SNRP.L Regulatory News (SNRP)

01 June 2011

Strategic Natural Resources PLC

("SNR" or the "Company")

Final results for the year ended 28 February 2011

The Board of Strategic Natural Resources ("SNR") (AIM: SNRP) is pleased to announce its audited financial results for the year ended 28 February 2011. A full copy of the annual report and accounts will be made available shortly from the Company's website, www.snrplc.co.uk.

Highlights during the period:

·; Completed the Company's export feasibility study

·; Completed the restructure of its BEE shareholding in its 74 per cent. owned subsidiary, Elitheni Coal (Pty) Limited ("Elitheni")

·; Raised a total of £5.075 million through new and existing institutions

·; Appointed new finance director

Post period highlights:

·; Entered into off-take agreement with Trasteel for the supply of 2 million tonnes of coal from the Elitheni Mine

·; Announced commencement of new drilling programme at the Elitheni Mine

·; Appointed new technical director

SNR Chief Executive David Nel said, "We are pleased to report that we have moved into a period of converting our plans into realities. Given the team and commitment to the task at hand, this year will be a year filled with enormous activity and delivery and I am looking forward to updating the market as we progress, to be a part of the process leading up to the successful shipment of our first vessel of coal."

For further information, please contact:

For further information about Strategic Natural Resources plc please visit www.snrplc.co.uk.

The financial information set out below does not constitute the Company's statutory accounts for the years ended 28 February 2011 or 2010, but is derived from those accounts. The auditors have reported on those accounts; their report was unqualified however it did include references to matters to which the auditors drew attention by way of emphasis without qualifying their report.

CHAIRMAN'S STATEMENT

I have pleasure in presenting the Company's results for the year ended 28th February 2011. This statement reviews the Operational and Financial performance of the Company for the year ended 28th February 2011 together with developments after that date and provides an update on the operations and plans for the Company.

Operational Update

I reported in the Interim announcement in November 2010 that we had received numerous enquiries from prospective export purchasers of Elitheni coal and that we were in advanced discussions with several international traders, power developers and coal brokering companies.

In April 2011 we were very pleased to announce that negotiations had been successfully concluded with the Trasteel Group, which was founded in September 2009 and has experience in the steel and raw materials sectors, for our first off-take contract covering the first 2 million tons of production from the Elitheni mine, commencing at an annual rate of 500,000 tons in June next year and building up to higher rates over the next two years. I would draw shareholder's attention to this contract which at the current price for export coal from South Africa, allowing for adjustments to reflect the quality of our coal, is of considerable value to the Company. This will be produced from circa 1% of our existing resource base which we are now once again actively involved in increasing through a new c.USD2.5 Million drilling programme announced in March 2011.

Shareholders will, I am sure, share the appreciation of the Board that we are just at the beginning of a major mine development programme with very substantial volumes in prospect over the many years to come.

Whilst the signing of an off-take agreement for export coal has been the main focus of attention over the recent past the Company has not lost sight of the domestic power generation and industrial steam markets. Shareholders should note that the large volumes of beneficiated coal required under the off-take agreement will result in larger volumes of mined coal at the mine site and a resulting discard stockpile from the washing process which will be suitable for domestic steam and independent power plant markets. This coal will be available to the Company to sell on an extremely competitive basis given that the mining costs will have been recovered from the export sales contract.

In May 2011 we were delighted to announce the appointment of Bertus Steenkamp as our technical director. With extensive low seam mining experience in South Africa and a shared vision for this coalfield, he will be responsible for the setting-up of the Mine Technical Services such as planning, scheduling and plant procurement, which will include the appointment of mining contracting services and related in house mining services for the Company.

Summary of Results

Operational performance resulted in a loss before and after tax of £2.7m (2010 £436k) as set out in the Financial Statements. The significant components of this increase in losses can be broken down as follows:-

·; Administrative expenses rose by £630k due to increased employment costs (£385k) which included certain termination payments, and an increase in professional and consulting fees of £124k and other expenses of £121k.

·; The Board reviewed the carrying value of the Suxe burners and given the status of known projects under active development decided to write down this equipment to nil value which gave rise to an impairment charge of £121k.

·; During the year and in order to restructure and consolidate the BEE shareholding in Elitheni, shares were transferred to Rapitrade 644 (Pty) Ltd which gave rise to an impairment charge of £312k.

