Final Results

Frontier Mining Ltd

("Frontier" or "the Company")

Final Results for the year ended 31 December 2011

Frontier Mining Ltd (AIM: FML), the AIM listed gold and copper exploration and development company focused on Kazakhstan, today announces its final audited results for the year ended 31 December 2011.

Operational Highlights - Benkala

·; Revaluation of Benkala project delivering financial gain of $53.6 million

·; Completion of an updated JORC compliant resource statement

·; Complete Governmental sign off on the transfer of ownership of Coville assets

·; $39.8 million directly invested into Benkala

·; Purchased South Benkala deposit for $2.8 million

Operational Highlights - Baitemir

·; 7,557 metres of trenching completed and core drilling extended to almost 17,000 metres

·; Confident of a new copper deposit discovery in line with previously announced expectations of 800,000 tons of contained copper

Operational Highlights - Maminskoye

·; Sale of Maminskoye asset for $37.5 million resulting in a net cash gain of $33.7 million

Financial Highlights

·; Revenue from operations at Koskuduk of $3.2 million (2010: $5.7 million)

·; Revaluation of Benkala project delivering financial gain of $53.6 million

·; Profit / (Loss) Before Tax of $36.6 million (2010 $31.1million loss)

·; Earnings / (Loss) per Share of $0.02 (2010: $0.03 loss)

·; Net Asset Value of $161 million

·; Successful refinancing of the group providing further financial stability:

o New debt facility of $29 million

o Raised $13.8 million in loan notes

o Obtained two tranches of $5 million from an off-take agreement

o Repaid $18.6 million of debt

Post-Period Highlights

·; Complete Governmental sign off on the acquisition of South Benkala

·; Mining and stacking operations at Benkala operational

·; Commenced leaching process on stacked ore on first production pad

·; SX/EW plant at Benkala undergoing final testing

·; Maiden Copper production imminent

Erlan Sagadiev, CEO of Frontier, commented: "2011 was a transformational year for Frontier Mining. We have made considerable progress and used our assets to ensure progress on the 'landmark' Benkala project and have stuck to our plan outlined at the beginning of the year."

"Frontier Mining is now focussed on Copper production at Benkala and further discoveries across our other licenses to deliver significant value to our shareholder's during 2012. We therefore look forward to 2012 with confidence"

For further details please contact:

Notes to Editor

Frontier Mining Limited is a copper exploration and development company with a focus on Kazakhstan. The Company's main activity is the Benkala Copper Project in North West Kazakhstan, which forms part of the Urals copper gold ore belt. Frontier has a 100% interest in Benkala through its subsidiary KazCopper LLP.

Frontier, through its wholly owned subsidiary FML Kazakhstan, also owns Baitemir, a potential copper gold porphyry deposit with associated gold and molybdenum situated on the Naimanjal exploration licence area in North East Kazakhstan.

Frontier maintains an administrative and technical office in Almaty, the former capital city of Kazakhstan and the main business centre in the South East. The Company also maintains offices in Aktyubinsk and Semipalatinsk, close to the Benkala and Baitemir operations respectively.

Benkala

A Competent Persons Report completed by Wardell Armstrong International ("WAI") in June 2010, estimated the oxide section of the Benkala project, which represents development of only ~10% of the total resource at Benkala, to have a NPV of $190 million, based on 0.5% diluted copper grade, 63% recovery and 185,000 tonnes of contained metal at a 6,000 USD per tonne copper price. Frontier will use the production platform of the SX-EW project currently under construction to finance further evaluation and technical studies required to advance development of the significant Benkala sulphide resources. Frontier expects first production at Benkala in the second quarter of 2012.

WAI updated their Joint Ore Reserves Committee resource estimate in February 2011, significantly increasing the measured and indicated resource for both oxide and sulphide ores. The oxide resource has increased by a total of 9.72kt to 174.38kt (+5.9%) and the sulphide resource by 65.54kt to 779.28kt (+9.2%) of copper. As well as the overall increase, both ore types now have significantly more resource in the measured category and there has been an increase in the average oxide grade percentage. In addition, the overall inferred resource has also increased by 42.8kt to 607.70kt of copper (+7.6%).

In January 2012 Frontier added the South Benkala mining area to its existing Benkala licence. The South Benkala area is approximately 10 kilometres south of Benkala and has a GKZ resource estimate of 94.5kt of oxide and 515.1kt of sulphide copper.

Baitemir

Baitemir was identified as the most attractive deposit on the Naimanjal licence area and an exploration drill program was developed to confirm the size and grades of the deposit. Frontier has now drilled almost 16,000 metres and, on the basis of positive results, has an additional 1,000 metre drilling programme for 2012. The Company is working to further define the mineral inventory, anticipating the generation of a mineral resource prepared in accordance with the guidelines of the JORC Code (2004) in 2012.

Issued Share Capital

Frontier Mining's shares are traded on the AIM market of the London Stock Exchange.

Frontier has 1,860,913,920 ordinary shares issued.

For further information please visit: www.frontiermining.com 

FRONTIER MINING LTD

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT

Summary

2011 proved to be a significant year for Frontier, laying the foundations for impending production at Benkala, which heralds the start of a new chapter for the Company as a substantial independent copper producer in the region.

The management team worked to build and exploit our portfolio, leveraging value to ensure that all available resources were in place to maintain rapid development of the mine, plants and infrastructure at Benkala. Acquisition of Coville's assets expanded our portfolio considerably with the addition of a further 50% interest in Benkala (securing 100% ownership) and 100% interest the Maminskoye gold deposit in the Southern Ural Mountains of Russia.

Following government approvals for the Benkala acquisition in April, we successfully negotiated the sale of Maminskoye for $37.5m in July, fully funding our flagship copper project and allowing the Company to remain focused in Kazakhstan.

The balance sheet was further strengthened by two $5 million tranches from a copper off-take agreement with Red Kite Group and $29 million of financial facilities with Sberbank, a noteworthy achievement given the recent challenging financial environment experienced by mining developers.

