SNRP.L Regulatory News (SNRP)

06 July 2012

Strategic Natural Resources PLC

("SNR" or the "Company")

Final results for the year ended 29 February 2012

The Board of Strategic Natural Resources ("SNR") (AIM: SNRP) is pleased to announce its audited financial results for the year ended 29 February 2012. A full copy of the annual report and accounts has today been posted to shareholders, along with notice of the Company's annual general meeting ("AGM"), to be held at the offices of FTI Consulting, at Holborn Gate, 26 Southampton Buildings, London WC2A 1PB at 11.00 a.m. on 31 July 2012. The annual report and accounts and AGM noticewill also be made available on the Company's website, www.snrplc.co.uk.

Highlights during the period:

·; Coal off-take agreements signed

·; Raised a total of £1.9 million through additional investment by Cooch 1095 Ltd

Post period highlights:

·; Raised a total of £8.7 million through investment of a new shareholder, Richardsons LLP

·; Commencement of open cast production

SNR Chief Executive David Nel said, "This has been a year filled with preparation, change and achievement as we have commenced production and we continue to gear ourselves for the commencement of exports. None of this would have been possible without the shareholders and partners who support this business and the dedicated team of professionals in their service. I am looking forward to charting together the course we have set for this Company over the next financial period."

For further information, please contact:

The financial information set out below does not constitute the Company's statutory accounts for the years ended 29 February 2012 or 2011, but is derived from those accounts. The auditors have reported on those accounts; their report was unqualified.

CHAIRMAN'S STATEMENT

I have pleasure in presenting the Group's Annual Financial Statements and a summary of activities over the past year. With our inaugural blast in June 2012, we achieved an important milestone, one which ushered in an exciting new stage in the Company's development, with the Elitheni mine expected to reach a steady state of underground production and first export sales in the last quarter of 2012.

2011 heralded many achievements for SNR. Firstly I am delighted to welcome aboard the new shareholders that have made the commencement of our production possible. Cooch 1095 Limited ("Cooch") continued to support SNR and invested £1.9m in September 2011 and Richardsons LLP ("Richardsons"), joined the register, investing £8.7m as a post balance sheet event, in March 2012. These significant investments have greatly strengthened the balance sheet of SNR and enabled the Company to meet the production goals necessary to supply the first of our vessels to Trasteel International, for our primary off-take of 2 million tonnes of coal.

This primary offtake agreement was signed in April 2011 and formed the commencement of a relationship with Swiss based trader, Trasteel International, which was founded by former senior executives of the Duferco trading group. Trasteel has made a significant entrance over the past few years on the iron ore, steel and coal trading stage and we are delighted to have signed an initial off-take agreement with them.

In addition to our coal off-take agreement with Trasteel, which will all be exported from South Africa, we are pleased to announce the first major local off-take agreement concluded between Elitheni and a major bio ethanol plant being funded by South Africa's Industrial Development Corporation, to be erected 250km from our Elitheni coal mine. The coal will be supplied to fluidised bed ("FB") boilers in support of their production processes and the production of power for the plant. This first local contract is the culmination of many years of work and will further demonstrate the viability of the Eastern Cape coal into the local emerging FB combustion market and the value of implementing clean coal technology for local industry.

Our relationship with Trasteel has further evolved, in support of opportunities in the higher value anthracite market and this has culminated in the formation of 'EliTra', a 50:50 joint venture between our 74% owned South African subsidiary Elitheni Coal (Pty) Limited ("Elitheni") and Trasteel in Switzerland. The purpose of EliTra has been to further cement our relationship with Trasteel and to facilitate a new delivery schedule through which our anthracite can be sold. Although EliTra is a joint venture, it is important to note as per the Company's announcements on this, that Elitheni will still be selling coal at its target profit margins to EliTra, the only profit shared between Elitheni and Trasteel is the 'additional' profit per tonne that will be earned, over and above the current discount offered to Trasteel on thermal coal sold. The formation of EliTra, in support of the worthwhile focus on the anthracite market, has resulted in a combination of anthracite and thermal type coal vessels, commencing in November / December 2012. The ability to focus on the anthracite market in conjunction with the thermal market represents a great opportunity for SNR in current tumultuous

commodity and equity markets and it affords Elitheni the flexibility to trade to different markets, which not all coal mines can enjoy.