·; It was announced in December that the settlement of the loan agreement with Ulitorque had been challenged in the arbitration court and unfortunately the arbitrator had ruled against the Company. The Company moved extremely quickly to settle this unexpected liability at the minimum cost and paid Ulitorque (Pty.) Limited £909k (ZAR 10.2m) in full and final settlement of all and any claims which it may have against Elitheni Coal (Pty) Ltd.

Funding requirements

The Group has sufficient funds to cover its overhead for the next twelve months. However project development costs are currently unfunded and the Group is considering a number of options and strategies to raise the sums required to develop the Elitheni mine. These options include the issue of equity, debt finance and the assumption of financial partners. The directors expect to be able to successfully raise the additional funds required but whilst negotiations are on-going, the Group does not have any binding agreements in place at present. I expect to make further announcements updating shareholders on our financing plan in the near future.

Future operations and plans

The attention of the Board is now firmly focussed on the mine development programme to achieve the production targets needed to fulfil the Trasteel contract as well as the financing plan which will be needed to accomplish the investment required.

The Company has a great deal of work to complete both in terms of mine development, readiness of the logistics chain as well as ensuring the coal terminal at the port of East London is fully operational.

The recent appointment of our technical director ensures that the planned mine development is well in hand, with detailed mine planning and a related procurement strategy already completed. Once fully implemented this will enable the production capability required to deliver against our first 2 million tonne off-take and in addition ensure there is an on-going capability to produce and deliver 2 million tonnes of saleable coal per annum. The first equipment necessary has already been procured.

The fortuitous location of the mine in relation to the port and road and rail networks is seen by the Board as more of an opportunity and advantage as well as being a challenge. The Company has made significant headway in terms of finalising the solution for road, rail and port services and has formalised the necessary relationships and partnerships to ensure successful execution of each. The mine's location in relation to the port and the road network allows the Company to commence with road transport for the first year of operation and to convert to rail at a later stage, allowing sufficient time to ensure all logistics necessary for rail can be phased in smoothly.

The port of East London has been extremely supportive and is committed to a start date of June 2012, so much so that, at their own expense, they commenced the Environmental Impact Assessment (EIA) in November of 2010 for the new coal terminal at the port. The EIA process, which allows for certain elements of construction to commence in advance of its conclusion, is expected to be concluded by November 2011.

The Company has developed a road map and project plan for every operational aspect, from the mine development to the logistics implementation, and the organisational growth now required. Key members of the executive together with the senior management team will manage the development to ensure all aspects are synergistically achieved.

Drilling Progress

We are pleased to have recommenced an active drilling programme with an estimated budget of USD2.5M allocated to three primary objectives:

1. To find more coal, and target the high value areas, specifically focussed on historical reports of possible coking coal.

2. Improve our resource categorisation by enhancing inferred resource to indicated or measured resource.

3. Commence exploration of the significant opportunity in Phase 5.

I look forward to updating shareholders on the progress of this programme with the aim of providing an update of our CPR within Q4 of 2011.

As shareholders will appreciate from the above this has been a transformational period for your Company which could not have been achieved without the hard work and expertise of our teams in both South Africa and the United Kingdom. I am sure you will agree with me that all our people deserve to be congratulated on the speed and excellence of what can only be ranked as a remarkable period of building the future of your Company. I look forward to this time next year with confidence when our first coal will have been mined, washed and delivered to the port of East London in time for the first shipment under the Trasteel contract.

R. H. R. Latham

Chairman

Date: 31 May 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 28 February 2011

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 28 February 2011

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 28 February 2011

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 28 February 2011

1. FINANCE EXPENSE

On 17 June 2009 Elitheni Coal (Pty) Limited ("Elitheni") entered into a loan agreement with Ulitorque (Pty.) Limited ("Ulitorque"), a private company registered in South Africa, the loan principal being £320k (ZAR4.5m). Under the loan agreement interest accrued and was compounded monthly on the basis of JIBAR plus a margin of 3.5 per cent. The loan agreement provided the lender with the opportunity to convert the outstanding balance due under the agreement into a 10 per cent. equity interest in Elitheni 9 months after drawdown, or into new shares of the Company equal to such outstanding loan amount. This loan was subsequently modified by the lender requesting early repayment.