Frontier's fortunes took another positive step with the acquisition of South Benkala copper deposit in May (completed in January 2012), which delivers considerable potential for which we plan to either increase the capacity or extend the operating life of the SX-EW plant at Benkala.

Away from Benkala, the Company was pleased with early exploration success at Baitemir copper prospect, fuelling investor appetite for good news.

Continued gold production at Koskuduk provided the Company with cash flow and allowed us to meet contractual and financial obligations.

I can state with confidence that as we approach our resurgence as a copper producer, Frontier is stronger than at any point since the Company was founded, poised on the verge of stable expansion, both in terms of reserves and production.

As Chairman and Chief Executive Officer, it is with great pride that I present our Annual Report.

Operating and Financial Highlights

This is the first year that the Company has reported with a 100% interest in the Benkala project. The acquisition of 50% from Coville has resulted in a revaluation of the original investment, generating a $53.6 million gain in the value of the original investment, shown in the 2011 operating figures.

Sales revenue from operations at Koskuduk for the 2011 year was $3.2 million (2010: $5.7 million) while overall operating loss for the year was $5.7 million (2010: $2.6 million). Together with finance, other costs and fair value adjustments of $5 million and an impairment charge against the Koskuduk mine of $6.6 million, shows a loss before revaluation of $17.3 million. The revaluation gain of $53.6 million results in a total profit of $36.3 million for 2011 after tax (2010: $31.3 million loss).

Revaluation of the original Benkala investment and the construction of the mine and plant have added assets of $94.5 million dollars to the Company's balance sheet in 2011. This takes the Company's overall net asset value to a strong position of $161 million.

During 2011, the Company raised $13.8 million in loan notes, acquired access to $29 million in bank facilities and repaid debt of $18.6 million. In July, the Company sold the Maminskoye deposit for $37.5m, resulting in a net cash inflow of $33.7m after payment of associated liabilities.

Operations at Koskuduk mine have now been suspended. The decision was made firmly on the basis that the Company aims to be solely focussed on copper production, continuing small scale gold operations at Koskuduk would serve only to divert valuable resources away from copper assets with greater reserves and production potential. Suitable equipment has been transferred to either Baitemir or Benkala operations and remaining assets of $3.3m have been identified as available for sale. Capitalised historical costs of $3.3m have been deemed not recoverable, resulting in an impairment loss of $6.6m which has been taken against them both in 2011.

Selling, general and administrative expenses of $5.9 million are up from the previous year (2010: $3.1 million) reflecting growth in the Company, the additional 50% costs at Benkala (KazCopper) and decommissioning costs at Koskuduk.

Project Review

Acquisition of Coville's Assets

In April 2011, the Company received written and final approval from both the Ministry of Industry and Trade of Kazakhstan and the Inter-Ministerial Committee to complete the transfer of ownership of Coville Intercorp Ltd.'s 50% interest in the Benkala copper project. This transaction also included the Maminskoye gold deposit.

Benkala

The Company issued an updated JORC statement for Benkala in February 2011, prepared by Wardell Armstrong International, confirming that the resource estimate was in-line with previous Soviet estimates of 1.56m tonnes of contained copper of which 183,290 are oxide resource. The oxide deposit represents less than 12% of the total overall resource; making Benkala the cornerstone of Frontier for many years to come.

Extensive construction of the mine, plant, infrastructure and facilities at Benkala continued at pace throughout 2011 and we expect production of the first copper cathodes within a few weeks. Significant progress has continued on a monthly basis, mining, crushing, stacking and leaching operations are now underway. The SX/EW plant is undergoing final testing prior to receiving the first copper solution for processing; initial planned production capacity is 7,000 tpa, to be increased to 10,000 tpa before the end of the year.

During 2011, we invested approximately $39.8 million directly into the project and we plan to inject an additional $26 million to ensure we produce 3,500 to 5,000 tonnes of copper in 2012, bringing Frontier significant revenue streams for the first time.

South Benkala

The Company received final approval in December 2011, from both the Ministry of Industry and Trade of Kazakhstan and the Inter-Ministerial Committees, enabling the Company to complete the purchase and transfer of the Subsurface Use Contract for the South Benkala mineral deposit. The total purchase price paid was $2.8 million, the purchase is now complete.

Approximately 10 kilometres south of Frontier's existing Benkala license area, South Benkala has a GKZ resource estimate developed by Soviet geologists. Using drilling data from a 1978-79 drilling campaign, the geologists identified 609,600 tonnes of contained copper with 94,500 tonnes of oxide copper. Frontier plans to incorporate the South Benkala reserves into the Benkala project development and has already commenced an infill drilling program to further define the oxide resource of the deposit, currently operating two drill rigs on the site.

Naimanjal License Area

The Naimanjal License comprises an area of approximately 170 square kilometres with a number of mining properties.

Baitemir

The management team believe that the Baitemir copper resource offers significant potential and undertook an aggressive exploration programme, accelerating the initiated in 2005. This exploration has resulted in the discovery of a significant new mineralised copper footprint (with associated gold, silver and molybdenum) with a total length of 2,000m and width of 400m. The mineralisation zone was intersected by a series of eighty 60 degree angled drill holes of between 50 to 500 metres depth on 100x100 metre grid spacing. In addition, trenching was undertaken over the mineralisation zone every 100 metres.

During 2011 we completed 7,557 metres of trenching bringing the total at Baitemir to over 14,500 metres. 14,768 metres of core drilling was completed in 2010 and 2011, bringing the total volume of drilling to almost 17,000 metres.

All geological samples for the programme have been sent to the Stewart Group laboratory in Kyrgyzstan. The majority of the samples have produced assay results, now under review by the Company geologists to undertake a resource definition to the Kazakhstan GKZ standard. We expect a report to be submitted to government agencies later in the summer, and plan to produce a JORC standard resource report by the end of the year.