We have also seen over this last financial year and in the months immediately following the financial year end, some important board changes. In the middle of last year, we were fortunate to welcome onto the main board of SNR, the Honourable Mr. Stone Sizane, a member of the South African Parliament and former Chairperson of the African National Congress in the Eastern Cape of South Africa. Mr Sizane was appointed to the Board of SNR to represent the interests of the 20% stake of Elitheni held by SNR's Black Economic Empowerment partner, Rapitrade 644 (Pty) Ltd. In addition, in September of last year we were fortunate to welcome aboard Mr. Andy Brennan to represent the interests of Cooch, who have been a continual support in our endeavours to become a fully funded mining venture. Mr. Brennan has several years of senior banking experience in Ireland, specifically with respect to high net worth individuals and private clients.

Following the completion of the funding to enable the Company to commence production at the Elitheni mine, the Board took the decision to move the Group's finance function back to South Africa, to support the Group's day to day activities, including the management of cash flows, profitability and debt finance arranging. Mr. Mark Rosslee has been appointed to the board of Elitheni in South Africa and as financial controller of SNR. Mr. Rosslee has over 20 years of experience in the resources industry, having served on the boards of NAMDEB, a division of De Beers, as well as several mid-tier and junior listed resource companies. We welcome his experience in support of Elitheni and SNR.

In addition, we recently announced two more appointees to the board of SNR, Mr. Gabriel Ruhan and Mr. Don Nicolson. Mr. Ruhan has been appointed to the board of SNR as the Richardsons representative director, as an agreed condition of the investment by the Richardsons. Mr. Ruhan represents significant international business interests and brings a wealth of business experience, specifically in the shipping industry through his company, Global Marine. We are delighted to welcome Mr. Ruhan to the Board. His experience is most welcome given the focus for SNR on sea borne trade of Elitheni coal over the next five years.

Mr. Don Nicolson joins the Board as Deputy Chairman with a wealth of corporate experience, having served as Chief of Staff for BP North Sea and having been chief executive officer of Scottish Coal, under the Scottish Resource Group. It is, as is Mr. Ruhan's appointment, a great privilege to welcome so accomplished an international business leader to the board of SNR.

The Company also announced that Mr. Jeremy Metcalfe will be leaving the SNR board to accommodate Mr. Ruhan. We would like to thank Mr. Metcalfe for years of support and service to the Company. As a founding member of SNR, the Company owes Mr. Metcalfe a great debt of gratitude.

We have chartered a course for the Group over the past year, developed new relationships and welcomed new members to the Board in order to ensure we commence our first major revenue generating activities. I look forward to updating shareholders later in the year as we move closer to the first vessel sailing from South Africa. I would like to thank all my fellow directors for the support over the years and especially in this last financial year as we successfully completed the necessary fundraising to commence production in 2012 and for SNR to become cash generative.

R. H. R. Latham

Chairman

5 July 2012

CHIEF EXECUTIVE'S STATEMENT

Following on from the Chairman's Statement and summary of the achievements of 2012, it gives me great pleasure to add to these words, with a further elucidation on the implications of some of the actions taken over this past year and the strategy for the Group moving forward.

The past financial year has been one of focusing on planning and investment for production build-up and further resource development. The group invested £1.7 million in resources drilling and pre-production planning, all being funded by the new issue of 10 million shares at 19 pence per share. Several items of capital, including a continuous miner, which are required for the current production development, were secured with initial deposits totalling £1.5 million. Net working capital reduced to just over £1.3 million pounds from £3.9 million after investing in the future growth and development of the Elitheni mine. The Group realised a net loss of £1.5 million (2011 net loss: £2.2 million) mostly arising from corporate overheads, related expenditures and exchange losses. Loss per share for the year reduced by 41 per cent. to 0.14 pence per share due to the reduced interest charges on loans and increased shares in issue.

With the support of our new and existing shareholders, we are now in a position to commence production. The clearing of our initial opencast area, to allow access to a 'high wall' through which we will commence steady state underground mining, was a ground breaking event ceremoniously initiated by the Honourable Premier Kievet of the Eastern Cape on the 1st of June 2012. We expect that this will expose some 100,000 tonnes of initial coal to be processed later in the year when the washing plant is commissioned in September 2012.

Having entered into this significant period in the Company's development, the Board has set out its own 'Big Five' South African goals:

1. to achieve a production capability of 800kt by end of 2012;

2. to ensure all logistics and infrastructure are in place to support the movement of this coal by the end of 2012;

3. to double both goals by the end of 2013;

4. to double the resource base by the end of 2014; and

5. to be exporting coal from both East London and Coega and have secured supply for a mine mouth Independent Power Plant (IPP) by the end of 2017.

