SNRP.L Regulatory News (SNRP)

31 March 2014

STRATEGIC NATURAL RESOURCES PLC

("SNR" or the "Company")

Unaudited interim results for the six months ended

31 December 2013

Strategic Natural Resources PLC (AIM: SNRP), the 74 per cent. owner of coal exploration and mining assets located near Indwe in the Eastern Cape Province of South Africa, today announces its unaudited interim results for the six month period ended 31 December 2013. SNR intends to announce audited accounts for the 12 month period ending 30 June 2014 by 31 December 2014 and publish its 2014 Annual Report and Accounts by the same date.

Key items:

· first shipment of thermal grade coal exported from the Elitheni mine in September 2013, demonstrating the success of the logistics and infrastructure from Indwe to the Port of East London and generating maiden revenues of £699,000;

· losses of £12.6 million (six months ended 31 December 2012: £1.1 million loss)

· significant impairment of previously capitalised development costs due to suspension of mining activities at the Elitheni mine;

· net assets as at 31 December 2013 were £1.416 million (31 December 2012: £15.02 million)

· discussions with the Company's primary lender and major creditors are on-going; and

· discussions continue with potential strategic investors.

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

Chairman's Statement

I am reporting on recent developments at the Company and on our unaudited interim results for the 6 month period ended 31st December, 2013.

Coal Operations

The first sales cargo of coal from the Elitheni mine was shipped in September 2013, which generated first revenue for the business and demonstrated the functionality of the mine's infrastructure, logistics and port export capability.

However, mining operations at the Elitheni Mine have been and remain temporarily suspended pending an improvement in international coal prices and proper re-capitalisation of the business.

Elitheni received a winding up petition from a group of creditors 29th November, 2013 with the amounts disputed by the Company. Having contested the claims submitted, the Court petition was withdrawn with both parties agreeing to arbitration to be held on 28th April - 1st May 2014. Elitheni management remain confident that the arbitration ruling will be favourable notwithstanding the fact that funds are set aside with the Court in South Africa to cover the full amount under dispute.

Strategy

Our strategy remains unchanged and is as follows:

· secure agreement with a strategic investor or investors to repay current debt and provide adequate funding for on-going mining development and proving up of further coal reserves and resources in our licence areas;

· recommence and enhance financially viable production levels at the Elitheni mine;

· advance a coal fired power station strategy partnership with the Industrial Development Corporation ("IDC") in South Africa and agree a profitable supply agreement;

· explore and develop a local domestic coal market in the Eastern Cape; and

· progress drilling on the strategically important Phase 5 area.

Funding

Considerable time and effort has been invested since April 2013 in attempting to secure the right strategic investment for the Company.

As part of this process, there has been significant interest from several parties including reputable international coal trading companies and especially from companies in India, one of the main likely markets for Elitheni's grade of coal.

Despite various discussions and negotiations getting to advanced stages, no deal has yet been agreed. The continuing depressed international coal price remains a deterrent to both economic production activity and potential investors who remain cautious on the sector.

Since December 2013 the Company has been in detailed negotiations with a private investment vehicle which expressed an interest in making a material equity investment in SNR. Whilst outline commercial terms had been provisionally agreed, the investment vehicle has yet to satisfactorily demonstrate proof of funding to progress the deal. Whilst discussions are continuing there can be no guarantee that this deal will be successfully concluded.

The Company is also in discussions with, and is currently carrying out due diligence on, two other unconnected potential investors who have shown a keenness to take up significant shareholdings by way of a subscription of new shares and an equity credit line, the proceeds of which will be used to pay legitimate creditors pending procurement of the appropriate strategic investment for the Company.

In addition, short term funding is being sought to undertake a detailed bank feasibility study of the resource at the Elitheni mine to properly underpin the application for significant grant funding from the IDC in South Africa.

Discussions with our primary lender, Land Consultants Limited ("LCL") continue with a view to reaching agreement for further deferral of SNR's £8 million loan which is currently due for repayment at the end of June 2014. Consideration is also being given by both parties to the conversion of interest payments due into new SNR shares.

Financial results

During the 6 month period ended 31 December 2013, the Company made a loss of £12.619 million (loss of £1.139 million for the 6 month period ended 31 December 2012). The increase in this loss is primarily due to three factors: the additional corporate overhead supporting the significantly increased operational activities leading to the first shipment of thermal grade coal in September 2013; the subsequent restructuring of both the management and operations of the mine which lead to the mine entering into a care and maintenance phase pending receipt of additional funding - which in turn resulted in the Board making a large impairment provision; and the weakening of the Rand by over 15% in the 6 month period (over 25% in the 12 month period to 31 December 2013).

As a result of the first shipment in September 2013, SNR was pleased to recognise the first revenue. The associated cost of sales against this revenue was greater, reflecting the additional underlying production costs required at the mine before it is fully operational. Directors fees and expenses are included within administration expenses but it is noted that their payment has been deferred since February 2013.

The largest negative impact to the results has been the impairment to Property, Plant and Equipment. As previously disclosed, all development costs associated with the establishment of the mine were capitalised and were to be amortised over the anticipated life expectancy of the Elitheni Mine and the underlying mining resources. Whilst the underlying mining resources remain, it is acknowledged that production has temporarily ceased at the mine until further funding is secured and hence it was considered necessary to impair a large portion of the capitalised development costs. In addition, equipment at the mine which is now considered redundant for current mine operations due to a change in the mining strategy have also been impaired. All other assets within Property, Plant and Equipment have been depreciated in accordance to our accounting policies as disclosed in the accounts for the 16 month period ended 30 June 2013.