We are confident that Baitemir presents a significant new discovery and are excited by the early results which identify a substantial asset consistent with our previously announced expectations of 800,000 tonnes of contained copper. Frontier intends to continue exploration and determine strategic insights for the expedient and efficient construction of the mine, plant, infrastructure and facilities; with initial production provisionally planned for 2016.

Koskuduk

Management have decided to suspend gold operations at Koskuduk, facilitating operational and financial focus on our copper assets, which present a greater return on investment for both human and financial resources. The project was never considered to have a life of more than three to five years and despite consistently generating limited profitability, revenue has enabled the Company to meet contractual obligations and provided cash flow.

Maminskoye

In July 2011 the Company sold the Maminskoye gold deposit, located in south-western Russia, for $37.5 million in cash to Stanhigh Limited of Cyprus. The net gain of $33.7m in cash was an excellent return for this asset in current market conditions and ensured that progress at Benkala was maintained.

Corporate

There were significant changes to the Board in 2011, when we welcomed Greg Vojack, Yerbulat Tastanov and Yerlan Aliyev and bade farewell to Tom Sinclair. The Company believes it now has a very strong foundation of commercial and mining experience on which to build future success.

Summary and Outlook

2011 and the period post year-end has witnessed incredible progress at Benkala, successful completion of the South Benkala purchase and growing anticipation for the exploration results at Baitemir.

Benkala will transform Frontier from a fledgling development company into a major independent copper producer. The development plan for the sulphide deposit and expansion of production capacity to 20,000 tpa will entrench the roots for Frontier's continued growth.

Both myself, my colleagues on the board and the management team are committed to the long-term success of the Company, establishing Frontier as the premier independent copper producer in Kazakhstan.

Erlan Sagadiev

FRONTIER MINING LTD

FRONTIER MINING LTD

FRONTIER MINING LTD

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED DECEMBER 31, 2011

FRONTIER MINING LTD

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2011

Non-cash transactions during the year are described in Note 17.

FRONTIER MINING LTD

1. BACKGROUND

a) Organizational structure

Frontier Mining Ltd ("Frontier" or "the Company") was incorporated under the laws of the state of Delaware on August 5, 1998 for the purpose of exploring, and if warranted, developing gold and copper deposits in the Republic of Kazakhstan.

On October 18, 2010 notice was given to shareholders of the Company's intention to re-domicile from Delaware to the Cayman Islands. A Special General Meeting of the Company was held on November 8, 2010 and the re-domicile was approved. On December 21, 2010 the Company completed the re-domicile to the Cayman Islands and all shareholdings in existing Group entities were transferred to the newly incorporated Cayman Islands entity.

At December 31, 2011, the Company's registered office was located at: 1st Floor, Landmark Square Building, 64 Earth Close, PO Box 715 KY1-1107, Cayman Islands. At December 31, 2011 the Company had three representative offices, two of which were located in the Republic of Kazakhstan, and one in London, England.

The number of employees of the Group at December 31, 2011 was 503 people (2010: 451 employees).

b) Operations

The Group's activities currently relate to: the Naimanjal license area, and the Benkala and the South Benkala license areas.

The principal activities of the Company and its wholly owned subsidiaries (the "Group") at December 31, 2011 are as follows:

Naimanjal license area

The Naimanjal subsurface use contract dated August 16, 1999 provides combined exploration and extraction rights for a 30-year period for gold, silver and copper deposits. The Naimanjal license No. 1166DD currently covers an approximate area of 529 square kilometres in North Eastern Kazakhstan. It includes five deposits, the status of which at December 31, 2011 is shown below:

During 2010, management suspended operations at the Naimanjal mine. In July 2011, management made a decision to suspend operations at the Koskuduk mine and the Group will focus on developing its copper deposits at Baitemir, with Beschoku and Yubileiny as possible satellite feeders to Baitemir. The formal decision was made in January 2012. Impairment losses were recognized against Koskuduk in 2011 and the Naimanjal in 2010 (see Note 11).

On May 10, 2012 management received approval from the Ministry of Industry and New Technologies of the Republic of Kazakhstan for surrender of the subsurface use contracts for the Naimanjal and Koskuduk mines. According to the Kazakhstan Law on Subsoil Use the Group has to provide a liquidation program to competent state bodies within 180 days from the date of approval. Management made its best estimate of the future liquidation costs for Koskuduk and Naimanjal mines and increased the carrying value of the restoration obligation (see Note 21).

Benkala license areas

(i) Benkala

The Benkala copper-molybdenum-gold deposit is located in North-western Kazakhstan within the Urals gold/copper ore belt. Benkala is currently in the development stage with initial production of copper planned for 2012. The Group's initial 50% interest in the Benkala project was acquired in 2007. The Benkala contract dated November 15, 2007 is valid for 29 years with an extension right and includes a four year exploration period and a 25 year development period. On April 11, 2011 the Company received final approval from the Kazakh authorities to receive the remaining 50% of the Benkala project from Coville Intercorp Ltd ("Coville"), a related party (see Note 28).This transaction had been approved at a Special General Meeting of the Company that was held on November 8, 2010 but was conditional upon the receipt of certain government approvals. As part of this transaction with Coville, the Group also received a 100% interest in the Maminskoye gold exploration deposit in southern Russia. The Company sold the Maminskoye gold exploration deposit in July 2011 to unrelated party (see Note 19).

(ii) South Benkala

In May 2011 the Company announced that it had entered into a sale and purchase agreement to acquire the Subsurface Use Contract for the exploration deposit known as South Benkala from an unrelated party for a total consideration of $2.5 million. The Republic of Kazakhstan had a pre-emptive right to acquire the property, which was not exercised and thus the licence was officially transferred to KazCopper LLP in December 2011. The subsurface use contract was originally signed in February 2009 and was for a four year exploration period until February 2013.