These strategic goals will guide management in achieving very real targets, enabling it to achieve profitability in the near and long term and generate sustainable growth and represent an attractive investment for all shareholders.

To enable the underground production capability, we will commence with an initial horizontal adit, comprising three mining sections. Conventional drill and blast underground equipment will be utilised in two sections, with a continuous miner in the third. Completion of these three sections should enable production capability of over 1 million tonnes 

per annum. We have already secured the continuous miner from international mining supplier, Sandvik, as well as the necessary conventional drill and blast equipment for additional underground sections. Completion of the first two sections alone should enable production of approximately 70,000 tonnes per month and equipment for the third section is currently being sought in conjunction with the additional loan finance the Company requires to accelerate the production build up profile.

The Directors are confident that the Company is sufficiently funded to commence and sustain mine production at Elitheni. However, in order to ensure all logistics, production and resource goals are met and the creation of shareholder value is accelerated, the Company is considering additional funding options. Given the recent injections of equity capital, the Company has chosen to pursue, as far as is possible, a strategy of leveraging the balance sheet via debt finance and the Company is in discussions with various providers of debt who have provided the Company with indicative term sheets. Whilst it may take several months to complete a debt financing, the Company is confident it has sufficient cash as well as alternate plans to meet further funding requirements, should the process take longer than envisaged.

Through the formation of EliTra, the equity fundraisings and the focus on anthracite sales, we have placed the Company in a far stronger position. Anthracite sales, depending on the qualities produced could be as high as a $25-30 per tonne premium to the API 4 index. In the current global climate, where there is uncertainty over commodity prices, being able to place a product at a higher value market is naturally a significant advantage. Not only does the anthracite market provide better upside for the Company but through the beneficiation of the run of mine coal to produce the anthracite specification, the Company will generate a middlings product (which is better than discard but not quite exportable quality). The advantage of this approach is that we are able to take these middlings through a second stage wash and achieve a product which will be close to the original Trasteel specification required for Thermal coal (5500 Kcal/kg). The Group is aiming to supply circa 30 per cent. of its cargo to anthracite markets in 2013, with a 50:50 split achieved by 2016, totalling 500kt anthracite and 500kt Thermal, i.e. two 40,000 tonne vessels per month from the port of East London.

The port operator of East London, Transnet Port Terminals, has been very supportive about these new coal shipments. The port operator is preparing for the arrival of the first vessel during the last quarter of 2012. The coal handling will be done on an environmentally friendly basis. There are also discussions taking place with the National Ports Authority to dredge the port of East London in order to accommodate larger vessels. This will allow SNR to be even more competitive within the global marketplace and ultimately penetrate additional markets in the Far East. In addition, Transnet Freight Rail have approved a plan to ensure the coal will be railed into East London from Queenstown, only a short distance from the mine, until the branch line has been re-instated. The Directors believe East London will be capable in 3 year's time to accommodate the exporting of 3 to 4 million tonnes of coal annually, using a container and bulk dry terminal.

As per our 'Big Five' goals, the Company will continue to pursue a strategy of growing its resource base. At present, Golder Associates (the Group's Competent Person) have confirmed a 150 million tonne resource, with Elitheni's qualified person adding an estimated 53 million tonnes to the resource in 2011. In June 2012 the Company commissioned Minxcon to compile not only a resource update but a full SAMVAL reserve statement in support of debt finance. The results of this study will be released in Q3 2012. On the basis of concluding further funding, the Company will continue its drilling programme. In the 2011 drilling season the Company identified areas of Phase 3 which indicated Coking Coal qualities and in addition, through non-invasive prospecting, a number of areas in Phase 5 which showed good Thermal Coal qualities. Both of these areas will become the focus of future drilling.

The Company remains in close working contact with both provincial and national governments and remains in debt to them for their support of the Elitheni project. Elitheni is fortunate to have the Honourable Mr. Stone Sizane as well as Mr. Mazizi Msutu as shareholders and directors heading up Stakeholder Management and Sustainable Development and is making good strides forward in discussion with the government for a mine mouth power plant to be erected as a component of the IRP 2010, issued by the Department of Energy.

We are confident that, through the determination and commitment of the individuals who have dedicated themselves to the success of the Group, we will see a world class coal mine and coal loading facility fully established in the region before the end of 2013. I am looking forward to updating you on our progress throughout the year.

David Nel

Chief Executive Officer

5 July 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 29 February 2012

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 29 February 2012

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 29 February 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 29 February 2011

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 29 February 2012

1. NATURE OF OPERATIONS

The principal activity of Strategic Natural Resources PLC and its subsidiary entities ('the Group') is the acquisition and development of natural resource assets. During the year under review, all of the Group's activities were located in South Africa and focused on the development of the coal resource of Elitheni.