The Company entered into a short term loan agreement with SP Angel Limited ("SP Angel"), pursuant to which SP Angel loaned £300k to the Company on 15 March 2010. The Company used this loan together with its own existing cash resources, to effect repayment of both the principal and accrued interest of the Ulitorque loan on 16 March 2010 and subsequently repaid the loan from SP Angel from the proceeds of a placing by the Company which was announced on 17 March 2010.

Subsequently the Company received notice from Ulitorque that, in their opinion, the repayment of all of the outstanding capital and accrued interest did not satisfy the repayment conditions set out in the Ulitorque Loan Agreement and that they wished to convert the principal of the Ulitorque loan and accrued interest into a shareholding of 10% in Elitheni. The Directors were advised by legal counsel in South Africa that Ulitorque had limited basis for making such a claim because repayment had been made in accordance with their request for repayment and the Directors believed the claim from Ulitorque to be without foundation.

The matter was subsequently put to arbitration in South Africa and on 5th October 2010 the Company was informed by the arbitrator that Ulitorque's claims had been upheld.

On 29 December 2010 Elitheni paid Ulitorque (Pty.) Limited £909k (ZAR 10.2m) in full and final settlement of all and any claims which it may have against Elitheni Coal (Pty) Ltd being the agreed settlement of £1.336m (ZAR15m) less the amount already paid in settlement of the original loan £427k (ZAR 4.8m).

2. LOAN NOTE

The loan note represents the instrument under which the deferred consideration arising on the sale of the Group's 26 per cent. interest in Elitheni Coal (Pty.) Ltd to Rapitrade 644 (Pty) Ltd is owing and secured. Interest is payable at 3 month LIBOR plus 1.5 per cent.

The balance owing at the year-end in respect of accrued interest amounts to £1k (2010 - £402k).

On 26 June 2008, the Company's wholly owned subsidiary, Acharnian Mining Ltd ('Acharnian'), exchanged contracts for the sale of 26 per cent. of its interest in Elitheni Coal (Pty.) Limited (the 'Original BEE transaction') for a total consideration of £4.84m of which ZAR 10m (£0.64m) was received representing 4 per cent of the interest in Elitheni Coal (Pty.). The balance of £4.2m was originally payable in two tranches, £3.3m by 12 December 2008 and £0.9m by 31 May 2009. The repayment date of the tranche due by 12 December 2008 was subsequently extended to 31 May 2009. The deferred consideration was secured against the shares sold. At 28 February 2009 the Directors decided to make a provision of 50 per cent. against the balance owing plus the interest accrued at the balance sheet date. At 28 February 2010the provision totalled £2.3m being 50 per cent. of the £4.2m owing plus accrued interest at that date of £402k.

During the year and in order to restructure and consolidate the BEE shareholding in Elitheni, Acharnian exercised its rights under the original loan pledge agreements and procured the transfer of the remaining 22 per cent. to Rapitrade 644 (Pty) Ltd ("Rapitrade") to replace these original loans. Under the terms of this Sale of Shares Agreement the remaining 22 per cent. was transferred to Rapitrade 644 (Pty.) Ltd for the sum of ZAR 22,000,000 having received written confirmation from the original BEE shareholders of their agreement to this consolidation and restructuring of Elitheni's BEE shareholding.

The sale price was satisfied by the payment by Rapitrade to Acharnian of ZAR 15,000,000 in cash and a simultaneous loan of ZAR 7,000,000 by Acharnian to Rapitrade. This loan bears interest at a rate equal to the three month LIBOR plus 1.5 per cent. Upon Elitheni declaring a dividend, Rapitrade will apply 50 per cent. of the sums payable towards discharging the then outstanding loan.

No share based payment charge under IFRS 2 arises on this transaction since the fair value of the consideration received is considered to be the same as the fair value of the equity sold.

The sale agreement refers to the possibility that the purchasers of the 26 per cent. interest in Elitheni may, at some time in the future and subject to the agreement of the Company, convert their interest in Elitheni into ordinary shares in the Company. No terms for a conversion have been agreed as at the date of these financial statements and accordingly no fair value is deemed to exist in respect of conversion rights which may be agreed in the future.

The interest recognised in finance income in the year of £56k (2010 - £92k) is the amount due on the original loans after a making a provision of 50 per cent plus £1k being interest accrued on the loan to Rapitrade.

An impairment charge of £312k being the difference between the sale price of the 22% sold to Rapitrade and the then written down value of the amount owed including accrued interest from the original BEE shareholders has been made and is included in administration costs.