(iii) ,Kazakhstan Chemical Company LLP

On December 16, 2011 the Company formed Kazakhstan Chemical Company LLP as an entity to be involved in the sourcing, supplying and transportation of chemicals for the Benkala project. It had no activity in 2011.

2. PRESENTATION OF FINANCIAL STATEMENTS

Consolidated subsidiaries

The consolidated financial statements include the Company and its wholly owned subsidiaries namely US Megatech Inc., Frontier Mining Antilles NV, Frontier Mining Co-operative, Frontier Mining Finance BV, FMLK, KazCopper LLP, Kazakhstan Chemical Company LLP and Baltemir LLP.

Basis of presentation

These consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These financial statements are presented in US Dollars ("$"), unless otherwise indicated. Management has concluded that it best represents the economic effects of transactions, events and conditions related to the Group's operations. Transactions in other currencies are treated as transactions in foreign currencies.

The US Dollar is the functional currency of the Company and all entities in the Group.

As detailed in Note 1 above, during the year the Company acquired the remaining 50% of the Benkala project and 100% of the Maminskoye gold exploration deposit from Coville. The Maminskoye deposit was subsequently sold in July 2011 to unrelated party. Prior to this acquisition, the Group's 50% ownership interest in the Benkala project was treated as a joint venture arrangement and was accounted for using he proportionate consolidation method. This is the first year that 100% of KazCopper LLP (being the owner of the Benkala project) accounts are included in the Group's consolidated financial statements (see Note 19).

The consolidated financial statements are prepared under the historical cost convention, except for the valuation of certain financial instruments as described in Note 4.

Going concern

These consolidated financial statements are prepared on a going concern basis.

The Group's activities have been progressively refocused to the exploration, development and production of copper, primarily as a result of the development activities related to the Benkala project. In previous years, the Group was focused on gold mining and production.

To date, the Group has not earned significant revenues. During 2011, the Group had limited production and revenues from the Koskuduk mine, the only operating asset and sole source of operating cash inflow, and the Group was in the development stage of the Benkala copper mine.In early 2012, management has formally decided to suspend operations at the Koskuduk mine (see Note 1). In 2012 the sole operating asset and source of operating cash inflow for the Group will be the Benkala copper mine.

For the year ended December 31, 2011 the Group incurred a loss before revaluation gain and income tax expense of $17,358,429 (2010: loss before income tax of $31,139,803) and had net operating cash ouflows of $1,407,742 (2010: $7,624,396). At December 31, 2011 the Group had accumulated losses of $48,765,736 (2010: $85,042,631) and a working capital deficit of $19,581,822 (2010: deficit $ 15,747,134).

Management's cash flow forecasts, based on the assumption that successful commissioning and budgeted production at Benkala will be achieved and on the prevailing outlook for copper prices, show that the Groupwill generate operating cash inflows  for the foreseeable future (being the period up to June 30, 2013). The major risks and uncertainties which management considered in its assessment of going concern were the production start date at Benkala, the level of copper production and copper prices in the foreseeable future which impact the Group's ability to generate operating cash inflows required for working capital purposes.

Key assumptions made by management in its forecasts include:

·; minimum copper production from Benkala in 2012 of 5,000 tonnes (with production forecast to commence in July 2012) and 8,000 tonnes in 2013;

·; a copper price of $7,000 in 2012 and 2013; and

·; continued availability of existing finance facilities;

A summary of the Group's financing arrangements at December 31, 2011 is as follows:

·; The Group continues to operate with a $20 million financing agreement with New Technology Kazakhstan LLP ("New Technology LLP"), a related party, which commenced in April 2009. In May 2011, the repayment date was extended until December 2012 and in December 2011 this was further extended to January 2014 (see Note 20).At December 31, 2011 $11.5 million of this facility was undrawn;

·; During 2011, Frontier issued four individual notes payable totalling $13.8 million to two unrelated parties. Two of the notes provide warrants to the provider and the others are associated with a copper off-take agreement (see Note 20);

·; In December 2011, Sberbank Kazakhstan ("Sberbank") signed an agreement to provide loan and credit facilities to KazCopper LLP of $29 million, which comprised a $20 million investment loan to be used for capital expenditure and a $9 million working capital facility. At December 31, 2011 the working capital facility had been drawn down to fully repay the Company's $8 million existing loans with HSBC Kazakhstan. At December 31, 2011 the undrawn amount under the Sberbank facilities was $20.3 million (see Note 20);

·; At December 31, 2011 the total finance facilities available to the Group under the above arrangements were approximately $62.8 million of which approximately $31.8 million was undrawn at that date. Management's budgets and forecasts show that this is sufficient to ensure the Benkala project achieves its targeted production startup date of July 2012.

As disclosed in Note 20, at December 31, 2011 the Company has $13.8 million of notes payable which are due for repayment by June 2013. Management forecasts indicate that this debt repayment will be sourced from operating cash flows generated from the Benkala mine. If forecast production levels are not achieved at Benkala, management will need to identify additional sources of debt and/or equity funding. Management is confident that it can raise additional funding if required.

Accordingly, at the time of approving the consolidated financial statements, the directors believe that the Group has adequate resources to continue in operational existence for the foreseeable future.

3. KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Critical judgments in applying the entity's accounting policies

In the process of applying the entity's accounting policies, which are described in Note 4, management has made the following judgments and estimates that have the most significant effect on the amounts recognized in the financial statements.

Impairment of assets

The Group assesses its non current assets at the end of each reporting period to determine whether any indicators of impairment exist. If there are any such indicators, the recoverable amount of the assets is calculated and compared to the carrying amount. The excess of the carrying amount overthe recoverable amount is recognized as impairment.

The recoverable amount is calculated as the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use. The calculation of value in use requires the Group to make estimates regarding the Group's future cash flows. The estimation of future cash flows involves significant estimates and assumptions regarding mineral resource estimates, gold, silver and copper commodity prices, level of production, operating costs and discount rates. Due to its subjective nature, these estimates could differ from future actual results of operations and cash flows; any such difference may result in impairment in future periods and would decrease the carrying value of the respective asset.