2. GENERAL INFORMATION

Strategic Natural Resources PLC is the Group's ultimate parent company. It is incorporated and domiciled in England and Wales. The address of Strategic Natural Resources PLC is given on the information page. Strategic Natural Resources PLC shares are traded on the AIM market of The London Stock Exchange PLC.

3. SUMMARY OF ACCOUNTING POLICIES

3.1 Basis of preparation

The basis of preparation and principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

The consolidated financial statements of Strategic Natural Resources PLC have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS's"), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets.

3.2 Going concern

The Financial Statements have been prepared on a going concern basis. The Group has sufficient funds to cover its corporate overhead as well as the initial production build up for the next twelve months that will enable it to meet its delivery and offtake commitment to Trasteel. The impact of market conditions both from a currency and commodity price could however negatively impact in this ability but as indicated in the directors' report the directors are evaluating various mitigation options to limit this eventuality. However any new or accelerated project development capital costs will require further funding. The Group is also considering a number of funding options including the issue of new equity, project debt finance and the refinancing of the new and refurbished capital equipment. Whilst these negotiations are on-going, the Group does not have any binding agreements in place at present but is confident with an updated resource statement, of which Minxcon have been engaged, should give any potential lenders the necessary technical and financial assurance they require.

3.3 Accounting standards

Various new standards, amendments and interpretations became effective for the year ended 29 February 2012 and were adopted by the Group. These new standards, amendments and interpretations do not result in any material changes to the financial statements of the group or company.

Various standards, amendments and interpretations have been issued but are not yet effective and have not been early adopted by the group or company. The Directors do not expect these will have a material impact on the financial statements of the group or company.

3.4 Basis of consolidation

These financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 29 February 2012.

Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

Unrealised gains on transactions between the Group and subsidiary entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiary entities have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the acquired company, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the entity prior to acquisition. On initial recognition, the assets and liabilities of the acquired entity are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Investments in subsidiaries and joint ventures are stated at cost less impairment in the balance sheet of the Company.

The non-controlling interest shown in the consolidated statement of comprehensive income and the consolidated statement of financial position represents the 26 per cent. interest owned by minority shareholders in the Group's operating subsidiary, Elitheni Coal (Pty) Ltd.

3.5 Foreign currency translation

The financial information is presented in pounds sterling, which is also the functional currency of the parent company.

In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of remaining balances at year-end exchange rates are recognised in the Statement of Comprehensive Income in administrative expenses.

In the consolidated financial statements, all separate financial statements of subsidiary entities, originally presented in a currency different from the Group's presentation currency, have been converted into sterling. Assets and liabilities have been translated into sterling at the closing rate at the balance sheet date.

Income and expenses have been converted into sterling at the average rates over the reporting period. Any differences arising from this procedure have been charged/(credited) to the Translation Reserve.

3.6 Income and expense recognition

Revenue is recognised upon the performance of services and delivery of goods or transfer of risk to the customer. No revenues were recorded during the current year.

Operating expenses are recognised in the Statement of Comprehensive Income upon utilisation of the service or at the date of their origin. All other income and expenses are reported on an accruals basis.

3.7 Borrowing costs

All borrowing costs are expensed as incurred except where the costs are directly attributable to specific construction projects, in which case the interest cost is capitalised as part of those assets.

3.8 Plant and equipment

Plant and equipment is stated at cost, net of accumulated depreciation and any provision for impairment. No depreciation is charged during the period of construction.

Depreciation is calculated to write down the cost or valuation less estimated residual value of all plant and equipment by equal annual instalments over their estimated useful economic lives. The periods generally applicable are:

Plant and machinery between 5 and 6 years

Fixtures and fittings between 6 and 10 years

Computer equipment between 2 and 3 years

Motor vehicles over 5 years

Material residual values are updated as required, but at least annually, whether or not the asset is revalued. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

3.9 Deferred expenditure

Deferred expenditure represents pre-payments in relation to costs of selling coal. As and when coal is sold, deferred expenditure will be recognised in the income statement as an expense.

3.10 Intangible assets (comprising development and exploration work)

An intangible asset is recognised when it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and that the cost of the asset can be measured reliably. Intangible assets are recognised at cost, their carrying value is cost less accumulated depreciation and any impairment losses.

Drilling, exploration and mine development costs are capitalised as intangible fixed assets to the extent that there is a reasonable degree of certainty that there will be a future income stream from the project which has a positive net present value over the expected life of the project. The costs will be amortised over the life of the mine when production commences.

