the warrants were measured by utilization of a valuation technique based on Level 2 while basing itself on market information that is viewed.

f. On July 3, 2018 the Company reported that subsequent to a comprehensive detailed report, prepared recently

during the course of a work visit by the advisory geologist to the subsidiary abroad, Dr. J. D. Ward, in which framework all the findings of the Target Mineral Assemblage were researched from the samples they collected in Zone 1 and an update with a summary were prepared that raised significantly the findings of gemstones of the subsidiary in zone 1 from 5,825.24 carat to 9,778.15 carat following the inclusion of the high-quality Spinel gemstone in the gemstone group. Subsequent to these findings, Dr. Ward redefined the group of gemstones located in Zone 1 as a "Gem Box." The gemstones included in the Gem Box are: Spinel, Carmel Sapphire, Garnet, Ilmenite, Sapphire, Hibonite, Moissanite, Ruby, and Diamond that constitute 99.5% of the Target Mineral Assemblage found by the Company in Zone 1.

He also pointed out that there were 137 drillings in Zone 1 and 14 channels were sampled for an inclusive weight of 6,385 tons.

g. On July 23, 2018 the Company reported that Paradigm Project Management (Pty) Ltd was appointed in

order to perform a technical valuation and cost ("TEE") aimed at commercial production in Zone 1 that is located in the Kishon Mid-Reach Zone 1, which is projected during the year 2020.

h. On August 15, 2018 the Company reported receiving an advanced exploration Permit for prospecting that

relates to the Kishon Mid-Reach Zone 1 and spreads over a terrain of approximately 252 dunam. This Permit is the first one received since the Company's establishment. Subsequent to performance of a work program in the framework of this new Permit, the Company will be entitled to receive an Exploratory Report that will permit completion of the regulatory procedures necessary for performance of commercial mining in this area.

Concurrently, the Company reported receiving an Exploratory Permit that spans an area of approximately 173,636 dunam, constituting an extension for another year of the prior Exploratory Permit that had expired.

NOTE 4. Changes in the Liabilities Resulting from Financing Operations -