As described in Note 1, management decided in July 2011 to suspend operations at the Koskuduk mine. The formal decision was made in January 2012. An impairment loss of $6,540,870 was recorded in 2011 against total assets relating to this mine. Operations at the Naimanjal mine were suspended in 2010 and an impairment loss of $16,525,902 was recorded in that year (see Notes 11, 12 and 13). Management currently anticipates that the Koskuduk nor the Naimanjal mines will not recommence operations.

The key assumptions used in the determination of value in use for the non-current assets related to the Benkala mine include:

·; Estimated mineable reserves of 175,000 tons of oxide copper;

·; Copper price of $7,000 per ton;

·; Discount rate of 16.8%.

Ore reserves

Ore reserves are a critical component of the Group's projected cash flow estimates that are used to assess the recoverable values of assets, to determine depreciation and amortization expense andto forecast the timing of the payment of mine abandonment and sit e restoration costs. In estimating the amount of ore reserves for the Benkala area of interest, management used a 2011 report it obtained from independent geological experts prepared under the JORC quantification methodology to interpret geological and exploration data to determine measured, indicated resources and inferred reserves. The estimation of reserves is based on expert knowledge and estimation. The quantification of the reserves involves a degree of uncertainty. The uncertainty is primarily related to completeness of reliable geological and technical information. In addition, the presence of reserves does not mean that all reserves will be able to be extracted on a cost effective basis. Ore reserves are analysed and assessed on a periodic basis. The quantity of reserves can be subject to revision as a result of changes in production capacities and changes in development strategy.

Exploration and evaluation assets

The Group's accounting policy for exploration and evaluation expenditure results in such expenditure being capitalized for those projects for which such expenditure is considered likely to be recoverable through future extraction activity or sale, or for which the exploration activities have not yet reacheda stage which permits a reasonable assessment of the existence of reserves. This policy requires management to make certain estimates and assumptions as to future events and circumstances,in particular whether the Group will proceed with development based on existence of reserves or whether an economically viable extraction operation can be established. Such estimates and assumptions may change from period to period as new information becomes available. If, subsequent to the capitalization of the exploration and evaluation expenditure, a judgment is made that recovery of the asset is unlikely or the project is to be abandoned, the relevant capitalized amount will be written off to profit and loss.

Depreciation and amortization of mining assets

The Group's mine development assets are depreciated over the respective life of the mine usingthe unit-of-production (UOP) method based on the ore reserves. Any changes to the ore reserveshas a direct impact on the depreciation rates and, subsequently, the asset carrying values. Any change in the depreciation rate is applied on a prospective basis, which could result in higher depreciationin future periods.

Property, plant and equipment are depreciated on a straight line basis over the useful economic lives or life of mine whichever is shorter. Management periodically reviews the appropriateness of economic useful lives of the assets based on the current condition and the estimated period during which they will bring economic benefit to the Group.

Provision for mine abandonment and site restoration

The Group's mining activities are subject to various laws and regulations governing the protection of the environment. The Group estimates the provision for mine abandonment and site restoration obligations based on management's understanding of the current legal requirements and license agreements. The provision is based on management's estimate of the total cost of restoration for disturbance caused at the reporting date and is discounted to its net present value and recorded as an expense over the estimated mine life. The estimate of total cost requires management to make a number of assumptions including restoration activities and discount rates. A change in these assumptions, or a change in the environmental laws, could result in a change in the provision in a future period. Any such change is recorded at the time of the revision, and the amount of expense each period is modified on a prospective basis.

Financial liability at fair value through profit or loss

The Group has financial liabilities recorded at fair value through profit or loss being loans to various entities. The fair value of these liabilities are determined using a discount valuation model.

As described in Note 20, the Group uses valuation techniques that include inputs that are not based on observable market data to estimate that fair value of certain types of financial instruments. Note 20 provides detailed information about the key assumptions used in the determination of the fair value of financial instruments.

Contingencies

By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.

Income taxes

The Group is subject to income taxes in the Republic of Kazakhstan and, prior to the re-domicile of the parent entity during 2010, the United States of America. The taxation system in Kazakhstan is relatively new and is characterized by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by various levels of authorities, which have the authority to impose severe fines, penalties and interest charges. These circumstances may create tax risks in Kazakhstan that are more significant than in other countries. The Group recognizes liabilities for anticipated additional tax based on its interpretations of the current tax laws and the amount it believes that is probable to be paid upon any inspection by the tax authorities.

Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax provisions in the period in which such determinations are made.

Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is not probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized. Various factors are considered in assessing the probability of the future utilization of deferred tax assets, including past operating results, operational plans, expiration of tax losses carried forward, and tax planning strategies. If actual results differ from these estimates or if these estimates must be adjusted in future periods, the financial position, the deferred tax asset currently recorded may be impaired in that period and results of operations and cash flows may be negatively affected.

Value added tax ("VAT")

The Group is at development stage of its copper mine and does not generate operating income, as a result of which unable to reclaim VAT on sales. Recoverability of VAT is dependent upon having future VAT payable on sales of goods against which VAT recoverable can be offset. Management believes that the Group will be able to generate sufficient future VAT payable to be used to offset the recognized VAT recoverable, but that not expect such a recovery to take place within the 12 months from date of the last statement of financial position. Accordingly, VAT receivable was classified as a long-term asset.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1 Principles of consolidation

The consolidated financial statements of the Group include Frontier and the companies thatit controls, and from which it obtains economic benefits. This control is normally evidenced whenthe Company is able to govern the financial and operating policies of an entity so as to benefit from its activities. The results of subsidiaries acquired or disposed of during the year are included inthe consolidated statement of comprehensive income from the effective date of acquisition or up tothe effective date of disposal, as appropriate. Intercompany balances and transactions, including intercompany profits and unrealized profits and losses are eliminated on consolidation.