3.11 Taxation

Current income tax assets and liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the period. All changes to current tax assets or liabilities are recognised as a component of tax expense in the Statement of Comprehensive Income.

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. However, in accordance with the rules set out in IAS 12, no deferred taxes are recognised in respect of non-tax deductible goodwill. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

At 29 February 2012, no recognition has been made of the potential deferred tax asset arising from the Group's trading losses to date in view of the uncertainty regarding both the timing of the reversing of the asset and the tax rate which will apply when the reversing occurs.

Deferred tax liabilities are provided for in full with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided that they are enacted or substantially enacted at the balance sheet date.

Deferred tax is provided on differences between the fair value of assets and liabilities acquired in an acquisition and the carrying value of the assets and liabilities of the acquired entity and on the differences relating to investments in a subsidiary unless the temporary difference can be controlled and will probably not reverse in the foreseeable future.

Changes in deferred tax assets and liabilities are recognised as a component of tax expense in the Statement of Comprehensive Income, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

3.12 Financial assets

The Group's financial assets include cash and cash equivalents, trade and other receivables and loan notes.

Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as money market instruments and bank deposits.

Receivables and loan notes are non-derivative financial assets with fixed or determinable payment dates that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. Receivables are measured initially at fair value and subsequently re-measured at amortised cost using the effective interest method, less provision for impairment. Any impairment is recognised in the Statement of Comprehensive Income.

Trade receivables and loan notes are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms. The amount of the write-down is determined as the difference between the assets carrying amount and the present value of estimated cash flows.

3.13 Financial liabilities

The Group's financial liabilities include current and non-current trade and other payables.

Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities

categorised as at fair value through profit or loss are recorded initially at fair value. At the current time the Group have not entered into any held for trading financial instruments and so do not have any instruments at fair value through profit or loss. All transaction costs are recognised immediately in the Statement of Comprehensive Income. All other financial liabilities are recorded initially at fair value, net of direct issue costs.

Financial liabilities are subsequently recorded at amortised cost using the effective interest method, with interest related charges recognised as an expense in finance expense in the Statement of Comprehensive Income. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the Statement of Comprehensive Income on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

A financial liability is derecognised only when the obligation is extinguished, that is when the obligation is discharged, cancelled or expires.

3.14 Restoration, rehabilitation and environmental costs

An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or on-going production of a mining property. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are charged against profits over the life of the operation through the amortisation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site damage which is created on an on-going basis during production are provided for at their net present values and charged against profits as extraction progresses.

Changes in the measurement of a liability relating to the decommissioning of plant and other site preparation work that result from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the current period. If the increase in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the Statement of Comprehensive Income.

If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy above.

3.15 Social and labour plan costs

An obligation to incur social and labour costs to uplift the community arises in terms of a Social and Labour Works Programme submitted to the Department of Minerals and Energy, committing to the upliftment in areas like, human resources development programmes, local economic developments, formation of trusts to drive community projects, small, medium and micro enterprise development and community development.

Such costs arising from the uplifting of the community, discounted to their present value, are provided for and capitalised at the date of the granting of the mining right and as soon as the constructive obligation to incur such costs arises.

These costs are charged against profits over the first five years of the mining right, through the amortisation of the asset and the unwinding of the discount on the provision. Changes in the measurement of a liability relating to the social and labour plan that results from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the current period. If the increase in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the Statement of Comprehensive Income.

If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy above.

3.16 Equity

Equity comprises the following:

• "Share capital" represents the nominal value of equity shares.

• "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

• "Translation reserve" represents the differences arising from translation of investments in overseas subsidiaries.

• "Share option reserve" represents the estimated fair value of these instruments which have not been excercised.

• "Retained Earnings" represents cumulative retained profits/(losses).

• "Non-controlling interest" represents the minority's interest in the net assets of the entity in which the minority has a shareholding.

3.17 Share based payments

Consideration received in respect of the sale of equity instruments to the non-controlling interest was compared with the fair value of those equity instruments in accordance with IFRS 2 "Share Based Payments" and IFRIC 8 "Scope of IFRS 2". Any differences arising between the consideration and fair value would be recognised as a share based payment charge.

In accordance with IFRS 2 'Share-based payments', the Group reflects the economic cost of awarding shares and share options to employees and directors by recording an expense in the statement of comprehensive income equal to the fair value of the benefit awarded. The expense is recognised in the statement of comprehensive income over the vesting period of the award.