Due to the on-going litigation against SNR and Elitheni, the Board have undertaken a review of the trade and other receivables balance of £1.643 million (2012: £2.929 million), which consists of both operational deposits and deposits made against litigation claims and based on legal advice have made a provision, within non-current liabilities for a portion of the deposits.

As discussed above, discussions with our primary lender, LCL continue with a view to reaching agreement for further deferral of SNR's £8 million loan currently due for repayment at the end of June 2014. The loan is classified within "Current Liabilities"

Post Period Events

On 26th March 2014, SNR received a winding up petition, from the lawyers of London Commodity Brokers ("LCB"). LCB are claiming an amount of circa US$1.15 million pursuant to the contractual arrangements put in place under the Trasteel off-take agreement.

The Company disputes the amount claimed by LCB and has been in discussions with LCB concerning the amount due and settlement terms. The board of SNR is disappointed that a winding up petition has been filed by LCB but remains optimistic that a settlement can be reached. The winding up petition is due to be heard at the Companies Court at 10.30 am on 12 May 2014.

On 27th March, SNR was advised by Elitheni that it had received a court order made by the High Court of South Africa seeking to attach SNR's ultimate holding in Elitheni, to the applicant, Thelo Rolling Stock Leasing (Pty) Ltd ("Thelo").

Elitheni is discussing this Court Order with its South African legal advisers and is in discussions with Thelo regarding the repayments of amounts due to them. Preliminary legal advice is that the Court Order may not be valid.

Under the terms of the Court Order, SNR has 30 days, from 25th March, 2014, in which to enter a Notice of Intention to Oppose and SNR intends to serve such notice.

Outlook and Going Concern

We continue to face acute working capital constraints and are grateful for the support and tolerance of the majority of our creditors. Likewise, we are grateful to our main lender, LCL, who remain supportive and are considering a further deferral of our £8m bridging loan facility, due for repayment by 30 June 2014. Should such further deferral be granted by LCL, it would greatly assist our continuing efforts to secure longer term funding, parallel to which consideration is also being given by both parties to the conversion of interest payments into new SNR shares.

The cash position as at 31 December 2013 was £12k which is insufficient to pay creditors as they fall due. Further to the period end there has been cash recovered from the balance sheet that was used to meet critical current creditors. If new sources of funding are not forthcoming in the near future, there is doubt that the business will be able to continue as a going concern. Should this be the case the Company's shares would likely be suspended from trading on AIM until such time that the Company could continue as a going concern.

Whilst the Company's ability to continue as a going concern is dependent on securing adequate funding for the business, the Board is confident that:

· we hold an extremely valuable asset in the relatively densely populated Eastern Cape area with significant logistical, rail and shipping advantages;

· the recent serious power outages in the Eastern Cape provides a serious stimulus, to both local government and commercial interests, to accelerate construction of a coal fired power station to address power shortages; and

· despite current funding obstacles, the strategic potential of the business remains strong and, whilst there can be no guarantee, the Board remains optimistic that an acceptable funding package can be secured.

Andy Brennan

Chairman

31 March 2014

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

For the six months ended 31 December 2013

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)

As at 31 December 2013

Company registration number 5249946

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

For the year ended 31 December 2013

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

For the six months ended 31 December 2013

NOTES TO THE INTERIM STATEMENT

For the 6 months to 31 December 2013

1. Basis of preparation

These un-audited condensed consolidated interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The comparative figures for the six month period ended 31 December 2012 were derived from the Statutory Accounts for the 16 month period ended 30 June 2013 which were approved on 30 August 2013. The auditors' report on those accounts was unqualified with an emphasis of matter that without obtaining further sources of funding, there may be significant doubt on the Group's ability to continue as a going concern. The auditors' report did not contain a statement under section 498 (2) - (3) of the Companies Act 2006. These accounts have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006. The financial information contained in this interim statement has been prepared in accordance with all relevant International Financial Reporting Standards ('IFRS') in force and is expected to apply to the Group's results for the year ending 30 June 2014 and on interpretations of those Standards released to date.

The Financial Statements have been prepared on a going concern basis. The Group is reliant on its ability to successfully raise further financing to settle existing debt and fund working capital to achieve the future strategic direction. The Group is considering a number of funding options including the issue of new equity to a strategic partner and investors. Whilst these negotiations are on-going, the Group does not have any binding agreements in place at present but is confident that an investor will be secured in the short term. If new sources of funding are not forthcoming in the near future, then there is a strong probability that the business will be unable to continue as a going concern.

2. Accounting policies

These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies set out in the Group's financial statements for the 16 month period ended 30 June 2013.

3. Loss per share

The basic and diluted loss per share has been calculated by dividing the result for the respective period attributable to shareholders by the weighted average number of shares in issue during the relevant period.

4. Property Plant and Equipment / Intangibles

a. Property Plant and Equipment

Impairment, in accordance with IAS 36 has been performed on three assets within property plant and equipment. Mining asset consists of all development costs associated with the establishment of the mine incurred in the 16 month period to 30 June 2013. These costs were to be amortised over the anticipated life expectancy of the Elitheni mine and the underlying mining resources. Whilst the underlying mining resources remain, it is acknowledged that production has temporarily ceased at the mine until further funding is secured and hence it is considered necessary to impair a large portion of the capitalised development costs. In addition, equipment at the mine which is now considered redundant for current mine operations due to a change in the mining strategy have also been impaired.

b. Intangibles

5. Reconciliation of profit before tax to cash generated from operations

6. Approval

The Board of directors approved this interim statement on 31 March 2014. This interim statement has not been audited.

Shareholders will be able to download a copy of the second interim report from the Group's website www.snrplc.co.uk. Copies may also be obtained from the Company's registered office, 3 St Helen's Place, London EC3A 6AB.