4.2 Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Groupin exchange for control of the acquiree. Acquisition-related costs are recognised in profit or lossas incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

·; Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; and

·; Assets (or disposal Groups) that are classified as held for sale in accordance with IFRS 5Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

The identifiable intangible assets acquired in a business combination are recognised separately from goodwill. An intangible asset is identifiable if it meets either the separability criterion or the contractual-legal criterion.

When a business combination is achieved in stages, the Group's previously held equity interest inthe acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

4.3 Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, which is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent ofthe parties sharing control.

Joint venture arrangements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group's share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis.

Any excess of purchase consideration over the acquisition of the Group's interests in a jointly controlled entity is accounted for in accordance with the Group's accounting policy for business combinations.

Where the Group transacts with its jointly controlled entities, unrealized profits and lossesare eliminated to the extent of the Group's interest in the joint venture.

4.4 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

Revenue is recognized when the risks and rewards associated with ownership of goods are passed to customers; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; it is probable that the economic benefits associated with the transaction will flow to the Group; the amount can be measured reliably; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from saleable gold and silver produced during the testing phase of production activities is deducted from capitalized mine development costs.

4.5 Foreign currencies

The functional currency of the all companies in the Group is the US Dollar. The presentation currency of the Group is the US Dollar.

In preparing the financial statements of the individual entities that form part of the Group, transactions in currencies other than the entities' functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated into the functional currency at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in items of historical cost in a foreign currency are not retranslated.

Exchange differences are generally recognized in profit or loss in the period in which they arise.

4.6 Borrowing costs

Borrowing costs are recognized as an expense in the period in which they are incurred, except to the extent that they are directly attributable to the acquisition, construction or production of qualifying assets. In that case, borrowing costs are added to the cost of these assets, until such time as the assets are substantially ready for their intended use.

4.7 Share-based payments

Equity-settled share-based payments to employees and others including non-executive directors are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss over the remaining vesting period, with a corresponding adjustment to the equity-settled employee benefits reserve.

4.8 Taxation

The Group is subject to Kazakhstan and United States (prior to its re-domicile) income tax laws. The Company is exempt from all corporate and other tax in the Cayman Islands.

Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates enacted or substantially enacted at the balance sheet date.

Deferred tax is recognized using the balance sheet liability method in respect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements to the extent that there is a reasonable expectation of their realization. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit nor accounting profit.

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

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on a net basis.

Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Current and deferred tax for the period is charged or credited to the consolidated statement of comprehensive income, except when it relates to items credited or charged directly to equity (in which case the deferred tax is also recognized directly in equity) or where they arise from initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in determining the excess of the Group's interest in the net fair values of the acquiree's net assets over the cost of the business combination.

4.9 Retirement benefit costs

The Group accounts for its employee retirement benefit costs in accordance with the pension scheme of the Republic of Kazakhstan, which requires current contributions by the employer and employee calculated as a percentage of current gross salary payments. This plan is a defined contribution plan and such contributions (social tax payments) are charged to expense as incurred.

4.10 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Capital work in progress is carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation for these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Capitalized cost includes major expenditures for improvements and replacements that extend the useful lives of the assets or increase their revenue generating capacity. Repairs and maintenance expenditures that do not meet the foregoing criteria for capitalization are charged to the consolidated statement of comprehensive income as incurred.

Depreciation is computed on a straight-line basis over the following estimated useful lives:

The useful lives and depreciation method are reviewed annually to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits to be derived from items of property, plant and equipment. The effects of any changes in estimate are accounted for ona prospective basis.

4.11 Exploration and evaluation assets

Exploration and evaluation assets are measured at cost.

Expenditures related to the following activities are capitalized and included in the initial measurement of exploration and evaluation assets:

·; acquisition of rights to explore mining licenses;

·; topographical, geological, geochemical and geophysical studies;

·; exploratory drilling;

·; trenching;

·; sampling; and

·; activities in relation to evaluating technical feasibility and commercial viability of extractinga mineral resource.

Expenditures not included in the initial measurement of exploration and evaluation assets are:

·; the development of a mineral resource once technical feasibility and commercial viability of extracting a mineral resource have been established; and

·; administration and other general overhead costs.

Exploration and evaluation costs for each area of interest, other than that acquired from the purchase of another mining company, are carried forward as an asset provided that one of the following conditions is met:

·; such costs are expected to be recouped in full through successful development and exploration of the area of interest or alternatively, its sale; or

·; exploration and evaluation activities in the area of interest have not yet reached a state which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active significant operations in relation to the area are continuing, or planned for the future.

Purchased exploration and evaluation assets are recognised as assets at their cost of acquisition or at fair value if purchased as part of a business combination.

An impairment review is performed when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to mine development assets.

4.12 Mine development assets

The decision to develop a mine property within a project area is based on an assessment of the commercial and technical viability of the project, the availability of financing and the existence of markets for the product. Once the decision to proceed to mine development is made, development expenditures relating to the project are capitalized and carried at cost with the intention that these will be amortized by charges against earnings from future mining operations.

Development expenditure is recognized at cost. Upon reaching designed commercial production capacity, mine development assets are amortized using the unit of production method.

Intangible assets

Intangible assets include non-mining and exploration licenses and computer software. Intangible assets under development are not amortized. Amortization of these assets begins when the related assets are placed in service.

Licenses

Licenses are stated at cost net of accumulated amortization. Amortization is provided so as to write down the cost of an asset on a straight-line basis over its estimated useful economic life.

Computer software

Computer software costs are recognized as assets at cost net of accumulated amortization. Amortization is recognised on a straight-line basis over their useful lives, but not exceeding a period of seven years.