Fair value is measured by use of a Black-Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is either charged against the statement of financial position or charged to the consolidated statement of comprehensive income and amortised over the remaining vesting period, the relevant treatment will depend on the nature of the service rendered.

Where an option or a warrant is issued to a third party the directors value the service received at fair value, where this is not ascertainable the directors will value the service based on the fair value of the instruments issued as described above.

3.18 Pensions

During the period under review, the Group did not operate or contribute to any pension schemes (2011 - nil).

3.19 Key assumptions and estimates

The Group makes estimates and assumptions concerning the future. The Board has considered the critical accounting estimates and assumptions used in the financial statements and the main areas of significant risk which may cause material adjustment to the carrying value of assets and liabilities within the next financial year are discussed below.

Social and labour plan and rehabilitation obligations

The net present values of provision estimates have been discounted to their present value at 7% per annum (2011: 8%) being an estimate of the prevailing risk free interest rates in South Africa.

Social and labour plan costs are reviewed annually and after taking into account work completed during the year fresh estimates are made of the expected future costs required to bring the Group's obligations to completion. If a shortfall arises additional provisions are made.

Rehabilitation expenditure is expected to be incurred at the end of the mine life. For further information, including the carrying amounts of the liabilities, refer to note 20.

Carrying value of intangible assets

The group assesses at each reporting period whether there is any indication that intangible assets may be impaired. If such indication exists, the group estimates the recoverable amount of the asset. The recoverable amount is assessed by reference to the higher of 'value in use' (being the net present value of expected future cash flows of the relevant cash generating unit) and 'fair value less cost to sell'. The estimates used for impairment reviews are based on detailed mine plans and operating plans.

3.20 Segment reporting

The Group's only operating activities at present are the coal mining activity in South Africa and the head office function in the UK.

The measurement policies used by the Group for segment reporting under IFRS 8 are the same as those used in the financial statements.

4. SEGMENT ANALYSIS

IFRS 8 requires operating segments to be reported on the basis of internal reports that are regularly reviewed by the chief operating decision maker who is considered to be the Board of Directors.

The following tables provide an analysis of the operating results, total assets and liabilities, capital expenditure and depreciation for 2012 and 2011 for each segment. The Group has only two operating activities, being the development of the coal mining asset in South Africa and the registered office function in the UK.

5. ADMINISTRATIVE EXPENSES

6. EMPLOYMENT COSTS

6.1 Remuneration

Total social security costs in respect of the directors amounted to £29k (2011 12k). The total share based payment charge for key management personnel was £92k (2011 Nil). Key management personnel are considered to be the directors of the Group.

6.2 Share-based payment

The company operates an equity-settled share based remuneration schemes for directors and senior employees. Under the approved scheme, options vest based on pre-determined share-prices and currently all options issued will vest when the published mid-market closing price of a Share is 30 pence or higher per Share for a minimum of 10 consecutive dealing days (being days on which the London Stock Exchange is open for the transaction of business), during the period starting on the Date of Grant and ending before the tenth anniversary of the Date of Grant.

The exercise price of options outstanding at 29 February 2012 was 16.625 p (2010: Nil) and their weighted average contractual life was 9.25 years (2010: Nil). Of the total number of options outstanding at 29 February 2012, Nil (2010: nil) had vested and were exercisable. The weighted average fair value of each option granted during the year was 8.02p (2010: Nil).

Equity-settled

Option pricing model used Black-Scholes

Weighted average share price at grant date (in pence) 16.625

Exercise price (in pence) 30

Weighted average contractual life (in days) 4,197.5

Share price at date of grant (in pence) 16.625

Contractual life (in days) 4,197.5

Expected volatility 75%

Expected dividend growth rate 5%

Risk-free interest rate 2%

The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over the last three years.

7. FINANCE INCOME

The loan interest is due from the minority shareholders in respect of the deferred consideration. The interest rate on the loan is based on six month and twelve month LIBOR plus 2.25 per cent. and three month LIBOR plus 1.5 per cent.

8. FINANCE EXPENSE

9. TAX EXPENSE

No taxation is due to be paid in respect of the results for the periods covered by these financial statements. Losses carried forward which may be available for offset against income in future periods are estimated at £0.0 m in the UK and ZAR 11.5 m/£1 m in South Africa. No deferred tax asset has been recognised in respect of these losses owing to uncertainty over the timing of when the losses will be utilised. If a deferred tax asset was recognised, the carrying value of the asset is estimated at £699 k (2011 - £465k).

10. LOSS PER SHARE

The basic and diluted loss per share has been calculated by dividing the result for the respective year attributable to shareholders by the weighted average number of shares in issue during the relevant year. In accordance with IAS 33 as the Group is reporting a loss for both this and the preceding year the contingently issuable shares are not considered dilutive because their exercise would have the effect of reducing the loss per share.

11. PARENT COMPANY'S RESULT FOR THE PERIOD

As permitted by Section 408 of the Companies Act 2006, the parent company's Statement of Comprehensive Income is not shown separately in the financial statements. The loss for the period was £315k (29 February 2011 - loss £529k).

12. PROPERTY, PLANT AND EQUIPMENT

The motor vehicles have been financed by hire purchase.

13. OTHER ASSETS

These other assets represent deferred expenditure as described in note 3.9. These pre-paid expenses are linked to the off-take agreement with Trasteel, and this expense will be recognised in the income statement over the period of the agreement. It is a US $ denominated asset and currently stands at US $ 2 million. The first delivery should take place in later part 2012 and the agreement should terminate in 2014. The recognition is likely to take place as the necessary tonnes are delivered over the contract.

14. INTANGIBLE ASSETS

The intangible asset represents the Directors' estimate of the fair value of the coal mining licence and the development and exploration work which has been undertaken at the site in South Africa. When the mine is in economic production, these costs associated with bringing the mine into production will be amortised over the expected useful life of the mine. No amortisation has been charged in the current or prior year since the production from the mine has been negligible.

15. INVESTMENTS

On 13 December 2006, the Company acquired 100 per cent. of the issued share capital of Acharnian Mining Ltd, a company incorporated in the British Virgin Islands, company number 1056886. Acharnian Mining Ltd owns 74 per cent. (2011 - 74 per cent.) of the issued share capital of Elitheni Coal (Pty.) Ltd, a company incorporated in South Africa, company number 2001/002173/07.

16. TRADE AND OTHER RECEIVABLES

16. TRADE AND OTHER RECEIVABLES (continued)

Included in the groups other receivables is deferred expenditure, described in note 3.9 and note 13, and amounts paid as deposits to secure some of the mining equipment required for the initial development of Elitheni Coal.

The amount due from subsidiary is repayable on demand and bears interest at 3 month LIBOR plus 1.5 per cent.

17. 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 £16k (2011 - £1k). 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.).

During the last financial 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% 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 £17k (2011 - £56k) (see note 7) is the amount due on the new loans.

18. CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the Group and the Company comprise cash and short term bank deposits held in interest bearing accounts, accessible at between 1 and 30 days' notice.

19. SHARE CAPITAL

The share capital of the Company consists of fully paid ordinary shares with a par value of 1p. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting of the Company.

20. TRADE AND OTHER PAYABLES

20.1 Trade and other payables

1 The social and labour commitments provision recognises the obligation to incur social and labour costs in South Africa to uplift the community arising out of a Social and Labour Works Programme submitted to the Department of Minerals and Energy in South Africa. The uplifting covers areas such as human resources development programmes, local environmental developments, formation of trusts to drive community projects, small, medium and micro enterprise development and community development.

2 The environmental rehabilitation provision represents an obligation to incur restoration, rehabilitation and environmental costs in South Africa when environmental disturbance is caused by the development and mining activities. A provision is recognised for the present value of such future costs. Provision is also made for the future costs relating to the decommissioning of the plant or other restoration work. It is anticipated that the cost of restoration and decommissioning will be incurred over the life of the mine. The provision is based on the estimated net costs to rehabilitate the mine on the assumption that third parties will attend to the rehabilitation of the mine, including Vat and a 10 per cent. contingency.

The table below details the movement on the social and labour provision and the environmental rehabilitation provision during the year

20.2 Provisions

21. RECONCILIATION OF LOSS BEFORE TAX TO CASH USED IN OPERATIONS

22. CAPITAL COMMITMENTS

The Group, through its interest in its subsidiary company, Elitheni Coal (Pty.) Ltd ('Elitheni') is engaged in developing the mining licence owned by Elitheni.

23. RELATED PARTY TRANSACTIONS

The Company has made loans to its subsidiary, Acharnian, amounting to £9,43m at the balance sheet date (2011 - £6.04m). Interest charged during the year amounted to £0.54m (2011 - £0.11m). The Company also made loans directly to Elitheni, amounting to £0,06m at the balance sheet date (2011 - £ Nil m). Acharnian has made loans to Elitheni amounting to £9.23m at the balance sheet date (2011 - £6.21m). Interest charged during the year amounted to £0.18m (2010 - £0.08m).