4.13 Impairment of tangible and intangible assets

The Group reviews on an annual basis the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that its carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

4.14 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost, including an appropriate portion of fixed and variable overhead expenses, is assigned to inventories by the method most applicable to the particular class of inventory. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

4.15 Accounts receivable

Accounts receivable are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Accounts receivable are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

4.16 Cash and cash equivalents

Cash includes cash on hand and deposits with banks with original maturity terms not more than three months.

4.17 Restricted cash deposits

Cash deposits with banks are made pursuant to requirements of the Group's subsurface use contracts. The Group accumulates such cash deposits restoration provisions related to obligations to restore and make the mines safe after use and the estimated costs of cleaning up any chemical leakage.

4.18 Site restoration costs

Provision is made for closure, restoration and environmental clean-up costs where there are legal or constructive obligations to do so, (which includes the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas) in the accounting period when the related environmental disturbance occurs, based on the estimated future costs. The provision is discounted where material and the unwinding of the discount is recorded as a finance expense in the period incurred. At the time of establishing the provision, a corresponding asset is capitalized and amortised on a unit of production basis upon the commencement of production.

The provision is reviewed on an annual basis for changes in cost estimates, economic useful life of existing operations and inflation and discount rates.

4.19 Provisions

A provision is recognized when, and only when, the Company has a present obligation (legal or constructive) as a result of a past event and it is probable (that is, more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of the provision is determined based on the present value of the expenditures expected to be required to settle the obligation.

4.20 Financial liabilities and equity instruments issued by the Group

Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs or at the fair value of the consideration given when issued for asset purchases or services received.

Compound instruments

The component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. The amount is recorded as a liability on an amortized cost basis using the effective interest rate method until extinguished upon conversion or at the instrument's maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently re-measured.

Derivative financial instruments

Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each balance sheet date. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. The resulting gain or loss is recognized in the profit or loss.

A derivative with a positive fair value is recognized as a financial asset whereas a derivative witha negative fair value is recognized as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis.

4.21 Adoption of new and revised standards and interpretations

New and revised IFRSs applied with no material effect on the consolidated financial statements

The Group has adopted the following new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee (the IFRIC) in the current year. Their adoption has not had any significant impact on the amounts reported in these financial statements.

·; Amendment to IFRS 3(2008) "Business Combinations" - As part of the May 2010 Improvements tIFRSs, IFRS 3 was amended to: 1) transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS; 2) clarification of the measurement choice regarding non-controlling interests at the date of acquisition;

• Amendment to IFRS 7 "Financial Instruments: Disclosures" - As part of the May 2010 Annual Improvements to IFRSs, IFRS 7 was amended to provide clarification of disclosures and the release of the requirement for disclosure regarding restructured loans;

• IAS 24 (2009) "Related Party Disclosures" -provides a new, clearer definition of a related party, with inconsistencies under the previous definition having been removed and introduces a partial exemption from the disclosure requirements for government-related entities.

The adoption of the new or revised standards did not have any effect on the financial position or performance of the Group, and all have been retrospectively applied in compliance with IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors", unless otherwise noted below.

Amendments to IAS 24 - The disclosure exemptions introduced in IAS 24 (as revised in 2010) do not affect the Group because the Group is not a government-related entity.

New and revised IFRSs in issue but not yet effective

At the date of authorization of this financial information, the following new standards and interpretations were in issue, but not yet effective, and which the Group has not early adopted.

The Group does not expect that the adoption of the following standards will have a material impact on the consolidated financial statements of the Group in future periods, except as follows:

The amendments to IFRS 7 "Financial Instruments: Disclosures" (respective amendments to IFRS 7 regarding disclosure requirements - for annual periods beginning on or after 1 January 2013) - introduce additional disclosures, designed to allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitisations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

Retrospective application is required in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors with the exception that in the first year of application, an entity need not provide comparative information for the disclosures required by the amendments for periods beginning before July 1, 2011. The Group is currently assessing the impact of the amended standard on its consolidated financial statements.

IFRS 9 "Financial Instruments" (effective for annual periods beginning on or after 1 January 2015, with earlier application permitted) issued in November 2009 and amended in October 2010, introduces new requirements for the classification and measurement of financial assets and financial liabilities.

● IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 "Financial Instruments: Recognition and Measurement" to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost. All other debt investments and equity investments are measured at their fair values.

● The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated at FVTPL) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated at FVTPL was recognised in profit or loss.

Group management anticipates that IFRS 9 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2015 and that the application of the new standard may have a significant impact on amounts reported in respect of the Groups' financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures were issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) andIAS 28 (as revised in 2011).

Key requirements of these standards, applicable to the Group's financial statement are described below.

IFRS 10 "Consolidated Financial Statements" - replaces all of the guidance on control and consolidation in IAS 27 and SIC-12 by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee (ie whether an entity is controlled through voting rights or through other contractual arrangements as is common in special purpose entities). Under IFRS 10, the single definition of control, accompanied by extensive application guidance, is based on whether an investor has:

• power over the investee;

• exposure, or rights, to variable returns from its involvement with the investee; and

• the ability to use its power over the investee to affect the amount of the returns.

IFRS 11 "Joint Arrangements" - replaces IAS 31 with new accounting requirements for joint arrangements by classifying them as either joint operations or joint ventures (the 'jointly controlled assets' classification exists no more).

·; In recognising their rights and obligations arising from the arrangement, the parties should no longer focus on the legal structure of the joint arrangement, but rather on how rights and obligations are shared by them.

·; A joint operation gives parties to the arrangement direct rights to the assets and obligations for the liabilities. Thus, a joint operator recognises its interest based on its involvement in the joint operation (ie based on its direct rights and obligations) rather than on the participation interest it has in the joint arrangement. A party to a 'joint operation' recognises assets, liabilities, revenues and expenses arising from the arrangement.

·; A joint venture gives the parties rights to the net assets or outcome (profit or loss) of the arrangement. Joint ventures are accounted for using the equity method in accordance with IAS 28 "Investments in Associates". Entities can no longer account for an interest in a joint venture using the proportionate consolidation method. A party to a 'joint venture' recognises an investment.