These costs amounted to £26k which we accrued and were paid after year-end (2011: £46k).

1 B Nel and D J Nel are trustees of the Southern Cape Corridor Trust (the "Trust"). B W Nel is not a beneficiary of the Trust, although his children, including D J Nel, are beneficiaries. The Trust owns 78.5% and D J Nel owns 20% of the shares in Southern Cape Corridor Power (Pty) Limited. Southern Cape Corridor Power (Pty) Ltd performed consulting services to the Group during the year.

2 Included under trade and other receivables in note 16.

Details of directors' remuneration is included in note 6.

24. FINANCIAL ASSETS AND LIABILITIES

The Group's financial instruments comprise cash and cash equivalents, loan note receivable and various items that arise directly from its operations such as trade receivables, trade payables and hire purchase liabilities.

The main purpose of these financial instruments is to finance the Group's operations.

The Board regularly reviews and agrees policies for managing the level of risk arising from the Group's financial instruments. These are summarised below.

Market risk

Foreign currency risk - The Group undertakes transactions principally in British pounds sterling and South African Rand. While the Group continually monitors its exposure to movements in currency rates, it does not utilize hedging instruments to protect against currency risk.

The functional currency of the Company is British pounds sterling. At 29 February 2012, cash balances amounting to £592k (2010 - £2,095k) were held in Sterling denominated accounts.

The functional currency of Elitheni is South African Rand ("ZAR"). At 29 February 2012, Elitheni held cash balances denominated in ZAR amounting to ZAR 1,811k/£151k (2011 - ZAR 16,184k/£1,441k).

ZAR denominated financial assets and liabilities at 29.2.2012, translated into British pounds Sterling at the closing rate, are as follows:

The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group's financial assets and financial liabilities and the sterling/ZAR and the sterling exchange rate.

It assumes a +/- 20 per cent. change of the sterling/ZAR exchange rate for the year ended 29 February 2012 (2011: 20 per cent.). Both of these percentages have been chosen to reflect the market volatility of the currencies concerned. The sensitivity analysis is based on the Group's foreign currency financial assets and liabilities.

If sterling had weakened against the ZAR by the above percentages this would have had the following impact:

If sterling had strengthened against the ZAR by the above percentages this would have had the following impact:

Exposures to foreign exchange rates vary during the year throughout the normal course of the Group's business. The above analysis is considered to be representative of the Group's exposure to currency risk.

Interest rate risk - The Group utilises cash deposits at variable rates of interest for short-term periods, depending on cash requirements. The rates are reviewed regularly and the best rate obtained in the context of the Group's needs. The results of the Group are not significantly affected by the level of interest income.

Interest earning balances were held in British pounds sterling and ZAR. The weighted average interest rate for British pounds sterling was 1.6 per cent. (2011: 1.5 per cent.) and for ZAR 4.00 per cent. (2011: 4.75 per cent.). If interest rates had been 1 per cent. point higher or lower during the year, the effect on net interest income would have been £10k (2011 - £11k).

Liquidity risk

In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches to finance its activities for limited periods only. Further funding is raised as and when required. The Group's policy continues to be to ensure that it has adequate liquidity by careful management of its working capital.

Credit risk - Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions, trade receivables and other financial instruments. Credit risk from balances with banks and financial institutions is managed by the Board. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty.

Counterparty credit limits are reviewed by the Board on a regular basis. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty failure.

The Group has exposure to counterparty risk in the form of the loan note referred to in note 16.

Financial assets

Cash at bank and in hand comprise cash and short-term deposits held by the Group treasury function. The carrying amount of these assets is approximately their fair value.

Trade and other receivables fall due for payment within 3 months from the balance sheet date other than the repayment terms of the Loan note receivable are disclosed in note 17.

Financial liabilities

Trade and other payables fall due for payment within 12 months from the balance sheet date.

25. CAPITAL MANAGEMENT AND PROCEDURES

The Group's capital management objectives are:

1. to ensure the Group's ability to continue as a going concern

2. to increase the value of the assets of the Group; and

3. to enhance shareholder value in the Company and returns to shareholders

The achievement of these objectives is undertaken by developing existing ventures and identifying new ventures for development. The Group will also undertake other transactions where these are deemed financially beneficial to the Company.

The Directors continue to monitor the capital requirements of the Group by reference to expected future cash flows.

26. EVENTS AFTER THE BALANCE SHEET DATE

Richardsons Capital LLP subscribed for 51 million new ordinary shares of 1p each in the Company at a subscription price of 17p per share, raising £8.7m.