IFRS 12 "Disclosure of Interests in Other Entities" - requires enhanced disclosures about both consolidated and unconsolidated entities in which an entity has involvement, so that financial statement users are able to evaluate the nature, risks and financial effects associated with the entity's interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. Thus, IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10 and IFRS 11 and replaces the disclosure requirements currently found in IAS 28.

IAS 27 (2011) "Separate Financial Statements" - includes the provisions on separate financial statements that are left almost unchanged after the control provisions of IAS 27 have been replaced with the new IFRS 10.

IAS 28 (2011) "Investments in Associates and Joint Ventures" - now includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11.

Each of the five standards above becomes effective for annual periods beginning on or after 1 January 2013, with earlier application permitted if all the other standards in the 'package of five' are also early applied (except for IFRS 12 that can be applied earlier on its own). The Group does not expect that the adoption of the following standards will have a material impact on the consolidated financial statements of the Group in future periods.

IFRS 13 "Fair Value Measurement" (effective for annual periods beginning on or after 1 January 2013, with earlier application permitted) - provides a definition of fair value and a single source of fair value measurement and disclosure requirements to use across IFRSs. The Standard:

• defines fair value;

• sets out in a single IFRS a framework for measuring fair value; and

• requires disclosures about fair value measurements.

IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements, except for share-based payment transactions within the scope of IFRS 2 "Share-based Payment", leasing transactions within the scope of IAS 17 "Leases", and measurements that have some similarities to fair value but that are not fair value, such as net realizable valuein IAS 2 "Inventories" or value in use in IAS 36 "Impairment of Assets".

The Group intends to adopt this standard at 1 January 2013 and is currently assessing the impact of adoption.

Amendments to IAS 1 "Presentation of Financial Statements" (effective for annual periods beginning on or after 1 July 2012, with early adoption permitted) - revise the way other comprehensive income is presented. The amendments to IAS 1:

• preserve the amendments made to IAS 1 in 2007 to require profit or loss and OCI to be presented together either as a single 'statement of profit or loss and comprehensive income', or as two separate but consecutive statements 'statement of profit or loss' and a 'statement of comprehensive income';

• require entities to group items presented in OCI into two categories based on whether they will be reclassified to profit or loss subsequently when specific conditions are met and those items that will not be reclassified subsequently to profit or loss; and

• require tax associated with items to be allocated on the same basis and to be shown separately for each of the two groups of OCI items.

The Group does not expect this amendment to have a material effect on its financial position or results of operations.

Amendment to IAS 12 "Income Taxes" - provides (for income tax calculation purposes)a presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally, be through sale for the purposes of measuring deferred taxes.

The standard is effective for annual periods beginning on or after 1 January 2012, with earlier application permitted.

Amendments to IAS 32 "Financial Instruments: Presentation" (amendments to IAS 32 effective for annual periods beginning on or after 1 January 2014) - provide clarifications on the application of the offsetting rules, and focus on four main areas:

• the meaning of 'currently has a legally enforceable right of set-off;

• the application of simultaneous realisation and settlement;

• the offsetting of collateral amounts; and

• the unit of account for applying the offsetting requirements.

The respective amendments to the disclosure requirements in IFRS 7 "Financial Instruments: Disclosure" requires information about all recognised financial instruments that are offset in accordance with paragraph 42 of IAS 32. The amendments also require disclosure of information about recognised financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS 32. These disclosures will allow financial statement users to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with an entity's recognised financial assets and recognised financial liabilities, on the Group's financial position.

The Group is considering the impact of these amendments on the consolidated financial statements and the timing of their application.

5. SEGMENT ANALYSIS

5.1 IFRS 8 Operating Segments

Pursuant to IFRS 8, the Group is required to identify and report operating segments on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources and to assess performance. The Group's chief operating decision maker has been determined as the Group's chief executive.

Information reported to the Group's chief operating decision maker for the purposes of resource allocation and assessment of segment performance is specifically focused on license areas. The Group's reportable segments IFRS 8 for 2011 are as follows:

·; Naimanjal license area (gold, silver and copper)

ü Naimanjal mine

ü Koskuduk mine

ü Baitemir (includes Beschoku and Yubileiny)

·; Benkala (copper)

ü Benkala licence area

ü South Benkala licence area

As disclosed in Note 1, in May 2011 the Group acquired the South Benkala license area. There were no activities during 2011.

The Group's measure of segment results is loss/profit before taxation and before the allocation of central administration costs, directors' salaries, selling, general and administrative expenses, finance costs and other gains or losses not directly related to license areas. Information regarding the Group's reportable segments is presented below.

5.2 Segment revenues and results

The following is an analysis of the Group's revenue and results by reportable segment:

2011

2010

Revenue recorded above represents revenue generated from the Group's sole external customer(see Note 6). There were no intersegment sales.

The following is an analysis of the Group's other segment information:

2011

2010

5.3 Segment assets and liabilities

For the purposes of monitoring segment performance and allocating resources between segments:

·; all assets are allocated to reportable segments other than financial assets and tax assets; and

·; all liabilities are allocated to reportable segments other than financial liabilities, current and deferred tax liabilities, and other liabilities.

5.4 Other segment information

The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 4.

Depreciation and amortization charges for the year (including amounts capitalized to mine development assets) are:

Naimanjal license area:

§ Naimanjal mine nil (2010: nil)

§ Koskuduk mine $752,939 (20010: $924,691)

§ Baitemir mine nil (2010: nil)

Benkala license area $1,020,039 (2010: $405,504)

6. REVENUE

All of the Group's sales of gold and silver dore alloy are made to one customer in Switzerland.

7. COST OF SALES

8. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

9. FINANCE COSTS

10. EXPLORATION AND EVALUATION ASSETS

Movements for the year are summarized as follows:

11. MINE DEVELOPMENT ASSETS